Source: http://www.legislation.govt.nz/sop/government/2020/0547/latest/whole.html
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Supplementary Order Paper No 547 (released 21 July 2020) – New Zealand Legislation
Supplementary Order Paper No 547
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Proposed amendments to Dairy Industry Restructuring Amendment Bill (No 3)
Dairy Industry Restructuring Amendment Bill (No 3)
This Supplementary Order Paper amends the Dairy Industry Restructuring Amendment Bill (No 3) to—
provide for the removal of open entry to Fonterra, but with some adjustments to the approach recommended by the Primary Production Committee in its report on this Bill:
clarify the difference between the base milk price and the farm gate milk price:
improve the application of the concept of asset beta in new section 150C(4) in clause 29:
change commencement dates to allow a further year for the commencement of various provisions:
make consequential and technical drafting changes.
Removal of open entry
The Dairy Industry Restructuring Act 2001 (DIRA) was passed to enable the formation of Fonterra and to manage risks arising from the company’s dominance in the New Zealand dairy market. The purpose of subparts 5 and 5A of Part 2 of DIRA was to promote the efficient operation of dairy markets in New Zealand by regulating the activities of the dominant market player (Fonterra) to ensure that New Zealand markets for dairy goods and services are contestable.
DIRA was comprehensively reviewed in 2018 and this Bill was introduced and referred to the Primary Production Committee in 2019. This Bill (as introduced) maintained the key regulatory measure implemented in 2001, namely open entry, being the requirement on Fonterra (with limited statutory exceptions) to accept applications—
from persons wishing to become shareholders in Fonterra and supply milk; and
from existing shareholders to increase their supply to Fonterra; and
from farmers who had withdrawn from the co-operative to supply another processor and wished to return.
From 1 June 2023, the amendments set out in this Supplementary Order Paper will retain the right of existing shareholders to increase their supply of milk to Fonterra, but remove the right of open entry for persons wishing to become shareholders that is currently in section 73 of DIRA. As open entry is being removed, the existing 2 exceptions in sections 94 to 96 of DIRA and the 2 further exceptions proposed in this Bill (as introduced) are to be removed.
The Primary Production Committee, in its report on this Bill, recommended a new section 73(1) to require Fonterra only to accept applications from first-time farmers, that is, new entrants—
who have never supplied milk to Fonterra or another processor (including through an entity in which they were the beneficial owner) and have more than a 50% beneficial interest in their farm; and
whose application is for less than 300,000 kg of milk solids.
The Committee considered that such an amendment should retain open entry for those who may have previously supplied milk as a sharemilker or contract milker.
This Supplementary Order Paper takes a different approach from the Select Committee’s recommendations regarding first-time farmers. This Supplementary Order Paper removes the provision relating to first-time farmers because of the complexities involved in defining first-time farmers, as acknowledged in the Select Committee’s report. These complexities could give rise to unintended consequences.
Rather than providing ongoing open entry for first-time farmers, new section 73 in clause 20B requires Fonterra to have regard to 2 matters as follows when it considers an application to become a shareholding farmer:
the effect of its decision on the ongoing viability of the farm, if the farm had a supply agreement with Fonterra in the previous season (so that, if the farm was sold in the previous season, Fonterra must consider the effect on the farm’s viability if the farm did not obtain a new supply contract with Fonterra); and
the land-use opportunities available to the applicant.
The proposed amendments balance the importance of these issues to farmers with Fonterra’s ability to better manage its milk supply and investment in processing capacity.
This Supplementary Order Paper makes a number of amendments consequent on the repeal of open entry. It repeals existing exceptions to the open entry requirements that were enacted in 2001 and that permitted Fonterra to decline an application on the basis of very small milk supply or uneconomic transport costs. This Supplementary Order Paper also removes the 2 new exceptions included in the Bill (as introduced). Those further exceptions would have given Fonterra the ability to decline an application that related to a new conversion or where the applicant was unlikely to comply with Fonterra’s terms of supply. With the repeal of the open entry requirements, Fonterra need no longer rely on specific exceptions to decline an application.
The amendments relating to the removal of open entry are proposed to take effect on 1 June 2023.
Capacity restraint notices
This Supplementary Order Paper also amends the Bill to reduce the period to which capacity constraint notices can apply from 3 seasons back to 1, as currently set out in DIRA. As Fonterra will have the discretion to refuse applications, it will have no need to rely on capacity constraint notices (which were originally intended to deal with exceptional production, rather than ongoing supply arrangements) to manage milk volumes and capacity.
Base milk price and farm gate milk price
The Bill as reported back by the Primary Production Committee clarifies the difference between the base milk price and the farm gate milk price, 2 concepts that have often been conflated. The Bill states explicitly that Fonterra may pay a farm gate milk price that differs from the base milk price, and that the 2 prices must be published annually with an explanation as to why they differ or do not differ.
The base milk price is a calculated price based on the revenues and costs of an efficient processor of Fonterra’s size and scale, processing all its milk into most basic commodity products, using most cost-efficient processing technologies, selling them in highly competitive global dairy markets, and earning no more than the normal rate of return, in the particular season. This calculation is based on a notional processor that is more cost-efficient than Fonterra in order to incentivise Fonterra to seek further cost efficiencies in its existing operations and provide a benchmark against which to assess performance and efficiency.
DIRA does not require Fonterra to actually pay the calculated base milk price. Such a requirement could have the unintended consequence of forcing Fonterra to pursue a short-term supply-driven commodity-focused processing business and investment strategy, as opposed, for example, to choosing a different strategy (such as a longer-term demand-driven production of higher value-added dairy products).
The farm gate milk price is the total cost of milk divided by the actual kilograms of milk solids supplied in a season by shareholder farmers, and is a price paid by Fonterra based on its strategic and business decisions. The farm gate milk price, therefore, can differ from the base milk price. Actual payments to individual suppliers may vary slightly from the farm gate milk price in line with Fonterra’s terms of supply, depending on contractual considerations such as milk quality and on-farm performance.
There are various reasons why Fonterra might chose to pay a farm gate milk price that differs from the base milk price, as follows:
Fonterra might not be able to afford to pay the base milk price:
Fonterra could be facing intense competition for its milk supply. At times of scarce milk supply, Fonterra (as well as other dairy processors) might place a higher value on security of supply and pay above the base milk price as a short-term response to market conditions:
Fonterra might wish to reduce its milk supply volumes and secure funding to pursue a value-added strategy. Investment in such a strategy might require some revenue to be held back (with the agreement of shareholders) rather than paid out in full to suppliers.
This Supplementary Order Paper further clarifies the distinction between the two prices by clarifying the definition of farm gate milk price.
Meaning of asset beta
The Bill (as introduced) required Fonterra to apply the capital asset pricing model when setting the base milk price. An aspect of the capital asset pricing model is the concept of asset beta, which is used to measure the exposure to risk of the notional processor relative to the performance of the stock market as a whole. This Supplementary Order Paper clarifies the application of asset beta to reflect the methodology used by the Commerce Commission when reviewing the base milk price, by ensuring the asset beta used by Fonterra is consistent with that of comparable producers of similar products on the world market.
Commencement dates and other amendments
Finally, this Supplementary Order Paper also makes a number of technical amendments and postpones commencement dates, recognising delays in passing the Bill in 2020. Commencement needs to align with the start of the dairy season and provide sufficient time for affected parties (farmers and processors) to manage contractual and investment planning.
The Ministry for Primary Industries is required to prepare a disclosure statement to assist with the scrutiny of this Supplementary Order Paper. It provides access to information about any material policy changes to the Bill and identifies any new significant or unusual legislative features of the Bill as amended.
A copy of the statement can be found at http://legislation.govt.nz/disclosure.aspx?type=sop&subtype=government&year=2020&no=547&
The Honourable Damien O’Connor, in Committee, to propose the amendments shown in the following document.
166—2
Main amendments to principal Act
4 Section 4 amended (Purpose)
5 Section 5 amended (Interpretation)
6 New sections 5A and 5B inserted
5A Status of examples
5B Transitional, savings, and related provisions
7 Subpart 4 heading in Part 2 replaced
8 Section 43 amended (Overview)
9 Cross-heading after section 43 repealed
10 New section 43A inserted (Manager of core database must retain database)
43A Manager of core database must retain database
11 Section 61 and cross-heading above section 61 repealed
12 Section 62 amended (Regulations relating to herd testing and provision of information to core database)
13 Section 63 amended (Regulations relating to access to core database)
14 Section 64 amended (General regulations relating to herd testing and core database)
15 Section 65 amended (Regulations requiring disclosure of information by LIC)
16 Section 65A replaced (Regulations relating to dairy industry entity other than LIC)
65A Regulations appointing manager of core database
65B Regulations naming intended manager of core database
65C Regulations for previous manager or intended manager of core database
65D Duration of regulations for previous manager or intended manager of core database
17 Section 66 amended (Information to be supplied to chief executive)
18 Section 68 replaced (Database if LIC wound up)
68 When management of core database reverts to the Crown
19 Section 69 repealed (Herd Testing Regulations 1958 deemed to have been made under this Act)
19A Section 71 amended (Statement of principles)
19B Section 72 amended (Overview)
20 Section 73 amended (New co-op must accept application)
20A Cross-heading above section 73 amended
20B Section 73 replaced (New co-op must accept application)
73 New co-op’s obligations relating to applications by new entrants and shareholding farmers and discretion to accept new entrants
20C Section 74 amended (Commencement and terms of supply)
20D Section 81 amended (Requirements applying to co-operative shares for applications in application period)
21 Section 86 amended (Publishing capacity constraint notices)
21 Section 87 amended (Effect of capacity constraint notice on supply)
21A Sections 94 to 96 and cross-heading repealed
22 New sections 96A to 96J and cross-headings inserted
Third exception
96A Supply from new dairy conversion: third exception
96B Definitions relating to third exception
96C Replacement collection point
96D Application relating to 2 or more collection points
96E Evidence to support position that section 96A does not apply
96F Procedure if new co-op considers third exception applies
96G Disclosure of evidence relied on to reject application under section 96A
Fourth exception
96H Inability to comply with new co-op’s terms of supply: fourth exception
96I Procedure if new co-op considers fourth exception applies
96J Disclosure of information relied on to reject application under section 96H(2)
23 Section 106 amended (No discrimination between suppliers)
23A Section 107 amended (Regulation of supply contracts for raw milk)
23B Section 109A amended (Subpart 5 of Part 2 provisions do not apply)
24 Section 115 amended (Regulations relating to milk)
25 Section 134 replaced (Levy regulations)
134 New co-op must pay levy
26 Section 145 amended (Application of Commerce Act 1986 provisions)
27 New sections 147 to 150 and cross-heading inserted
Regular reports on operation of subparts 5 and 5A
147 Minister must require regular reports
148 Commission input
149 Terms of reference for report to be published
150 Limits on effect of report and response
29 Section 150C amended (Setting of base milk price in way that is consistent with certain principles)
29A New section 150CA and cross-heading inserted
Farm gate milk price
150CA Provisions relating to farm gate milk price
30 Section 150E amended (Appointment of members of panel)
31 Section 156 repealed (Gift duty and taxation in respect of Livestock Improvement Corporation Limited)
32 New Schedule 1 inserted
Consequential and other amendments
33 Consequential amendments to principal Act
34 Amendments to regulations
35 Revocation of Herd Testing Regulations 1958
New Schedule 1 inserted
This Act is the Dairy Industry Restructuring Amendment Act (No 3) 2019.
Sections 19A, 19B, 20A, 20B, 20C, 20D, 21, 21A, 23A, and 23Band 23A come into force on 1 June 20222023.
So much of Part 3 of Schedule 2 as relates to the definition of own supply in regulation 3 of the Dairy Industry Restructuring (Raw Milk) Regulations 2012 comes into force on 1 July 2023 June 2024.
The rest of this Act comes into force on 1 June 2020 2021.
This Act amends the Dairy Industry Restructuring Act 2001 (the principal Act).
