MPs launch bold new dairy era

By PHILIPPA STEVENSON and NZPA

Parliament has given the new dairy industry giant Fonterra its blessing and at the same time ended a bitter dispute between pipfruit growers and major exporter Enza.

The Dairy Industry Restructuring Bill, enabling New Zealand Dairy Group and Kiwi Dairies to merge, absorb the Dairy Board and form the new Fonterra Cooperative, was passed without dissent.

The Government brought a legislative close to the pipfruit foreign exchange row when a bill ending Enza's virtual export monopoly passed into law.

All that remains to set the ball rolling for Fonterra is for the Governor-General to sign legislation and for the Kiwi, Dairy Group and Fonterra boards to accept it by passing ratifying resolutions.

They have 20 working days from Thursday to do that and then Fonterra will be up and running.

The bill sets out a regulatory package to ensure that competition is maintained in the domestic dairy products market and that there is protection for supplying farmers and dairy companies which have not joined the mega cooperative.

Agriculture Minister Jim Sutton said its passage marked the beginning of an exciting new era for the dairy industry.

"I wish well all dairy farmers, sharemilkers, members of Fonterra and of the cooperatives of Tatua and Westland and all other members of the industry as they respond to this exciting new challenge."

Mr Sutton said he was pleased that the Government had managed to maintain the timeframe on the bill.

"It was important we went through this process as expeditiously as possible, because while this legislation was unresolved the industry in many ways had been in a state of suspense and did not have complete credibility in the market place."

Fonterra chairman John Roadley said the onus was on the company to deliver on promises, starting with the more than $300 million in annual gains by the third year after the merger.

Mr Sutton said the Apple and Pear Industry Restructuring Act Repeal Bill would enable orchardists and marketing firms to make the most of opportunities to sell their produce overseas.

"From this coming season, New Zealand's pipfruit growers will have a genuine choice of exporter and a track record against which they can assess exporter performance.

"The bill will allow New Zealand's pipfruit industry to retain its existing competitive advantages while also giving life to new entrepreneurship and niche market development that was severely constrained under the former modified single-desk export system.

"To succeed, this industry must look forward, by understanding and competing in the international market, rather than looking backwards and engaging in costly and unproductive arguments over industry issues in the courts, in arbitration disputes or for that matter in Parliament." Enza is still the major exporter of New Zealand apples and pears.

It is 60 per cent owned by growers and 40 per cent by corporate investors Guinness Peat Group and FR Partners.

An amendment to the legislation sorted out the dispute between Enza and growers over Enza's foreign exchange losses.

It covers an attempt by Enza to claw back the losses and other costs from growers. Enza must not make any deductions from growers for any losses arising from current foreign exchange contracts and must refund any deductions already taken from growers.

A second amendment protects the Crown from inheriting liabilities from the Apple and Pear Marketing Board.

Enza had attempted to place foreign exchange debts of $54.5 million onto its 1100 growers, effectively cutting their payouts by $4.50 a carton.

The industry regulator, the Apple and Pear Board, forced Enza to pay $21.1 million of the costs and growers agreed to pay $30 million.

The compromise deal depends on Enza being able to raise a bank loan to meet its part of the cost, and most of the growers accepting the deal.