KEY POINTS:
Rules forcing Fonterra to sell milk at a regulated price to competitors could be dropped by 2013, says Agriculture Minister Jim Anderton.
"It is important for the industry to realise that access to regulated milk was only ever intended as a temporary measure until a sufficient level of
competition was reached, at which point Fonterra's legal obligation to supply regulated milk ceases," Anderton said.
In light of the entry of new independent processors the end of Fonterra's obligation could happen by 2013 or potentially earlier, he said.
Following an amendment to the Raw Milk Regulations, Fonterra had to supply up to 500 million litres of milk to other dairy processors at a regulated price during the 2007/08 season, and up to 600 million litres for the 2008/09 season.
A discussion document released yesterday as part of a review by the Ministry of Agriculture and Forestry outlined options for changing the regulations. "This is the next step in a comprehensive review to ensure that the regulations are operating well and that regulated milk is available for sale at a fair and efficient price for all participants in the milk industry," Anderton said.
The preferred option, said to most likely result in a fair price and a smooth transition to a post-regulated environment, would cap supply at 600 million litres of raw milk, with an auction mechanism used to manage excess demand.
Open Country Cheese interim chairman Wyatt Creech said the regulations were only intended to be temporary. The Waikato cheese maker collected its own milk but also received 50 million litres of regulated milk from Fonterra but was not concerned about the supply ending, Creech said.
"We'll just get the milk ourselves."
A spokesman for Goodman Fielder, which gets all its milk from Fonterra at the regulated price and whose brands included Meadow Fresh and Tararua, said the company had not yet read yesterday's document and would not comment at this stage.
"We're watching obviously the review with interest because we do have a stake in the industry but we don't want to make any public comment at the moment till things become a little clearer," he said.
Fonterra general manager for strategy and economics Alex Duncan said the co-operative agreed with the discussion document that change was required.
"The use of Fonterra's farm gate milk price as the starting point for the regulated milk will come as welcome news for our farmers, in particular this will reduce the extent to which our farmers subsidise other dairy companies to compete against us in export markets."