Dairy Industry Regulations

The Dairy Industry Restructuring Act 2001 (DIRA) enabled the creation of Fonterra in 2001.

Fonterra was formed by the amalgamation of New Zealand’s two largest dairy co-operatives – New Zealand Co-operative Dairy Company and Kiwi Co-operative Dairies – and the assets of the former New Zealand Dairy Board.


Proposed changes to DIRA are currently before Parliament in the form of the Dairy Industry Restructuring Amendment Bill, which passed its second reading in late June.


In broad terms, the changes to DIRA are principally to enable the introduction of Trading Among Farmers and to introduce certain provisions relating to the “Base Milk Price” (Fonterra’s Milk Price), including the role of a Milk Price Panel, Milk Price Manual and regular review of the Manual by the Commerce Commission.


For more information go to Ministry for Primary Industries > Amendments to the Dairy Industry Restructuring Act, March 2012

  

To see Fonterra’s view on the Dairy Industry Restructuring Amendment Bill at the time of its introduction, read Fonterra’s media release Dairy Legislation 


Open Entry & Exit

DIRA was introduced to ensure that New Zealand dairy markets remain contestable and efficient. It promotes contestability by ensuring that New Zealand dairy farmers can freely enter and exit Fonterra.

 

Under DIRA Fonterra has a statutory obligation to:

  • be an open co-operative that accepts all milk supply offered by any dairy farmers in New Zealand that are willing to make capital contributions in proportion to their milk supply;
  • issue and redeem its Co-operative shares at the same price; 
  • allow farmer shareholders to leave the Co-operative with minimal transaction costs;
  • ensure that the proceeds of co-operative shares are paid in a timely manner;
  • treat new entrants and existing farmer shareholders equally.

For more detail on the DIRA freedom of entry and exit requirements go to the Ministry for Primary Industries website.


Raw Milk Regulations

Under the Dairy Industry Restructuring (Raw Milk) Regulations 2001, Fonterra is compelled to make up to five percent of the raw milk it collects available to independent processors at either an agreed price, or a regulated price. 

The total volume of raw milk that Fonterra must supply to independent processors is limited to 600 million litres per season, with a 250 million litres cap to New Zealand Dairy Foods Limited, and interconnected bodies corporate, and a 50 million litres cap to any other independent processor and interconnected bodies of that independent processor.


Raw Milk Announcements

Under the Raw Milk Regulations Fonterra is required to disclose certain information including the forecast and actual figures for the season of:

  • total volume of raw milk that it has contracted to supply to independent processors;
  • the total cost of milk; 
  • the Farmgate Milk Price; 
  • kilograms of milk solids supplied; 
  • the additional cost of winter milk for each Island; and
  • the additional cost of organic milk


Forecasts and Actual Information for the 2012/13 Season Ending 31 May 2013:


Forecasts and Actual Information for the 2011/12 Season Ending 31 May 2012:


Forecasts and Actual Information for the 2010/11 Season Ending 31 May 2011:


Actual Information for the 2009/10 Season: