Dairy Industry Restructuring Amendment Bill (No 3)

Thank you, Madam Speaker. I’m really pleased to stand here and take a call on the Dairy Industry Restructuring Amendment Bill (No 3).

💬 Hon Member: Are you going to oppose it?

No, I am absolutely not going to oppose it, because I support it wholeheartedly and I too want to commend our Minister Damien O’Connor for being brave enough to bring this piece of legislation to the House. He’s keen on making the hard decisions, not sticking his head in the sand and looking for the next vote. He’s happy to make the hard decisions because sometimes that’s what you have to do to make progress. And this will make progress.

We’ve heard from the Opposition—[Interruption] here they go, they must be getting excited—that Fonterra is going to be constrained and handcuffed and all the rest of it. But I have to agree with other colleagues here and the Hon James Shaw: where were you in the last nine years? Not the Speaker, sorry, Madam Speaker, but where were the Opposition in the last nine years? The defenders of the farmers, the defenders of Fonterra, they sat there quiet as mice until this Government was brave enough to bring this piece of legislation to the House, then all of a sudden it’s an uproar—an absolute uproar. Well, we know that the DIRA Act came in in 2001, and, yes, we know that times have changed, 18 years have gone by, things change; the industry has changed. But the fact of the matter is that Fonterra, even though they’ve gone from having 96 percent of the market share, they still have 80 percent, which is still a really significant amount of the market share.

One of the things that this piece of legislation proposes—and I think this is really good—is the ability for Fonterra to be flexible in whether they say yes or no to someone becoming a shareholder or, actually, collecting their milk. It comes back to the point that the Hon James Shaw made with regard to, say, a dairy farm being set up in the Mackenzie Country or in places that are actually not ideal, and it’s not good for the environment to be turned into a dairy farm. There are lots and lots of places within New Zealand that are fantastic pieces of land for dairy farming, but some places are not, and if somebody wants to set up a dairy farm there, then the obligation is on Fonterra to collect their milk. Well, that’s not OK.

What this piece of legislation also does is it gives Fonterra some protection with regard to the ability of saying yes or no, because we know—we know—that the dairy sector is our largest export sector here in New Zealand. I think the Minister said it brings in around $8 billion of total GDP. Now, a lot of that is based on the fact that they have a good reputation, and we know that other milk factories have agreements with their farmers that they must farm in a certain way and they must show that they can protect the environment and farm sustainably. We know that the majority of farmers do farm and look after their environment, because they want to pass the farm—if it’s a family farm—on to the next generation better than when they received it. So they do genuinely care about their land, they work really hard to sustain it, and they want to do the right thing. That is the majority. It is unfortunate that some make the news, and then everyone seems to be tarred with the same brush. However, the fact that we have Fonterra, and the dairy industry here is our largest export sector, we need to protect it. So that is good that Fonterra will have the ability to perhaps say no to a farmer who is actually not going to comply with what they believe is good farming practice.

I’m not going to go on any longer. I just want to say that I really, really commend this bill to the House. I look forward to seeing it go through the committee stage, and see what comes out at the other end. But, again, I commend the Minister for being brave and making the hard decisions.

Thank you, Madam Speaker. That was a really interesting contribution from the last member, Jo Luxton, describing this as progress. I’m not so sure how staying the same as it is, is going to be progress. But the interesting thing, from my perspective, is that there was a big attack, from Jo Luxton, on this side of the House for keeping Fonterra constrained and handcuffed, and then went on and used the rest of her speech to give reasons why she thought that Fonterra should continue to be constrained in handcuffs.

The other piece of the argument was around entry and exit. So if we go back to some of the conversations that we’ve had tonight about environmental issues. So just take it now, if we have a farmer that’s in the Mackenzie Country who’s all of a sudden one day not happy with Fonterra and decides to exit Fonterra—well, that’s fine; bye-bye farm in the Mackenzie Country—and goes off to some other organisation who may pick up the milk. If that farmer then decides that they want to go back to Fonterra, under this regime Fonterra has no grounds not to pick it up. It will be entered back into the company on the same terms and conditions as what it has left. So there you go. Some of the things that were just said in that last speech simply did not make any sense in my mind.

Now, I want to go back to the first speech, because Minister O’Connor stated in his speech that Fonterra is the only dairy company with a national presence, and he doesn’t believe that the Dairy Industry Restructuring Act (DIRA) should expire. So I really challenge Minister O’Connor, because is Minister O’Connor waiting for Fonterra not to be the only dairy company with a national presence in New Zealand, because would that be enough, in Minister O’Connor’s mind, to expire DIRA? What that would take us back to would be the two big companies that were in competition that we had in the first place. Is that what the Minister’s asking for? Despite all the promises made of when the South Island gets to a certain level and when the North Island gets to a certain level—even though it was started under a National Government, it was stamped under a previous Labour Government; those criteria that the farmers have met—the Minister’s saying, “No, no, no. That’s not good enough. Now we want to wait until this is not one dairy company with a national presence.” So it did expire. The criteria did expire in the South Island, Minister, and your Government rushed through legislation to make sure that we could hold on to DIRA until you got to the point of doing this piece of legislation.

One thing I did agree with the Minister—he said the domestic bit’s not an issue. The domestic bit was never an issue. In fact, most people in New Zealand, and even now, were quite happy to have domestic competition. It is not domestic competition in the milk market for our own local supply that is the issue; it is other companies coming into New Zealand, setting up against Fonterra, having to be supplied with milk from Fonterra to compete with Fonterra. Mr Yule actually said at one point in his speech: where else in the world would anything like that happen, where you’re actually supplying your competitors? So I think the time is up to release those shackles.

