Dairy Industry Restructuring Amendment Bill (No 3)

I move, That the Dairy Industry Restructuring Amendment Bill (No 3) be now read a first time. I nominate the Primary Production Committee to consider the bill. At the appropriate time, I intend to move that the bill be reported to the House by 17 February 2020.

As this House is aware, the dairy industry makes an enormous contribution to the economic wellbeing of New Zealand. One of the 12 priority outcomes of the coalition Government is to build a productive, sustainable, and inclusive economy and the dairy industry is a crucial player in that journey. It is our largest export sector, accounting for more than one of four export goods dollars that our country earns. It contributes nearly $8 billion to New Zealand’s total GDP. The industry provides jobs and incomes for more than 40,000 workers, most of them on farms but many in dairy processing too. As a former farmer and part-time farmer now myself, as someone who has followed the fortunes of the dairy industry very closely, I know its reputation for being hard-working, enterprising, and innovation is indeed well deserved. There is much about the industry that we should admire.

We’re now at the point where change is necessary to help the dairy sector in better shape for the future. The wide-ranging review of the Dairy Industry Restructuring Act 2001, the Act which paved the way for Fonterra, has recently been completed and this bill is the result of that review. The Dairy Industry Restructuring Amendment Bill (No 3) contains a package of measures that will ensure that the Dairy Industry Restructuring Act (DIRA) regulatory regime operates in the long-term interests of dairy farmers, consumers, and of the wider economy.

The bill contains amendments to the DIRA itself and also to the associated raw milk regulations. I’m being absolutely transparent about the totality of the changes being made to the DIRA regulatory regime. This way the select committee will be able to examine the proposed regulations as well as the statute changes and the regulation amendments will be made at the same time as the bill is enacted.

The Dairy Industry Restructuring Act was passed nearly 20 years ago. As mentioned, it enabled the formation of the Fonterra dairy cooperative, the objective being to have a company with the scale to be a strong international competitor and the drive to have innovation across our dairy industry. But the DIRA also recognised that there were risks to be managed in enabling the creation of an entity that, effectively, controlled 96 percent of farmers’ milk production at that time and a near monopoly in the New Zealand domestic consumer markets. There were concerns that Fonterra’s market dominance could impact on the performance of the dairy industry and that its dominance in the domestic consumer market could impose higher prices or limit choice. The DIRA therefore imposed some important disciplines on Fonterra.

The key measures are, firstly, open entry. Fonterra is required to accept any farm as a shareholder and accept all milk from shareholding farmers, subject to limited exceptions. These provisions prevent Fonterra from imposing blunt volume restrictions on new farmers’ supply. Open exit is the next provision. Fonterra must allow farmers to withdraw from the cooperative without unreasonable restrictions or penalties, which allows farmers to switch their supply to other dairy processors should they deem that Fonterra is not performing in their best interests. The third thing is the calculation of the base milk price. This aims to provide a transparent benchmark price so that Fonterra’s shareholding farmers have a reference point against which they can assess Fonterra’s and other dairy processors’ milk price offers. And then we have the raw milk regulations, which have two functions: to provide a limited initial supply of raw milk to new dairy processors to ensure there was some competition in the market place, and to protect the interests of New Zealand consumers by ensuring that there was one major competitor to Fonterra in that consumer market.

Eighteen years on, the Government has reviewed DIRA to ask whether the regulatory regime is still needed to manage these risks. There have been changes in that time. Fonterra’s share of milk production has fallen from 96 percent to about 80 percent. New processors have entered the market as both exporters and suppliers, and the dairy industry has grown over that time. Its contribution to New Zealand’s per capita GDP is 74 percent higher than it was in 2001 and dairy export receipts have more than doubled.

The aim of the Government’s review of DIRA, which involved widespread consultation and independent expert analysis, was to determine, firstly, whether the DIRA is operating in a way that protects the long-term interests of New Zealand dairy farmers, of its consumers, and of the nation’s overall economic and environmental and social wellbeing. The second one was whether the DIRA has had any unintended consequences. Thirdly, whether DIRA is still fit for purpose, taking into account the wider economic, trade, and social context in which the dairy industry operates. We want to ensure that DIRA supports a higher performing, sustainable dairy industry that is aligned with the Government’s strategic priorities of productivity, sustainability, and inclusiveness.

The DIRA review was not intended to be a review or critique of Fonterra’s performance or its business strategies or structure. It does not direct Fonterra or any other dairy business on corporate strategy or product mix. These decisions are for the company and its shareholders. Again, DIRA does not make judgments on whether the dairy industry is a good thing or not or how many cows we should have or where they should indeed be. Those things are up to the dairy companies and the industry.

The review concluded, having received many submissions, many of them strongly held views, that regulation, and particularly retention of open entry and exit requirements, is still required. Fonterra’s share of farmers’ milk has decreased, but Fonterra remains the only dairy processor with a national presence still collecting 77 percent or more of farmers’ milk production in most dairying regions. Even though there are now several large processors established in New Zealand, they are individually and collectively small in comparison, and generally setting their prices and other terms of reference to Fonterra’s.

There are a number of changes that will be put into place. If I can, firstly, move to open entry and say that the bill addresses a key point in the way in which Fonterra calculates base milk price. Sorry, I’ve just gone to the wrong page here. It will allow Fonterra to have some discretion in taking new farmers’ supply. It has been accepted that the growth of the dairy industry has come at some environmental cost and that Fonterra have asked for the discretion to be able to refuse milk supply from new suppliers. Those requirements will be put in place through the legislation. Can I say that they will have, as I say, performance criteria based on animal welfare, hygiene, unsafe work practices. Again these are risks to Fonterra should they be forced to take supply from farmers that, indeed, might not be up to world’s best standard.

There are a number of other provisions in there. I won’t go into the technical side of regulated milk or base milk price, other than to say that the changes that have been considered very carefully work through the balance of ensuring Fonterra and its management—giving some protection to farmers who often have no alternative to where they supply their milk, keeping enough upward performance pressure on the board and management to deliver the returns for those farmers but, again, ensuring that there’s no blind obligation to take milk anywhere from anyone, any time. That has put pressure on Fonterra to invest in stainless steel. The reality is now that we probably will see less growth in the dairy industry, and moving into that different situation it is important that Fonterra is not exposed to all the risks and that its competitors pick up all the opportunities. That is the balance that this Government is trying to achieve here.

