Australia’s competition watchdog has decided not to take action against Fonterra for the way it changed its prices to farmers last year, a move a Kiwi farmer has described as “shocking”.
In May 2016 Fonterra Australia reduced its payments for the 2015-16 season from $5.75 to $5 per kilogram of milksolids, but in order to make an average payout price of $5 for the whole season, it slashed its payout to $1.91 for the last two months.
The Australian Competition and Consumer Commission (ACCC) said on Friday it would not be taking Fonterra to the Federal Court, unlike rival co-operative Murray Goulburn.
“A major consideration for the ACCC in deciding not to take action was that Fonterra was more transparent about the risks and potential for a reduction in the farmgate milk price from quite early in the season,” chairman Rod Sims said.
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Karrinjeet Singh-Mahil and Brian Schuler, formerly from Waikato, decided to stop supplying Fonterra after what they described as the ” unconscionable” treatment dealt to them.
Singh-Mahil said she was shocked the ACCC had decided not to take further action against Fonterra.
She said at a public meeting early in 2016 Fonterra’s national milk supply manager was asked if the dairy giant’s price of $5.60 per kilogram of milksolids was sustainable.
“He replied ‘your $5.60 is safe to the end of the season’. Only a few months later they cut the payout for the last two months to $1.91.”
She said it had hit their operation hard because they reached their peak milk supply period in autumn.
Fonterra has always maintained it signalled early on in the season it might not be able to maintain the prices.
In a statement on Friday it said the last 12 months had been “incredibly challenging” for Australian dairy farmers, their families, our communities and our industry.
“We understand it will take time to rebuild confidence in the dairy industry.
“We are currently working on a range of initiatives, including a more transparent milk price, and industry measures to help get our industry back on track. At the same time, we are paying a milk price this season that is reflective of the market, and we continue to invest in regional areas, including $140 million at Stanhope, and over $10m at Wynyard and Cobden,” the statement said.
It pays an average farmgate milk price for the 2016-17 season of A$5.20 per kgMS. In New Zealand, Fonterra forecast for the end of the season is $6, not including dividends.
The ACCC alleged the information Murray Goulburn provided to farmers in the months before dropping the milk price was “false and misleading.”
It will not seek financial penalties against the co-op because any penalty imposed could directly impact on the affected farmers. But former managing director Gary Helou and former chief financial officer Bradley Hingle could face penalties of $220,000 per contravention, and there may be multiple.
Meanwhile Singh-Mahil said a number of near destitute Kiwi dairy farmers were still being assisted with food parcels. As non-citizens they did not qualify for government hand outs. She claimed most of them had been Fonterra suppliers.