Each year the Commission is required to report on the extent to which Fonterra’s milk price manual promotes the setting of a base milk price that provides incentives for Fonterra to operate efficiently, as well as provide contestability in the market.
The manual sets out rules for how Fonterra calculates the amount it will pay farmers for raw milk.
Commission chairman Dr Mark Berry said Fonterra had made a number of amendments to this season’s manual that increased consistency with the overall purpose of the regime.
These amendments had been made after the Commission criticised Fonterra over aspects of the 2013-14 payout.
«In our final report on the 2013-14 base milk price calculation, we questioned whether the base milk price methodology adequately provides for costs associated with one-off or difficult-to-forecast events such as the ‘super flush’ peak milk flows in the 2013-14 dairy season,» the Commission said.
«Fonterra’s Milk Price Panel has determined to further consider whether a cost allowance to take account of one-off or difficult-to-forecast events should be introduced if similar circumstances persist beyond the 2013-14 dairy season. We will consider whether a more explicit provision for these costs is warranted as part of our review of the 2014-15 base milk price calculation,» it said.
This is the first of two statutory reviews that the Commission is required to undertake each dairy season under the Dairy Industry Restructuring Act 2001 (DIRA).
Source: Stuff