Milk change better, not perfect but will give certainty

Federated Farmers Dairy chairman, Lachlan McKenzie says changes to the milk regulation system in New Zealand are better and fairer but not perfect. The government announced today it has decided to alter regulations after the Ministry of Agriculture and Forestry completed an intensive Raw Milk Review.

“It is good to see the government has taken a decision on this is a complex issue. While not perfect, it does give more certainty to all parties involved,” Mr McKenzie said.

“Federated Farmers is pleased to see the government has recognised that there are problems with current raw milk regulations specifically with the price setting mechanism.

“The problem for farmer shareholders was Fonterra had to supply a set amount of raw milk at a regulated price to independent processors such as Goodman Fielder and Open Country Cheese. This was a lesser price than they could sell milk on the international market.

“Fonterra farmers have expressed concern at subsidising other processing parties especially when these processors have large overseas ownership.”

In its review of the raw milk regulations, the government has come up with an auction system as an alternative way of setting the price of regulated milk.

“Federated Farmers believes the auction system is better than the formula system currently in place and will be seen by farmers as being fairer,” he said.

The proposed auction system for the 600 million litres of regulated raw milk will help ease independent milk processors into the practice of sourcing milk at real prices either from Fonterra or farmers directly. The intention is that regulated milk will be no less than the price Fonterra pays its own farmers for milk.

“Federated Farmers has always championed a free market and is disappointed the outcome of this review continues to support the current regulatory trigger levels which were put in place to encourage competition.” Once these are reached and the New Zealand market has enough milk processors to provide customer choice, regulated milk will cease to exist and independent milk processors will have to compete in a free market. Federated Farmers believes the sooner a free market comes about the better.

“The Commerce Commission’s submission on these regulations to MAF did not support the concept of a free milk market in New Zealand. This is hugely concerning to Federated Farmers as New Zealand encourages the advantages of free and open trade around the globe, especially in agriculture,” Mr McKenzie said.