KEY POINTS:
Rival dairy companies are vying for access to a Fonterra-controlled export trade worth hundreds of millions of dollars a year.
Fonterra controls the trade by virtue of quotas, which provide guaranteed access to overseas markets.
The politically sensitive trade also generates tens of millions of dollars worth of
quota-specific "rents" or extra profits that help boost payout to Fonterra's farmers.
The rents are the extra margin available to the co-op because of the lower tariffs generally faced by products exported under quotas.
Fonterra has sole rights to the dairy quota trade, which used to be formerly managed by the Dairy Board.
As part of the arrangements made when Fonterra began, rivals Tatua and Westland were effectively paid off so that Fonterra could take over sole management of the quota for a finite period. But its exclusive rights start expiring this year.
Westland, Tatua, newcomer Open Country Cheese and Fonterra - through the Dairy Companies Association of New Zealand - have submitted a paper containing their views on the issue to the Ministry of Agriculture and Forestry (MAF).
DCANZ's paper is not being publicly released but Westland and Open Country Cheese are clearly looking at securing a slice of the quota trade.
"Certainly Open Country wants to get its fair share," said chief executive Alan Walters. He said his Waikato-based firm was keen on the EU and US quota markets.
Westland chief executive Scott Eglinton said his firm would also be keen for a share of the trade "if it manifested itself in terms of value".
Tatua's chief executive Mike Matthews would not say whether his company was actually after a share but said it wanted a "fair and equitable" arrangement for all parties.
DCANZ international trade policy adviser Fiona Cooper Clarke - a senior Fonterra executive - said the paper "represents a range of industry views" about the way ahead.
Fonterra figures show the impact of quota rents on payout has dropped from more than $160 million in 2002-03 to about $48 million in 2005-06, despite sales volumes staying relatively constant. But they still added a welcome 4c/kg of milk solids to farmers' payouts last season.
Fonterra does not reveal the value or profitability of the quota trades. But one source estimated the trade involved about 10-12 per cent by volume of New Zealand's dairy exports.
That implies a quota trade value of at least $600 million based on export figures of $6.2 billion for the year to last November. The gross value of the EU quota butter trade alone has been reported at more than $260 million.
The co-op is not making public its position on future arrangements but it seems unlikely it would be happy to lose any significant source of revenue.
