Trading Among Farmers prompts consultation on dairy legislation

7 February 2011

The Ministry of Agriculture and Forestry today opened consultation on potential amendments to the Dairy Industry Restructuring Act (DIRA) to accommodate Fonterra’s Trading Among Farmers proposal.

Consultation with stakeholders will run for one month until March 7.

The DIRA regulates Fonterra to ensure dairy markets are contestable and was put in place by the Government upon Fonterra’s formation in 2001.

The legislation requires Fonterra to give farmers the choice whether to supply milk to Fonterra, and the Co-operative must issue and redeem its shares to farmers in accordance with their supply decision.

Fonterra’s Trading Among Farmers proposal would change the way farmers enter and exit Fonterra. Any such change would therefore require an amendment to the DIRA.

MAF’s manager Sector Regulation and Competition, Andrew Hume says the Government’s primary legislative objective is to promote efficient dairy markets in New Zealand.

“Efficient dairy markets are achieved in part, by ensuring that farmers have freedom to choose whether or not to supply milk to Fonterra. Because Fonterra is a co-operative, farmers’ milk supply decisions also depend on their ability to buy and sell co-operative shares at competitive prices,” he says.

“Fonterra’s Trading Among Farmers proposal would introduce a new system where suppliers trade their co-operative shares amongst themselves, rather than Fonterra issuing and redeeming the shares.

“Before amending the DIRA to allow Trading Among Farmers to proceed, the Government needs to be assured that Fonterra’s proposal can provide for both a sufficiently liquid market and the efficient pricing of milk.

“This would ensure that farmers can trade their shares in a timely manner and at competitive prices, thereby maintaining freedom of farmers to enter or exit Fonterra.”

MAF is consulting on a number of proposed options for amending the DIRA, to ensure the Government’s objectives for the New Zealand dairy industry are maintained and Fonterra’s TAF proposal can be implemented.

ENDS

© Scoop Media