The first option for each issue is to retain the status quo.
MPI said consultation with key stakeholders showed DIRA is effective in managing Fonterra’s dominance and is still relevant and needed.
It is unlikely to be encouraging inefficient industry growth or preventing Fonterra pursuing a value-add strategy.
However, it appears to be having unintended consequences in preventing Fonterra from managing some aspects of farmers’ environmental performance and that is a reputational risk to the company.
It might also be giving access to regulated milk for large dairy processors for whom it might no longer be necessary.
MPI said there is an opportunity to provide greater confidence in Fonterra’s base milk price calculation, which competitors allege is generating a barrier to entry.
Another possible objective is to preserve competition domestically in the short term while discouraging any undue dependence in the long term.
MPI has not been strongly directive, especially in two key areas where Fonterra wants changes.
The first issue is open entry for dairy farmers to join Fonterra where MPI says the first two options are status quo or complete repeal. The third allows Fonterra to decline to accept applications if Fonterra considers supply is unlikely to comply with its terms of supply.
That seems to be a vague and open-ended option aimed mainly at environmental requirements.
The second big issue concerns access to Fonterra milk by large processors. The options are status quo or excluding large processors, without suggesting any threshold.
Fonterra says the DIRA sunset clauses should have produced a repeal by now, particularly in the South Island where Fonterra’s share of milk has fallen below 80%.
Submissions close on February 8.
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