Questions are being raised about the accuracy of a Fonterra-commissioned report which the dairy giant says is evidence independent processors, and Kiwi consumers, aren’t paying too much for their milk.

On Friday last week, Fonterra published a report it had commissioned by respected United States analysts, Compass Lexecon.

Fonterra says the report shows clearly that, not only does it set the milk price correctly, but also that Fonterra’s creation has led to more competition in the marketplace.

However, a spokesperson for the independent milk processors in New Zealand, dairy industry analyst Peter Fraser, says the report’s authors weren’t given the full story by Fonterra.

Seaking on behalf of Open Country Dairy, Miraka, Synlait and Tatua, Mr Fraser, says that while Compass Lexicon is hugely respected and one of its authors, Robert Willig, is a guru of economics, it appears the company was not given much information to work with by Fonterra.

"I want to be absolutely clear that Fonterra have got very very credible people.

"The but in the conversation, because as you can guess there is a but here, I don’t think they’ve been given the information they need to do the issue justice."

Mr Fraser says it appears the report’s authors were completely unaware of changes in the New Zealand dairy industry since 2008.

"One of the arguments they’ve come out with is that we’ve gone out and looked at dairy processing in New Zealand, and we’ve noticed that since Fonterra was formed in 1991 there’s been tremendous growth in new processors.

"And they’ve gone from pretty much nothing in a standing start to quite a few out of there and there now actually processing about 10 percent of New Zealand’s milk supply. 

"So this would kind of suggest to us that DIRA has done quite a good job it’s  created a level playing field and it’s allowed these independent processors to get into the market.

"So on that basis and big tick in the box to DIRA and big tick in the box for Fonterra.

"And to be honest they’re correct, absolutely correct, right up until 2008. Because what they fail to say, and again I don’t think this is an omission on their part I just think they didn’t had the information.

"In 2008 Fonterra changed their pricing methodology and in 2009 they changed the way their share price is valued. 

As a consequence, of not having the most recent information, Mr Fraser says the report fails to answer the accusations that New Zealand’s independent processors have been laying at Fonterra’s door. 

"I’ll just use again a hypothetical example. Let’s say you’ve got an $8 pay out, now that $8 pay out can be spilt say $7.50 milk and 50c for a dividend or 7.40 and 60, you know there’s sort of no end of combinations you can do.

"But it is the value of the share that then leads to whatever the dividend policy is, which then basically goes through and sets the milk price. So there’s a little nexus in there that they  all need, that they work together in tandem.

"It’s through Fonterra changing the way  that it values the milk which in my view has allowed Fonterra to upwardly price the milk at the same time.

"In the following year they changed the way they did their share value evaluation, which put downward pressure on the dividend and the share price. I think that’s the nexus of where the problem has happened."

Peter Fraser says the report looks a little like a PR job by Fonterra. 

Country 99TV has tried repeatedly over several days to speak with a Fonterra executive for the company’s side of the story, but without luck. 

Fonterra has said it will finally reveal how it sets the milk price in New Zealand, in September.

Currently, only the company itself and select government ministers, know how Fonterra calculates the price Kiwis must pay for milk.

Until now the dairy giant has kept its price-setting formula secret.