Can I say that we want to ensure that there is a review process of the legislation on a regular basis, moving forward, that we do not believe as a Government that this legislation should automatically expire. That was the view held by officials and the previous Government, that at some point regulation would be unnecessary for the dairy industry. It is my view, and the view of Government at this point, that with such an important industry we need to ensure there is the right regulatory structure around what is our single biggest and most important company. And I look forward to the review, the strategic review, that they’ve carried out over the last six months. They are now a more honest company. They have fronted up with their deficiencies in terms of performance and capital structure. They are about to launch a strategy that I hope will align with that of Government of ensuring that we have a sustainable, high-performing company that delivers economic sustainability, environmental sustainability, and the very best returns for this country, for its dairy farmers, and for the wider community.

Thank you, Mr Speaker. I rise to talk to the Dairy Industry Restructuring Amendment Bill (No 3). At the end of the Minister of Agriculture’s speech, he posed a question. He said that in his Government’s view, there will be a time in the future where Fonterra and the dairy industry have reached the point where it doesn’t need significant regulatory impost but that time is not now. The National Party holds the view that with respect to open entry and exit provisions, and the obligation to provide a hand up for those who are wanting to put additional stainless steel at scale into the New Zealand dairy industry and then compete against Fonterra in the world market, we have reached that point, that those regulations in particular are no longer required and, therefore, the balance that the Minister talks about that he has sought to strike through this legislation, from the National Party’s perspective, has not been met. We therefore will oppose this legislation going to the select committee and oppose it here at first reading. Of course, we will debate it at select committee and look forward to the many, many submissions that we get from the agriculture sector and the dairy industry, in particular.

I would like to spend a bit of time reflecting on why we have got to that position. It is important to reflect a little bit on history. In 2001, when this company was established, clearly, with remarkable market power at 96-97 percent, it made a whole lot of sense to put some regulations over the top of that company to ensure that the right balance was struck in terms of ensuring a fair price paid back to farmers and, in particular, the New Zealand domestic liquid milk and retail market was competitive and there was the opportunity for new competitors to be able to move into the market.

But fast forward now to 2019, and Fonterra’s market share is around 80 percent. There are a significant number of competitors who have come into the market. Interestingly, when this legislation was initially established, the language that was used by the Labour Government at the time was that this regulation or requirement to assist new start-ups would particularly assist the domestic competition with respect to liquid milk and the retail brands. Well, what has happened, ladies and gentlemen, is that every single one of those new stainless steel competitors has got New Zealand milk and, understandably, commercially, immediately turned their eyes to the opportunity that exists around the world and from day one have competed with Fonterra vigorously, not only for New Zealand milk supply but particularly in the market.

So we hold the view from the National Party perspective that the market is working particularly well. There is a strong competitive tension that exists in this country with respect to access to New Zealand milk. Fonterra now should be freed from the obligation of giving a hand up, essentially, to new stainless steel at scale to come into New Zealand to immediately compete against them on the world stage. The National Party has no problem with the obligation to provide milk to those small, niche players that have cheeses and yoghurts—often, in a New Zealand context they sell some, plus a little bit offshore. That’s not what we’re talking about here. We’re talking about a strategic conversation on behalf of a critical industry in this country—25 percent of mercantile exports, huge value to the economy.

It’s not just a huge value to us. All those who compete in the global food space see New Zealand, see its milk pool, and see opportunity. Surely, we must put together a set of legislation and regulations that ensures that New Zealand can compete effectively in that context, as opposed to creating the obligation on Fonterra year after year to provide hand-ups and start-up opportunities for those. I acknowledge the Minister has reduced some of the obligation, but from the National Party’s perspective it hasn’t gone far enough.

Equally, with respect to the open entry and exit obligations, we acknowledge aspects of this bill which are in the right space, particularly the freeing up of Fonterra’s ability to be able to design commercial terms in terms of its annual supply conditions with its farmers that reflect the need to be able to expect from those same farmers best management practice with respect to environmental outcomes, animal welfare, and the like. I think it makes sense that they have now clarified through this legislation, regulations, the ability to be able to do it. It does make sense that they also now don’t have to take new conversions that appear in the context of the New Zealand industry, although if what we hear is true coming from the other side with respect to water, I suspect there will be very few opportunities for conversion, and, in fact, I think the whole conversation around which side of the House supports primary industry to be able to build and be sustainable and actually be successful on the world stage is going to become an acute focus over the next few weeks.

But a part of the open and entry part that is proposed in this bill that we disagree with is the continuing obligation on Fonterra to take back those who have left. Again, I think this needs to be painted out very clearly. You have farmers who leave, who sell up and go to a competitor, and then if it doesn’t work and they want to return back, Fonterra has no choice other than to have them back on exactly the same commercial terms as exist for those who have stayed with the co-op forever. That does not work well in rural New Zealand, and there are many people on the other side who know that. It doesn’t work, it doesn’t make sense, and it certainly doesn’t make sense in the context of a highly competitive domestic milk supply context.

We have some other issues that I will touch on and I’m sure my colleagues will explore in great depth. A particularly interesting focus from Minister O’Connor to put in here at the last minute some requirement to approve a ministerial appointment on to the Milk Price Panel. I think this is personal. I think that he has always had, in his view, deep suspicion that, somehow, the milk price manual, despite the fact that the Commerce Commission has had review after review around its efficacy—he still wants to have his person on there to be able to see what’s going on, to look under the lid, to really make sure. Well, I think that New Zealand politics, surely, has gone beyond that sort of behaviour. We have a milk price panel required under this legislation. It has proven efficacy over many, many years. Let it do its business. Don’t then try and say, “Well, actually, I want to put my own person in there, as the Minister.” They cannot help themselves. The only way issues get resolved from the Labour Party’s perspective is to put their own hands into the till, if it’s a tax conversation, or into the engine, if it’s the New Zealand economy. It ends up, I think, ultimately, cutting their hands off and making the engine go slower, and this is another example. They don’t need to make this appointment. I don’t think it adds any value. Again, we intend to push back quite strongly.

In terms of the components in this legislation which talk to the liquid milk and domestic retail space in New Zealand—and I’m talking here particularly the obligations on Fonterra to supply Goodman Fielder with, historically, 250 million litres but here it is suggested moving to 350 million. This is one part of the legislation that we are broadly comfortable with, and we can signal support with respect to that.

But, in conclusion, this is a position that we have reflected on and landed on very clearly as the National Party, that the time has come, because that is indeed the question that the Minister put. We’re having a conversation as to whether these regulations and legislation are fit for purpose for the 2020s. That’s what we’re talking about. So let go of the view of the world around constraining Fonterra that existed in this House in 2001 in the context of that market reality of a business with 97 percent. It now has 80. It is a hugely competitive space, New Zealand milk supply. It is part of a global food chain which has huge value to other players who want to come back and come from their countries and integrate back into our supply chain because they see opportunity. That’s fine. That’s the New Zealand way. We are open to the world. But let’s not add additional—we think unacceptable—regulation and obligation on Fonterra with respect to requiring them to give that new stainless steel a further opportunity when they’re already under huge competition from those already in this market and then, for those who leave the co-op, say “Welcome back, and you can come back and have the same terms and conditions of those many, many thousands who stay with them thick and thin.”

