The Government and Fonterra
January 25th, 2012 at 10:00 am by David FarrarDanya Levy and Andrea Fox at Stuff report:
Prime Minister John Key says proposed changes in the diary industry may result in cheaper milk and will give consumers confidence they are “not getting ripped off” by Fonterra.
Key this morning rejected claims by farmers that plans to force the dairy giant to provide five per cent of its raw milk to independent producers, up from three per cent, was sending profits offshore by assisting largely foreign-owned New Zealand-based exporters which compete with Fonterra.
Labour’s primary industry spokesman Damien O’Connor has voiced similar concerns. …
Key today said proposed provisions to phase out well-established competitors would alleviate concerns about overseas-owned companies profiting at Fonterra’s expense.
It was in Fonterra’s interest to have competition in the market.
“It’s very important that we have transparency because Fonterra find themselves primarily in a monopoly position, they control about 95 per cent of raw milk production in New Zealand,” he told TV3′s Firstline programme. …
Fonterra chairman Sir Henry van der Heyden has said it is valid for Fonterra to assist domestic market suppliers with milk, but requiring Fonterra to supply overseas-owned competitors “defied logic”.
The extra milk obligation would cost Fonterra $200 million over three years alone, he said. …
Dairy farmer James Houghton, a Fonterra supplier and president of Waikato Federated Farmers, said if Fonterra lost money, farmers’ payouts would be affected.
“I believe it is the Government wanting to control an industry it doesn’t need to control,” he said. “The more rules and regulations, the more control it has.
Hmmn, an interesting situation. On one side you have the Government and on the other side you have Fonterra and Federated Farmers, with some opportunistic backing by Labour. So is the Government doing the right thing or not?
Former Green MP Sue Kedgley, who was a member of the parliamentary select committee looking into milk pricing last year, said the proposals were good steps.
Well that solves it for me. The Government must be wrong!
January 25th, 2012 at 10:13 am
How do you fuck a successful company?
Let the government get involved.
Vote:January 25th, 2012 at 10:18 am
Absolutely the government is wrong! In fact this is populist, socialist nonsense! Fonterra was created with the aim of delivering maximum efficiency and economy of scale for farmers to maximise profitability, which is good for the economy. It delivers those same efficiencies to consumers in terms of pricing, but milk is an international commodity, and is in high demand.
If the government is really concerned about consumers paying too much for milk, they should focus their attention on the supermarkets’ margins on dairy products – that way at least it isn’t taking money out of the pockets of New Zealand farmers.
Vote:January 25th, 2012 at 10:38 am
On one side you have the Government and on the other side you have Fonterra and Federated Farmers, with some opportunistic backing by Labour.
It’s not opportunistic, this is an instance where Labour has a superior position to the over regulatory, anti-business practices of the Greens.
Vote:January 25th, 2012 at 10:42 am
Today’s milk price at Trader Joe’s, Contra Costa County is $1.29 a quart. That’s Nzd$3.20 per 2l milk. Nz’ers pay on average 50c more per liter. You’re all getting ripped off and it’s an issue that needs to be addressed.
Vote:January 25th, 2012 at 10:42 am
Is there any evidence that Fonterra are ripping off NZ consumers? If the select committee found no evidence of that then I’d say this is just populism (aka democracy), and puts us in the strange situation of having a monopoly that actually benefits NZers.
Vote:January 25th, 2012 at 10:49 am
The National Party, aka Labour lite, the political party of free enterprise…..yeah right.
Vote:January 25th, 2012 at 10:56 am
This is bizarre. Provided the farmers keep their hands out of the public purse and don’t ask to be rescued in droughts and floods, they are running a business, and the government should stay out of their business. The minister says the present model is wrong because it is focused on maximising the return to the farmers. Excuse me? What business is not about maximising the return to its owners?
Vote:January 25th, 2012 at 10:56 am
It’s litre Monique, not liter – don’t forget where you came from!
According to Dairy Program Subsidies in the United States totaled $4.9 billion from 1995-2010 the dairy subsidies in the US fluctuate enormously but average about $300m annually.
Vote:January 25th, 2012 at 11:14 am
Monique,
Does that include sales tax? Because if you take off GST the prices are exactly the same.
Vote:January 25th, 2012 at 11:23 am
“proposed changes in the diary industry may result in cheaper milk”
That’s taking the butterfly effect to the extreme, are Collins going to print their day planners on cows so you have your own milk source at your desk perhaps?
