Ardern Shane: Dairy Industry Restructuring (New Sunset Provisions) Amendment Bill — Second Reading 
Ardern Shane: Dairy Industry Restructuring (New Sunset Provisions) Amendment Bill — Second Reading 
[Volume:672;Page:18258] 
SHANE ARDERN (National—Taranaki - King Country) 
: 
 It is a pleasure to rise in support of the Dairy Industry Restructuring (New Sunset Provisions) Amendment Bill. Before I speak I must declare an interest. I am a shareholder in one of the affected parties in this process. 
Before we proceed with why we have got to where we are with the Dairy Industry Restructuring Act at the moment I think we need to remind ourselves a little bit of the history of how the Act came about in the first place. It came about because two of the major and largest dairy companies in New Zealand Kiwi Cooperative Dairies Ltd and New Zealand Dairy Group chose to merge thereby having a very dominant role in supply of dairy products in New Zealand. Also they merged with the New Zealand Dairy Board our statutory board at that stage. Hence the birth of the Dairy Industry Restructuring Act 2001. 
At that point in time to allow that to happen the Government agreed to give the new entity—GlobalCo I think it was called; the new co-op was another name that was used—a dispensation around normal Commerce Commission regulations. As they say the devil is always in the detail. An agreement was thrashed out that the new co-op would sell or divest up to 52 or 53 percent of its domestic market products therefore giving it under 50 percent. So the nonsensical debate that is going on at the moment about Fonterra’s 80 percent shareholding or 80 percent ownership of the domestic market is factually incorrect and is outlawed by the legislation. It cannot by law own that percentage of the domestic market but no one would let fact get in the way of the debate. 
The big debate about domestic milk at the moment has occupied a fair percentage of media time and people’s speculation and I guess I am reminded when I see that of the words of Charles Darwin. He said that it is not the strongest of species that survives nor the most intelligent but the most responsive to change. That is the species that survives. So Fonterra in recognition despite the facts has come to the Government and said that it accepts that the Dairy Industry Restructuring Act should be extended on the basis that the Government will hold an appropriate inquiry into who is eligible for this milk. I ask members to bear in mind that what the Act requires Fonterra to do is make available 50 million litres to any one single entity who wants to take advantage of that milk. One of the big debates at the Fonterra farm gate was about the price of that and whether the Fonterra shareholder farmer was getting a fair price. There were arguments on both sides and the Government agreed in principle —that is the Ministry of Agriculture and Forestry officials agreed—that the current legislation which is being amended by this bill was unfair. In other words Fonterra shareholders were subsidising that 50 million litres to the competitors that were able to pick it up. 
The second and most important issue in that debate was that Fonterra’s farm-gate price is I guess as transparent as any price one could get. It is advertised in the paper. People know what it is. Just by the way as an aside as a farmer I know that the average price per litre of milk to my farm in the last 10 years has ranged between 35c a litre and this year potentially 79c a litre. There is nothing hidden about that. Everybody knows it; it is published it is in the paper it is there for anyone to see. So the Commerce Commission inquiry that was spoken of by the previous speaker will be an interesting inquiry. Clearly the difference between the 79c the farmer gets paid at the farm gate and what mum of Glenfield is paying at the supermarket is substantially different and it would be interesting to find out where that difference is. 
That said it was decided that this amendment legislation should be passed to improve the farm-gate price—that is the price Fonterra gets paid for the 50 million litres it must by law make available to its competitors—and the setting for that was the farm-gate price plus 10c a kilogram to take into account shoulder milk which I will not explain now because it would be a bit difficult for people to understand in the time I have available to explain. So it was the farm-gate price plus 10c which is not hard for anybody to work out. 
In the process of submissions on this bill Westland Cooperative Dairy Co. Ltd  a company who chose in the initial merger of the major companies to stay outside of the new Fonterra or GlobalCo structure said in its submission that “the correct status for compulsory supply of raw milk is to distinguish between raw milk for domestic retail purposes and industrial product for export. Regulated raw milk supply is appropriate for the protection of domestic customers but not artificially support industrial (ingredient) producers. Westland believes that manufacturers of dairy products for export are competing for an international market share and should not have access to DIRA raw milk.” Now that was said by one of the small companies and I happen to agree. The original principle was that a small amount—50 million litres of milk and a total amalgam of that of up to 600 million litres of milk—should be made available by the big new co-op to small start-up companies who were going to deliver products into the domestic market. What we have is some large multinationals using their muscle to invest in small processors and gaining access to this milk. That was never the intent of the original legislation and the review that as the Minister announced will take place in March—and which is now ongoing—should bring some clarity to that and hopefully some further transparency to how that process works. 
Finally I must say that this industry collectively is 27 percent of this country’s export earnings. It is our single-biggest industry. It is the industry that will help this Government and successive Governments into the future pay for the social services that this country so badly requires and desires. It is probably the least interesting debate in terms of what people pay attention to in this Parliament. So we have an industry that is one of the largest if not the largest single industry in the country and it is the one that gets the least attention in terms of some of the detail. I have always found that quite amazing. That said we are supporting the passage of this bill. We look forward to the review that has been announced and the findings of that review. The submission process was one that was thoroughly gone through and the end result I am sure will be one to the satisfaction of all those involved. Thank you.