Farmers who don’t comply with its terms of supply, including environmental and welfare standards, can also be cut off, Agriculture Minister Damien O’Connor said in releasing changes to be made to the Dairy Industry Restructuring Act.
It will be able to pay more to farmers who excel in terms of environmental, animal welfare, climate change and other sustainability standards.
“These changes will provide certainty for the dairy industry and ensure the sector can pursue sustainable value growth for the benefit of all New Zealanders,” O’Connor said.
“The industry has changed considerably since 2001 and it is important to ensure the regulatory regime puts the sector in the best possible position.
“The Government is committed to building a modern and productive economy and that means being smarter in how we work.
”The changes we’re making will support our dairy sector to produce and export high-value goods in a way that sustains the environment it relies upon.
“DIRA drives much of this work and after 17 years it’s the right thing to do to make it fit for the 21st century.
“Following farmers, independent dairy processors, non-government organisations and representatives of Maori interests around the country sharing their views Cabinet this week approved changes,” he said.
“I want to make sure we have a law that is going to work for everyone it affects.”
The Government will retain the open entry and exit provisions for Fonterra with qualifications to manage ongoing risks arising from Fonterra’s large size and scale in NZ dairy markets.
It will let Fonterra to refuse milk supply from farmers where the milk is not compliant or unlikely to comply with Fonterra’s terms and standards of supply or is supplied from newly converted dairy farms.
Fonterra’s terms of supply will be able to relate to, and offer different prices on the basis of various on-farm performance matters including environmental, animal welfare, climate change and other sustainability standards.
But it will limit Fonterra’s discretion in regard to setting a key assumption in calculating the base milk price, the asset beta. That is something that has been a bone of contention in the industry with others disputing how Fonterra uses it.
And Fonterra will be required to appoint one member of its Milk Price Panel on the nomination of the Minister of Agriculture.
But it won’t have to supply regulated milk to independent processors with their own supply of 30 million litres or more in a single season.
The terms on which Fonterra supplies regulated milk to Goodman Fielder for the benefit of domestic consumers will be updated.
The DIRA will be reviewed again after four to six years to provide regulatory certainty.
People will have another chance to have their say on the changes to the DIRA and the Raw Milk Regulations during the select committee process.
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