We will be opposing this, but we look forward to a very, very productive conversation in the select committee. Thank you.

What a shame. The National Party had an opportunity here to send a message, as it has done numerous times in this House to the rural communities across this country, that they are going to work constructively with this Government to find a way in which we can establish a framework to ensure economic prosperity in our rural communities. And what do we see? We see the National Party playing politics yet again because they see—rather foolishly, in my mind—that fighting these battles and opposing such legislation is going to win them votes. But the message that they are sending in opposing the Dairy Industry Restructuring Amendment Bill (No 3) is that they are grasping at straws for relevancy. What they are doing is they are trying to appeal and create some differences to this Government. But with this legislation we are yet again as a Government proving that we are providing long-term solutions to agriculture and to rural communities.

What we have done is consulted wisely on this piece of legislation. We have undertaken an extensive review and consultation with various groups, and I’ve got them listed here—with farmers, independent dairy processors, NGOs, and representatives of Māori interests—on measures that will ensure the legislation is fit for purpose. Some said there should be less regulations; some said there should be more. We feel that we have found the balance. And what the National Party could have done—as they have done many, many times before—they could have stood and said, “We have reservations about this bill. We will support it at the first reading and get it to select committee and we will let the public have their say.” But they have nailed their colours to the mast in opposing this bill already, and far too soon in my view, because this piece of legislation will ensure that the dairy industry continues to be competitive and continues to operate in a way that restores and enhances and maintains our reputation as a fair and sustainable producer that lives up to the brand as much as it can whilst continuing to improve how we portray ourselves overseas.

But they haven’t taken that chance. The National Party have opposed this. They say that it is competitive enough. That’s not what we’ve heard when we’ve actually consulted the industry. They say, in their opening gambit—Todd Muller said that the Minister of Agriculture said something which he clearly did not say and then stood up and listed a number of things that they think that are good in this bill and that the Minister has clearly consulted in listening to the industry and made some changes which will go down well. The list of things that the National Party supported in this bill was longer than those which they opposed and I think that sends a very clear message to everybody.

They don’t oppose this bill. They don’t oppose this bill at all. They see merit in this bill but they are trying to create some relevancy in opposing something—anything. When they see the gains that this Government is making for rural communities they finally see an opportunity. I don’t believe that they oppose this bill, but if they want to play politics let them because we know, at the end of the day, that this bill benefits the dairy industry and benefits the rural communities that support it.

Thank you, Mr Speaker. Today is a good day for the New Zealand dairy industry because the biggest political party in this country has stood up for farmers and has stood up for the dairy industry and is making a pathway forward for that industry. This is time, as my colleague Todd Muller has said, to put the Dairy Industry Restructuring Act (DIRA) away. We have achieved the purpose of creating Fonterra and competition in the market. That has happened. They are down to 80 percent of the market and falling, and that will continue as more operators come in. But we do not need the hand of Government to determine what our biggest co-operative and company has to do. We need that company to be able to unshackle itself from this room and to go out into the markets and perform. And the Labour Government—the essence of what the Minister of Agriculture said in his speech was that the Government does not trust that company and that the Government knows better than that company what should happen to farmers, their assets, and their future generations.

I disagree completely with that. The New Zealand farmers have proven themselves over generations to be the best in the world. And Fonterra may have its good and bad points and it may have its detractors, but the fact is it is the only flagship we have on the world stage, and go to any other primary producer in New Zealand and Australia and they will tell you they want exactly the same thing. Go to the kiwifruit growers. They’re not going to give up Zespri tomorrow, are they? Go to Australia and look at their dairy industry where Murray Goulburn went under last year. There is no other co-operative that is world stage and it does not need this room to tell it what its future is. That is the first point.

The second point is that Fonterra and the market have come of age. In the market we have competitors that are out there. And as Mr Todd Muller said, many of those competitors have gone straight for the export market. They haven’t gone out there trying to reduce the price of milk for ordinary Kiwis. They’ve gone where the highest value is. And they haven’t gone out there and created a new vision of value-added products. A lot of the products they make are pure and simple milk powder and a lot of the way they sell their products is going around, following around Fonterra trying to pick up its market share. That’s the reality of what’s been happening to our New Zealand dairy industry and we’ve competed long enough in that sphere. It’s time we let that company go.

There are some points where we need to help. And there are some points where, you know—there is that point around the domestic supply that is there for Goodman Fielder. And we don’t see that that is a problem and Fonterra itself does not see that that is a problem. But we don’t need to have DIRA to achieve that purpose. We can achieve that in other ways in other legislation. The concept of having DIRA legislation where the co-operative is controlled by this Parliament is no longer needed.

This Parliament should not be dictating whether people can supply or not supply Fonterra. If the Government truly believed what it said about environmental outcomes and sustainability and wanting to have value-added products, it would let Fonterra set those signals and it would let Fonterra go out there and make the decisions about who supplies. But with having DIRA legislation there it constrains Fonterra from being able to do that. It constrains them from meeting the market because, effectively, they have to pick up milk that goes to another company and has to come back to it. Take away that and then Fonterra has much more power to go out there and put in those extra things that the Government says that they value: those environmental, those sustainability requirements. By doing what we do now we take that away from Fonterra.

Another issue that is in there will be the milk price and how that’s set and also the Government involvement in that. There is no need for the Government to put its arm and to put its hand into the management and direction of the milk price in New Zealand, as it is doing in other legislation around National Animal Identification and Tracing (NAIT). It is the hand of Government wanting to control our primary industry and they are doing that because they are wanting to be able to tax that industry long term. They want to be able to control by knowing all the information around that industry. Fonterra is a co-operative but it is in a corporate world. It does not need Government’s hand in there. There is no need for that and it is purely ideological from the Minister.

We’re going to come back after dinner and talk about this some more. But New Zealand First I see sitting there. They’ve got a choice in this room here now—in the next hour. Do they come back and support a Labour-Greens Government that is against farmers, against the wishes of farmers, or do they join with National in sending a signal to the Government that this is the time to stand up for rural New Zealand? This is the time to actually do a deal with us, with them, so that we get the right result for Fonterra shareholders, for the New Zealand industry, and for the future of our productive sector.

This is an important debate that comes around in this Parliament far too often. This country does not need to constrain its biggest economic player that’s in the private sector. We are a Parliament here that is devised to help people, to support people, and to look after people. We are not a Parliament that is designed to be a corporate watchdog to make decisions on economic decisions that private sector individuals do. Farmers should have that responsibility and they should take that upon themselves. And the day we take DIRA off the New Zealand dairy farming sector will be the day that New Zealand dairy farmers feel like they can actually go out there and do their own thing. They will feel that they can actually be achieving.

