The Commerce Commission says it will be looking into the implications of Fonterra’s decision to keep its forecast milk payment to farmers below the payment calculated using the milk price manual.
Fonterra announced last week it would keep the forecast farmgate milk price at $8.30 a kilogram of milk solids, even though the price indicated by the manual should be $9 a kilo.
The co-operative says it’s holding the raw milk price at the lower level because of the growing imbalance between that price, based on milk powder returns, and the earnings for other products such as cheese and casein.
The Commerce Commission monitors the milk price manual and the way it’s being applied in twice yearly reviews, to make sure it complies with the competition laws.
The Commission’s deputy chair Sue Begg says Fontera’s decision doesn’t affect it’s latest review of the manual.
But she says it will be looking at the implications of Fonterra deviating from the pricing model in a more detailed review next year.
«And at that point Fonterra will provide us with detailed information on how it’s gone about setting the milk price, and it will also provide us with an explanation of why its setting its price below what would be calculated using its model. That’s a matter we will look at next year.»
Meanwhile, Sue Begg says the Commerce Commission’s just-completed review of the milk price manual has found that it’s largely consistent with what the DIRA regulations require.
However the Commission is concerned that the lack of prescription in some rules in the manual makes it unclear how Fonterra is applying it in a couple of areas, and it will be taking it up with the company in next year’s review.
Source: Radio New Zealand