NZ First Leader Winston Peters and Regional Development Minister Shane Jones have been rebuffed by Agriculture Minister Damien O’Connor over their suggestions that Fonterra be split up.

They also appear to be being opposed by their own caucus.

But though O’Connor has ruled it out for his current review of the Dairy Industry Restructuring Act, he is not ruling it out into the future.

However O’Connor supports Fonterra getting powers to refuse milk from farmers who breach environmental, animal welfare or labour standards.

Those environmental standards could include refusing milk if its production had an impact on climate change.

Speaking in June, NZ First Leader, Winston Peters, when he was acting Prime Minister, left open the possibility that Fonterra could be split up.

Peters agreed the terms of reference for the Dairy Industry Restructuring Act at that point excluded any splitting up of the dairy company.

Then he said: “But it is possible in a thorough review that conclusions emerge which weren’t apparent at the time you set the terms of reference. And surely you’d admit to the possibility of that being a sound policy.”

At the same time NZ First MP and Regional Economic Development Minister, Shane Jones said: “I have requested the Minister of Agriculture – when he looks at his dairy restructuring – identify the issues and whether or not it’s time for us to look at a restructuring of Fonterra.”

The comments caused some concern within the dairy industry and NZ First MP Mark Patterson set out to mend fences by holding a series of meetings with dairy farmers around the country.


Patterson told POLITIK last night that the meetings were not concluded yet and he had not reported back to the NZ First Caucus but there was a clear message from farmers that they wanted to be the ones who made the decisions about the structure of Fonterra, not politicians.

O’Connor says he has discussed the future of Fonterra with New Zealand First.

“This is a sound process we are going through,” he told POLITIK.

“Everyone will have their right to have a say.

“The issue of the breakup of Fonterra hasn’t been discussed.

“It’s certainly not my option, and I don’t think that the other parties seriously believe that would progress at this point.” 

However, O’Connor is leaving the door open.

“If the company can’t perform better into the future then clearly that might be one of the options.”

Though this may be a short-term rebuff for NZ First, Peters and Jones have probably made their point.

They have put Fonterra on notice.

Otherwise, O’Connor’s review will address the big issue of whether Fonterra should be forced to pick up all milk that it is offered and whether it can drop suppliers who don’t meet environmental or animal welfare standards.

Fonterra critics say the requirement they pick up all milk forces the company into investing heavily in milk processing plants rather than spending more on product and market development.

O’Connor has launched a discussion paper which proposes three options on milk pickup:

  • The status quo where they must pick up everything
  • Abolish the requirement altogether and allow Fonterra to decide who it picks up milk from.
  • Fonterra would be allowed not to process milk from a farmer who could meet their environmental or animal welfare standards. Those standards could include the climate change impact of the production of the milk.

O’Connor seems to already favour the last option.

“I think it is reasonable to expect that the company has the ability not to pick up milk from farmers who are not adhering to the basic standards around animal welfare, around environmental practice, around labour practice — that is one of the emerging issues from the time of this original legislation that needs to be changed to ensure that Fonterra does have reasonable discretion but not that it has an absolute right that it might treat shareholders unfairly.”

This Fonterra situation demonstrates that there are limits within the coalition to New Zealand First’s power.