Wednesday, May 29, 2024

Dairy Bill to protect vital sector

An Amendment Bill introduced to Parliament today will provide greater economic security for New Zealand’s $22.1 billion diary sector, says Agriculture Minister, Damien O’Connor.

He said the Bill will support Fonterra’s move to a new capital structure which will reduce long-term risks to the sector.

“The Dairy Industry Restructuring (Fonterra Capital Restructuring) Amendment (DIRA) Bill supports the Fonterra co-operative’s move to its new capital structure, and sets the foundations for the continued future success of our highest value export sector,” Mr O’Connor said.

“New Zealand dairy farmers are world-leading and the Fonterra co-operative has been a central part of this.”

Minister O’Connor said the Government believes the Bill strikes the right balance between supporting Fonterra’s shareholder mandate while taking the opportunity to improve transparency in the sector.  

“Long-term sustainability, fair pricing in the domestic market and value creation in New Zealand’s dairy industry is part of the balance we are aiming for. The past two decades have seen new entrants bring competitive innovation to the industry and we want to see that continue,” he said.

“Our dairy industry’s continued success is vital to both New Zealand’s ongoing economic recovery, and protecting New Zealanders from the sharp edges of a global economic downturn.”

The Bill’s key risk mitigation measures were developed following consultation with industry, and will:

  • Improve the transparency and robustness of Fonterra’s base milk price-setting arrangements by increasing the number of Ministerial nominees to Fonterra’s Milk Price Panel from one to two.
  • Require the Chair of Fonterra’s Milk Price Panel to be fully independent of Fonterra, and appointed only with the approval of the Minister.
  • Give the Commerce Commission the power to issue binding directions to Fonterra on matters arising from its reviews of Fonterra’s Milk Price Manual and base milk price calculation.
  • Support liquidity and transparency in the trade of Fonterra shares in its restricted farmer-only market by, for example, requiring Fonterra to engage a designated market maker(s) and make independent financial markets analysis of its performance accessible to farmers and unit holders. 
  • Support Fonterra’s ability to access internal capital for investment in innovation, by requiring Fonterra to maintain and publish a dividend and retentions policy.

“It’s important the Amendment Bill proceeds quickly to give certainty to Fonterra, farmers and the wider dairy sector,” Mr O’Connor said.

“The Bill’s first reading will take place later this month, and I expect the Select Committee stages of the legislative change process to take place this year. This will provide the opportunity for the dairy sector and public to provide further comment and input.

“The benefits of a high-performing and efficient Fonterra flow through its nearly 10,000 farmer-shareholders into our rural communities. 

“This Bill will play an important part in the ongoing resilience and prosperity of rural New Zealand,” the Minister said.

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