Thursday, 28 February 2019 08:49

DIRA must be modernised

Written by 
Fonterra chief executive Miles Hurrell. Fonterra chief executive Miles Hurrell.

Here are excerpts from Fonterra’s submission to the Dairy Industry Restructuring Act (DIRA) review, signed by chief executive Miles Hurrell.

DIRA has been critical of the performance of the New Zealand dairy sector since its passage in 2001.

The formation of Fonterra has created wealth for NZ and for NZers. It has improved social and economic outcomes for NZ’s dairy farmers and their communities. The evolution of the industry since 2001 has had a significant impact: dairy exports grew from $6.3 billion in 2001 to $17.1b in 2018. The legislation has achieved what was intended -- to create competition. 

Farmers now have choices in whom they supply their milk to and NZ consumers have many choices when purchasing dairy products. Since the passage of the legislation, our cooperative has created a transparent milk price calculation that is the envy of farmers the world over. Through our cooperative and a strong transparent milk price the entire NZ dairy industry has benefitted. 

Whereas Kiwi dairy farmers were once paid about half that of their European or US peers, NZ farmers are now consistently paid at parity or more. Fonterra farmers are paid the maximum sustainable price for their milk by their cooperative. 

Fonterra remains a NZ owned co-op. The money our farmers are paid for their milk and the profits their cooperative makes remain in NZ. Most of it goes into our rural communities where our farmers spend roughly 50 cents of every dollar they earn. 

DIRA has the dual objective of establishing a strong, large scale exporter taking NZ’s products to the world and protecting NZ dairy farmers and domestic consumers. It is critical for the evolution of the legislation that both are kept in focus and that neither is prioritised over the other. Our cooperative continues to work to develop a modern, world-leading dairy sector where our products are desired in markets worldwide and where consumers are prepared to pay a premium for NZ products. 

We also want domestic consumers to have choices when feeding their families.  Fonterra’s performance is not solely driven by DIRA, however a modernised DIRA will contribute to achieving our shared vision for the future of the industry. Our cooperative wants an industry that promotes investment in regional NZ and where profits are kept at home for the benefit of all NZers. 

We want an industry which pays farmers good money for their milk and which helps protect and enhance the unique attributes of NZ’s environment. NZ farmers also want certainty about the future of their industry so they can make informed investment decisions and be able to determine their own destinies. 

It’s difficult for NZers to achieve scale when marketing their products to the world. The Government helped to achieve this by allowing the formation of Fonterra. It recognised the value it could bring NZ. But it also recognised that certain safeguards were needed. Some safeguards are still critical today, and they should be expanded to be a requirement of every dairy processor. Others are inadvertently tipping the playing field in favour of foreign exporters at the expense of Kiwi farmers. 

For the dairy industry to continue to succeed some aspects of DIRA must be modernised. We look forward to working with the Government over the coming months as the review progresses and to supporting a fair outcome in the interests of all dairy farmers and NZ.

Fonterra’s submission on DIRA can be found here; https://www.fonterra.com/content/dam/fonterra-public-website/fonterra-new-zealand/documents/pdf/Fonterra-DIRA-Submission-8-Feb-signed-by-Miles-Hurrell.pdf

 

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