The manual determines how Fonterra calculates the farmgate milk price, which is the price paid by Fonterra to dairy farmers for their raw milk.
This is the first of two statutory reviews the commission is required to undertake each milk season under the 2012 amendments to the Dairy Industry Restructuring Act 2001 (DIRA).
The commission has concluded the 2013-14 milk price manual is largely consistent with the purpose of the DIRA milk monitoring regime.
However, the commission noted that the lack of prescription in some rules in the manual reduced transparency, which is important to the efficiency objective.
The lack of prescription also resulted in the commission being unable to conclude on the extent to which two rules in the manual for the 2013-14 dairy season are consistent with the contestability objective of the legislative purpose.
The commission will consider the specific application of the rules during the second statutory review at the end of the season.
During the consultation process, Fonterra provided additional clarification in respect of one issue from the commission’s previous reviews, regarding the treatment of stranded assets, which had not been addressed by Fonterra in the 2013-14 manual.
The commission noted Fonterra’s December 11 announcement of a forecast farmgate milk price for 2013-2014 that was less than that calculated under the milk price manual.
“It’s the commission's view that Fonterra's decision doesn't affect our review of the milk price manual,” Commerce Commission deputy chairwoman Sue Begg said.
“However, we will consider the implications of any deviation from the milk price panel's recommendations for the base milk price when we review how the milk price manual is applied to set the milk price.
“That is the second review we have to undertake by September 15, 2014.”
The final report is at Review of Milk Price Manual 2013/14 Season page.
