Fonterra gets go-ahead to charge rivals 10c premium

Agriculture Minister David Carter has given Fonterra a green light to charge its smaller rivals a 10c premium on each kilogram of milksolids from next season.

Fonterra controls about 95 per cent of the nation's milk production, which is about 15 billion litres, and the Labour government last year proposed placing limits on the 600 million litres of Fonterra's milk now going to rivals.

Increasing demand for the cheap statutory milk has meant the allocation has been boosted from an initial 400 million litres, first to 500 million, and then to 600 million.

This access to raw milk under the Dairy Industry Restructuring was a key trade-off that Fonterra farmers made to avoid Commerce Commission scrutiny of the mega-merger that set up their company. But Fonterra has fought a long-running series of battles in the courts and at the Commerce Commission over who should get the cheap milk, and at what price.

It was initially planned for the wholesale milk price to be the price Fonterra pays its own farmers, plus a premium determined by the auction, from November.

This auction was called off by Carter in July, when he said law changes could not be completed in time. Now Carter has altered the pricing formula, from the 2010-11 season to comprise the commodity milk component of the Fonterra payout, plus 10c/kg.

"A 2008 review found that for five of the last six seasons, independent processors have been able to access milk under the regulations at a lower price than Fonterra pays its own farmers," he said yesterday. "This was never the intention of the regulations."

- NZPA