When Fonterra was established in 2001 under the Dairy Industry Restructuring Act 2001 (DIRA), the legislation required a review of the state of competition in the industry in 2015-16. For various reasons, the recommendations in that review were not implemented. In 2017, however, the government announced a comprehensive review of the DIRA by the Ministry of Primary Industries (MPI). Earlier this year, the MPI review was completed with recommendations for changes to the DIRA. The resultant Dairy Industry Restructuring Amendment Bill (no 3) is currently with the Select Committee.

Overall, MPI believes that changes are needed to ensure better management of on-farm performance and planning for processing capacity. It expects these changes will increase certainty around milk price calculation, remove unnecessary regulation and protect consumer interests. In order to achieve the above objectives, several changes have been proposed, including: 

  • Allowing Fonterra to refuse the supply of milk from farmers in circumstances where milk does not or is not likely to comply with Fonterra's terms and standards of supply, or in circumstances where milk is supplied from newly-converted dairy farms 
  • Clarifying Fonterra's terms of supply can relate to various on-farm performance matters, such as environmental, animal welfare, climate change and other sustainability standards and that price can be adjusted accordingly
  • Limiting Fonterra's discretion in calculating the base price of milk and clarifying that Fonterra can pay a different farm gate milk price to the base milk price
  • For Fonterra to be no longer required to supply regulated milk to independent processors with their own supply of 30 million litres or more in a single season, and
  • Proposing that MPI updates the terms on which Fonterra supplies regulated milk to Hong Kong/Singapore-owned manufacturer Goodman Fielder in order to benefit domestic consumers.

The Select Committee's report is due on 20 March 2020. We will have some commentary on this report in the Autumn 2020 edition of Rural eSpeaking. 

In the meantime, to read more about the Bill, please click here. If you would like to know more about how this proposed legislation may affect your farm, please get in touch with us.

DISCLAIMER: All the information published in Rural eSpeaking is true and accurate to the best of the authors' knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this article. Views expressed are those of individual authors, and do not necessarily reflect the view of this firm. Articles appearing in Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.  Copyright, NZ LAW Limited, 2019. Editor: Adrienne Olsen. E-mail: adrienne@adroite.co.nz. Ph: 029 286 3650 or 04 496 5513.