Fonterra has welcomed a change to the regulations governing milk prices because it will now no longer have to subsidise the cost of milk supplied to its competitors.

Because of its dominant position in the market, the co-op has to supply up to 600 million litres of milk a year to other processors. The price it charges for this milk is covered by a formula.

Fonterra maintains it’s been forced to supply the milk at a lower price than what it pays its own farmers. The Government has now adjusted the price formula.

From June, they will pay the going farmgate milk price, plus a margin of 10 cents per kg of milksolids.

Federated Farmers dairy chairman Lachlan McKenzie  says the move solves the milk price problem in the Dairy Industry Regulation Act.