Changes to the Dairy Industry Restructuring Act 2001
The Dairy Industry Restructuring Amendment Bill (No 3) (Bill) was granted Royal Assent on 24 July 2020 and has now become law.
The Bill amends the Dairy Industry Restructuring Act 2001 (Act) which enabled Fonterra to be established almost 20 years ago. The Bill was introduced as a result of a review commenced by the Ministry of Primary Industries which recommended changes to ensure better management of on-farm performance, improved certainty of milk price calculation, and greater protection of consumer interests. Overall, the changes are aimed at enhancing the performance of New Zealand’s dairy industry and ensuring that the Act remains fit-for-purpose in a post COVID-19 world.
What are the immediate changes?
The Bill introduces a number of changes which took eﬀect from 1 June 2020, including:
- allowing Fonterra to refuse the supply of milk from newly converted dairy farms or where farmers are unable to meet Fonterra’s terms of supply;
- expanding Fonterra’s terms of supply to include factors such as health and safety, animal welfare, and a farm’s measures to protect the environment, with Fonterra permitted to pay diﬀerent prices on the basis of such factors;
- limiting Fonterra’s ability to calculate the base milk price and clarifying that Fonterra can pay a diﬀerent farm gate price to the base milk price – though these prices are now required to be published each season;
- updating the terms on which Fonterra supplies regulated milk to Goodman Fielder to meet increased domestic consumption; and
- requiring Fonterra to appoint one member of its Milk Price Panel on the nomination of the Minister of Agriculture.
Rights of entry and re-entry are now closed
The Bill removes open entry rights of new and returning farmers, though this change will only take eﬀect from 1 June 2022 in order to give farmers and processors suﬀicient time to prepare. From this date, all rights of open entry are removed except for new farmers where:
- the applicant’s farm is majority owned by a person who has never before been the majority owner of a milk supplier; and
- the applicant’s farm produces less than 300,000kg of milk solids.
Reduced obligations on Fonterra to supplylarge independent processors
On 1 July 2023 Fonterra’s obligation to sell raw milk to other processors will cease where another processor has already secured its own supply of 30 million litres or more in a single season rather than for three consecutive seasons, as at present.
The Act will now be subject to review by the Minister of Agriculture on a 4-6 year basis to ensure that the law governing the dairy industry remains up to date and fit-for-purpose.
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