Part 1 Main amendments to principal Act
Replace section 4(e) with:
provide for the regulation of matters relating to the core database, including its management; and
In section 5(1), insert in their appropriate alphabetical order:
Access Panel means the Access Panel established by regulations made under section 63
constitution means,—
in the case of a company within the meaning of section 2(1) of the Companies Act 1993, the constitution of the company; and
in the case of any other entity, the documents or instruments that form the constitution of the entity
a company or other body corporate:
a corporation sole:
in the case of a trust that has—
only 1 trustee, the trustee acting in their capacity as trustee:
more than 1 trustee, the trustees acting jointly in their capacity as trustees:
an unincorporated body (including a partnership)
farm gate milk price means the total cost of milk divided by kilograms of milk solids that new co-op pays out to shareholder farmers in a season
government agency means an agency of the Crown, whether a department, a corporation, a Crown entity, a Crown Research Institute, or another organisation or instrument
intended manager, in relation to the core database, means an entity named as the intended manager of the core database by regulations made under section 65B
kilograms of milk solids means the number of kilograms of milk solids supplied to new co-op in a season by shareholding farmers
manager of the core database means—
DairyNZ Limited; or
an entity appointed by regulations made under section 65A, if regulations have been made under that section; or
the Crown, if the management of the core database has reverted to the Crown under section 68 (and no entity has been appointed by regulations made under section 65A)
organic milk means raw milk certified as organic milk by a certifying entity or person prescribed by regulations made under section 115
previous manager, in relation to the core database, means an entity (or the Crown) replaced as manager of the core database by regulations made under section 65A
raw milk—
means untreated milk from a cow; and
includes untreated organic milk; and
includes any other milk of a kind that is not excluded by paragraph (d) and is prescribed by regulations made under section 115; but
milk or a component of milk from a cow if the milk or component is produced under special conditions by, for example, the use of specialised herd selection, specialised farming practice, specialised feeding practice, or new technology; or
total cost of milk means the total calculated by—
getting a sum by adding together all payments to which all the following apply:
the payment is made by new co-op and or any body that is an interconnected body corporate of new co-op; and
the payment is made to a shareholding farmer; and
the payment is for the raw milk that the farmer supplies to new co-op or any body that is an interconnected body corporate of new co-op in a season; and
deducting from the sum—
the total organic milk premium for the season; and
the total winter milk premium for the season
total organic milk premium means the total premium paid to shareholding farmers for the supply of organic milk to new co-op and any body that is an interconnected body corporate of new co-op in a season
total winter milk premium means the total premium paid to shareholding farmers for the supply of winter milk to new co-op and any body that is an interconnected body corporate of new co-op in a season
winter milk means raw milk supplied in June or July, and in any other period prescribed by regulations made under section 115
In section 5(1), replace the definition of core database with:
core database means the database that comprises—
information provided to the manager of the core database under—
the Herd Testing Regulations 1958 or under the terms and conditions of any licence issued under those regulations; or
any regulations made under section 62; and
information provided to a previous manager under any of the things referred to in paragraph (a) while it was the manager of the core database; and
information provided to a previous manager or an intended manager under regulations made under section 65C
In section 5(1), repeal the definition of panel that relates to the panel established under regulations made under section 63.
In section 5(1), repeal the definitions of approved restructuring day, qualifying company, and qualifying products or services.
An example used in this Act is only illustrative of the provisions to which it relates. It does not limit those provisions.
If an example and a provision to which it relates are inconsistent, the provision prevails.
In Part 2, replace the subpart 4 heading with:
Subpart 4—Management of core database
Replace section 43(1) and (2) with:
Section 43A states that the constitution of the manager of the core database must be read as requiring the manager to retain the core database.
Sections 48 to 52 contain provisions relating to the constitution and corporate form of LIC.
Sections 62 to 65D contain regulation-making powers relating to—
herd testing:
the provision of information to the core database:
access to the core database:
disclosure of information by the manager of the core database:
the appointment of the manager of the core database and the naming of an intended manager:
the regulation of a previous manager or an intended manager of the core database.
In section 43(3), replace “69” with “68” .
Repeal the cross-heading after section 43.
After section 43, insert:
The constitution of the manager of the core database must be read as requiring the manager to retain the core database.
the Minister and the manager of the core database agree in writing that the subsection no longer applies; or
the manager of the core database is the Crown.
Repeal section 61 and the cross-heading above section 61.
In section 62(e), replace “LIC for entering into the core database” with “the manager of the core database for entering into the core database” .
In section 62(f), replace “LIC” with “the manager of the core database” .
In section 63(1)﻿(a), (b)﻿(ii), (c), (h), and (j) and (5), replace “LIC” with “the manager of the core database” in each place.
In section 63(1)﻿(g), replace “LIC’s” with “the manager of the core database’s” .
In section 63(4), replace “LIC” with “The manager of the core database” .
In section 64(a)﻿(i), replace “LIC” with “the manager of the core database” .
In section 64(b), replace “LIC’s” with “the manager of the core database’s” .
In the heading to section 65, replace “LIC” with “manager of core database” .
In section 65(a), replace “LIC” with “the manager of the core database” .
In section 65(a)﻿(i) and (ii), replace “LIC’s” with “the manager’s” .
Replace section 65A with:
The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations appointing an entity to manage the core database.
The Minister may make the recommendation only if—
the core database reverts to the Crown under section 68; or
the existing manager of the core database asks the Minister in writing to make the recommendation; or
the existing manager has changed, or the Minister considers it likely that the existing manager will change, its constitution in a way that the Minister considers may compromise its suitability as manager of the core database; or
the Minister considers that the existing manager has failed, or is at risk of failing, to—
comply with this Act or any regulations made under sections 62 to 65; or
manage the core database in a way that the Minister considers satisfactory.
The Minister must,—
before making a recommendation under subsection (2)﻿(c), consult the existing manager:
before making a recommendation under subsection (2)﻿(d)﻿(ii), give the existing manager a reasonable opportunity to manage the database in a way that the Minister considers satisfactory.
An appointment under subsection (1) takes effect on a date specified in the regulations.
The appointment of an existing manager ends when an appointment under subsection (1) takes effect.
A failure to comply with subsection (3) does not affect the validity of regulations made under this section.
