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:10141] 
SHANE ARDERN (National—Taranaki - King Country) 
: 
 I rise once again in support of the third reading of the Dairy Industry Restructuring (Raw Milk Pricing Methods) Bill. I thank the members of the Primary Production Committee very much for their fulsome support of myself. But I ask them to please lay off because I do not think that it is in the best interests of my political career going forward to be so forcefully and roundly supported by the Labour Opposition. But I thank them none the less; they worked very hard in the select committee where sometimes we had difficult characters before us. We managed to get the bill reported back to the House on time with some reasonable recommendations for the Minister which have been accepted. 
I will recap what the dairy industry in New Zealand in respect of this debate is about. As the Acting Minister of Agriculture said—and I was surprised to hear this myself when he commented; I hope it is correct—the dairy industry now provides 27 percent of our export earnings. It was 25 percent the last time I looked but it is now 27 percent. I am sure that figure is correct because the officials would have given it to the Minister. 
Fonterra is made up of approximately 10500 shareholder farmers. They are hard-working mum and dad New Zealanders. They are the hard-working individuals who own the industry through the shares that they hold and the land that they purchased. They risk their capital and it can be a substantial risk. I know some cases of directors who were about to press the start button on the new factories they had built. Had those plants not operated up to the specification range that they were supposed to operate up to they would have lost their farms. I am talking particularly about the Waharoa site now the Fonterra site in Hawera South Taranaki. It is a 20-tonne-an-hour powder plant that is world leading—the first in the world. That was how it worked. That was the risk they took that was the capital they invested and those were the decisions they made. I have never seen another industry in New Zealand with that type of backbone in terms of that integrated structure—from the producer right through to the market—and investing that type of capital. 
As I said earlier and most people were surprised to hear this Fonterra now represents 84 percent of all milk exported from New Zealand. Let us understand the difference between export and domestic. We seem to be able to understand that the All Blacks playing against the Springboks is different from when Taranaki plays Waikato. But when it comes to trading internationally for some reason we cannot understand it. There is a mental block about the domestic market and the international market. Fonterra exports 84 percent of all the milk processed in New Zealand. Fonterra exports 84 percent not 90 percent not 100 percent and not all these other figures that are put about. Fonterra with 10500 shareholders exports 84 percent of all milk that is processed in New Zealand. Fonterra represents a substantial part of the economy in New Zealand. This bill allows up to 600 million litres of Fonterra’s milk to be made available domestically to competitors of that company—that is what it does. The purpose of the bill is to set a fair pricing mechanism. Some legitimate concerns were raised by speakers from the other side about how fair that pricing mechanism is. It is the Fonterra farm-gate price plus 10c per kilogram of milksolids to recognise the seasonal production curve. 
The Prime Minister has just recently opened in Edendale Southland what is now the biggest powder plant in the world. I think it now processes 27 tonnes an hour. I understand that the specification range of that plant is somewhere between the commodity bottom-end powder which is skim-milk powder at about $1500 to $2000 a tonne right up to the very high-end specification which sometimes can be in excess of about $7000 per tonne. I stand to be corrected on those figures but that is what I understand to be the case. The plant will be efficient—and on paper it is the most efficient in the world—only if we can get milk into that plant for a long enough period. The legislation that we are passing tonight allows competitors of that plant like Kraft General Foods which is the total shareholder of the former Cadbury’s plant in Dunedin to be able to collect milk directly from under that new powder plant in Edendale deliver it to Dunedin and get that milk at Fonterra farm-gate prices in a Fonterra tanker plus 10c a kilogram. 
The debate is whether that process is fair and equitable and that debate will continue. There will be another round of discussions and there is a consultation paper out there. The small processors at the other end of the scale argue that of course they should have access to milk and if they are innovative and if they are developing markets in New Zealand or internationally that will bring a higher return to New Zealand from that process then yes of course they should. That is the balance we have tried to strike. I acknowledge the members of the Primary Production Committee for the work they did and I thank them for their support. I commend this bill to the House.