New Zealand raw milk competition 'at risk' from Fonterra dominance: Westland

By Mark ASTLEY contact

- Last updated on GMT

New Zealand raw milk competition 'at risk' from Fonterra dominance: Westland

Related tags: Farm gate milk, Milk

Competition for farm gate milk in New Zealand is "at risk" from Fonterra's market dominance, says Westland Milk Products.

Responding to a call for submissions by the New Zealand Commerce Commission, Westland Milk Products, a Hokitika-based cooperative, said that on the whole "there is sufficient competition in the dairy industry."

"However," ​it said, "competition for farm gate milk (the market in which dairy farmers supply raw milk to dairy processors and dairy processors compete to secure farmer supply) is at risk from Fonterra's dominance in this market."

It added that "a number of actions have been taken by Fonterra that hinder withdrawal from Fonterra by its suppliers."

These actions, Westland said, are "contrary to the purpose and principles" ​of the Dairy Industry Restructuring Act (DIRA) - the legislation that allowed the merger of New Zealand Cooperative Dairy and Kiwi Cooperative Dairies to form Fonterra in 2001.

"Helping or hindering"

In May, in line with Section 148 of DIRA, the Ministry for Primary Industries (MPI) requested the Commerce Commission produce a report on the state of competition in the New Zealand dairy industry.

On June 12, the Commerce Commission launched a consultation it said would "look at whether the regulations are helping or hindering the efficient operation of the Ne Zealand dairy industry."

The Commerce Commission call for submissions on the state of competition in the New Zealand dairy industry, which closed on July 10, was heard by a number of industry stakeholders, including Westland, Synlait and Federated Farmers.

Westland recommended that "parts of the current regulatory regime must remain."

"Unfortunately a number of the regulations pertaining to farm gate milk have largely been either unused or appear to have been ineffective but in so far as they are intended to promote the concept of freedom of entry and exit (to/from Fonterra) we support their continuance,"​ it concluded.

Federated Farmers meanwhile recommended "retaining the Dairy Industry Restructuring Act (the DIRA), regardless of the amount of competition present in the industry."

"Federated Farmers submits that the DIRA and its regulations will need to be amended if it is to be kept long term," ​it added.

The Commerce Commission is required by the MPI to complete its report on the state of competition in the dairy industry by March 1 2016.

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