Independent milk processors free ride at an end

Federated Farmers welcomes Agriculture Minister, the Hon David Carter’s amendments to the pricing formula for regulated milk.

“Cooperative dairy farmers were sick of having their pockets picked by independent processors,” says Lachlan McKenzie, Federated Farmers Dairy chairperson.

“Under the unamended pricing formula, independent processors buy milk at a lower price than cooperative farmers receive for it.

“This travesty could not be allowed to continue, as cooperative farmers have been giving value away to independent processors for too long. Offering milk to independent processors at the farm gate price plus 10 cents per kilogram of milk solids also allows them to make good business decisions based on real and fair prices.

“Unlike cooperatives, most independent processors are owned by overseas investors. The money these investors saved when buying cheap milk off the cooperative went directly from the green fields of New Zealand to the boardrooms of overseas companies.

“On the other hand, cooperative dairy farmers invest a large percentage of their profits back into the domestic economy. When these profits are eroded, every New Zealander suffers.

“Clearly cooperative dairy farmers have been subsidising the back pockets of these overseas investors for five of the past six seasons. This was uncovered in a review of the pricing system undertaken in 2008.

“Amending the pricing formula for regulated milk is certainly a step in the right direction. The changes will take effect in the 2010/11 season, when the price of milk supplied to independent processors will be set at the farm gate price plus 10 cents.

“The move allows independent processors to continue taking milk at a set, known price while still enjoying certainty of supply. Then if they think the price is too high, they can source their own milk from somewhere else,” Mr McKenzie concluded.