NZ Herald - O'Connor welcomes robust debate over Fonterra

A review of the $12 billion dairy export industry will give Fonterra an opportunity to show how well it's performing and its critics to say otherwise, says Minister of Agriculture Damien O'Connor.

"There are lots of opinions on Fonterra and its performance...a good healthy robust forum for careful consideration I think will be valuable."

In an industry where politically charged campaigning and one-sided debates abound, opportunities like this give a much needed chance for open, reasoned discourse. 

O'Connor said the opportunity for a review had been presented because of the Dairy Industry Restructuring Act (DIRA) timetabling and it being time to look at a large number of issues connected to New Zealand's biggest industry.

These issues included competition, capacity, pasture-based farming versus intensive operations, corporate versus family farming, and environmental matters.

Fonterra, created under DIRA in 2001 from a huge merger of industry entities, today has 82 per cent of the country's raw milk. At the time it was formed it had 96 per cent.

The review puts on hold scheduled changes to Fonterra's enabling legislation to allow a broader review of the dairy sector and whether it is adding enough value to the country's biggest export commodity, said O'Connor. The Act deregulated the export dairy industry.

The previous government had legislation ready to amend the Act that would have retained easy entry and exit for Fonterra's cooperative farmer-owners but gave the company a choice whether to accept new milk and provide regulated price milk to competitors.

The proposed changes followed a Commerce Commission review after Fonterra's share of South Island milk fell below a DIRA threshold. The competition watchdog concluded Fonterra's market dominance still warranted regulation.

O'Connor intends introducing legislation this year to amend DIRA and prevent some provisions of the Act expiring in the South Island on May 31.

He hopes the new review, to be led by the Ministry for Primary Industries, will be completed within 12 months.

"I think there will be enough information and enough opinions around the country and internationally now to conduct a really useful process," he said.

The country's second biggest dairy manufacturer and exporter Open Country said it was considering its position in regards to the new review.

"Clearly we have views on some aspects but they have yet to be formalised. We would expect to make a submission," said chairman Laurie Margrain. Privately owned Open Country collects around 7 per cent of the country's raw milk.