By Suze Metherell
Fonterra's base milk price is in line with the legislation which merged New Zealand's biggest dairy cooperatives and created the world's largest milk exporter, says the Commerce Commission.
The competition regulator is required to check Fonterra's base milk calculations annually as part of the Dairy Industry Restructuring Act's milk price monitoring scheme.
The Auckland-based dairy company will pay farmers $4.40 per kilogram of milk solids, which the commission said in a draft report is largely consistent with both the efficiency and contestability in the market for purchasing farmers' milk.
"Fonterra has made a significant effort to improve the transparency of its calculations and we have now resolved some outstanding issues from last year," said deputy commissioner Sue Begg. "Most notably we can conclude its assumed energy and fixed asset costs are consistent with the purpose of the regime."
The act and the competitiveness in New Zealand's dairy market is currently under a nine-month review by the Commerce Commission. Among the issues under investigation is whether the act's competition thresholds have been met.
Last week, Primary Industries Minister Nathan Guy said independent processors collected 22 percent of all milk solids in the South Island and 9 per cent in the North Island, triggering the expiry of pro-competition provisions under the act.
The final report on Fonterra's milk price calculations is due on September 15.