Why Fonterra accepted defeat in the dairy aisle
OPINION: Fonterra's sale of its consumer dairy business to Lactalis is a clear sign of the co-operative’s failure to compete in the branded consumer market.
DIRA may also be no longer fit for purpose, in that it provides access to regulated milk for large dairy processors “for whom it may no longer be necessary”.
However, DIRA remains relevant and effective at achieving its core objective of managing Fonterra’s dominance, and was unlikely to be encouraging inefficient industry growth or preventing Fonterra from pursuing a value-add strategy.
MPI says those were its preliminary findings after consulting industry stakeholders in the first stage of a major review of DIRA launched in May.
Agriculture Minister Damien O’Connor released the document at a ceremony on a dairy farm at Outram, Otago, to mark the start of wider public consultation.
O’Connor said our biggest and most important export sector must be fit for the future.
“It’s timely to take a strategic view of the challenges and opportunities facing the nearly $17 billion dairy sector.”
“A productive and sustainable dairy sector that grows value and protects the natural resources it depends upon is vital to our economic prosperity and the wellbeing of all New Zealanders.”
O’Connor said DIRA, which led to the setting up of Fonterra in 2001, regulates the co-op’s dominance in the market to protect the long-term interests of all farmers, consumers and the wider economy.
“The dairy industry was built on the back of the DIRA legislation and it is a significant driver of the industry’s performance.
“The review is looking at open entry and exit obligations, the farmgate milk price settings, contestability for farmers’ milk, the risks and costs for the sector, and the incentives or disincentives for dairy to move to sustainable, higher-value production and processing.
“We need everyone with an interest in the success of the dairy sector to take part in a frank appraisal of the issues.”
Public submissions are invited until February 8, 2019, after which potential legislative changes will be drawn up to go to Parliament.
The document says key legislative areas are open entry requirements, access to regulated milk for dairy processors, the base milk price calculation and the DIRA review and expiry provisions.
