Ardern Shane: Dairy Industry Restructuring Amendment Bill — First Reading 
Text is incorporated into the Bound Volume 
Ardern Shane: Dairy Industry Restructuring Amendment Bill — First Reading 
[Sitting date: 03 April 2012. Volume:679;Page:1574. Text is incorporated into the Bound Volume.] 
SHANE ARDERN (National—Taranaki - King Country) 
: 
 Before I start my comments in relation to the Dairy Industry Restructuring Amendment Bill I declare an interest. A family trust I am involved in is a shareholder in Fonterra. I thank the Minister for Primary Industries for sending this bill to the Primary Production Committee. I read with some interest just recently in a press statement by a senior press gallery person that it was being sent as a sop to farmers. Well I just want to clarify one thing. Every piece of legislation that has ever been related to the dairy industry every piece of legislation that has ever been related to the dairy industry—that is legislation not regulation because of course regulation goes to the Regulations Review Committee—goes to the Primary Production Committee. So I am not sure where that person got that from. Maybe she was interviewing her computer keyboard but perhaps she could tell us where that came from at some stage in the future. It would be interesting.  
As the Minister has outlined Fonterra was formed nearly 11 years ago to create a structure that allowed individual farmers to band together and compete in the international market place. For those who may be listening to this debate a little bit of history at this time is probably beneficial in putting this debate into context. Originally across New Zealand there were many hundreds of independent dairy companies—in fact I believe there were about 104 in Taranaki alone. These companies were either farmer cooperatives or publicly listed or privately owned companies. They used to sell their products independently to both domestic and international markets.  
It soon became obvious to them that the Tooley Street buyers of London who used to come out en masse in those days and we are going back into the 1930s and 1940s were playing one company off against the other—some things never change and some things change all the time—and lowering the price of dairy products overall in New Zealand. So collectively the dairy companies decided then with the support of their farmers to go to the Government and form the New Zealand Dairy Board which was a legislated single-desk seller. This structure was asked for and paid for by the farming companies. Mechanisation over the years has driven rationalisation and most of the companies merged to form mega companies. We got to the point where we ended up with two large companies in New Zealand dominating the Dairy Board’s affairs. At this time the Government desired to see deregulation of producer boards and for the dairy industry this resulted in the formation of Fonterra.  
Fonterra in its 10 years has achieved 8 percent growth annually. No other New Zealand - owned company has achieved this. Fonterra is now the dominant milk trading company in the world. That means that the original objectives have been met—that is to have critical mass and be able to compete internationally. What is unique about New Zealand’s dairy industry is that we export 95 percent of what we produce as opposed to most dairy nations where the domestic consumption is 95 percent or better—and in fact in some cases of course it is well over 100 percent; that is why we are able to export to them. The industry brings $20 billion of export receipts into New Zealand and represents 26 percent of New Zealand’s export earnings. I want to go on record today to say that I am proud of the achievements within this industry and I believe that New Zealand stands to gain substantially if this industry continues to prosper. Interestingly most other primary industries have said they would like to create a Fonterra-type model for their industry.  
The bill has two parts: raw milk regulation and Trading Among Farmers and shares regulation which is commonly known as TAF as the Minister said. I do not intend to go into a lot of detail here because most of that detail has already been canvassed and I am sure speakers on the opposite side will raise some of that detail. But I know that there are some communities and some farming groups that are concerned about the proposed legislation and I look forward to hearing submissions highlighting the issues within the industry through the select committee process. There has been concern about the domestic price of milk and the transparency around farm-gate milk price setting. I look forward to the findings of recent investigations and how the proposals before us will affect this. The 10300 dairy-farming shareholders who own the Fonterra company and have built it to the stage it is at now—some putting their own farms at risk through their directorships and developing new technologies in large production plants that are the envy of the world—are concerned that there is potential for less than 100 percent farmer ownership. So we look forward to hearing those submissions.  
Whatever the outcome of this process and no matter what anyone else thinks Fonterra is made up of 10300 farming shareholders and their determination and investment must be acknowledged. Fonterra is not a large greedy corporate as some have portrayed it. It is a farmers’ market with enough critical mass and scale to compete in the international market place. So for this Parliament to not recognise that and not focus entirely on ensuring that all of those virtues are protected going forward and that we end up with legislation that enables that to happen will not be in the best interests of the farmers Fonterra the dairy industry at large the country or the economy. It is obvious to me that the process through the select committee will allow for much debate and I look forward to the Opposition’s role in that process of having a look at the detail around this legislation.