Vote:January 25th, 2012 at 11:37 am
Excuse me, but who is in power? Labour or National. An industry that has had no subsidies since the mid 1980′s, is now told to subsidies the public with cheap milk. In Aussie right now the supermarkets are at war over who can supply the cheapest milk. More competition over there, but we have a duopoly over here, which is part of the problem.
Vote:January 25th, 2012 at 11:38 am
Unless it is in chocolate, icecream, baking or cooking milk is terrible stuff so my interest levels are fairly low but isn’t this just an attempt (probably ham fisted as it involves bureaucracies) to regulate competition?
Vote:January 25th, 2012 at 11:44 am
How about making farmers pay their taxes in product rather than money? Say 5% of their product goes to the government, which can then make sure that Kiwis can get NZ meat and dairy at lower prices than international market prices. Just an idea.
Vote:January 25th, 2012 at 11:52 am
Of course there’s no chance at all that the Chinese Government have gently leaned on our Government to ease the way for the Pexin bid AND ensure they get plenty of milk put their way by Fonterra… none at all, that’s definitely not the sort of thing the Chinese Government would do at all… ever… right? And even if they did our Government would reject any such pressure outright wouldn’t they…
Vote:January 25th, 2012 at 11:55 am
A plan.
Lets start manufacturing our own TV’s and shoes and cars in New Zealand again,. Lets subsidize the cow cockies again, Lets have compulsory unionisim again.
Yes I really want shit NZ made products only available again, I want to revert to the 60′s, New Zealand was great!!!!!!!!!!!!!!
If you think milk is priced to high, don’t buy it, its makes you fat, obese even. Just think ,cheap milk will make more fat bastards
This government is pandering to 12. 5 people with this rubbish, they should stay away
Vote:January 25th, 2012 at 11:57 am
Despicable tactics from the spineless Key government.
Vote:January 25th, 2012 at 11:59 am
Fonterra is a monopoly, monopolies get regulated, deal with it. Remember how Fonterra behaves, international price goes up, domestic price has to rise to match it; international price drops, domestic price has to rise to compensate farmers for poor returns. Domestic consumers get consistently screwed by a monopoly.
Vote:January 25th, 2012 at 12:09 pm
Ah………..the National socialists, defenders of the free market, purveyors of all that is good and great with the right, fucktards. Why stop at milk prices, if the government is so concerned the public is getting ripped off why don’t they drop their excessive fuel taxes. How about a break from high fuel prices. But no, so much easier to have a go at Fonterra and farmers. Fucking hypocrites. You can pick up Fonterra’s account books every year, perhaps you should also get some copies of those running our supermarkets, find out who is really ripping off who but of course this sounds to much like work.
Vote:January 25th, 2012 at 12:24 pm
Well the chickens all come home to roost.
24% of our export income is provided by Fonterra. 75% comes from Agriculture and the stupid dumb fucking Nats. want to shit their nest.
That’s of course because the national Party that once was the Party of farmers in NOW the National Urban liberal Party. They just conveniently forgot to tell those that hadn’t picked up the message and forgot yo tell the farmers.
Farmers have two choices. vote the lazy socialist [pricks out of govt and replace them with whom? or Get behind ACT or a new Party that represents their income and Spending power.
Strangley enough I said all this before the election but no one noticed.
Vote:January 25th, 2012 at 12:25 pm
Does include sales tax yup. Phone about to die. Will research then jump back into fray.
Vote:January 25th, 2012 at 1:02 pm
Tricky.
Probably the best solution would be to force Fonterra to break up into at least 4 regional companies and introduce local competition into the dairy dairy industry. That would be best for both farmers and consumers in the long run. Trying to regulate a monopoly just creates unfair pressures that invite circumvention by all parties and ultimately only really benefits the lawyers.
I mean, we do believe in free market capitalism don’t we?
Ironic how there are so many ‘righties’ in favour of the fonterra ownership structure, when basically, what it amounts to is voluntary socialism.
Vote:January 25th, 2012 at 1:24 pm
I have 2 x 2litres for $6 at my dairy. I am quite happy to pay that price.
Vote:It is the price of Coca’s etc that seriously undercut milk which is probably our greater problem.
January 25th, 2012 at 1:57 pm
Who appointed you Milk Commissar? Pfftt.
Vote:January 25th, 2012 at 7:58 pm
It’s nonsense to supply milk to competitors who then export it as milk powder to foreign markets. If the purpose of supplying milk to competitors is to have domestic competition, then it should only go to those who supply the domestic market.