Sitting suspended from 6 p.m. to 7.30 p.m.

I’d just like to carry on where we left off before the dinner break, and that was around the DIRA. When we had the Minister do his opening speech tonight, he said that the purpose that the Government had in having this Act continue through and to control Fonterra was that the Government wants to have regulation over New Zealand’s biggest company—those were his exact words. My argument is that we have now reached a stage in the New Zealand dairy industry where farmers need to have control over their biggest—

💬 Hon Damien O’Connor: Well, they could if they’d made the bloody effort.

—company and cooperative, not that Minister. This room has been a constraint on New Zealand industry for far too long, and we do not need to have that continue through this revamped DIRA legislation.

Another part he said was that generally setting prices are on the terms of reference of those companies and not following Fonterra, but that is simply not the case. The other companies that are out there, as my honourable colleague Todd Muller said earlier, have been using Fonterra’s pricing as their basis to enable them to go into the market places. They do not wildly change their prices from that that Fonterra has. They are very much there, trying to take advantage of the lead Fonterra has, and the Minister wants to put a hand of Government into the corporate decision-making of that organisation, like he is doing with NAIT. It is something that is not necessary.

DIRA has achieved its purpose. Fonterra is now only 80 percent of the New Zealand dairy market, and there will be questions in the future, not about new stainless steel being built around this country, but about what stainless steel has to be closed down. That will happen in the next decade, and this is time where Fonterra needs to be given the chance to create its own future now, for the issues it’s had in the last few months and in the past—they are really only a symptom that it needs to be able to take control and not be shackled by this Parliament. So—

💬 Andrew Bayly: But Damien knows best.

The Government does not know best. Farmers are the people that know best what to do with their assets and their control.

This gives us the opportunity here today to wrest back control for the people that are actually our producers. So I would encourage all parties in this House to support the National Party in looking beyond this bill and to work out how we can look after the Goodman Fielders of the world, but, at the same time, let’s give up on trying to have this room constrain and dictate the future of the New Zealand dairy industry.

It is worth reflecting on the fact that we are debating the Dairy Industry Restructuring Amendment Bill (No 3), and we have the National Party over there, screaming that we should be doing more when, in fact, the No. 2 bill that was before this Parliament and was passed under the stewardship of Nathan Guy in the last Parliament was a much more tepid version of this current bill. Minister Damien O’Connor is to be commended for, in one of his first acts as Minister, kicking that well into the weeds and bringing it back now, after extensive reviews and consultations, into a much more workable and sustainable bill.

It is also rather ironic to hear the National Party over there standing up as champions of Fonterra. They have always conceptually and ideologically hated the concept of Fonterra. They have never been supporters of New Zealand ownership. They stood meekly aside as our biggest meat exporter, Silver Fern Farms, went into the control of foreign Government ownership, when the board and a significant amount of shareholders were reaching out to them for some help. On the other side of that debate, New Zealand First have always been strong and fierce supporters of New Zealand ownership and, particularly, strong supporters of the co-op model, where New Zealand farmers have control of the supply chain well beyond the farm gate.

This is a significant piece of legislation. This will be one of the most significant pieces of legislation to go through the 52nd Parliament. New Zealand First does support this bill. However, as the Minister knows, our support does come with some qualifications.

The creation of Fonterra has been enabled by this legislation. The merger of the Dairy Board, Kiwi Cooperative Dairies, and the New Zealand Dairy Group back in 2001 was a watershed moment for corporate New Zealand and the dairy industry. It created a national champion and one that offered great promise.

It is our only significant multinational. It is, by New Zealand standards, a corporate behemoth. It has an almost $20 billion turnover. It has 22,000 direct employees. It commands 25 percent of New Zealand’s merchandise exports. I believe that that is probably the highest stake in the economy that one single company has in any OECD economy—and I’m not sure if that’s a fact. Maybe it’s a patsy fact, but I would imagine that that would be the case. This is a tremendously significant company for New Zealand, and it controls something like 30 percent of the world’s cross-border dairy trade, so it’s internationally significant. It has been compared to being the OPEC of dairy.

So this legislation has had far-reaching consequences. It has enabled, through the open-entry provision, mass expansion of the dairy industry, with the provision for almost unlimited volumes of milk having to be taken by Fonterra. It has dramatically changed the landscape of New Zealand and it has, potentially, also constrained its ability to innovate as it’s had to take that wall of milk and put up milk powder dryers to handle that volume.

The promise, it’s fair to say, has not been delivered on that original version. We now see the co-op in a somewhat difficult position. It is having to liquidate assets, including iconic brands like Tip Top, and also looking at, I think, $800 million worth of liquidation of assets. It has signalled a significant loss this year, on the back of a significant loss last year.

There has been a culture of corporate excess, with the extraordinary salaries paid to those at the top end of town. The $8.5 million salary to Theo Spierings, who proved to be the emperor with no clothes—that is an affront to the 10,500 shareholders of this company, 86 percent of whom are mum and dad farmers who have one farm. They’re not corporate farmers; they are, by and large, small, family-owned farms.

New Zealand First has prioritised this piece of legislation. I myself, with my trusty sidekick Stu Husband from the Waikato—we conducted meetings around eight provinces in New Zealand and visited all the major processors and some of the smaller ones to get a flavour of what the feeling was out on the ground, and I can tell you that the shareholders of Fonterra are intensely passionate and proud of their co-op.

In terms of the legislation, there are four issues. The Milk Price Panel—I know that’s been discussed by the previous speaker, Mr Bennett. We have looked at this. I think setting the milk price has been a little bit contentious, having a Government appointee in there. We’re not particularly bothered by that. We don’t see that that is too much of a problem. But we will look at that through the select committee process.

We strongly support the limiting of requirements to provide independent processors with dearer milk. Actually, I’ll qualify that. We’re very supportive of small New Zealand start-ups getting that supply of milk. The foreign start-ups, or the foreign companies, we are not supportive of that. But the Minister has come up with an elegant solution, I believe, in the volumes of milk and time-limiting that for one year after the company has 30 million litres of its own supply, which does negate that and does protect New Zealand’s trade interests. New Zealand is well benefited by access to international markets. We don’t want to do anything that cuts across that.

Where we do have some reservations is around the open-entry provisions. We do support the increased discretion for Fonterra to decline supply around environmental issues or for animal welfare standards and the flexibility that that does give. But we believe this discretion is too narrow.

