Fonterra's 2014/15 milk price is in line with legislation, commission says
The competition regulator is required to check Fonterra's base milk calculations annually as part of the Dairy Industry Restructuring Act's milk price monitoring scheme.
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UPDATED: Fonterra earnings raise concern about base milk price, commission says
Fonterra Cooperative Group's 2014/15 base milk price is in line with the legislation that merged New Zealand's biggest dairy cooperatives and created the world's largest milk exporter, says the Commerce Commission.
The competition regulator is required to check Fonterra's base milk calculations annually as part of the Dairy Industry Restructuring Act's milk price monitoring scheme. The Auckland-based dairy company will pay farmers $4.40 per kilogram of milk solids, which the commission said in a draft report is largely consistent with both the efficiency and contestability in the market for buying farmers' milk.
"Fonterra has made a significant effort to improve the transparency of its calculations and we have now resolved some outstanding issues from last year," said deputy commissioner Sue Begg. "Most notably, we can conclude its assumed energy and fixed asset costs are consistent with the purpose of the regime."
DIRA and the competitiveness in New Zealand's dairy market is currently under a nine-month review by the Commerce Commission. Among the issues under investigation is whether the DIRA competition thresholds have been met.
Last week, Primary Industries Minister Nathan Guy said independent processors collected 22% of all milk solids in the South Island and 9% in the North Island, triggering the expiry of pro-competition provisions under DIRA.
The current threshold frees Fonterra from its obligation to supply milk to smaller competitors once at least 20% of supply is taken by competitors in both the North and South Islands. Fonterra currently has an 86% share of the nation's milk pool, down from 96% when it was set up in 2001.
The commission will take comments on the draft report for the rest of the month, with the final report on Fonterra's milk price calculations due September 15.
(BusinessDesk)
Suze Metherell
Mon, 17 Aug 2015
Mon, 17 Aug 2015
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