O'Connor DamienThird ReadingHon DAMIEN O'CONNOR (Minister of Agriculture): Madam Deputy Speaker I would just like to firstly acknowledge your tenure in this House and your contribution to Parliament. I apologise; I wasn't able to be here for your valedictory but I acknowledge that and say I don't have any food in my mouth this time.I move That the Dairy Industry Restructuring Amendment Bill (No 3) be now read a third time. The bill represents a balanced approach to addressing changing circumstances in a dynamic industry and a changing global context. The bill was introduced in 2019 and considered by the Primary Production Committee which reported back in March 2020. It was read a second time in July this year. I'd like to acknowledge the very good work and the cooperation of the Primary Production Committee. As I noted in the second reading debate the bill has undergone some substantial changes since its introduction. This is in part a response to a changing context. Since the bill was introduced the world has undergone a major shock as a result of the COVID19 pandemic. That event highlighted the importance of New Zealand primary industries in supporting New Zealanders by providing food and new sources of employment and also in supporting our economic wellbeing. New Zealand's food exports kept up the flow of export earnings and the primary industries are now taking their rightful place in our economic recovery. It is therefore essential that the dairy industry has the right regulatory settings to support it. We want to see a strong and efficient dairy sector that meets the needs of farmers consumers and the economy as a whole. That's why the bill has evolved since its introduction. The Dairy Industry Restructuring Act (DIRA) regulates Fonterra. Fonterra is a key player in domestic and global dairy markets. We want to see a strong and efficient Fonterra with a strong and efficient dairy industry. We also want to ensure that farmers have pathways for their milk to reach domestic and global markets through an efficient dairy processing sector and that they can make good choices about the use of their land for the benefit of their farm business and the economy as a whole. When the DIRA was passed it included obligations on Fonterra that were intended to promote its efficient performance and to support new processors into entering the market. The open entry provisions in the DIRA required Fonterra to accept anyone who wanted to be a shareholder and to accept all shareholders' milk. Over time these requirements have created some inefficiencies. Fonterra has faced uncertainty over milk supply volumes and as a result has had to invest in extra capacity to manage that uncertainty. We now have a number of other large-scale processors in the market and we cannot afford to impose continuing costs of this kind on Fonterra. That is why the bill as it faces its third reading has been amended to repeal the open entry requirements. Fonterra will be free to decide like other processors whether or not it wants to take on new suppliers with some conditions. At the same time the bill balances this discretion with some of the expectations on Fonterra as I've said. The bill requires that when Fonterra decides whether or not to accept an application it must take a couple of important factors into account. The company must consider firstly the effect of its decision on the ongoing viability of the farm where a Fonterra farm has changed hands and secondly land-use opportunities available to the applicant. The bill therefore balances the interests of both Fonterra and of farmers. It gives Fonterra the ability to better manage its milk supply and investment in processing capacity. It provides a pathway to a supply contract for new farmers entering the dairy sector while enabling farmers to make choices about land use. The bill also recognises that the dairy sector has changed over time and that regulation that made sense in 2001 is no longer required. We have removed the entitlement of large-scale processors who are generally focused on export to buy raw milk from Fonterra at regulated prices. This measure was implemented in 2001 to support the development of competition at a time when Fonterra controlled 96 percent of the market for farmers' milk. We now have as I've said a number of large-scale processors around the country with their own raw milk supplies. They have demonstrated that it's not necessary to provide large processors with regulated access to milk from Fonterra. So we have removed a requirement that is no longer needed. We have however ensured that processors who really need access to regulated milk can still get it. These processors are little companies that supply New Zealand domestic consumers for the most part. They make a wide range of cheese yoghurts ice creams and other speciality dairy products that provide choice and variety for New Zealanders. We want to ensure that they can keep doing that because often the innovation comes from these small and dynamic companies.We've also retained but updated provisions for Goodman Fielder to buy regulated raw milk from Fonterra if it needs to. I stress the words if it needs to." Since 2001 Goodman Fielder has been buying raw milk from Fonterra but it has not been relying on the DIRA to do so. It has bought its milk under a commercially negotiated contract. So the provisions in the DIRA are there as a backstop if in the future Goodman Fielder cannot negotiate further contracts for raw milk or source its supplies. I know that this has been somewhat of a controversial matter. There was a lot of discussion at the select committee questioning why we need to have some big regulatory protection for a large foreign-owned processor and the answer is that we have to be pragmatic and to make a trade-off. We want New Zealand consumers to have reliable access to the basic dairy products—fresh milk cheese etc. at fair prices. So we need at least one large competitor to Fonterra. That competitor is Goodman Fielder at the moment and the provisions in the DIRA are not there for the benefit of Goodman Fielder per se; they are there as an insurance policy for New Zealand consumers and we will be keeping these provisions under review. As for the remaining issues in the bill I think that they have been well covered in the second reading and we've had good discussion during the committee stage of the bill to clarify some of the points. We have tidied up some aspects of the base milk price to clarify its purpose and to make it clear that it's a benchmark not a regulated price that Fonterra must pay. We've also provided for one member as was discussed of Fonterra's milk price panel to be appointed by Fonterra's board on the nomination of the Minister of Agriculture. The base milk price provisions in the DIRA are all about transparency. That's why the process has to be robust and credible. The change in membership aims to strengthen that transparency and the new member as I say will be nominated by the Minister not appointed by the Minister. He or she is not the Minister's representative but indeed someone who can be trusted to have a fair oversight and check on the process. I consider that the bill provides a re-entry regime that meets the current needs and supports the role of the dairy sector in meeting the challenges that we all now face as a country. As I said at the outset the industry and the context in which it operates is dynamic and subject to constant change both domestically and globally. The dairy industry faces the challenge of changing consumer demands competing alternative proteins climate change environmental limits and new technology and practice. The regulatory regime will need to flex and adapt it to remain fit for purpose. For that reason the bill reinstates provisions for a regular review that were removed in 2016 and this review is necessary as we move forward into the future. Can I just acknowledge the good work of the Primary Production Committee in overseeing this. Can I acknowledge the cooperation of all parties in the House to get the final wording right Finally can I say that while Fonterra is our national champion and we are very proud of it we need to ensure that it's not a bully in the market place; that it does leave the door open for innovative evolution of our dairy sector; and that it does allow individual farmers or individual companies that want to to go out and seek new markets and that it works with them and doesn't try to compete against them. So I commend this bill to the House."