O'Connor Damien: Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill — First Reading 
O'Connor Damien: Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill — First Reading 
[Volume:658;Page:7581] 
Hon DAMIEN O’CONNOR (Labour) 
: 
 I will not take too long to speak on the Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill other than to say that Labour will support it. This is an evolution of the Dairy Industry Restructuring Act that was passed under a Labour Government and it is a natural evolution following a review that was carried out by the previous Labour Government to move forward on some of the problems identified in the supply of milk into the domestic market. 
One thing I will say is that this bill should have been in the House some time ago. The National Government has seen fit to privatise the prison system and to do many other things before it moved on this vital area of economic growth for the country. The Government let the dairy industry remain in a period of uncertainty until it finally introduced this bill. I say shame on the Government and on the Minister of Agriculture for not having this bill in the House within the first 100 days. None the less Labour will support the legislation. 
Mr Brownlee has outlined what the bill does. It makes some technical changes to the Dairy Industry Restructuring Act. It allows ultimately for an auction system to be put in place. The previous Minister of Agriculture Jim Anderton had conducted the review and put to Cabinet a recommendation for an auction system. That would have proceeded but the National Government of course sat on its hands and discovered in June of this year that there was insufficient time to put such a system in place. So the Government has had to introduce this new legislation into the House. 
I think the bill is fair. It addresses the concerns that farmers have had for some time in the industry that independent processors were getting cheap milk—that is milk that was collected by Fonterra tankers and delivered to independent processors at a cost less than the cost of the production transporting and coordination. At the same time Fonterra had to build I guess for the possibility of taking all that milk processing it and turning it into something. So there was a potential cost there that was not taken into account in the original formula for working out the cost of milk. I think officials should take note that in the original Act they miscalculated a number of things. Their thoughts that there would be no major processors in this country competing with Fonterra have been proved wrong. There are now a number of potential processors such as Russian companies Synlait—and no doubt Ruth Richardson will sell that off to the Singaporeans or to anyone who will pay her a price—and other processors as well. 
I ask however what bill will be before this House next and that is a very important question. This legislation is a natural development of the Dairy Industry Restructuring Act; the next bill about capital restructuring dare I suggest will be far more important. I hope that the National Government will pay more attention to that next bill than it has done to this one because this issue should have been addressed back in January. The uncertainty has meant that an auction system cannot be put in place and an auction system is the only fair way of long-term price establishment for raw milk. In the interim the raw milk price which is the price that farmers receive up and down the country for their raw milk less the value-added component that will be paid through their milk cheque payment is that price plus 10c per kilogram of milksolids. That is a small premium to allow for the uncertainty that Fonterra faces as it has to collect the milk and manage its distribution through the independent processors. 
There were some genuine concerns from businesses like Cadbury’s and other high-value dairy industry processors that were seeing the potential competition—competition that would mean they would not be able to access the volumes of milk they required for the certainty of their businesses. But we have now moved to a situation where up to 600 million litres of milk can be collected by Fonterra tankers and delivered to independent processors. That is a privilege I suggest for those independent processors in both setting up and running their businesses but they will pay 10c over and above the raw milk price. 
Labour will support the legislation but we issue a warning to the Government that it should show more respect for the dairy industry and process legislation in a more timely fashion. It will also have to pay careful attention to the next bill that no doubt will be before this House on the issue of capital restructuring. Thank you.