News New legislation
Fonterra is no longer obliged to collect milk
It had been going on for a while, but 'finally' the time has come: Fonterra is no longer obliged to collect the milk of its members. The dairy processor has been trying to get rid of this concept since early 2019. The current system would in fact encourage overproduction, a fall in dairy prices and forced investments in processing capacity.
As an open dairy cooperative, Fonterra has no choice in admitting members, anyone who wants to supply can become a member. In addition, the processor is legally obliged to collect the milk of all its members. In addition to arguing that this would have an effect on overproduction, the processor also states that they must collect milk from member dairy farmers who do not meet the Fonterra's environmental standards. According to the cooperative, this is reason enough to overhaul what they say is outdated legislation.
New legislation
It has now been 1,5 years since Fonterra announced that it wanted a reform of the legislation. The current legislation was based on the fact that Fonterra could not form a monopoly, so the company said that it ran into problems during this time. With the new legislation, Fonterra is no longer obliged to collect the milk of new members. In addition, the cooperative may also refuse to collect milk from dairy farmers who do not meet its environmental standards.
Furthermore, the obligation that the cooperative must supply milk to starting competitors in order to help them get started will no longer be required. Although Fonterra still has a large market share with 80%, it is no longer what it used to be (96%). Damien O'Connor, the New Zealand Minister of Agriculture, hopes that this reform will give Fonterra the opportunity to invest in high-quality dairy products again.
Competition
A last-minute addition to the new legislation gives Fonterra the opportunity to refuse dairy farmers who want to come back after a trip to another processor. This is causing concern among competitors, but after a few talks with, among others, the Minister of Agriculture, these concerns now seem to have been dispelled. O'Connor mentions that it is unfair for Fonterra to have to continue investing in capacity to be able to collect such extra supplies, while others do not have to.
Jorine Cosse
© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.