The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations naming an entity as the intended manager of the core database.
The Minister may make the recommendation only on the written request of the entity.
This section applies if 1 or both of the following apply:
regulations are made under section 65A to appoint a new manager of the core database:
regulations are made under section 65B naming an intended manager of the core database.
For the purposes of this section, the provisions referred to in subsection (3) apply as if the previous manager or intended manager were the manager of the core database.
The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations for all or any of the following purposes:
the purposes described in—
section 62(e) and (f):
section 63(1)﻿(a), (c), (g), (h), and (j):
section 64(a):
providing for audits of compliance with regulations made under paragraph (a)﻿(i) to (iii) and for matters related to the audit, including the auditor’s powers:
prescribing offences for the breach of, or non-compliance with, regulations made under paragraph (a)﻿(i) to (iii):
prescribing penalties not exceeding $20,000 for any of those offences:
providing that a person is liable for damages for any loss or damage caused by that person’s contravention of regulations made under paragraph (a)﻿(i) to (iii).
If regulations are made, or to be made, under this section for the purpose described in section 63(1)﻿(j), section 63(2) to (7) applies—
to the previous manager or intended manager as if it were the manager of the core database; and
to the regulations as if they were made, or to be made, under section 63.
If regulations are made under this section for a purpose described in section 65, sections 66 and 67 apply—
to the regulations as if they were made under section 65.
Regulations made under section 65C are revoked on the close of the fifth anniversary of their commencement unless—
the regulations are revoked earlier; or
the Governor-General by Order in Council confirms that the regulations will remain in force.
If an Order in Council is made under subsection (1)﻿(b), the regulations remain in force until they are revoked.
In section 66(1) and (3), replace “LIC or any other dairy industry entity nominated by the Crown to manage the core database” with “The manager of the core database” .
In section 66(2), replace “LIC or any other dairy industry entity nominated by the Crown to manage the core database” with “the manager of the core database” .
In section 66(2), replace “LIC’s or that other dairy industry entity’s” with “the manager’s” .
Replace section 68 with:
The management of the core database reverts to the Crown if—
the Minister and the manager of the core database agree under section 43A(2)﻿(a) that section 43A(1) no longer applies; or
a liquidator or interim liquidator is appointed for the manager of the core database under Part 16 of the Companies Act 1993 or any other enactment; or
an administrator is appointed for the manager of the core database in respect of a voluntary administration under Part 15A of the Companies Act 1993; or
a receiver is appointed in respect of all or substantially all of the property of the manager of the core database; or
a statutory manager is appointed for the manager of the core database under Part 3 of the Corporations (Investigation and Management) Act 1989 or any other enactment; or
the manager of the core database is removed from the register of companies kept under section 360(1)﻿(a) of the Companies Act 1993; or
the manager of the core database is liquidated, wound up, or dissolved or otherwise ceases to exist.
Repeal section 69.
Replace section 71(b) with:
new co-op must accept applications to supply it with milk from new entrants and existing shareholders who meet the criteria set out in section 73 and may, in its discretion, accept applications to supply it with milk from other new entrants by shareholding farmers to supply it with milk:
Replace section 72(1) with:
Sections 73 to 85 describe the obligations of new co-op if it accepts applications from new entrants and shareholding farmers to supply milk, as shareholding farmers.
Repeal section 72(2) and (3).
Replace section 73(3) with:
New co-op must notify the applicant, within 15 working days of receipt of the application,—
of its acceptance of the application; or
of its rejection of the application under section 94 or 95; or.
that it is considering whether to reject the application under section 96A or 96H.
Further provisions relating to the exceptions are in—
section 94 (the first exception):
section 95 (the second exception):.
sections 96A to 96G (the third exception):
sections 96H to 96J (the fourth exception).
In the cross-heading above section 73, replace “must” with “may” .
Replace section 73 with:
It is the intention of this section that an applicant should be entitled to become a shareholding farmer if—
the majority of beneficial ownership or control in the applicant or the supply are held by persons who—
have never previously been the majority partner, shareholder, or beneficiary of a supplier to a dairy processor; and
are farmers, sharemilkers, or contract milkers; and
the application relates to the supply of less than 300,000 kg of milk solids in the first season.
New co-op must accept an application to increase the volume of milk supplied as a shareholding farmer to new co-op that is made by a shareholding farmer in an application period.
In any other case, new New co-op may, in its discretion, accept or decline an application made in an application period by a new entrant to supply milk to new co-op.
In exercising its discretion to accept or decline an application to become a shareholder, new co-op must have regard to—
the effect of its decision on the ongoing viability of the farm to which the application relates, if new co-op had a supply agreement in respect of the farm at any time in the previous season; and
New co-op must notify the applicant of its decision on the application within 15 working days of receipt of the application.
Sections 136 to 139 specify—
how an application may be given; and
when an application is made.
See sections 94 to 96J for exceptions relating to applications by new entrants and applications by shareholding farmers to increase supply.
In Schedule 1, repeal clauses 4 and 5 and the cross-heading above clause 4.
Replace section 74(1) with:
If new co-op accepts an application under section 73 made in an application period, new co-op must accept the milk to which the application relates from the beginning of the season following that application period.
In section 81(1), replace “is required by section 73 to accept” with “accepts under section 73” .
In section 81(3), replace “is required to accept” with “accepts” .
In section 86(2)﻿(d), replace “1 season” with “3 seasons” .
In section 87(1), replace “is required to accept” with “accepts” .
In section 87(3), replace “is required to accept” with “accepts” .
Repeal sections 94 to 96 and the cross-heading above section 94.
After section 96, insert:
This section applies if an application by a new entrant or a shareholding farmer relates to the supply of milk from a new collection point.
New co-op may reject the application if—
the application relates to the supply of milk from a new collection point; and
more than 50% of the production land that is used to produce the milk for supply to the new collection point is new production land.
In sections 96A to 96G,—
collection point means a place containing a milk vat, or milk vats, from which milk can be collected by new co-op or an independent processor
new collection point—
means a collection point that has not been used at any time in the preceding 5 years to supply milk from cows as part of a business; but
a collection point that will replace another collection point under section 96C; or
a collection point for milk produced on particular land if, on a regular basis throughout the preceding 5 years, milk has been produced from the land as part of a business and processed by the applicant themselves or sold to consumers as unprocessed milk.
