Govt, Fonterra butt heads over proposed dairy changes

Email
Print

Tue, 24 Jan 2012 6:07p.m.

The Government believes Fonterra will eventually come round to the proposed changes

The Government believes Fonterra will eventually come round to the proposed changes

By Tova O’Brien

The Government and New Zealand's largest company Fonterra are butting heads over proposed changes to the dairy industry.

If the changes go ahead, smaller dairy companies - many of them foreign-owned - would be allowed a greater share of the raw milk market, and therefore a greater share of the multi-million-dollar profits.

There are six main independent milk processors in New Zealand competing against Fonterra. To foster competition, the Government wants to make it easier for more independents to get into the lucrative business.

“I'm suggesting that we give them a period of three years by which stage these large companies have their own supply then they should no longer be eligible for raw milk from Fonterra,” says David Carter, Primary Industries Minister.

Each year the independent processors are allotted 600 million litres of subsidised milk – that is about 4 percent of Fonterra’s milk supply.

The Government wants to increase that to 5 percent, but Fonterra says to do so would cost farmers $200 million.

“They get up very early in the morning to produce milk and then that milk has to be sold to these foreign-owned companies and these foreign-owned companies then export that out of New Zealand,” says Fonterra chairman Sir Henry van der Heyden.

But the Government believes Fonterra will eventually come round to the changes.

“It's not about Fonterra, it's not about our farmers, it's about what's good for the New Zealand economy,” says Mr Carter.

The changes would also force Fonterra to reveal more information about how it sets its milk prices. The Government says at the moment they lack transparency.

Fonterra would not be drawn on any of the other proposed changes because it had not had time to read through them properly.

But the co-op's president says he thinks it is very transparent and that most farmers would agree.

Around 1500 farmers have already denounced the changes and Fonterra believes most of its 10,000 members will follow suit.

They have one month to do so before submissions close..

3 News

Become a fan of 3 News on Facebook and on Twitter.

Post a Comment

Before commenting, please take the time to read our moderation guide


(Won't be published)



Comments

26 Jan 2012 09:28a.m.

Stu wrote:

Why is the Government heell bet on destoring the one great NZ owned company bringing in billions of oversea funds. If they continue down this track the dairy industry will end up like the beef industry. that is all the companies trying to sell to the same customers overseas driving down the prices for prrrrrroduct, lower returns to farmers, therefore reducing the amount of money coming into this country.
As for the price of milk at the supermarkets, just don't buy your milk from them, i can buy 6 litres for $6 from a corner dairy. Now if they can sell it for that, it must mean the supermarkets are makig a killing. And the comments that lower income families buy fizzy instead of milk because off cost is rubbish. They are just lazy, if you drink one glass of milk in the morning you tend to eat less at lunch and milk is full of every thing people need to stay healthy. When you look at fizzy, it is made of water and sugar, so alot cheaper to make with not health beneifit at all.

25 Jan 2012 01:21p.m.

Mike wrote:

Who is going to pay for this susidising of the foreign milk companies?

NZ.

As NZ will be paying for it it will lead to NZ paying more for its milk in one form or another.

All that will happen is Fonterra will change its formula to work out how much more they charge for milk.

Currently Fonterra sets the price of NZ milk based on overseas prices as most NZ milk is sold overseas. These changes will cost about $200 mil so dont be surprised if Fonterra changes its formula if these changes are forced upon them to include the cost of subsiding those foreigners. It will then be a transparent $200 mil more NZ will be paying for its milk and everyone will be happy because its transparent, and they are paying that much more for milk!

Already Fonterra has strict guidelines which the inquiries have shown to be fair even if not publicised. Its not simple pricing as a business selling $14 bil and basing pricing on that sales can only be complex. But after Labour Greens screaming 'Fire' we now have a public worried about it even though there was no problem in the first place.

Why do NZ milk supliers sign up with Fonterra? Simple, they give better returns to those suppliers. If competitors want more milk, they just need to offer more money to Fonterra suppliers. But the competitors want their cake and eat it too, they want cheaper milk without paying the farmers for it.

Why are the Greens worried about 'Fair Trade' yet want to cripple our own producers here in NZ in preference of overseas interests? Who has been funding their anti-NZ campaign as they have not been transparent about that! NZ farmers have had hard times, many are only just starting to clear losses resulted from the last downturn. Better to let them recover fully and lead NZ's economic recovery than boot them till we have another recession.

25 Jan 2012 08:57a.m.

AT wrote:

Surely if the prices of NZ milk in milk-importing-nations are very cheaper than those in NZ, something is not right. Either supermarkets and other retailers are profiteering or Forterra is enjoying its monopoly milk business....

24 Jan 2012 10:25p.m.

Greg wrote:

Keep NZ profits in NZ.

24 Jan 2012 09:51p.m.

PHIL wrote:

Fonterra would not be in this position if they had given their home market consumers a decent discount off the internaional price instead of gouging them,all the while offering specious excuses. The window of opportunity to put it right is closing fast...

24 Jan 2012 08:18p.m.

Ruz wrote:

The proposed changes tend to indicate that the Government accepts that the price of milk sold in NZ is too high. The counter claims being put up by Fonterra reinforce that.

24 Jan 2012 06:58p.m.

AaronC wrote:

Lets hope the government applies the same levels of pressure when it comes to farmers ruining our waterways. lol like thats ever gonna happen..To short sighted to see the value of something that cant be cash cropped like the environment.