Northland dairy farmers have rejected government proposals aimed at restoring public confidence in the dairy market, including a requirement that Fonterra sell more milk at a regulated price to its competitors.
They described a draft bill that contained government consultation on its preferred options as “popular politics” which would not be in the best interest of the industry or the country in the long run.
The Commerce Commission will annually monitor milk pricing in New Zealand under a raft of Government proposals announced to rein in Fonterra’s market power and restore public confidence in the milk market.
Fonterra, which controls about 90 per cent of the raw milk market in this country, will also be required to publicly disclose information about how its sets its milk price, and the farmer-owned dairy co-operative would have to sell 200 million litres more milk a year at a regulated price to other dairy companies.
Farmers of New Zealand president and Kaitaia dairy farmer Ian Walker said the proposals provided no incentive for milk prices to be competitive and, if passed into law, would result in a reduction in farmers’ income.
“They [new dairy companies] should provide an attractive package to farmers for them to switch allegiance. These companies are going into best dairy areas and effectively cherry picking,” Mr Walker said.
“What other organisation would provide raw materials to its competitors so they can produce and compete with their supplier?”
He said companies such as Westland and Open Country Dairy should compete fairly and not encourage government interference in the market.
Mr Walker suggested New Zealand adopt Australia’s free market competitive model where farmers were free to supply raw milk to whoever offered the best price.
“They [critics] could argue that Fonterra is so big a company but these companies [Fonterra competitors] have been around for a number of years.”
He said the proposals would compel dairy farmers to supply milk to Chinese companies that came to New Zealand.
“Dairy farmers have been attacked for over a decade, with horrendous amount of regulations and guidelines put in place and now there’s pressure to reduce milk prices in supermarkets.
“I hope Fonterra wakes up from its slumber and takes this Government head on.”
Primary Industries Minister David Carter said the consultation on its preferred options would be in the form of a draft bill and draft set of regulations.
The draft bill would also include changes to enable Fonterra to move to its proposed Trading Among Farmers (TAF) scheme should it choose to.
Should Fonterra not proceed with TAF, or if farmers reject the capital restructure plan this year, the Government recommends Fonterra be required to price its shares at fair value. Submissions close on February 24.
About 300 million litres, or 53 per cent of the 600 million litres of regulated milk Fonterra is currently required to provide other companies, was forecast to go to competitors who mainly exported their products.
Fonterra last year attributed the high price of milk and other dairy products to strong international dairy prices.
A campaign by consumer watchdog Consumer New Zealand and a public backlash saw Fonterra freeze its wholesale price of raw milk for a year.