O'Connor Damien: Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill — Second Reading In Committee Third Reading 
O'Connor Damien: Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill — Second Reading In Committee Third Reading 
[Volume:661;Page:10134] 
Hon DAMIEN O’CONNOR 
: No I have no vested interest; I am not a shareholder in any way. I have brothers who are and a father but I am not in any way a contact. Westland also said however that if we are intent on continuing with this structure then it will apply for milk which seems a little bizarre given that that company actually objects to the whole set-up anyway. But it said that it was in its commercial interests—and it has an obligation to its shareholders to maximise returns—to ring up Fonterra and ask for tankers of milk to be supplied in Hokitika. Of course it will pay for transport but it is still worthwhile for it to do that because being able to square one’s supply curve—that is fill in the gaps and get consistent supply into one’s factories—is invaluable in any large processing structure. 
There is a value in that that had not been assessed by Fonterra or those purchasing. I thank the Westland Cooperative Dairy Co. for its honesty because it did help the select committee and I guess reinforced the view that we need to move towards an auction system where the market will identify the true value and we will not be attempting by regulation to set a fair price on a commodity—milk—the price of which fluctuates on a regular basis in the international market place. In fact it fluctuates quite a bit domestically on the basis of those international prices. So I hope that Westland does not have to continue to access milk from Fonterra because it will be a transfer of wealth from Fonterra to Westland shareholders. Maybe that is quite a good thing actually but anyway I have to thank them for their submission. 
There were a number of other submissions one from Federated Farmers which I have to say was fairly consistent. They still believe that the market will deliver everything without regulations. I think it is a little naive of them but they do understand that there was a dilemma and their farmer shareholders were searching for and seeking a resolution to this. I have to tell them they are getting it a year later than they should have because of the National Government’s procrastination and that is unfortunate. It is not because the select committee sat on its hands. We moved immediately. We heard submissions. We processed this as quickly as we could and I think we have done a pretty good job with it. 
I will refer to just one other submission which was from Open Country Cheese a large and growing company in this country. It has concerns. It has enjoyed the benefits of accessing milk. I think it is prepared to accept that an auction system will be the fairest way for it to move forward. But it has views too around the capital restructuring of Fonterra—the next step that we will see in this House—and how it thinks that it may lock farmers into Fonterra. That is not the intention of this House and was not in 2001 when we passed the legislation. Farmers need to be able to come and go. Land use needs to be able to change although in my humble opinion there is a loss of value to this country of continued land use change and a waste of capital. But I think we will look at that in hindsight—[ 
Interruption 
] Of course if that Minister Steven Joyce gets his way Fonterra will be listed on the stock market his friend Mark Weldon will be enjoying a slice of the action when the shares are bought and sold and he will be patting himself on the back saying what a wonderful thing he has done for New Zealand agriculture. In the end as the stock market has done before time and time again those shares will disappear offshore but Mr Steven Joyce has no fears about that. It does not worry him who owns New Zealand as long as there is someone around making a slice on the transactions as those shares come in and out. That is the warning that I have. 
The detail that the select committee has worked through on this legislation has been done because the chair and the committee members are firmly of the view that we are doing this to improve the situation for the dairy industry in the belief that it will remain in New Zealand hands. If we were—and I think we have checked and double-checked—making a mistake by bringing in an auction system that will better facilitate the capital restructuring and will allow shares to be traded on the stock market then I would not vote for this piece of legislation. But I think that in the staged way that we are approaching this this is a good piece of legislation. 
The technical details in this bill—which I have not dwelt on too much I have to say even though this is the Committee stage—I think are all sound. We have amended through clause 4 section 115 which deals with the issue of auctions and what may be required. The Minister of Agriculture will have the right to set a reserve. There are some concerns about that. The chief executive of the Ministry of Agriculture and Forestry—and I see some officials in the Chamber who I am sure will be listening carefully—is required to maintain the auction system. The chief executive is required to maintain a sound fair and honest auction system. That does not always occur when there are a couple of big players and some small players. That is why the concerns that some of the smaller players had have been addressed and there will be a certain amount of milk available for smaller players—I think it is up to 40 million litres. So if one wants to start a little cheese factory then one will be able to bid at the auction and one will not have to compete with Open Country Cheese Westland Dairy as they might bid into it Synlait or the Russian-owned companies as who knows what foreigners may come into this country the Chinese or anyone else. Opportunities for small innovative entrepreneurial New Zealanders have been protected with the set-up that we have and the changes we have made. 
New section 119A has been inserted to allow regulations to be made under the Act. We need some protections to ensure that there is decent consultation. We have dealt with those technical issues as best we can in the bill. Maybe one of the Government members or the chair of the Primary Production Committee can get up and give us an assurance on that. I feel comfortable with it. We have to make sure that the regulations that this bill allows do apply and that we can have a fair and honest auction system. Thank you.