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.
In June 2015 the Minister for Primary Industries requested a report on the state of competition in the New Zealand dairy industry, as contemplated by section 148A of DIRA. The Commerce Commission's report is expected to be completed and provided to Ministers in early 2016. It will then be up to the Government to consider the findings in the Commission’s report and any changes that should be made to DIRA.
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 enter and exit Fonterra.
Under DIRA Fonterra has a statutory obligation to:
- be an open co-operative that accepts (subject to limited exceptions) all milk supply offered by any dairy farmer in New Zealand who is willing to hold shares in Fonterra in proportion to their milk supply;
- ensure the terms of supply that apply to new farmer shareholders only differ to those applying to existing farmer shareholders to reflect different circumstances;
- allow farmer shareholders to supply up to 20% of their weekly production throughout the season to another processor;
- allow farmer shareholders to leave the Co-operative and, on leaving, purchase their milk vats (subject to specified conditions).
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 2012, Fonterra must make up to 795 million litres of the milk it collects each season available to independent processors at either an agreed price or a regulated price.
Of that amount, the volume of raw milk that Fonterra must supply to:
- Goodman Fielder New Zealand Limited is limited to 250 million litres per season, and
- any other independent processor and their interconnected bodies corporate is limited to 50 million litres per season.
Fonterra is required to disclose certain information including the forecast and actual figures for the season of:
- The total quantity of raw milk to be supplied by shareholding farmers
- The total quantity of raw milk 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
- The additional cost of organic milk
Raw milk regulations - forecast and actual information