Fonterra is taking milk battle to top

Fonterra is taking its marathon legal battle against two small dairy processors to the highest court in the land.
Appeal Court judges ruled in March that Grate Kiwi Cheese Co Ltd and Kaimai Cheese Co Ltd were "independent", meaning both companies were eligible to be supplied with raw milk from Fonterra farmers and pass the milk on to one of Fonterra's big domestic rivals for toll processing.
Industry observers said at the time this meant "virtual" dairy companies could ask for 50 million litres a year from Fonterra and require the cooperative to deliver it to a bigger company's factory for processing.
Fonterra unsuccessfully argued such companies were only "virtual processors" and not entitled to the milk.
Now the giant cooperative has been allowed to appeal the case to the Supreme Court, where it will argue the Court of Appeal incorrectly applied the Dairy Industry Restructuring (Raw Milk) Regulations 2001.
To ensure competition after Fonterra was formed, enabling legislation required it to supply "regulated" and relatively cheap milk to smaller processing companies, and Grate Kiwi and Kaimai argued in 2008 that any person who carried out some processing of any kind of milk or dairy product should be able to have up to 50 million litres of cheap milk delivered to the factory of their choice.
But Fonterra has said the two companies were passing on their milk to Open Country Cheese to be made into cheese, which they then processed and packaged.
If Kaimai and Grate Kiwi were supplied with raw milk at cost price it could mean any company which processed dairy foods of any kind could get cheap milk from its farmers, Fonterra said earlier this year.
Grate Kiwi began grating and blending cheese for the New Zealand market in 1991, when it was called Oceanic Foods.
Waharoa-based Kaimai is a newer company producing a range of soft, hard and semi-hard cheeses.
Fonterra controls nearly 95 per cent of the nation's milk production, which is about 16 billion litres per year, and it provides 600 million litres to rivals. It has said that supplying the milk costs each of its 10,000 farmers nearly $1000 a year.
Those farmers received gross milk payments and dividends averaging about $1 million each last season.