Ardern Shane: Dairy Industry Restructuring Amendment Bill — In Committee 
Text is incorporated into the Bound Volume 
Ardern Shane: Dairy Industry Restructuring Amendment Bill — In Committee 
[Sitting date: 17 July 2012. Volume:681;Page:3549. Text is incorporated into the Bound Volume.] 
SHANE ARDERN (National—Taranaki - King Country) 
: 
 It is a privilege to rise and speak in this debate today in the Committee stage of the Dairy Industry Restructuring Amendment Bill. Before I do though I need to declare an interest as part of a trust that has shares in Fonterra. Can I assure Parliament and those who have just spoken that it is in the DNA of most dairy farmers—the one who is speaking to you being one—to maintain 100 percent ownership in Fonterra. It is absolutely in their DNA. 
Damien O’Connor 
: 50 percent. 
SHANE ARDERN 
: I heard the contribution from the other side about it being as low as 50 percent. There is nothing to back that up. In fact from my own research out there as to whether it was the big corporate farmers versus the hard-working mum and dad farmers who voted in this vote yes or no I would suggest the split of those who were concerned was equal between the larger shareholders or milksolids providers and the ordinary mum and dad farmers. There is no evidence to say that support is as low as 50 percent. It would be interesting to know the outcome of that but it is not relevant to this debate. So I would suggest that members concentrate on the facts: 66 percent of those who voted through milksolids voted in favour. That is a mandate by any comparison with anything that happens in this Parliament. 
The fact that the vote for constitutional change required 75 percent but only achieved 72 percent is disappointing but I am sure it will be rectified as the Minister for Primary Industries said when the next opportunity arises. If not then that is the decision of the shareholders themselves. To suggest as some have that the 10400 independent business people who are the shareholders of Fonterra do not have the wit the intelligence the ability the knowledge the understanding the ability to get the right advice and the ability to look at the facts and on balance make a call is insulting to the 10400 shareholders who have made that call. The fact that this company and this industry over the last 8 years have seen something like a 280 percent increase in turnover—280 percent—and now represent about 25 percent of the total export earnings from this country suggests I think that this group of individuals do have the wit the ability the lifestyle and the interest at stake to ensure that the decisions they make going forward are in the best interests of their own industry plus the best interests of “New Zealand Inc.” 
If members opposite believe that there is an entity a structure or a company in New Zealand that has more of “New Zealand Inc.” at heart than this company has then suggest them bring them forward; I have not been able to find them. Maybe my research is not wide enough but to suggest that this company does not have at heart the best interests of New Zealand or “New Zealand Inc.” is I think actually insulting to the facts. 
Fonterra is a priceless asset to New Zealand dairy farmers and it is a priceless asset to New Zealand. Farmers in many parts of the world are very very envious of the structure we have. They are also very very envious of the market structures that are being developed. But that does not get past the fact that this company was faced with a substantial redemption risk. In fact it was built into the formation of the company if you go back to the history of it. And of course that was with the compromise that must be struck between free entry and exit existing so that you can have a dynamic dairy industry in New Zealand and having capital that can flow in and out freely. This is a very very good solution to that problem which is to have an ability for those who for whatever reason wish to divest themselves of the dividend rights in the shares into a separate custodian group that will be able to trade those dividend rights and overcome the substantial redemption risk that exists. 
In the process leading up to this there has been some interesting debate. I am reminded of Gareth Morgan actually saying in 2004 that the dairy industry was dicing with disaster. Gareth Morgan said in 2004 that the industry was dicing with disaster and that the industry should look upon a different structure. He was referring to the risk that existed from redemption but he could not have been more wrong because as I said earlier on there has been a staggering growth rate since those comments were made. This company now is the envy of the world in terms of its ability to trade into and compete within 150-odd different countries in the world—some of which have industries bigger than Fonterra and some of which have industries bigger than the New Zealand economy. Others have tried. There are plenty of examples where others have decided they can enter into the niche market in the very sophisticated end of the product range and achieve a dividend for it. So far the evidence of them being to do that is at best marginal at best challengeable. But some will no doubt achieve that and I hope that they do because it is in the best interests of New Zealand and the industry at large that there are a number of players who can compete at farm-gate price. 
Part of the process being debated here is about how that farm-gate price will be set and it is interesting to note that the concerns raised by Opposition members about what may happen with the size of the tradable fund have taken precedence when probably the most vexed issue or question in the whole debate so far has been how that farm-gate milk price may be set and what intervention the State may have in regard to that. The compromise that has been met in this bill is that the milk price manual which is set out and publicly released by Fonterra is now going to be enshrined in legislation. The independent panel which feeds information into that manual is going to be there by statute and the Commerce Commission itself will finally have an annual ability to oversee how that process takes place. 
The Commerce Commission raised some issues with the Primary Production Committee that were very interesting. The select committee did what it could to address those issues. I think that the position we have finished up in is one of compromise without doubt but it is certainly something that will assist the industry with the issues it raised. I think we should not forget that it was the industry itself that raised the concerns with the Government and came to the Government for amendments and the end result of those amendments and negotiations is what we have here today. It has been a privilege to have been a part of that process and I look forward to the passage of the bill through the House.