The Ministry for Primary Industries (MPI) released a discussion document in November 2018 on the review of the Dairy Industry Restructuring Act 2001 (DIRA). DIRA regulates Fonterra's role in the New Zealand dairy industry. It provides for the ability of farmers to enter and exit supply arrangements with Fonterra and for oversight by the Commerce Commission of its milk price setting process. DIRA was due to expire in the South Island at the end of May but was extended under an amendment bill passed earlier this year while the review takes place.
Originally intended to apply only as long as Fonterra's dominance of the New Zealand dairy market made it necessary, DIRA obliged Fonterra to accept milk supply from all farmers who offered it. Fonterra says that obligation impacts on its capital investment options and slows its ability to invest in new product development. The review will look at the open entry and exit obligations and whether Fonterra should continue to be obliged to accept any application for a shareholding and milk supply. Agriculture Minister Damien O'Connor has said he would like the option for Fonterra to decline to accept milk from farmers not complying with Fonterra's environmental performance benchmarks.
The review will also look at Fonterra's milk price setting process and incentives or disincentives for dairy to move to sustainable higher value production and processing.
Consultation on the DIRA review runs until February 2019.
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