The public consultation stage of the government's review of legislation governing Fonterra and the $8 billion dairy industry is due to start in October.

The Ministry for Primary Industries which is leading the review said it expected formal consultation to take place over October and November, with policy recommendations made to government early next year.

Terms of reference for the review were published in early May. The review will consider the effectiveness of the Dairy Industry Restructuring Act 2001 (DIRA) and its impact on the industry.

It is expected to spur changes to the legislation next year.


An MPI spokesperson said meetings with affected industry stakeholders were under way to assist the ministry in developing a formal public consultation document.

The review will consider export and domestic dairy markets, seen as separate but connected, and whether the dairy sector is operating in the long-term interests of New Zealand consumers in terms of prices, availability, quality and product range.

Along with DIRA, officials will consider the wider regulatory system including the Resource Management Act, Health and Safety At Work Act, Immigration Act, Overseas Investment Act, Financial Markets Conduct Act and the Commerce Act.

Agriculture Minister Damien O'Connor has said in particular, the review would look at open entry and exit for Fonterra farmers, raw milk price setting, the risks and costs for the sector and the incentives or otherwise for dairying to move to sustainable, higher value production and processing.

The government earlier this year passed temporary legislation to delay the expiry of provisions requiring Fonterra to accept milk from any South Island farmer, in order to allow a fresh look at the industry.

The previous government had planned to relax some of the regulatory conditions on Fonterra.

Latest available figures show Fonterra, created from a government-approved big industry merger in 2001 without Commerce Commission scrutiny of the deal, collected and processed 82 per cent of New Zealand's raw milk production. In 2001 it had 96 per cent market share.

Dairy exports are expected to earn about $16 billion this year.