Federated Farmers says a decision by Fonterra to offer loans to dairy farmers vindicates the co-operative model, as it is essentially farmers helping farmers.
The dairy company is lending up to $15 million to its 50% owned rural supply subsidiary, RD1, so the retailer can extend interest-free terms to farmers for essential dairy supplies.
It says the short-term loan is part of a package of measures to help farmers under financial pressure because of the reduced milk payout, which at $4.55 per kilo of milk solids for the current season is 65 cents below the expected price for the past season, which has not yet been finalised.
The Federation says both Fonterra and RD1 deserve praise for proactively working with farmers where they need it.
Federated Farmers estimates that in the two years to April, farm debt rose by about 30% to $45 billion. Spokesperson Lachlan McKenzie says dairy farmers' costs are usually highest this time of year as they prepare for spring.
Fonterra Milk supply director Barry Harris says the short-term loan is part of a package of measures to help farmers under financial pressure because of the reduced milk payout.
He says RD1 will have to repay the loan, including interest, by the end of April next year.