New Zealand dairy giant Fonterra has called for a change to milk collection rules in its home market.

In its submission to a review of the country’s Dairy Industry Restructuring Act (DIRA) seen by just-food, the cooperative made the case for an end to the so-called open entry rule whereby it has to collect milk from any shareholding farmers who want to supply it in its collection area.

In its 66-page submission it accepted DIRA has been critical to the performance of the New Zealand dairy sector since its passage in 2001. 

“The formation of Fonterra has created wealth for New Zealand, and has improved social and economic outcomes for New Zealand’s dairy farmers and their communities,” it said.

But it added: “DIRA has now achieved what it set out to – create competition. Today farmers have choices in who they supply their milk to and New Zealand consumers have many choices when purchasing dairy products.

“For the dairy industry to continue to succeed, some aspects of DIRA must be modernised.”

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By GlobalData

The dairy group suggested open entry had several downsides, including the risk of industry-wide over capacity which could lead to lower returns.

Fonterra said it would, alternatively, support the removal of open entry in regions where its market share dropped below 75%, as well as for new conversions and applications it felt were unlikely to meet its terms of supply. 

Its submission on the DIRA review was one of 188 received by the Ministry for Primary Industries (MPI), which will review them and develop policy recommendations for the New Zealand government. 

The government will then decide whether any law changes should be made as a result of the review.