Examples of a new collection point
A dairy farmer (A) adds an additional collection point to A’s existing farm. This is a new collection point.
A dairy farmer (A) subdivides A’s farm, retaining the part of the farm on which the only collection point is located. The purchaser of the other part (B) builds a new collection point for the other part. The collection point built by B is a new collection point.
A dairy farmer (A) switches A’s farm from dairy production to beef and lamb, closes the old collection point, and sells the old milk vats to A’s neighbour (B). B changes B’s land use from forestry to dairy, and builds a collection point for B’s farm. This is a new collection point because there is no connection between the closed collection point and the new collection point.
Examples of where there is no new collection point
A dairy farmer (A) upgrades or relocates A’s collection point on A’s farm. This is not a new collection point.
Two dairy farmers (A and B) were using a shared collection point on A’s farm. They close this point and build a collection point on B’s farm. The collection point merely replaces an existing collection point and is therefore not a new collection point.
A dairy farmer (A) subdivides A’s farm, retaining the part of the farm on which the only collection point is located. The purchaser of the other part (B) continues to use the collection point on A’s farm. This is not a new collection point.
new production land means land that, in the preceding 5 years, has not been used at any time as part of the production land of a business
preceding 5 years, in relation to an application, means the 5-year period immediately preceding the date of receipt of the application
production land means the land that, in the ordinary course of business, is used for grazing lactating cows
Land that is used only to graze non-lactating dairy cows is not part of the production land.
Land that is used only on a single occasion to graze lactating dairy cows is not part of the production land because it is not used for grazing lactating dairy cows in the ordinary course of business.
This section applies for the purposes of paragraph (b)﻿(i) of the definition of new collection point in section 96B.
A collection point (A) will replace another collection point (B) if, at the start of the dairy season to which the application relates,—
A will be the collection point for milk produced on particular land; and
B will be the immediately preceding collection point for milk produced from that land; and
B will have ceased to operate.
Subsection (2) applies regardless of whether the entire volume of milk that was collected from B will be collected from A.
If 2 or more applications relate to collection points that will replace another collection point (B) under subsection (2), only the collection point that relates to the first application received by new co-op is to be treated as replacing B.
If an application relates to 2 or more collection points, new co-op must—
apply section 96A separately to each collection point as if separate applications had been made for each collection point; and
separately accept or reject the application in respect of each of those collection points.
A shareholding farmer makes an application in respect of an existing collection point and a new collection point.
The application must be accepted to the extent to which it relates to the existing collection point (because the exception in section 96A only relates to new collection points).
However, the production land for the new collection point is new production land. New co-op may reject the application to the extent to which it relates to this new collection point.
Sections 96A to 96C and 96E to 96G apply, with all necessary modifications, for the purposes of subsection (1).
New co-op must treat the following as conclusive evidence that the exception in section 96A does not apply in respect of a collection point if the evidence relates to any time within the preceding 5 years:
a contract or correspondence with, or documentation from, an independent processor that clearly indicates that the independent processor has accepted milk from the collection point (for example, a receipt for milk collection):
a farm dairy risk management programme applying to the collection point under the Animal Products Act 1999:
a farm dairy assessment report applying to the collection point that is prepared for the purposes of the Animal Products Act 1999:
any other evidence of a prescribed kind.
An applicant may provide any other evidence that may establish with reasonable certainty that the exception in section 96A does not apply.
If new co-op is considering rejecting an application under section 96A(2), the notice that new co-op must give the applicant under section 73(4) must state the reasons for new co-op’s opinion.
The applicant must, within 15 working days after receiving a notice under section 73(4),—
provide any further evidence to support the application; or
notify new co-op in writing that the applicant agrees to provide further evidence; or
notify new co-op in writing that the applicant refuses to provide further evidence.
If new co-op is notified under subsection (2)﻿(b), it must as soon as is reasonably practicable notify the applicant of a reasonable time within which to provide further evidence.
New co-op must notify the applicant of the acceptance or rejection of the application within 15 working days after—
the applicant provides further evidence under subsection (2)﻿(a):
the date on which new co-op is notified under subsection (2)﻿(c):
the end of the 15-working-day period referred to in subsection (2) (if the applicant does not comply with that subsection):
the end of the reasonable time set under subsection (3).
The time frames in subsections (2) to (4) do not affect new co-op’s obligation under section 73(1) or (2) to accept an application initially made in an application period.
A second or subsequent request for further evidence does not affect the time frame within which new co-op must act under subsection (4).
If new co-op rejects the whole or a part of an application under section 96A, new co-op must provide written reasons for its decision, on demand, to—
the new entrant or shareholding farmer to which the application relates; and
This section applies if an application by a new entrant or a shareholding farmer is made in an application period.
New co-op may reject the application if new co-op considers that the applicant is not likely to comply with new co-op’s terms of supply.
If new co-op is considering rejecting an application under section 96H(2), the notice that new co-op must give the applicant under section 73(4) must state—
that new co-op is considering rejecting the applicant’s application because it considers that the applicant is not likely to comply with new co-op’s terms of supply; and
the reasons for new co-op’s opinion.
provide further information; or
notify new co-op in writing that the applicant agrees to provide further information; or
notify new co-op in writing that the applicant refuses to provide further information.
If new co-op is notified under subsection (2)﻿(b), it must as soon as is reasonably practicable notify the applicant of a reasonable time within which to provide further information.
the applicant provides further information under subsection (2)﻿(a):
A second or subsequent request for further information does not affect the time frame within which new co-op must act under subsection (4).
If new co-op rejects an application under section 96H(2), new co-op must provide written reasons for its decision, on demand, to—
After section 106(4), insert:
In its terms of supply, but subject to subsections (1) to (4), new co-op may provide for differential pricing for milk based on any matters specified in the terms of supply, including, but not limited to, matters that relate to animal welfare, food safety, health and safety, employment conditions, the environment, climate change, and sustainability.
In section 107(1), after “offer new entrants” , insert “it accepts under section 73” .
