24 Apr 2012

Farmers urged to consider Fonterra's future

12:09 pm on 24 April 2012

Fonterra farmers are being warned they risk selling themselves and the country short if they vote down proposals to allow trading in shares in the co-operative.

Farmers voted overwhelmingly in 2010 for the Trading among Farmers (TAF) scheme which enables them to trade shares between themselves, while also setting up a fund that allows outside investors to buy dividends of shares, but not voting rights.

Since then, some farmers have voiced concerns that it could lead to outside investors pressuring the co-operative to lower milk payments to drive up their own share of profits.

Fonterra announced on Monday that it would give its 10,500 farmer suppliers a fresh vote on the scheme on 25 June.

Brian Gaynor of Milford Asset Management says if farmers reject the proposals it will hamper the co-operative's overseas expansion plans which will depress farmers' potential earnings.

Mr Gaynor says the co-operative's international growth ambitions are not as important to farmers as the milk price.

"Now one could argue that the more successful Fonterra is on the international stage the higher the milk price over the longer term."

Whakatane dairy farmer Robin Barkla, who is vice-chair of Federated Farmers dairy section, initially voted against the scheme and says he needs more information before June to make an informed vote.

He says Fonterra needs to put the final concept to farmers so they can vote on that basis, not on a plan that may change in the future.

Fonterra chairman Sir Henry van der Heyden says he is confident farmers will retain full ownership and control, and farmers will have information supporting that when they take the vote.

However, he could not specify the voting threshhold required for the scheme to go ahead.

Outside investment 'risky'

A former Federated Farmers dairy section chairperson says if a new proposal is passed, the decision could spell the end of Fonterra.

Lachlan McKenzie says that, historically, any co-operative which has opened itself up to outside investment has collapsed due to the tension and conflict of interest between parties.

However Hugh Candy, who owns two dairy farms, told Nine to Noon he thinks a Fonterra trading proposal will be passed, despite growing opposition.

Mr Candy says as more details are released about the proposal, more farmers are thinking carefully about their decision.

However he says many will vote for the proposal, as they will simply want the issue to be resolved.