I would challenge Mark Patterson, who said New Zealand First does not want Fonterra sitting on stainless steel. Well, currently, Mr Patterson, you know that Fonterra is sitting on stainless steel, and under this regime, if we don’t unconstrain it—

💬 Mark Patterson: You actually listened to what I said.

We did listen to what you said, Mr Patterson. We did hear you, and, actually, we’re very hopeful that when we get to the vote on this piece of legislation, you might be voting in the direction that your speech indicated that you were supporting.

I must admit, one of the best speeches that I’ve actually heard tonight came from James Shaw, because James—

💬 Rt Hon David Carter: I thought mine was better than that.

Sorry—sorry, the Rt Hon David Carter. I’m probably referring to people on the other side of the House. Of course our MPs have all made fantastic speeches tonight. But, you know, James Shaw gets the piece that Fonterra is forced to take milk against its own wishes, which then may add to conditions around environmental standards. That is one of the things that, when you’re forced to do something as a business that you don’t want to do, there is no way out of it. They’ve been forced to build extra stainless steel. They have grown in production, and I must admit, some of that hasn’t been forced; some of that has been encouraged by Fonterra over the years. Not all of it has been forced, at this point in time; some of it has been their own decision. But it has been a very production-led approach, and it’s absolutely correct, what James Shaw was saying about the production-led and having a bulk of commodities and actually thinking more clearly, without being constrained and without being forced, about where Fonterra needs to be going in the future. There’s a saying in our dairy industry—it actually says production is vanity and profit is sanity.

Look, we are all proud as dairy farmers to belong to a co-operative. We know that things haven’t been going well in Fonterra over recent times—in fact, they’ve been going pretty badly. It’s time to actually pick this up. It’s under new leadership. We haven’t been impressed with where it’s been going for the last little while, but it is under new leadership. Here’s an opportunity to pick it up. Here is an opportunity for this Government to unconstrain it, to let it go, to let it get involved in some of the value-add that it’s been talking about, without forcing it and forcing it to be uncompetitive.

So when we went through the global financial crisis in 2008, when everything else was down, this dairy industry was the thing that held this country up—it held this country up, big time. It’s really interesting because at that time people were very concerned about, you know, mental health, depression, and all of those sorts of things. The dairy industry actually came through that global financial crisis and held the rest of the country up very well. Well, I would request that at this point in time, the country actually holds its dairy industry in high regard, because I would suggest that all the pressures that are coming down on this industry right now—they don’t need to be constrained with DIRA on top of it. As my colleague Todd Muller has rightly been saying, and I’ve known this for a long career in this dairy industry—that if the prices are right, that if the interest rates are low, that if the weather’s doing the right thing, which it currently is—[Bell rung]

ASSISTANT SPEAKER (Hon Ruth Dyson): Perhaps back to the bill for the last two minutes, or on to the bill for the last couple of minutes? Thank you.

—yeah, we’re on to the bill—that farmers will be happy. But right now, the pressures that are coming down on farmers are huge, and I believe that this bill is just going to be another one of those things that’s going to put pressure down on farmers. The promise of where those shackles are going to be removed is being broken, and it’s time to get back to letting farmers take control of their own business.

I do not believe that the Minister’s idea of putting a person onto the Milk Price Panel is going to be of any value at all. Why would we put someone on the Milk Price Panel when the questions aren’t even being asked about whether that person would be a deemed director of Fonterra? What are they going to be doing? I know in my time on the shareholders’ council, the milk price has been checked out, it’s been modelled, it’s been verified so many times, and it’s been peer-reviewed and it comes under all sorts of pressure, and I can’t see how someone from a Government department sitting on that milk price committee is going to make any difference.

A year ago, Government Ministers talked about smashing apart Fonterra, but they have dialled back on their rhetoric. I was very concerned when I heard the Minister say tonight, under this regime, that Fonterra was the only national significant dairy industry company co-operative. I want to keep it that way, the National Party wants to keep it that way, and I can tell you that farmers absolutely want to keep it this way. We will not see it put in danger, and for that reason, we are opposing this reading of this legislation. Thank you, Madam Speaker.

Madam Speaker, thank you very much. It gives me great pleasure to rise in support of this bill. I was going to rebut all of the arguments of the member opposite, but I actually didn’t hear any. They were entirely incoherent. But this is a fantastic piece of legislation. Once again, our fantastic Minister Damien O’Connor has struck the perfect balance. Notwithstanding the lobbying he’s getting from every quarter to absolutely gut this industry, he’s taken a balanced approach to build a sustainable dairy industry into the future. I’m very pleased to see that Fonterra will now be able to take into account the environmental performance of farmers when they make decisions around milk supply. That’s a great leap forward. So I don’t need to say any more. The speakers on this side of the House have made it very clear—a very good piece of legislation, moving Fonterra and the New Zealand dairy industry forward together. I commend this bill to the House.

💬 Andrew Bayly: Why don’t you speak for a decent period of time?

ASSISTANT SPEAKER (Hon Ruth Dyson): I think the discretion that the Speaker indicated could be now applied to the use of “you” might be quite limited, Mr Bayly.

I move, That the Dairy Industry Restructuring Amendment Bill (No 3) be reported back to the House by 17 February 2020.

Motion agreed to.