Fonterra says smaller firms subsidised

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Fonterra continues to object to the Commerce Commission's position requiring the cooperative to supply more milk to Kaimai Cheese Company and Grate Kiwi Cheese Company at what Fonterra claims is a subsidised price.

Last week, the commission confirmed its preliminary view, with a draft determination requiring Fonterra to supply milk to smaller competitors at a determined price. Interested parties have till October 31 to make submissions before the commission's final ruling.

Fonterra has long claimed the default milk price is subsidised and amounts to an unfair transfer of funds from its farmers to the smaller dairy companies, many of which are owned or part-owned by overseas corporates.

In August, the Agriculture and Forestry Ministry said it was investigating an auction system to determine a fairer price. Fonterra supports this. Its legal counsel, David Matthews, said the auction system did not have to work perfectly. "It just needs to work something like it should and we'll get to a closer price."

- © Fairfax NZ News