Fonterra welcomes further review of regulated milk

Fonterra Co-operative Group said today it welcomed the Government’s decision to review the eligibility criteria for access to regulated raw milk.

Under the Dairy Industry Restructuring Act (DIRA), Fonterra is required to supply up to 600 million litres of raw milk each year.

“Fonterra is already supplying raw milk to 25 different companies on this basis. We accept Fonterra’s role in supplying regulated milk to help start-ups and processors without their own milk supply,” said Fonterra Chief Executive Andrew Ferrier.

“However, a significant proportion of milk supplied under the regulations goes to larger competitors who have their own local milk supply, are increasingly foreign-owned, and are competing with us in overseas markets.

“All of these competitors use the DIRA regulations to fill their processing plants at times of the year when milk supply is low.

“Essentially, this means Fonterra is helping processors to become more efficient by giving them more flexibility in sourcing their milk. This comes at a significant cost to Fonterra.

“It erodes profits back to our New Zealand farmer-shareholders, and the gains are increasingly going back to foreign shareholders.”

Mr Ferrier said that while Fonterra was disappointed that the Government intends to extend the DIRA conditions, it looked forward to providing input to the Government’s further review of eligibility criteria on the supply of regulated milk.

Mr Ferrier said it was important to remember that the DIRA was established to enable New Zealand to capture an important opportunity – namely, to create a dairy business of sufficient scale to compete internationally. This was what led to the creation of Fonterra.

As a result, Fonterra is now recognised by the largest users of dairy products in the world as the pre-eminent global supplier of healthy, nutritious dairy products. The strong competitive position that Fonterra has brings long term security of market access as well as wealth creation to New Zealand’s dairy farmers.