We do believe it is important that Fonterra are required to ring-fence its existing suppliers, and we support the increased footprint provision of 50 percent for those increased providers. But we do not think Fonterra should be required to hold capacity indefinitely for suppliers who have walked away. We think that there should be a sunset clause within these provisions. We think the five-year rollover until we look at that again is too long. This is a major cost on Fonterra’s business to hold this latent capacity, and we believe it is unfair that Fonterra should be required to compete with one hand tied behind its back, and we believe it is time to release those shackles. But we will see that prosecuted through the select committee process, as should be the way.

New Zealand First are strong supporters of the co-op and New Zealand ownership. We must look at the canary in the mine that was the Westland dairy co-op. We must look at the examples of Bonlac and Murray Goulburn, Australian co-ops that have fallen by the wayside, and we do not wish to be complacent. We believe that the Government shouldn’t be adding to these pressures by unfairly handicapping Fonterra, and we will, as I said, look to prosecute that through the select committee process. We do think there is a danger of New Zealand farmers becoming peasants in their own land if we do lose these valuable supply chains. It is imperative that in this our most major industry we keep control of that within New Zealand farmer ownership, and New Zealand First will be standing solidly behind our farmers in making sure that that happens.

So New Zealand First have looked at this bill very closely. We will look through the select committee process to make sure that it comes out the other end in a place where we believe it should be and that Fonterra can get back on the road to being the national champion that was envisaged for it when it was created in 2001. Thank you.

For anybody who is still listening to the debate, that contribution was Mark Patterson, New Zealand First, who spent 10 minutes telling this House why he shouldn’t be voting for this legislation and then said he will vote for this legislation. I cannot understand New Zealand First, who claims it’s the champion of the rural sector, out there imposing the zero-carbon bill and fuel taxes galore, and, with an opportunity to show solidarity tonight to every dairy farmer in New Zealand, that opportunity has been ignored by New Zealand First.

I was trying to think of a charitable way to describe this legislation over the lunch break, and it is lightweight legislation by a lightweight Minister of Agriculture.

I know more about the history of this legislation than anybody, probably, in this House. I know that Damien O’Connor claims credit for the original legislation in 2001, but the background to that was these negotiations started in 1998. I was the Associate Minister for agriculture, and I was involved. At that stage, Damien O’Connor, there were heavyweights involved. The Hon John Luxton—

💬 Hon Damien O’Connor: You didn’t have the guts to do it.

ASSISTANT SPEAKER (Hon Ruth Dyson): Order! Sorry, the Hon Damien O’Connor, please stop that sort of comment.

Thank you, Madam Speaker. At that time, there weren’t lightweights involved in this discussion; they were heavyweights. The Hon Bill Birch, the Hon John Luxton, the Hon Bill English, and men of that ilk were approached by two major dairy co-ops to come together to form Fonterra. That is the history of this legislation. The donkey work was done by the National Government prior to the 1999 election. Damien O’Connor then became the Minister of agriculture. He claims credit for the formation of this idea, and that is not correct. It is erroneous or, at the very least, duplicitous.

But, having put two major competitors together, there were issues around the Commerce Commission. At that stage, Fonterra would have been collecting 97 percent of all milk produced in this country. There had to be some restrictions on Fonterra. There had to be the ability for competition to come into this industry. You could argue that that legislation was about Fonterra being on trainer wheels, and tonight there’s the opportunity to take the trainer wheels away from Fonterra, get this House out of its business, and let the dairy industry foster. But the lightweight Minister has missed that opportunity, supported by New Zealand First. This legislation would not go through if New Zealand First really believed it was the saviour, the representative, of rural New Zealand. They are missing a golden opportunity.

Having said that, and having been involved in the initial discussions around the formation of Fonterra, I want to put on record here tonight that I have been extremely disappointed with the financial performance of Fonterra over many years. I say that sincerely, because it is the biggest company in New Zealand, the standard of living of every New Zealander is affected by the performance of Fonterra. One thing the Hon David Bennett said in his contribution is overseas it is well regarded. It is an international icon. But, here in New Zealand, it hasn’t performed financially as it should. It promised to us, as the original foundation Ministers involved in these discussions, that it would become the Nestlé for New Zealand. It has failed to do so.

I say to this House tonight that one of the things that the original legislation ensured was the opportunity for other competitors to come into this industry. We’ve got the likes of Oceania Dairy, Synlait, and Talley’s organisation there now, and thank God we’ve got them, because they’ve been one test against the performance of Fonterra.

Subsequently to the original legislation, we then moved to the trading amongst farmers, trying to give opportunities for Fonterra to raise the necessary capital that it needs to prosper. I feel very, very sorry for any investor who has bought shares in Fonterra from the time trading amongst farmers started, because they have lost considerable equity and the returns have been minimal, and in this year they will be nil.

💬 Hon Damien O’Connor: The member supported trading among farmers.

We delivered trading amongst farmers, and it has been a failure—it’s been a failure. This is the stupidity—

ASSISTANT SPEAKER (Hon Ruth Dyson): Could the member move towards the bill—just passing reference or a little more on the bill that we’re debating. It’s the first reading.

This is about the bill, Madam Speaker. It’s about Fonterra’s failure to perform, and you, Madam Speaker, are affected by the failure of Fonterra to perform. And here’s the opportunity to actually get this House out of it, to let Fonterra stand on its own two feet, and not have it coming back every three years or four years for dairy industry restructuring legislation.

I think that 18 years on it’s time to take the training wheels off, let Fonterra go. Let it compete adequately with the Synlaits, and the Oceania Dairies, and the Mirakas; let it have a go. Give farmers the opportunity to produce their milk and for them to decide who is the best processor for them to cooperate with.

What I totally disagree with is this open and entry clause, which Damien O’Connor is persisting with, that a farmer can actually make a choice to go to another processor and then a year or so later change his or her mind, and this legislation means Fonterra must take them back again. What sort of hurdle is that to Fonterra. What you’ve got is a completely changed dairy industry, Damien O’Connor, from what we had in 1998. Since that time, we’ve got an industry now which I would describe as stainless steel - capacity reached. I’d go further, Mr Damien O’Connor, to say dairy cow numbers have reached their peak in this country. The situation is totally different to what it was when these discussions occurred in 1998. So take the shackles away. New Zealand First should’ve realised the folly of their position.

This is an industry which can be iconic. It can really provide for the standard of living of every New Zealander, but it needs the opportunity to do so. The only part I think I totally agree with in this legislation is the need for provision of some domestic competition. Supply more to Goodman Fielder; 250 million litres up to 350 million litres, that would be on a par with the population increase that’s occurred in this country since 1998.

But let us internationally get out there, perform, for the benefit of New Zealand. Don’t shackle and protect an industry that actually wants the trainer wheels taken off them, Damien O’Connor. Let it have the opportunity to maximise its economic potential because it hasn’t done so, and I think it can argue one of the reasons it hasn’t done so is the shackling of the dairy legislation.

