Smith Nick: Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill — Second Reading In Committee Third Reading 
Smith Nick: Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill — Second Reading In Committee Third Reading 
[Volume:661;Page:10138] 
Hon Dr NICK SMITH (Acting Minister of Agriculture) 
: I move  
That the Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill be now read a third time 
. I do so as the Acting Minister of Agriculture on behalf of the Hon David Carter who is currently hard at work for New Zealand’s interests in the all-important opening market of China. I want to acknowledge his work on this bill as well as the very cooperative constructive way in which all members of the Primary Production Committee have helped to move this bill through the House. 
The bill was tabled in the House in October 2009 it had its first reading on 28 October after which it was referred to the Primary Production Committee. The select committee reported back the bill to the House on 22 February 2010.The bill has now had its second reading and passed through the Committee stage with only a very minor amendment in respect of the date of its coming into effect. 
The dairy industry is an integral part of the New Zealand economy. The industry contributed $11.3 billion or 27 percent of New Zealand’s total merchandise export value in the year to March 2009 and the industry continues to grow. As a result of productivity improvements and the expansion of dairy farming over the past few seasons New Zealand’s milk production is growing at around 3 percent per annum and there is great potential for further growth over the next 10 to 15 years. On the back of that strong milk growth we have seen increased investment in the industry through the entry and expansion of dairy processing companies and specialised food processors over the past few seasons. The increasing diversity of business models that have entered the dairy industry provides choice both to New Zealand farmers as well as to domestic and international customers and consumers wanting high-quality New Zealand dairy products. 
The Dairy Industry Restructuring Act has provided the regulatory framework in which new companies are able to enter the dairy processing industry and test the efficiency and the profitability of the different business models. The purpose of the pro-competitive measures contained in the Act was to promote the efficient operation of New Zealand dairy markets to ensure that New Zealand markets for dairy goods and services were contestable. The contestability of milk supply provided incentives for all dairy companies to seek innovative opportunities to drive cost efficiencies thereby improving the value of New Zealand milk and the returns to New Zealand farmers and the wider New Zealand economy. 
Upon the passing of this bill some of the inefficiencies in the current pricing system can be removed so that the dairy processors will be provided with the right economic incentives to source milk directly from farmers where practical rather than under the regulations. By promoting contestability in the market for farmers’ milk this bill builds on the purpose of the Dairy Industry Restructuring Act to promote the efficient operation of dairy markets in New Zealand. This bill allows for raw milk supplied to independent processors by Fonterra under the Raw Milk Regulations to be allocated through an auction system or through any other method. The bill improves upon the Act by providing for more flexibility in the pricing and allocation of regulated raw milk both now and in the future. As the industry continues to evolve the Government needs to have the tools to be able to modernise the regulatory framework in which the industry operates. This bill provides a more modern and flexible regulatory framework for pricing and allocating regulated raw milk. 
I want to pass on the Government’s thanks to the officials and to the industry which has constructively engaged in helping us get to the point of being ready to pass this bill. The bill builds on the objectives of the Dairy Industry Restructuring Act to promote a contestable market for farmers’ milk and ensure that the dairy markets in New Zealand operate efficiently. Yes it is an important issue for dairy farmers but actually the importance of the dairy industry makes this an important bill for all New Zealanders. I commend this bill to the House.