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Fonterra labels DIRA review a “missed opportunity”

Dairy giant Fonterra has reacted to proposed changes following the Government’s review into the Dairy Industry Restructuring Act (DIRA) saying it will bring some improvements to the sector, but represents a “missed opportunity” to better support New Zealand.

The Act, passed into law in 2001, regulates Fonterra’s dominance in the market to promote the efficient operation of dairy markets in New Zealand.

Under the new legislation Fonterra will be allowed to “refuse milk supply from farmers in circumstances where milk is not compliant or unlikely to comply with Fonterra’s terms and standards of supply or is supplied from newly converted dairy farms.”

“Our farmer-owned Co-operative wants an industry that promotes investment across regional New Zealand and where profits are kept in New Zealand,” Fonterra chairman John Monaghan said in a statement on Thursday.

“We stand for an industry where New Zealand farmers are paid well for their milk and the unique attributes of our environment are protected and enhanced.”

Monaghan said the cooperative is disappointed the Government did not recommend removing the requirement for Fonterra to supply its farmers’ milk to large, export-focused businesses.

“We welcome the Government’s decision to give Fonterra the right to refuse membership to our Co-op where a farm is unlikely to comply with our terms of supply, or where the farm is a new conversion. These changes will support our Co-op’s ability to meet our customers’ demands and continue leading the industry toward a sustainable future for our farmers and the rural communities in which they live and farm.”

Fonterra is encouraging the Government to extend better price transparency and require all processors to publish the average price they pay to farmers, the key parameters of their milk price and examples showing the payout that would be received for different parameters.

The Fonterra Shareholders’ Council said farmers are feeling “ignored and frustrated”.

“Despite their efforts to engage in meaningful consultation on changes to DIRA their voice has largely gone unheard as we continue to kick the can down the road with respect to essential change to this important piece of legislation,” the group said in a statement.

“This was an opportunity to focus on the wider industry, not just Fonterra, and to optimise value creation for New Zealand from the dairy sector. We are concerned the opportunity to shift DIRA’s purpose to the future and to enable the highest value creation from our milk hasn’t been fully taken up.”

The group is disappointed there is no firm position on the expiry of DIRA and when the New Zealand market for milk collection will be considered sufficiently competitive.

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