Replace section 107(1) with:
If new co-op accepts applications from new entrants, it must offer them contracts for milk supply as shareholding farmers for 1 season.
Repeal section 109A(b).
After section 115(1)﻿(f)﻿(i), insert:
periodic returns of milk solids bought from, or sold to, other persons:
After section 115(1)﻿(f), insert:
prescribe kinds of evidence for the purposes of section 96E(1)﻿(d); and
prescribe entities and persons who may certify raw milk as organic milk; and
prescribe any matter that is authorised to be prescribed for the purposes of the definitions of raw milk and winter milk in section 5(1); and
Replace section 134 with:
New co-op must pay, in each financial year, a levy to the Minister that is determined in accordance with regulations made under subsection (2).
The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations—
specifying the amount of the levy, or method of calculating or ascertaining the amount of the levy, on the basis that the costs estimated under subsection (4) should be met fully out of the levy:
including in the levy, or providing for the inclusion in the levy of, any shortfall in recovering those actual costs (including, without limitation, providing for a reconciliation of the levy against the levy that would have been payable had the calculation used the actual costs and invoicing new co-op for the amount under-recovered from it as part of the levy):
refunding, or providing for refunds of, any over-recovery of those actual costs:
specifying 1 or more financial years or part financial years to which the levy applies:
providing for the levy amount to be specified in the Gazette or some other publication (if the amount is not specified in the regulations):
providing for the payment and collection of the levy:
requiring payment of the levy for a financial year or part financial year, even though the regulations may be made after that financial year has commenced:
exempting or providing for exemptions from, and providing for waivers of, the whole or any part of the levy.
The regulations may provide for the levy to apply, and be calculated in respect of, 1 or more financial years (with the levy being collected in each of those years from new co-op).
In calculating estimated costs for the purposes of subsection (2)﻿(a), the Commission—
the cost of making determinations; and
the cost of enforcing this subpart or subpart 5A; and
the cost of enforcing determinations in the High Court; and
over-recoveries or under-recoveries of actual costs; and
the cost of conducting reviews under subpart 5A; and
must exclude—
the cost of taking other proceedings in the High Court, or defending proceedings against the Commission in the High Court; and
the cost of investigations that are not related to complaints or determinations made under this subpart; and
the cost of providing input for the reports under section 147 on the operation of subparts 5 and 5A; and
must calculate and deduct the total amount of application fees likely to be received.
The Minister must consult with new co-op and the Commission before making a recommendation under subsection (2).
The amount of unpaid levy is recoverable in a court of competent jurisdiction as a debt due to the Crown.
After section 145(a), insert:
sections 74A to 74C (provisions relating to undertakings):
After section 145(l), insert:
section 100A (stating case for High Court):
After section 146, insert:
The Minister must require regular reports from the chief executive on whether this subpart and subpart 5A should be retained, repealed, or amended.
The Minister must require the first report no earlier than 4 years after the commencement of the Dairy Industry Restructuring Amendment Act (No 3) 2019 and present the report to the House of Representatives no later than 6 years after commencement of that Act.
The Minister must require any subsequent report no earlier than 4 years after presentation of the previous report to the House of Representatives, and present the report to the House of Representatives no later than 6 years after presentation of the previous report to the House of Representatives, unless subsection (4) or (5) applies.
If a Bill is introduced into the House of Representatives to amend this Act in the 6 years before the Minister is required to present a report under subsection (3) and the Bill is passed, the Minister must instead—
require a report no earlier than 4 years after the commencement of that enactment or (if different provisions come into force on different dates) the earliest date on which any provision of the enactment commences (the commencement date); and
present the report to the House no later than 6 years after the commencement date.
If the Bill is withdrawn, lapses with the dissolution or expiry of Parliament, or is defeated, the Minister must—
request the report no earlier than 4 years after the withdrawal, lapse, or defeat of the Bill; and
present the report to the House of Representatives no later than 6 years after the commencement date.
The Minister may, in consultation with the Minister responsible for the Commerce Act 1986, require the Commission to provide input for a regular report under section 147.
In providing any input to the report as required by the Minister, the Commission may exercise the powers specified in section 145.
The terms of reference for a report under section 147 may provide for any matter that relates to whether subparts 5 and 5A should be retained, repealed, or amended that the Minister considers appropriate.
The Minister must publish the terms of reference on the Ministry’s Internet site.
The Crown is not bound by a report under section 147.
Sections 147 to 149 are not intended to—
create any rights or protections in relation to any person or group of persons; or
confer any rights or protections on any person or group of persons.
After section 150C(2), insert:
For the purposes of subsection (1)﻿(b), any estimate of the return on capital must be made applying the capital asset pricing model.
For the purposes of subsection (3), the asset beta used in the application of the capital asset pricing model must be consistent with the estimated asset betas of other dairy and commodity processors.
For the purposes of subsection (3), the asset beta used in the application of the capital asset pricing model must be consistent with the estimated asset betas of other processors of dairy and other food products that are—
traded in significant quantities in globally contested markets; and
characterised by uniform technical specifications.
In subsection (4), asset beta means a measurement of a firm’s exposure to systematic risk where systematic risk measures the extent to which the returns on a company fluctuate relative to the equity returns in the stock market as a whole.
After section 150C, insert:
For the purposes of this subpart, new co-op may pay a farm gate milk price to shareholder farmers that differs from the base milk price.
New co-op must publish as soon as practicable after it sets determines the farm gate milk price for any season, on new co-op’s website in an electronic form that is publicly accessible, a notice that states—
states both the farm gate milk price and the base milk price for that season; and
explains why the farm gate milk price differs or does not differ from the base milk price (as the case may be).
After section 150E(1), insert:
New co-op must appoint 1 member of the panel who is nominated by the Minister, and the appointment must be on the same terms and conditions that apply to members appointed under subsection (1).
In section 150E(3), after “subsection” , insert “(1A) or” .
Repeal section 156.
Insert the Schedule 1 set out in Schedule 1 of this Act as the first schedule to appear after the last section of the principal Act.
Part 2 Consequential and other amendments
Amend the principal Act as set out in Part 1 of Schedule 2.
