Back in June of last year I had real
fears the Dairy Industry Restructuring Act (DIRA) review was going to become a
political football rather than a serious look at what was best for the dairy
industry and our country: Shane Jones had launched a blistering attack on Fonterra,
their Chair and their performance. Winston Peters doubled down, giving Jones
his full backing, and Jones renewed his attack in September.
I can
only assume Fonterra had read my earlier column on how to deal with trolls
because their public response was perfect: they said nothing. Without fuel the
attacks lost steam and the focus shifted away from Fonterra to more responsive
targets, and this is an excellent result because Fonterra’s DIRA submission is
good, really good, and it deserves to be judged on its merits and not be used
as stick to beat the company with.
I would
urge all dairy farmers to read the submission; you can find it on the
FarmSource website under the “news” tab. You don’t even have to read the whole
thing, the letter from Miles sums it up nicely and Appendix A gives nice detail
if you want it, I think the rest of it is there to keep the lawyers happy. If I
can read and understand it then I’m sure the ministers and officials will have
no problems.
DIRA came
into being in 2001, allowing the formation of Fonterra which achieved one part
of its dual purpose, to establish a large scale exporter of dairy products. The
second purpose of DIRA was encouraging competition and protecting dairy farmers
and domestic consumers.
The two big
issues I wanted to see addressed in this review were access to regulated milk
and the requirement for Fonterra to accept all new suppliers, known as open
entry.
The
regulated milk supply, where Fonterra is required to supply milk essentially at
cost to competitors while they get their own supply going, was intended to
foster domestic competition.
Instead this milk was, and still is, used to make
product for export. Off the top of my head I can think of four ex politicians
heavily involved with dairy companies, they knew DIRA would allow them to
compete internationally with Fonterra and gain a foothold overseas without the
expense of first establishing their own supply chain. There’s plenty of milk
being supplied at cost to ensure domestic competition and no need to continue
subsiding competitor’s export ambitions. Goodman Fielder for example contracts
millions of litres for local supply and even has Fonterra do the processing for
them.
The open
entry rule essentially requires Fonterra to accept all new suppliers so long as
they are no further away than the furthest farm already being collected. Given
Greenpeace’s “too many cows” campaign and the public backlash over the 5,000
cow dairy conversion in the McKenzie basin, this should be a no brainer.
Imagine
if Fonterra could refuse to allow you to be a new supplier unless all your
waterways were fenced and best practice riparian planting had been followed! We
could be on the front foot with environmental compliance at a farm level rather
than playing catch up.
This
review is the chance for our Government to allow the dairy industry to move
forward with confidence; I hope they use the opportunity to do what’s best. The
time for cheap political point scoring is over.
