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A public version of the submission was released yesterday.
Fonterra says some aspects of the dairy industry regulations are “tipping the playing field in favour of foreign exporters, at the expense of Kiwi farmers”.
In its submission to the Government’s review of the Dairy Industry Restructuring Act (DIRA), the co-op is calling for a modernisation of some aspects of the regulations.
The co-op’s submission was submitted to Ministry of Primary Industries on February 8; a public version of the submission was released yesterday.
Fonterra's first preference is a total repeal of the open entry provisions of DIRA.
Under DIRA Fonterra has a statutory obligation to be an open cooperative that accepts all milk supply offered by any dairy farmer in New Zealand provided he or she holds proportionate share s in the co-op.
As a second preference, Fonterra says it supports the removal of open entry and the non-discrimination rule in any region where its market share drops below 75%.
“Our third preference is for an exception to open entry and the non-discrimination rule for new conversions and applications we consider unlikely to comply with our terms of supply.”
Fonterra says open entry has helped bring about the vibrant and competitive dairy sector NZ has today.
In this respect, DIRA has done its job, it says.
“It seems it is also no longer being relied upon to the same extent it might once have been.
“Removal of open entry would help our cooperative achieve our vision and control our strategic direction. Decisions on whether to build new manufacturing sites need to be based on the real world; not because a company is getting a leg up at the expense of farmers and their families.”
Fonterra says the downsides of open entry should not be under-estimated, particularly for the environment, and sustainability more generally, and the risk of industrywide over-capacity.
“Strong healthy local environments and communities are the foundation for sustainable, profitable dairy farming and removal of open entry would better enable our cooperative to be a leader on the environment,” it says.
Fonterra also wants an end to rival processors having access to the co-op’s regulated milk.
Fonterra says it wants DIRA regulated milk provision to exclude large, export-focused processors, being processors that either source 30m litres/year of their own raw milk or have capacity to process more than 30m litres/year, and export 20% or more of their processed volume.
Submissions on the DIRA review closed on February 8.
In a follow-up to this old mutt’s piece two issues ago about Fonterra directors getting to grips with the co-op’s financial state and loudly sharing their dismay in the Koru club, another of the Hound’s spies has passed on more news in the ‘Fonterra director watch’ category.
Fonterra says there’s an urgent need to improve return on capital invested in the co-op by farmers and unit holders.
Fonterra has taken a $126 million hit over the sale of its stake in Venezuelan consumer joint venture, Corporacion Inlaca.
Fonterra is pulling out of a European joint venture as part of its portfolio review following last year’s disastrous financial results.
Fonterra says it has returned to profitability with a net profit of $80m for the first half of the 2019 financial year.
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