So I say to this Government, “Think again—think again about the legislation you’re passing here tonight.” There was an opportunity, 18 years on from the original passing of the legislation to let it go; but no, the Government’s intent on missing that opportunity.

I am absolutely staggered that New Zealand First, as a party that actually claims it’s got an interest in New Zealand agriculture, has marched into the lobbies of the Ayes to vote with the Government without thinking about it. Mark Patterson smirks over there because he’s a good guy, but this will be the sort of legislation if he supports, he’ll have one of the shortest parliamentary careers of all times, three years and three years only. There’s still a chance, Mark Patterson, talk to your New Zealand First colleagues, get them to see reason, and change your mind.

Well, always a pleasure to follow the Hon David Carter, second time today.

So I’d actually just like to start by following on from some of the things that the Hon David Carter was saying. Bill Birch, John Luxton, Bill English, men of that ilk, would perhaps be the headline line of this debate so far. I’m not a man of that ilk.

What I want to say about the Dairy Industry Restructuring Amendment Bill (No 3) is that the Green Party will be supporting it to select committee. There are some changes that we’re looking for. At the very least we want some assurance that the changes that are proposed in the bill go as far as we would like, because our view is that this bill is a good start but actually it needs to go further, actually to remove the restrictions around open entry completely. The reason for that, and I think we may be arguing from a different spot, and strange times do end up with strange bedfellows, but the Green Party has a view that the existing provisions have led to a situation—and it was interesting hearing the Hon David Carter saying that he thought that we had reached the maximum number of dairy cows that the land and could sustain in New Zealand, because we share that view. In fact, we think that we probably passed that point a while ago—that the existing regime means that an investor in Queen Street could buy a patch of land in a place that was completely inappropriate for a dairy farm like say the Mackenzie Country, for example, and go and convert that into a dairy farm and then require Fonterra to pick that milk up. If there were sufficient numbers of conversions in an area what that meant was that, essentially, Fonterra had to create a drying unit in the area otherwise it was completely uneconomic to do so. So it had to build the infrastructure in order to do that. And so what you had is a regulated environment that, essentially, enabled investors to force conversions, get a guaranteed buyer for their product, create all of that infrastructure, and cause environmental havoc in places that were completely inappropriate for dairy farming. There’s lots of parts of the country where, you know, it’s fine within certain boundaries but there are parts of the country where you had huge conversions and it was completely inappropriate. So in our view that regime was responsible for actually a lot of the overcapacity that we’ve seen, and a lot of the strain on the environment that we’ve seen in New Zealand in relation to the industry.

It’s also a completely production-led approach rather than a consumer-led approach. Of course Fonterra has to actually sell products to the rest of the world, so it is a consumer- and a business-to-business business in that it actually has customers, and so it’s got to work out what do they want, where’s the value, and then in an ideal world they would actually be passing that back down the chain and saying to farmers “Look, this is the kind of product that we’re looking for. This is the amount that we’re looking for.”, and so on. That’s actually how markets should operate, not one that’s led entirely from a production end and say, “We’re actually going to create this volume. Now you have to push it out there, almost no matter what the market wants.” I think that some of the performance issues that David Carter was referring to are caused by that. I mean, I know that there are other issues, but part of it is actually that the entire design of the legislation is set up for a production-led approach not a consumer-led approach. Actually marketing-led, consumer-facing companies, who are much more responsive to market requirements—I think, if you start at that end of the value chain you would end up with a better result.

Related to that, of course, given New Zealand’s overall strategy, because we are limited in terms of the amount of productive land that we’ve got, we’re only ever going to be a niche producer of anything in terms of the global marketplace. Then, obviously, the way for us to improve our livelihoods is to move up the value chain. And I know that we’ve got an economy that over the past century and a half of the modern period has been built on, essentially, commodities, and has been at the whim of the commodity markets, then you’re not going to create more wealth that way, particularly when you get to capacity. So I would argue that the existing regime has led to a situation where we’ve chosen production over value creation, and that what we need to do through this legislation, in freeing up Fonterra, would actually enable Fonterra to take those consumer insights and say “How do we get value?”, and then pass that back down to farmers and get a much more dynamic, value-led situation, which also happens to be way more environmentally sustainable than the model that’s been allowed to perpetuate over the last 18 years.

So we are going to be supporting this legislation through to select committee. At the very least we want some assurances that the draft legislation of the bill that’s been presented to the House will actually enable the kinds of changes that we’re looking for, the kinds of results that we’re looking for. If we’re not assured of that, we’ll be proposing changes to the legislation, perhaps in line with some of the other speakers who have gone before in terms of actually removing some of those constraints completely and really freeing it up. So I think it’ll be a very interesting and lively debate at select committee in terms of how we move forward on that.

If the bill was to remain as has been presented, one of the things that I think would be important for us would be to—Fonterra’s actually got quite sophisticated environmental reporting, but that would actually need to become legislated, I think, in order to incentivise the use of the proposed exceptions to open entry that are outlined in the bill. Again, we think that that would be a poor second choice because, ultimately, if you just free it up, then those incentives would get passed through anyway.

So that is what we’re hoping for from this bill. We do think that there is a real opportunity. I noticed, again, the Hon David Carter pointed out that this has been 18 years since it was first created as such, and that, in fact, it wasn’t designed to go on this long. It was supposed to be deregulated some time ago. But I do want to point out that of the 18 years that the Act has been in place, National were in power for half of those years. You have to wonder what they were doing with their time, given the passion and the energy that they have devoted to their speeches tonight about the urgent need for reform and the extent of reform that they’re outlining. You have to wonder, if this legislation was supposed to have expired, and the industry was supposed to be deregulated some time ago, and this is urgent, and it is critical, and they want to free Fonterra and unleash the shackles and so on, what were they doing for half the period of time that the legislation was in place? I just find that kind of extraordinary. You would think, given the critical nature, apparently, of everything that they’ve been talking about, given that they only left office a couple of years ago, you would think that they would have taken the opportunity to push through those major reforms in the period of time that they actually had.

But having said that, as I said, the Green Party supports this bill through into select committee. It is time for some deregulation. In fact, ideally, a greater level of deregulation in order to take away that existing regime around the open entry and so on, which we think has produced some really perverse outcomes in New Zealand. We will be looking for a stronger regime to ensure that, actually, we get the kinds of outcomes that New Zealanders want. Again, I have to say that this is one of those apparently rare times when people who are environmentalists, when the industry itself, farmers, and so on, actually appear to be pretty united on what needs to happen in order for the kinds of outcomes that we all want to take place. So I do think that this deserves a good working out at select committee because I do think we’ve got an opportunity to create some real change here. Thank you, Madam Speaker.

