The Commerce Commission wants Fonterra to review its reference commodity product basket more frequently than the five-year period currently required. Photo/File
The Commerce Commission wants Fonterra Cooperative Group to more regularly review the basket of products used to set its farmgate milk prices.
The antitrust regulator gave the Auckland-based milk processor's 2015/16 base milk price calculation the thumbs up, saying the price was largely consistent with the efficiency and contestability purposes
of the Dairy Industry Restructuring Act. Each season the commission is required to review Fonterra's calculation of what it pays farmers for raw milk to ensure the world's biggest dairy exporter isn't abusing its legislated dominance.
The commission held off on making a conclusion on the components Fonterra uses to evaluate its weighted average cost of capital, known as the asset beta, saying it needs more information.
"Having considered the submissions made on the draft report, we decided we did not have enough evidence to conclude on the practical feasibility of the asset beta," commission deputy chair Sue Begg said. "However, we do feel that this is a matter that can be resolved and have set out in our report suggested next steps in this regard."
It wants Fonterra to review its reference commodity product basket more frequently than the five-year period currently required, more transparency of forecast information, greater disclosure of its actual global ingredients and operations businesses compared to the notional producer assumed in the rules, and more information on the cost of capital.
