2 November 2018

Fonterra Likely to Win Right to Refuse Milk

News

Fonterra looks likely to win the right to refuse to take milk from dairy farmers who fail to meet environmental, animal welfare and other standards important to the cooperative’s reputation under proposals released today.

However, the discussion document on options for reforming the Dairy Industry Restructuring Act stops well short of Fonterra’s desire to be freed from the ‘open entry and exit’ provisions it says prevent it from pursuing value-added strategies.

Instead, the preliminary conclusions outlined in the document released by Agriculture Minister Damien O’Connor says there is nothing stopping Fonterra from dropping its milk price for farmer-shareholders if it wants to reduce supply.

The DIRA was enacted in 2001 to preserve competition in the New Zealand dairy market in exchange for allowing the country’s two largest dairy cooperatives at the time to merge, giving them scale and greater efficiency in export markets.

The release of today’s discussion document, on a high-performing Fonterra supplier’s dairy farm on the Taieri Plains near Dunedin, is a crucial step along the way to likely legislative reform, most likely by the end of next year.

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