Farmers commend Parliament for changing price formula
Released 29 Apr 2010
Federated Farmers has welcomed Parliament's changes to the pricing of milk that Fonterra is required to deliver to independent processors.
"From 1 June 2010, this milk will be the same price as what Fonterra pays its own farmers, plus a margin of 10 cents per kilogram of milk solids," says Lachlan McKenzie, Federated Farmers Dairy chairperson.
"Independent processors have received an unfair advantage because they've been able to buy this milk at a cheap price, when it suits them. This has allowed them to maximise their output by only taking milk when they needed it.
"This new pricing method for regulated raw milk will also allow independent milk processors to make good business decisions based on a fair price, very similar to the one Fonterra's farmers will be getting.
"This milk falls within the Raw Milk Regulations, part of the Dairy Industry Restructuring Act (DIRA) which was enacted when Fonterra was formed in 2001, to encourage competition within the dairy industry.
"For practically the whole time this legislation has been in place, regulated raw milk has been underpriced because of a faulty formula. This has negatively affected Fonterra's farmers in the pocket.
"This will also stop independent milk processors, who are owned by overseas investors, from getting cheap milk. Some of these firms have based their whole business model on getting milk, not from farmers at the farm gate, but from Fonterra at a cheap price. Federated Farmers has always said this is particularly unfair.
"It isn't in New Zealand's interest for many of these companies to source cheap milk so that they will export all of their milk products and most of the profits go off shore."
"I commend the debates that have been held in the House of Parliament and hope that it has focussed politicians' minds on the necessity of making sure Fonterra remains a wholly farmer-owned cooperative," Mr McKenzie concluded.
For further information contact:
Lachlan McKenzie, Federated Farmers Dairy chairperson, 07 332 3440, 021 382 442
