Govt favouring Fonterra, claim rival milk processors
A group of independent milk processors are accusing the Government of favouring Fonterra.
With the bill due back in the House shortly, Federated Farmers questions why there are no legislative safeguards around Fonterra's proposed shareholder's fund.
"Despite some unease among committee members, we thank the primary production select committee for taking so many of Federated Farmers points on board," says Willy Leferink, Federated Farmers Dairy chairperson.
"The select committee process was shortened to fit with Fonterra's second vote on Trading Among Farmers (TAF). Voting papers are now in the hands of its farmer-shareholders.
"Despite having to sprint through things, the committee has rectified much of the confusion and contradiction our submission picked up in the bill's drafting.
"We also appreciate the committee recognising how vital it is to get the base milk price right. They agreed with our view that farm gate competition really hinges on the base milk price.
"The committee has further fixed the definition of 'an independent person'. This is important because they will play a major role on the milk price panel.
"As it now stands the bill will likely return to the House shortly so our focus switches to the second reading and the committee of the whole House. These will follow in quick succession given Fonterra's TAF vote concludes on June 25.
"We're asking Parliament to keep out of the way Fonterra sets its share price as it should be a decision for the cooperative's 10,500 shareholders. We feel the state is going too far by mandating 'fair value' as the way Fonterra must set its share price by.
"Given Parliament wants to dictate share price setting and even the milk price framework, we are amazed there are no legislative protections around Fonterra's proposed shareholder's fund.
"This fund is designed to attract retail and institutional investors into New Zealand's largest company; one that accounts for over a quarter of all merchandise exports.
"Despite this, there are no legislated limits on the fund size, number of dividends a farmer can trade, or for that matter, the number of dividends outside investors can hold in the fund
"While there are limits in Fonterra's constitution, having it enshrined in legislation would make farmers a lot more comfortable with the whole concept.
"We also contrast this with the legislated mixed ownership model proposed for Mighty River Power. Given Mighty River Power's revenue is 17 times smaller than Fonterra's, is it no surprise why we want Fonterra to remain in the hands of its Kiwi farmer-shareholders?
"We also want the House to take a very hard look at the '20 percent rule'. As regulated milk phases out for those with their own supply, we know this will eventually bite Fonterra. The rule needs to be either repealed or replaced with a secondary volumetric limit.
"Another option is to tie it to the amount of milk taken in October.
"Federated Farmers eagerly awaits further changes to the Raw Milk Regulations. These are yet to emerge from the Ministry for Primary Industries but are absolutely vital," Leferink concluded.
