The commission’s finding was that the manual was largely consistent with the purpose of the milk price monitoring regime under the Dairy Industry Restructuring Act.
Deputy chairwoman Sue Begg said that while much of the manual remained unchanged, the amendment to include sales for whole milk, skim milk and butter milk powders achieved outside the Global Dairy Trade auction platform would need more analysis in the 2016-17 milk price calculation review.
“Although in principle we consider that including off-GDT prices is not inconsistent with the Act, we have concerns about the lack of detail as to how Fonterra will implement this change.
“We will take a closer look at this issue next year when we review Fonterra’s milk price calculation at the end of the current dairy season,” Begg said.
The final report recommended Fonterra revisit its treatment of lactose costs in the manual and consider including farmer support costs, though the commission’s view was both of those components were immaterial to the milk price calculation and did not significantly affect its findings under the review.
The final report also recommended Fonterra disclose the milk price paid on standard terms to increase clarity on how winter milk premiums and other adjustments were treated in the calculation.
“There are a number of issues we will be following up in our review of the base milk price calculation next year, including a focus on the cost of capital calculation Fonterra uses to set the capital charge,” Begg said.
