Fonterra 2014/15 milk price calculation gets NZ Commerce Commission approval

By Mark ASTLEY contact

- Last updated on GMT

Fonterra 2014/15 milk price calculation gets NZ Commerce Commission approval

Related tags: Milk, Dairy farming

Fonterra's farm gate milk price (FGMP) calculation for the 2014/15 season has been given the New Zealand Commerce Commission's stamp of approval.

Earlier today, the Commerce Commission published a draft report on Fonterra's FGMP calculation for the 2014/15 milk production season.

It is required to review Fonterra's FGMP calculation each year under the Dairy Industry Restructuring Act (DIRA) - legislation that allowed the merger of New Zealand Cooperative Dairy and Kiwi Cooperative Dairies to form Fonterra in 2001.

Fonterra ended the 2014/15 season with a FGMP of NZ$4.40 per kilogram of milk solids (kgMS).

In a statement, the Commerce Commission said Fonterra's calculations were “largely consistent with both the efficiency and contestability purposes of the DIRA.”

“Fonterra has made a significant effort to improve the transparency of its calculations and we have now resolved some outstanding issues from last year,”​ said Sue Begg, deputy chair, Commerce Commission.

“Most notably we can conclude its assumed energy and fixed asset costs are consistent with the purpose of the regime," ​she said.

A window for comments on the Commerce Commission’s draft report is open until September 1.

The final report will be published by September 15, it said.

In May 2014, Fonterra - the world's largest dairy exporter - announced an opening FGMP for the 2014/15 season of NZ$7.00.

The New Zealand dairy knocked a dollar off its initial estimate in July 2014, then reduced it to NZ$5.30 in September 2014 and NZ$4.70 in December 2014.

It further cut its forecast to NZ$4.50 per kgMS in April 2015, before settling on $4.40 the following month.

Fonterra announced an opening FGMP for the 2015/16 season, which began on June 1, of NZ$5.25 per kgMS.

It has since Fonterra slashed its forecast for the current season to NZ$3.85 per kgMS to account for the “imbalance”​ in supply and demand.

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