Amend the Dairy Industry (Herd Testing and New Zealand Dairy Core Database) Regulations 2001 as set out in Part 2 of Schedule 2.
Amend the Dairy Industry Restructuring (Raw Milk) Regulations 2012 as set out in Part 3 of Schedule 2.
The Herd Testing Regulations 1958 (SR 1958/44) are revoked.
Schedule 1 New Schedule 1 inserted
Part 1 Provisions relating to Dairy Industry Restructuring Amendment Act (No 3) 2019
1 Employees of LIC from before restructuring under subpart 4 of Part 2
This clause applies to a person to whom section 61 applied immediately before its repeal by the Dairy Industry Restructuring Amendment Act (No 3) 2019.
To avoid doubt, the repeal does not affect the person’s status or rights, or terms or conditions of employment, under that section.
2 LIC to be treated as previous manager of core database
LIC must be treated as a previous manager of the core database for the purposes of this Act.
Information provided to LIC, whether before, on, or after the commencement of this clause, must be treated as information that comprises part of the core database if the information was or is provided under—
any regulations made under this Act.
Regulations applying to LIC may be made under section 65C as if LIC were replaced as manager of the core database by regulations made under section 65A (as inserted by the Dairy Industry Restructuring Amendment Act (No 3) 2019).
Section 65D does not apply to regulations made under section 65C that apply to LIC.
3 Dairy Industry (Herd Testing and New Zealand Dairy Core Database) Regulations 2001 continue in force
The Dairy Industry (Herd Testing and New Zealand Dairy Core Database) Regulations 2001 (the regulations) continue in force.
To the extent that the regulations were made under sections 62 to 65A as in force immediately before the commencement of this clause, they must be treated as having been made under sections 62 to 65 as amended by the Dairy Industry Restructuring Amendment Act (No 3) 2019.
However, to the extent that the regulations apply to LIC, they must be treated as having been made under section 65C as inserted by the Dairy Industry Restructuring Amendment Act (No 3) 2019.
Section 65D does not apply to the regulations referred to in subclause (3).
New dairy conversions
4 New dairy conversion exception
The new dairy conversion provisions apply in respect of application periods under section 75 that start after the commencement of those provisions.
The new dairy conversion provisions are sections 96A to 96G.
5 New collection points
A dairy conversion for which a building consent was granted before the date of commencement of section 96A must not be treated as a new collection point for the purposes of that section.
6 Levy payable by new co-op
Regulations made under section 134 (as replaced by section 25 of the Dairy Industry Restructuring Amendment Act (No 3) 2019) apply to financial years that start on or after 1 July 2020 2021 (and regulations may be made for that purpose under section 134 (as replaced) at any time before that date).
Changes to open entry provisions
7 Effect of changes to open entry provisions on existing shareholding farmers
The commencement of section 73 (as replaced enacted by section 20B of the Dairy Industry Restructuring Amendment Act (No 3) 2019) does not affect the ability of the Commission to receive and determine applications in respect of conduct before that commencement, or the ability of a party to a determination or the Commission to enforce a determination, and sections 120 to 133 have effect for that purpose.
An application under section 120 may not be made later than 1 year after that commencement.
The commencement of section 73 (as so replaced enacted) does not affect the liability of a person for a contravention of subpart 5 or regulations made under this Act committed before that commencement, and sections 140 to 146 have effect for that purpose.
Proceedings for a contravention described in subclause (3) may be taken as if section 73 (as so replaced enacted) had not been enacted.
Schedule 2 Consequential and other amendments
ss 33, 34
Part 1Consequential amendments to principal Act
Repeal section 47.
In section 63(1)﻿(b), replace “a panel” with “an Access Panel” .
In section 63(1)﻿(c)﻿(i), (d), (e), (g), (h), and (i) and (3), replace “panel” with “Access Panel” in each place.
In section 63(1)﻿(f), replace “panel’s” with “Access Panel’s” .
In section 65(a)﻿(ii), replace “panel” with “Access Panel” .
In section 72(3), replace “96” with “96J” .
After section 72(10), insert:
Sections 147 to 150 provide for reports on the operation of subparts 5 and 5A of Part 2.
In section 163, replace “65” with “65C” .
Part 2Consequential amendments to Dairy Industry (Herd Testing and New Zealand Dairy Core Database) Regulations 2001
In regulation 3(1), insert in its appropriate alphabetical order:
Access Panel means the New Zealand Dairy Core Database Access Panel established by regulation 13
In regulation 3(1), revoke the definition of manager of the core database.
In regulation 3(1), revoke the definition of Panel.
After regulation 3(2)﻿(d), insert:
manager of the core database.
In regulation 11(b), replace “a Panel” with “an Access Panel” .
In regulation 11(c) and (d), replace “Panel” with “Access Panel” .
Cross-heading above regulation 13
Replace the cross-heading above regulation 13 with:
In the heading to regulation 13, replace “Panel” with “Access Panel” .
In regulation 13(1), replace “a Panel” with “an Access Panel” .
In regulation 13(2) and (3), replace “Panel” with “Access Panel” .
In the heading to regulation 14, replace “Panel” with “Access Panel” .
In regulation 14, replace “Panel” with “Access Panel” .
In regulation 15, replace “Panel” with “Access Panel” .
In the heading to regulation 16, replace “Panel” with “Access Panel” .
In regulation 16, replace “Panel” with “Access Panel” .
In regulation 17(a), replace “Panel” with “Access Panel” .
In regulation 18(1) and (2), replace “Panel” with “Access Panel” in each place.
In the heading to regulation 19, replace “Panel” with “Access Panel” .
In regulation 19(1) and (3), replace “Panel” with “Access Panel” .
In the heading to regulation 20, replace “Panel” with “Access Panel” .
In regulation 20(1) and (2), replace “Panel” with “Access Panel” .
In the heading to regulation 21, replace “Panel” with “Access Panel” .
In regulation 21(1) and (2), replace “Panel” with “Access Panel” .
In regulation 21(2)﻿(a) and (b), replace “Panel’s” with “Access Panel’s” .
In the heading to regulation 23, replace “Panel” with “Access Panel” .