Clearly those investing in private competitors to Fonterra are getting supplied with more milk – but without any focus on this delivering more competition in the domestic market. More of what was not working will not change the result, it will only deliver more profits to those who on-sell the milk offshore. The only sane reason for this is that National was bought by the private interests concerned.
As for forcing Fonterra to have tradeable shares so more can be bought up by corporate farmers – this is designed to encourage bidding wars between locals and foreigners to buy up farms supplying Fonterra – as then they can buy up shares in Fonterra off other farmers. Bidding up the price of land will do nothing to improve productivity or profit from farming or increase our GDP. It will reduce spare money for investment in added value etc. It’s the wrong path.
Vote:January 25th, 2012 at 8:01 pm
Scott Chris
The alternative was always two Fonterras – North and South. They would provide sufficient competition in the local market and still be large enough in foreign markets. I am not sure is it would be worth the bother of splitting now.
Vote:January 25th, 2012 at 8:08 pm
Correct me if you like but
before fonterra we had separate processing companies who in turn supplied the Dairy Board whop were responsible for all marketing of milk products inside and outside NZ.
apparently that wasn’t what the Govt. of the Day wanted so we then hatched Fonterra who took up both roles.
Now we have the drip heads wanting to give away tFonterra’s business to compatitors.
Sooner Creech and Luxton are gone from the diary industry the better.
Surley the labourer has the right to sell his wares for the best price to the person who gives hum the best value. Nothing says he should subsidize his competition.
Vote:January 25th, 2012 at 9:07 pm
Ed Snack— the nz domestic market is a wart on the arse of farmers, only around 8% of domestic production is required for NZ. If you think we are going to get rich from that you are wrong. We can sell overseas and make more money, and that is what drives the milk price, along with the margain by retailers. Also dont forget Fonterra controls 45% of the worlds dairy trade, it’s a fantastic NZ success story that everyone should be proud of.
Vote:January 25th, 2012 at 9:18 pm
I would like to see more scrutiny of Fonterra, something about them rubs me off the wrong way in terms of milk pricing. Why are they dead said against that? we need more ACCOUNTABILITY if they’re indeed New Zealand’s primary source of dairy.
Vote:January 25th, 2012 at 11:02 pm
SPC has it right – the current initiatives do not aid the domestic market – they aid the foreign market.
Milk costs in NZ and other countries are driven by several factors
The supply chain costs are a significant portion of costs so they can vary greatly by the distribution and sales costs – many countries have different costs of product because of this. It is arguable that NZ should have lesser costs because the milk goes a smaller distance, however this is not quite true – it is as cheap to get many goods from the south island to the north island as to Sydney.
Volumes – higher volumes means lower purchase cost
Retailer costs – NZ does not use dairy as a loss leader for some or other reason.
and despite my defense of Supermarketing in NZ the lack of competition does increase prices (not necessarilly profit – yes very Irish).
Vote:January 26th, 2012 at 12:09 am
You don’t have a right to cheap milk because by accident of birth you were born in an efficient, dairy producing country. Buy milk powder and make it up that way with you own water if its so important to you.
Fucking Kiwi losers.
Vote:January 26th, 2012 at 9:11 am
Comparing milk prices between countries is a complete and utter waste of energy and oxygen. No two countries have the same industry structure (ie cost structure) and no two countries treat their agriculture the same. Even within political blocs, different countries get different treatment.
Vote:EU – massive ag subsidies including milk and support schemes including state purchase of dairy product as a price support mechanism. Also the proportion of milk production consumed within the country of production is vastly greater than the 5% odd of NZ’s production that is consumed locally.
US – Production again subsidised and price support mechanisms are entrenched. This effectively means subsidised product on the local market. Export production and domestic production are effectively seperate industries with different prices and processors.
Australia – A pricing mechanism takes a skim off the export business and applies it as a subsidy to the domestic market. Again teh export and domestic industries are run by different players so while suppliers to export plants are actually doing relatively OK, the suppliers to teh domestic fresh milk market have been royally screwed by the oligopoly of retailers to the point where increasing numbers are leaving the industry having lost most or all of their equity – they have no alternative purchasers to supply.
Even within EU, the treatment of Irish vs French vs German vs Dutch farmers are different within the CAP.
Saying that you can buy milk for $x per litre is a logical nonsense and adds nought to the argument.
January 26th, 2012 at 9:57 am
In Oz the retailers screw over dairy producers (to the point they are selling stock to China), here they do the same to growers.
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