Labour: Fonterra proposal 'kick in the guts'

Fonterra says the recommendations will hinder plans to make milk more affordable in New Zealand. Photo / Bloomberg

The Labour Party is criticising Government proposals to change raw milk regulations as a "kick in the guts" for Fonterra farmers while making life easier for foreign investors.

"John Key seems determined to make life easy for foreign investors in our economy at the expense of hard working and loyal Kiwi investors and company owners,' Labour's primary production spokesman Damien O'Connor said.

"This is a kick in the guts for Fonterra farmers who have remained loyal to their company.

"Fonterra says this decision will mean subsidies continue for competing companies at a time when Fonterra itself is being asked to reduce the cost of milk to New Zealand milk consumers.

"They can't afford to do both, and this decision will put more upward pressure on the price of milk in our shops."

The Government proposals, which are open to public submissions until February 24, include a three-season limit for independent processors who source raw milk directly from farmers, an increase in milk available under the raw milk regulations to about 5 per cent of Fonterra's milk supply, and a recommendation for an annual milk price monitoring regime by the Commerce Commission.

Fonterra chairman Sir Henry van der Heyden has attacked the proposals, saying profits will head overseas and it will hinder, rather than help, New Zealanders to get access to affordable milk.

"The Government's move to require more raw milk to be handed over to increasingly foreign-owned dairy companies ... will impose nearly $200 million of additional costs over the next three years alone and work against our efforts to reduce the price of milk in New Zealand," he said.

But Primary Industries Minister David Carter said the review of farm gate milk prices found that Fonterra's approach lacked transparency, which the proposals would remedy.

Mr O'Connor also criticised the timing of the process, which coincided with the last opportunity for Fonterra farmers to scrutinise the latest proposals for the trading of their cooperative shares.

"Early attempts to open up New Zealand's largest company to share trading have been rejected by most farmers who fear losing control and eventual ownership of their cooperative," he said.

"John Key's influence as a former trader - who has supported outside investors for Fonterra - concerns a growing number of dairy farmers, and this latest timing seems to be more than a coincidence.

"Fonterra's dairy farmer owners will be angry with the latest [proposals for raw milk regulation], but they must not be distracted from the big issue which is the long term control of their cooperative company."