Ardern Shane: Dairy Industry Restructuring (New Sunset Provisions) Amendment Bill — Third Reading 
Text is incorporated into the Bound Volume 
Ardern Shane: Dairy Industry Restructuring (New Sunset Provisions) Amendment Bill — Third Reading 
[Sitting date: 11 May 2011. Volume:672;Page:18602. Text is incorporated into the Bound Volume.] 
SHANE ARDERN (National—Taranaki - King Country) 
: 
 In the 30-odd seconds I have before the dinner break I say it is a pleasure to rise in support of the Dairy Industry Restructuring (New Sunset Provisions) Amendment Bill. The previous speaker Damien O’Connor has outlined the history of the legislation reasonably accurately. I add that this industry is 27 percent of the country’s export earnings and it is one that we must get right. 
Sitting suspended from 6 p.m. to 7.30 p.m. 
The CHAIRPERSON (Eric Roy) 
: The House is resumed. Shane Ardern has the call and he has 9½ minutes remaining should he wish to avail himself of the opportunity. 
SHANE ARDERN 
: I am not sure whether I would make myself popular if I did. Speaking to the Dairy Industry Restructuring (New Sunset Provisions) Amendment Bill I think it is probably fair to put a little bit of context around it and talk about what is broken and what we are trying to fix. Effectively three issues were bothering the board of Fonterra and the Government alike. One was that the original Act the Dairy Industry Restructuring Act 2001 has the potential to expire some time in the not too distant future as was set out 10 years ago when it was first put in place given that the triggers that trigger the expiry clause are close to being met in the South Island at least and are probably a year or two away in the North Island. The Government looked at that and decided that the dynamics of the dairy industry outside what is controlled by Fonterra are not strong enough as yet. For that reason the Government decided it would be suitable to extend the period that the Dairy Industry Restructuring Act stays in force.  
The other major issue amongst the farming fraternity the shareholders of Fonterra was the price at which Dairy Industry Restructuring Act milk was being sold. The formula being used to set that price had developed into what was being seen by the shareholders of Fonterra as a subsidy to other companies that are able to pick up that 50 million litres of milk per company. So a price was set: Fonterra farm-gate price plus 10c. The 10c was put there to take into account the recognition of the loss of opportunity on the shoulders—that is a dairy season typically goes up with a sharp peak and comes down again on the far side with not such a sharp peak but it tapers away. If processing companies can pick up milk at the low points of that shoulder if you like then they have a substantial advantage. It was recognised that that was a cost to the shareholders of Fonterra.  
People talk about Fonterra as though it is some conglomeration of international executives etc. but it is worthwhile reminding ourselves at this point that in fact Fonterra is a farmer cooperative owned by 10300 shareholding farmers. So the 10300 individual small to medium sized businesses—some of them could potentially be described in New Zealand as large but certainly not internationally—that own this company are subsidising the other companies. In the end the Ministry of Agriculture and Forestry accepted that it was the case that they were subsiding those companies picking up the 50 million litres because they were not getting a fair return on it.  
The further point that this bill addresses is the fact that in the South Island the Westland area was excluded from the catchment that was measured to establish the trigger levels. In the legislation it is prescribed as about 80 percent of all milk collected in New Zealand going through Fonterra which is referred to in the legislation as the new co-op because that was the name it was given when the legislation was first put in place prior to the name “Fonterra” being introduced. The Westland area—the Westland Regional Council boundary I think it is or the territorial authority boundary—was excluded. The reason for that was the Westland company was one of the original companies that was part of the Dairy Board when the merger of the two major companies in New Zealand took place including the Dairy Board.  
The Westland company chose to stay outside that and until recently—about two seasons ago I think—it chose not to collect the 50 million litres of milk that it was eligible to collect under the Dairy Industry Restructuring Act because it never believed that that was in the best interests of New Zealand. But because the Dairy Industry Restructuring Act is likely to be extended the Westland company submitted to the Primary Production Committee that it is at a commercial disadvantage by not taking advantage of that 50 million litres and it has chosen now to do so. It collects milk from mid-Canterbury carts it across to Westland and processes it there. So the argument that Westland should stay outside the total catchment of the South Island because there is no real competition in that regard is now null and void. The area of Westland has now been included in the total catchment area for the South Island to establish when that trigger will be met.  
A range of other issues has been addressed during the discussions but I will leave those until another time. I sure there will be further debate in the dairy industry going forward and potentially further legislation. It is our intention to support this legislation.