DIRA Review, Time For Change -- February 2019

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.