Another blow for Fonterra with milk ruling

Another blow to Fonterra this week with the Commerce commission ruling on "statutory" milk. It  has confirmed that Kaimai Cheese Company and the Grate Kiwi Cheese Company are legitimate "independent processors" , a status that effectively forces Fonterra farmers to supply them with cheap milk reports Business Day. Now Fonterra not only has to deliver the milk where its smaller rivals want it, but those companies can each claim up to 50 million litres a year of the low-cost milkflows, even though they may be linked to the same manufacturer. The commission today released a final determination that potentially opens up Fonterra to a proliferation of small food processors each seeking a share of the 600 million litres of "statutory" milk it has to provide at cost price."Kaimai and Grate Kiwi are 'independent processors' ... and are entitled to be supplied with milk by Fonterra," the commission said in a 46-page decision. Fonterra lost on all fronts in the case, in which the commission said: "Fonterra has breached the regulations by not supplying Kaimai and Grate Kiwi with milk under the regulations since October 1, 2008. "The commission has ordered Fonterra to pay compensation to Kaimai and Grate Kiwi for the loss associated with the fact that they did not receive milk".If the parties can't agree on the amount of compensation, the commission can order the amount to be paid. The supply of raw milk to smaller rivals was a key trade-off that Fonterra farmers made to avoid commission scrutiny of the mega-merger that set up their company.