Browning Steffan: Dairy Industry Restructuring Amendment Bill — Second Reading 
Text is incorporated into the Bound Volume 
Browning Steffan: Dairy Industry Restructuring Amendment Bill — Second Reading 
[Sitting date: 21 June 2012. Volume:681;Page:3259. Text is incorporated into the Bound Volume.] 
STEFFAN BROWNING (Green) 
: 
 This bill the Dairy Industry Restructuring Amendment Bill is the thin edge the setting up of the selling out of the Fonterra cooperative and its family farmer members. So the Green Party will not be supporting this bill. This bill is the dairy farmers’ poor cousin of the Mixed Ownership Model Bill which was set up to privatise State assets. 
In the Dairy Industry Restructuring Amendment Bill the so-called Trading Among Farmers provision—TAF—allows outside investors in to trade on the dividend stream of Fonterra farmer members and begins an inevitable demutualisation of Fonterra and increased foreign control of New Zealand’s primary industries. We already have much foreign control in New Zealand primary industries particularly timber and we do not need more in the pastoral area. 
 This is not Trading Among Farmers; this is actually “Trading Against Farmers” nothing less. Even if Trading Among Farmers is not agreed by Fonterra’s farmer members—and they have not been well-informed by their executive—the milk pricing and so-called fair value share regime sets the scene for the rot to set in at Fonterra devaluing family farmers’ worth. 
Fonterra—the cooperative of 10500 New Zealand farmers representing 3 percent of global dairy production 25 percent of New Zealand’s export earnings and some $19.9 billion in revenue according to Fonterra—has got the greedy looking at how to get a slice of the action albeit that some are actually insiders. 
This bill has suffered from poor process with the Fonterra executive pushing a willing Government into rushing legislation through a rushed submission and hearings process at the Primary Production Committee and now we are dealing with this reading of the bill while farmers are actually in the middle of voting on whether they even want this version of the runaway Fonterra executive’s plan for bringing in outside investment and influence. 
The Dairy Industry Restructuring Amendment Bill should not be before Parliament at this time. Independent expert advice and informed responses that show serious flaws in the Trading Among—or arguably “Trading Against”—Farmers concept are still being circulated as we speak among decision makers including farmer shareholders and members of Parliament. 
The Green Party points out again the limited time given to the Primary Production Committee and the farmer members of Fonterra the limited access to full information from Fonterra the limited time for more expert discussion and advice and the subsequent difficulty in exploring the nuances of the bill especially considering its complexity. 
Let me reassure the House—and you well know Mr Deputy Speaker—that the select committee did spend dedicated time on extended hours to hear many and often substantive submissions and advice and spent a reasonable time in deliberations. However the information available to the select committee was never complete nor was there opportunity for farmers to submit to the committee on the information circulated very very late in the process by Fonterra to them. 
Fonterra has tried reselling the “TAF” concept the Trading Among—or “Against”—Farmers concept on the basis of redemption risk which is the need to be buffered against an outflow from Fonterra of farmer members to other milk processors or land-use choices. The need to pay out their shares on their exit is redemption risk and we will come back to that. 
The Minister for Primary Industries said just today that this bill is about allowing free access in and out of Fonterra by farmers and about allowing free competition in the dairy sector. That is clearly setting a scene for his friends including ex-frontbench National colleagues and the independent processors to have less competition from the most successful farmer cooperative we have known. 
Primary production cooperatives or single desk - type collectives work to the advantage of their members to ensure the best returns for their farming or sector production. Fonterra has been a good example of this and Zespri although not a cooperative but a producer collective is another. That is particularly evidenced by its management of export sales. ENZA—formally the New Zealand Apple and Pear Marketing Board—however is an example of where deregulating and fierce competition including outside investment blew the sector apart and it can no longer be considered a successful export sector to the level that dairy and kiwifruit are. 
This bill the Dairy Industry Restructuring Amendment Bill also missed an opportunity. The bill includes provisions that can influence land use land price commodity trading or value-adding. It may have been designed to reward best environmental practice also. The focus of the bill on the efficient operation of dairy markets in New Zealand missed an opportunity and it fails to allow those broader gains such as organics. Fonterra has already dropped 50 percent of its organic producers and certainly is not paying them any form of premium from its organic programme due primarily to what it considers inefficient milk pick-up runs and processing plant operations. What is inefficient? Unsustainable production is inefficient. Larger-volume independent processors show no sign of picking up what can be seen as more environmentally sustainable production. “Efficient” is primarily a term used for volume-based production and marketing. It does not address long-term economic efficiency that being sustainable production. 
The dairy industry has presented to me how it wants a 10 percent lift in production while holding its environmental footprint to the status quo as though that is OK. Well that is not such a fantastic outcome when the status quo in environmental outcomes is seriously way below par. This bill could have included drivers that would have focused on value-adding on-farm through certifiable sustainable production such as organics not further commodification for outside and more often than not foreign interests making New Zealand farmers peasants on their own land. 
Some consultants suggest it may take 15 years for the breakdown of Fonterra following the cracking of this cooperative nut but I suggest that with the vested interests of this loyal Fonterra board and management and the outside investors demutualisation will occur much more quickly once Trading Among Farmers or wildly fluctuating share values and milk pricing chip in. 
We all need to remember that Trading Among Farmers as proposed in the bill has had an evolution from origins that intended open stock exchange listing. Fonterra’s push for Trading Among Farmers follows that and Trading Among Farmers maintains as much of that as Fonterra’s executive the Government and officials think that they can get past the Fonterra farmers. That does not fit the cooperative model that has allowed the success of Fonterra to date. 
Fonterra has said that it needs this move to achieve the capital to allow offshore farm and infrastructure development. Then it says: “No no no that is not what we are saying. It is to cover redemption risk.” It is very easy to doubt the veracity of the Fonterra executive’s statements. Spin fact or fable—whatever the statements the real need for Trading Among Farmers as presented to the select committee is in part contradicted in its complex communications to its farmer members. 
Many submitters pointed out that buffering for redemption risk can be achieved by other means such as a retention policy that has already been shown to be successful in accruing significant capital. Figures show that retentions taken from 2008 have managed any redemption risk and in fact $438 million was taken in 2010 it was retained and another $487 million was retained last year. Effectively half a billion dollars a year can be retained and Fonterra was saying that it needs to do this smart thing of letting outside investors in for redemption risk. That is clearly not the case. 
I will just point to Mr van der Heyden and his friends who seem to have gone for a walk from their members. They have certainly alienated their members. But their very latest missive—and they are pushing very very hard— 
Mr DEPUTY SPEAKER 
: Order! The member’s time has expired.