Report on the state of competition in the New Zealand dairy industry
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In 2015 we completed a review of competition in the New Zealand dairy industry at the request of the Minister for Primary Industries.
The aim of the review was to:
provide an assessment on whether the state of competition in the dairy industry is sufficient to justify deregulation
advise the Minister on whether the ‘market share thresholds’ in the Dairy Industry Restructuring Act 2001 (DIRA) should be reset
the options (if any) for a pathway to deregulation.
Our view remains that there is not sufficient competition at the farm gate and factory gate to consider full deregulation at this time. The final report recommends that a pathway to deregulation would be smoothed by facilitating the development of a factory gate market for non-DIRA milk.
Options the Minister should consider include:
reducing DIRA milk entitlements
investigating if and when the DIRA milk price covers Fonterra’s opportunity costs
tightening the terms and conditions for DIRA milk supply.