It is a particular honour to rise tonight to speak about the Dairy Industry Restructuring Amendment Bill (No 3). As Minister O’Connor has mentioned in the House several times over recent days, I worked at Fonterra for several years between the years of 2012 and 2017. I admit readily that when I started my work at Fonterra I was sceptical of this idea of a cooperative, propped up by a piece of legislation with special rules, running New Zealand’s dairy industry. I was sceptical, because my view was that, actually, competitive markets, wherever they can be, should be allowed to flourish and can serve New Zealand best. But what I learnt when I was at Fonterra is quite how different our dairy industry is because of the global context in which it operates and the nature of the milk business and what it truly involves.

I remember vividly, early on in my time at Fonterra, sitting down with a man called John Wilson. When I sat down with John Wilson, he was a director on the board. He later became the chairman, and various members of this House tussled with him in that role, and he is now departed. But what I remember him saying to me so vividly when I questioned him, and I said “Why is it so important that we have a cooperative running our dairy industry?”, he said, “Nicola, the existential fear that all dairy farmers have is that the milk will not be picked up. We fear the possibility of becoming peasants in our own land, where other countries, other nations, other companies own our manufacturing stainless steel, they make the profits from our milk, and we exist at their whim and mercy, and we must work to ensure that is never the case.” And John Wilson was right.

I continue to have some scepticism about the performance that Fonterra has had in recent years, the decisions it’s made, and the investments it’s made. I can tell you very frankly that I know there are men and women working at Fonterra today who share that disappointment, who wish that they had performed better for their farmers. But we must remember that the most important people in all of this are not the managers at Fonterra, not the people even sitting around the board table or the executives; it is the suppliers to Fonterra—the 10,500 farmers who own that cooperative—that we should all in this House be considering, because when they do well, New Zealand does well.

I would say that the thing I learnt the most when I was working at Fonterra was that we need to think about those farmers and how we ensure that they are best placed to create more value from the land, to do it in a sustainable way, and to compete effectively on the world stage. This bill is not fit for the global world, the competitive world in which Fonterra must compete. This is a piece of legislation which is timid in a world that has changed rapidly.

In 2001, when Fonterra was formed, it had about 97 percent of milk supply in New Zealand. Today, we find ourselves in a world where Fonterra actually only gets around 80 percent of milk supply. We have a matured market. We have competition. We have independent processors entering New Zealand because they know how efficient our farmers are at producing milk, and what they want to do is get a slice of the action. There has been competition. We now find ourselves in a very different place. The place we find ourselves in is that Fonterra is having to compete in a world that is viciously difficult to compete in when it comes to producing milk at value, effectively, and at a higher return for farmers.

So what National says about this bill is that it does not strike the right balance. It does not ensure that New Zealand dairy farmers can remain competitive internationally. That’s no surprise because, actually, the ideas in this bill, and Minister Damien O’Connor knows this, came about after a very dated report: the Commerce Commission Review of the state of competition in the New Zealand Dairy Industry. That report is four years old now. Actually, what’s happened in the four years since is that every year Fonterra has lost about another 1 percent of milk supply in New Zealand. That trend has not ended, yet Damien O’Connor has introduced to this House a bill that may have worked four years ago, but is not fit for today.

I want to take you through a couple of the elements, because the first is this concept of open entry and exit. I think it makes sense that Fonterra should be able to make its own commercial decisions over who it is required to take milk from. Right now, what Fonterra’s required to do is pick up milk from anyone who wishes to supply it to them. Of course, this bill takes some good steps forward. It says, “Well, actually, if farmers are farming unsustainably, then Fonterra shouldn’t have to pick it up. If they’re new conversions, it shouldn’t have to pick it up.”, but, actually, it should go further than that.

I want to actually walk you through what happens right now in New Zealand if a farmer leaves Fonterra and says, “Well, I want to supply milk to a competing processor; a foreign-backed processor whose said that next year they might pay me a little bit more.” Well, what happens when they do that is that that foreign-owned processor can be very confident and that farmer can be confident that if they fall over, the next day they can just go trotting back to Fonterra.

I want you to think about the impact that has on the psyche of farmers who know that if it doesn’t work out, they can always return to Fonterra. I put it to you that it seems completely right in a competitive market that Fonterra should be able to have some discretion over the terms on which it accepts milk. We have now a far more competitive market than when the Dairy Industry Restructuring Act (DIRA) was formed, and these open entry and exit provisions need to move accordingly, because, actually, if we get that wrong, the threat, Damien O’Connor—the threat, Minister, is that we get an oversupply of stainless steel in New Zealand, such as that we have empty factories running at half-capacity up and down this country inefficiently, unsustainably, and, frankly, not profitably. And the result for New Zealand? The result is our farmers get less for their milk, shareholders get fewer returns; our local towns, our provincial suppliers, our provincial contractors—there’s less money for them too. We all need this to be a competitive industry that is working efficiently, and these rules will not allow for that. That should bother you, Minister O’Connor, and it certainly bothers us on this side of the House.

I want to turn, also, to the raw milk regulations; because these are an area that I know deeply upsets many of—

ASSISTANT SPEAKER (Hon Ruth Dyson): In the bill?

The raw milk regulations are designed within the DIRA, and what this bill doesn’t do—this is absolutely in the bill.

ASSISTANT SPEAKER (Hon Ruth Dyson): Sorry, the first reading should be about what the bill does do rather than what it doesn’t do.

Let me tell you what this bill does, Madam Speaker.

ASSISTANT SPEAKER (Hon Ruth Dyson): That would be good.

What this bill does is it perpetuates the current regime. That means that farmers are forced to send their milk from their cows down the road to a foreign-owned competitor at price so that that foreign competitor can get a leg up in this world—can get a leg up, can get their foothold in the New Zealand dairy industry. What I put to you is that in a globally competitive dairy market where Fonterra is competing with businesses of huge scale across the world, how can it possibly make sense for Fonterra to continue to have to, effectively, subsidise foreign competitors to come here and set up in New Zealand? It doesn’t make sense. I’ll tell you the image I have in my mind when I think about this requirement. I think of the farmer who showed me his videocam of the tanker that he followed that picked up milk from his farm and drove down the road to another factory. I sympathise with that farmer, because it is very hard for me to explain to him why that makes sense or why that serves our country or New Zealanders. I invite Damien O’Connor to explain that, because here, on this side of the House, we absolutely support a competitive dairy industry, a dairy industry in which there are multiple processes, but we think the time has long passed where we need to prop up new entrants into the future.

