Ardern Shane: Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill — Second Reading In Committee Third Reading 
Ardern Shane: Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill — Second Reading In Committee Third Reading 
[Volume:661;Page:10122] 
SHANE ARDERN (National—Taranaki - King Country) 
: 
 I rise in support of the Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill. In doing so and at the beginning of my comments I declare that I am a shareholder of Fonterra. In accordance with the Standing Orders I declare that interest. 
What we are talking about in this bill and what two earlier speakers have talked about is the raw milk regulation under which Fonterra has to provide milk—up to 600 million litres or up to 5 percent of its total milk production—to its competitors. Those are the small companies and sometimes not so small companies that also participate in the international market and in the domestic market in New Zealand. I will mention a figure and I ask members to take note of it. Fonterra now represents 84 percent of our export milk not the 93 percent not the 95 percent not the 100 percent monopoly and not the other figures that we often hear about but 84 percent of our export milk—that is products made from milk that are exported annually from New Zealand. 
The Primary Production Committee as the Minister said in the first reading debate considered a number of issues listened to many submissions and made some recommendations which I am pleased to say have been accepted. One of the submissions was from Westland Cooperative Dairy Co. which was one of the companies that were originally involved in the Dairy Board. I guess it was one of the legacy companies at the beginning of the process that chose to stay out of the merger that originally formed Fonterra. Westland Cooperative Dairy Co. made an excellent submission in the sense that it identified the intent of the legislation—the Dairy Industry Restructuring Act 2001—and said the company had been disadvantaged by that Act. That is another side of the argument. The company said that it was disadvantaged because of its location and that because the company had understood entirely the intent of the raw milk regulation when it was first set up the company had chosen not to take up its entitlement to collect the 50 million litres of raw milk that it would have been entitled to collect from Fonterra. 
As it has turned out the milk provided by Fonterra to other companies was provided at a subsidised price and because other companies that export into the same markets as the Westland company chose to take that milk the Westland company felt that it had been disadvantaged. So its submission was about whether the Act should be extended beyond the point where of course the triggers within the Act will be met. Those triggers are a percentage of milk in the South Island that is not going through the Fonterra structure and a percentage of that milk in the North Island. As previous speakers have said the South Island trigger is probably about 12 months away from being met and the North Island trigger is 2 or 3 years away from that on current forecasts. So within 3 years or maybe 4 years the current raw milk regulations could expire. 
The debate is about whether the triggers in the Act should be extended. The question is what percentage of milk going through Fonterra and into our export markets is acceptable. If 84 percent is still considered to be too high then what percentage would people be happy with? If we compare that system with the structure of other primary industries such as our meat and wool industry structures and if we talk to people involved in those industries we find they feel that their industries are too fractured. They will potentially come to the Government at some stage and ask for some assistance somehow or other to merge companies so that they can get more critical mass into their export structures. 
That is the debate in essence. The select committee was happy with the general direction that is being taken as the Minister said when he announced changing from the raw milk regulation we previously had in terms of pricing to the current proposal—that is it will be the Fonterra farm-gate price plus 10c per litre to take into account the “shoulder milk” or seasonal supply of milk. I think that is a good step forward. The 10500 shareholders and farmers who represent Fonterra and who also represent something like 25 percent of this country’s export earnings will be happy to hear that that has happened because there was a subsidy previously. I commend the bill to the House.