In regulation 23, replace “Panel” with “Access Panel” .
In regulation 24(1)﻿(a), replace “Panel” with “Access Panel” .
In regulation 25(1)﻿(a), replace “Panel” with “Access Panel” .
In regulation 26(1)﻿(a), replace “Panel” with “Access Panel” .
In regulation 27(1), (2), (3), and (5), replace “Panel” with “Access Panel” .
In regulation 32(2)﻿(c), replace “Panel” with “Access Panel” .
Schedule 1AA
In Schedule 1AA, replace clause 4 with:
4 Transitional provision relating to decisions of Dairy Herd Improvement Tribunal
This clause applies to decisions of the Dairy Herd Improvement Tribunal that were in effect immediately before the commencement of Part 2 of Schedule 2 of the Dairy Industry Restructuring Amendment Act (No 3) 2019.
The decisions remain in effect until this clause is revoked.
In the Schedule 4 heading, replace “Panel” with “Access Panel” .
In Schedule 4, clauses 4, 7, and 14 to 17, replace “Panel” with “Access Panel” in each place.
In Schedule 4, cross-heading above clause 6, replace “Panel’s” with “Access Panel’s” .
In Schedule 4, clauses 7, 15(1), 16(a), and 17(1)﻿(a), replace “Panel’s” with “Access Panel’s” .
In Schedule 4, heading to clause 14, replace “Panel” with “Access Panel” .
In the Schedule 5 heading, replace “Panel” with “Access Panel” .
In Schedule 5, clauses 1 to 8, replace “Panel” with “Access Panel” in each place.
In Schedule 5, clause 8(a), replace “Panel’s” with “Access Panel’s” .
In Schedule 6, form, after “manager of the core database” , insert “(or LIC)” in each place.
Part 3Consequential and other amendments to Dairy Industry Restructuring (Raw Milk) Regulations 2012
In regulation 3(1), replace the definition of farm gate milk price with:
farm gate milk price has the meaning given in section 5(1) of the Act
In regulation 3(1), replace the definition of kilograms of milksolids with:
kilograms of milk solids, except in Part 1A, has the meaning given in section 5(1) of the Act
In regulation 3(1), replace the definition of organic milk with:
organic milk has the meaning given in section 5(1) of the Act
In regulation 3(1), replace the definition of own supply with:
own supply, in relation to an independent processor,—
means raw milk collected or purchased by or on behalf of the independent processor from dairy farmers or any other source (such as new co-op, a dairy processor, or an intermediary); but
does not include milk supplied to an independent processor under section 108 of the Act or under regulation 4
In regulation 3(1), replace the definition of raw milk with:
raw milk has the meaning given in section 5(1) of the Act
In regulation 3(1), replace the definition of total cost of milk with:
total cost of milk has the meaning given in section 5(1) of the Act
In regulation 3(1), replace the definition of total organic milk premium with:
total organic milk premium has the meaning given in section 5(1) of the Act
In regulation 3(1), replace the definition of total winter milk premium with:
total winter milk premium has the meaning given in section 5(1) of the Act
In regulation 3(1), replace the definition of winter milk with:
winter milk has the meaning given in section 5(1) of the Act
Replace regulation 6(3) with:
Despite subclauses (1) and (2), new co-op is not required to supply raw milk to an independent processor (other than Goodman Fielder New Zealand Limited) if,—
in any 3 consecutive seasons before 1 June 2023 2024, the independent processor’s own supply of raw milk is 30 million litres or more in each of those seasons as specified in returns provided to new co-op under regulation 18(2); or
in any season beginning on or after 1 June 2023 2024, the independent processor’s own supply of raw milk is 30 million litres or more as specified in the returns provided to new co-op under regulation 18(2).
In regulation 7(1)﻿(a), replace “250” with “350” .
Replace regulation 17 with:
17 Return by new co-op relating to actual supply of raw milk to independent processors
New co-op must, no later than the first working day in July of the current season, provide a return to the chief executive stating the total quantity of raw milk it actually supplied—
to each independent processor in each month of the previous season; and
to all independent processors for the whole of the previous season.
For the purposes of subclause (1)﻿(a) and (b), new co-op must specify in the return the total quantity of raw milk supplied by new co-op under these regulations (including raw milk supplied at an agreed price under regulation 20(2)).
In regulation 19(1), delete “(other than Goodman Fielder New Zealand Limited)” .
In regulation 20(4), after “default milk price” , insert “, in relation to an independent processor other than Goodman Fielder New Zealand Limited,” .
After regulation 20(4), insert:
In subclause (3), default milk price, in relation to Goodman Fielder New Zealand Limited, means the default milk price as defined in subclause (4) plus 10 cents per kilogram of milk solids.
Regulation 23B
Revoke regulation 23B(2).
New cross-heading above regulation 23A inserted
Before regulation 23A, insert:
Returns of milk solids collected from dairy farmers
New regulations 23D to 23F and cross-headings inserted
After regulation 23C, insert:
Returns of raw milk bought or sold by independent processors
23D Independent processors must provide return
Each independent processor must, in accordance with this Part, provide a return of raw milk bought from, or sold to, another independent processor in each season.
The return must be provided to the chief executive within 30 days after the end of the season.
23E Required information
The return of an independent processor for a season must specify—
the total amount (in kilograms) of milk solids that the processor bought from, or sold to, another independent processor during the season; and
the part of that total amount (if any) that the processor bought or sold under the 20% rule.
20% rule means the entitlement to supply to independent processors up to 20% of weekly production under section 108 of the Act
processor—
means an independent processor that is required to provide a return; but
does not include an independent processor for a season if regulation 23F applies in respect of that season.
23F Independent processor that collects less than 2,000 kilograms of milk solids
If the total amount of milk solids that an independent processor collects from dairy farmers and any other source is less than 2,000 kilograms during a season, the return for that season must indicate that fact.
Regulation 23E does not apply to that return.
Certifiers for organic milk
23G Certifiers
Raw milk may be certified as organic milk by—
Biogro NZ Limited:
the Bio Dynamic Farming & Gardening Association in New Zealand Incorporated:
AsureQuality Limited.