I know the members of the National “Ag. caucus” will be very constructive on the select committee for this bill; that is the way they’re made. But I am deeply concerned that we have opposite us a Government that does not fundamentally respect farmers. They owe it to New Zealand farmers to get the structure of Fonterra right, to get the DIRA right. This isn’t about annual returns one year; this is about the very structure of our dairy industry. This bill fails to deliver for the globally competitive world that our farmers farm in, and we oppose it.

The next call is a split call.

Well, thank you, Madam Speaker. I am indeed proud to stand in support of this outstanding bill at its first reading. I want to congratulate our Minister of Agriculture, the Hon Damien O’Connor, for his leadership in actually fronting up to the hard issues that are confronting our dairy industry, and actually putting in place a very sound and sensible bill which will ensure the future prosperity of our dairy industry. So I want to acknowledge the Minister, and I want to acknowledge all the efforts of our coalition Government in bringing this bill to the House, because this—forget about the doom and gloom that has been spouted from the other side, this Government stands by our dairy industry. We want to support our number one export, dairy—the prosperity and the wealth that it creates for our country.

The Dairy Industry Restructuring Act (DIRA) needs updating, and it’s taken nearly 20 years for this to happen. We’ve heard a lot of talk tonight about how the shackles should be unlocked or freed, and how the training wheels need to be taken off. Well, the National Party was in Government for, what, some nine-odd years of Fonterra’s existence? Maybe even longer, and did nothing. But on this side, we are fronting up. We are. We are listening to the dairy sector and we are providing the leadership to help provide that stability and certainty for Fonterra into the future. We know it’s challenging times; this isn’t 2001, when 96 percent of farm dairy supply—it’s far from that today, but 80 percent is still a sizeable chunk of the total milk production of our nation. There do need to be some tweaks to the overall DIRA requirements. There are risks and there are also some constraints that need to be, maybe, loosened, and some that might need to be tightened. That’s what we’re doing with this bill.

We need to provide leadership for Fonterra; it is our number one exporter. But this bill, or the DIRA legislation, is not the reason for the woes which Fonterra is facing at the moment. We know it’s a highly competitive international market that it competes in. We know that management has made some very poor decisions in terms of its international investments, which it had to write down significantly in this year’s results. We know that there are ongoing issues in our major markets with tariff and trade wars, which are ongoing right as we speak. So there are really big challenges which our dairy sector is facing.

Thank goodness for our Minister and the leadership that he is showing in bringing this bill to the House. We need to ensure that those requirements that are in place in the existing bill—certainly some of them are outdated; some of them need to be loosened up. The entry and exit requirements—there is scope for Fonterra to have an increased say, in terms of flexibility, to turn away supply, to also turn away new entrants. So this isn’t—this bill hasn’t just been plucked out of the air. There has been a comprehensive review that underpins this piece of legislation and the regulations which go with it. That has been going on with industry participants and with experts for close to a year. Further to that, there was a Commerce Commission report which was the forerunner to the review, which also provided the platform which this bill has now manifested.

These are very sensible changes that we are making to the DIRA legislation. It’s actually going to help provide a solid foundation for Fonterra. We know that there are new entrants in the market place—I welcome the addition of the likes of Miraka, our 100 percent - owned Māori dairy-processer. There is a place for increased players in the dairy sector but we must also ensure that our number one company is supported, and that’s what this bill does. We want to ensure that our farm suppliers, the owners of Fonterra, the consumers of New Zealand, and also our international markets—because it’s our reputation that’s on the line everyday with our flagship company. We want to ensure that that has the support, and that’s why I support this bill. Kia ora tātou.

It’s a pleasure to speak to the Dairy Industry Restructuring Amendment Bill (No 3), and I do so after several very eloquent and well-put speeches from this side of the House. It actually gives us no pleasure to oppose this bill but we are doing it as a matter of principle, because we are trying to and will continue to support our farmers, Fonterra, and the significance of this industry to New Zealand. Quite frankly, Minister, we think you’ve got it wrong. Fonterra is our largest multinational—$20 billion worth of turnover, 22,000 employees; it is huge. It is important in this House, as we debate this bill, that we get it right. Fonterra also is internationally significant in the dairy industry. Not many companies in New Zealand can bear that title, but Fonterra can. In previous work I’ve done in Asia and other parts of the world, people are very proud of what Fonterra can do.

So this review comes from the Dairy Industry Restructuring Act (DIRA) 2001. It’s being reviewed every four to six years. It vitally affects 10,500 farming families in New Zealand, and it actually has a fundamental impact on the economy of New Zealand. When I stand back from not just looking at this from a pure agricultural perspective but I look at it as what we’re being asked to do here, we’re being asked to let a company allow a competitor to move into its patch, supply it with 30 million litres of milk so it can get started, and then proceed to take more of its market share. We also then say, “By the way, if you don’t like Fonterra for a while, you can leave but you can always come back at the same terms and conditions.” Can you name a market or any other organisation that would allow that type of disloyalty or disruption? We also have the fact that Fonterra’s share of the milk has dropped from 97 percent in 2001 to 80 percent now, and has been dropping by 1 percent per year.

I agree with previous speakers, including the Hon David Carter, who said that dairy cow numbers are probably at their peak. I also agree that we’ve probably got as much stainless steel as we need in New Zealand, in terms of facilities. I also agree that we do need to provide the likes of Goodman Fielder and others a domestic offshoot for milk.

But let’s not tie the hands of our largest corporate behind its back 18 years on from when the DIRA Act was formed. We are working for farmers and we will continue to do so. For those of you that are very strong in supporting the cooperative model and who want to support this bill—in my role as horticultural spokesman, I want you to reflect on what happened, for instance, to the apple industry, which was run as a co-op; hell was going to freeze over before it changed, it was deregulated, and look at the prices now. Look at how the market’s working: people are innovating. You see, big isn’t always better. I know Fonterra is a special case, but it’s really hard being big when you’ve got both hands tied behind your back—you actually can’t move.

So I want to come back to this issue of how you can leave with no responsibility—really, all care and no responsibility. See, it would be like Mark Patterson coming back to the National Party, which is where he started, not liking it for a while, and then going back to New Zealand First.

💬 Rt Hon David Carter: Or back to the farm after the next election.

Or back to the farm. Now, New Zealand First would never have him back. So what we’re doing here in this DIRA bill is we’re saying, “You can leave Fonterra, you can leave us, the fact that we’ve got huge drying towers that can’t be used now because we’ve got no milk, we can’t do anything about that because we need to hold them because one day you might want to come back.” That is the most ridiculous and ludicrous business proposition you can ever think of. Yet this Minister, despite some of the other things that have been changed, wants to leave that in the legislation. This is a bad move and that’s why we’re opposing it.

Debate interrupted.