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Updated at 4:55 pm on 20 June 2012
A key figure in the dairy industry at the time Fonterra was created is supporting the company's proposed Trading Among Farmers plan.
The debate over aspects of TAF has intensified this week as farmers vote on it.
The main area of contention is a shareholders fund that would allow outside investors to buy units entitling them to dividend rights from shares.
Sir Dryden Spring was chairman of the Dairy Board when it was merged with the Dairy Group and Kiwi Dairy Company into a new super co-operative more than a decade ago.
Sir Dryden, now retired from dairy farming and no longer a Fonterra shareholder, thinks farmers will face a bigger threat to their ownership and control if TAF does not go ahead.
"Fonterra was established with a flaw in its structure, and that was the fair value share, which under certain circumstances shareholders can require the company to redeem. Now that puts a huge strain on the company because effectively the share capital isn't equity at all it's effectively a contingent liability."
Sir Dryden says that unless Fonterra can solve this redemption problem, and make its capital permanent, it will under invest in its core dairying activities which he says will lead to under performance and falling income.
That, he says, is a far bigger risk to farmer ownership and control than TAF.
Sir Dryden also says he thinks there will be sufficient safeguards in place under TAF to keep Fonterra in farmer ownership and control.
However, Labour Party Primary Industries spokesperson Damien O'Connor is not convinced that TAF is the best solution for Fonterra.
He is a member of the Primary Production Select Committee that heard submissions on proposed changes to dairy industry legislation to pave the way for TAF.
The committee has recommended some changes to the Government Bill which is now going through Parliament.
He is challenging statements from Fonterra's chief executive, Theo Spierings, who has warned that the co-operative's share price would go up if TAF does not go ahead thereby putting more pressure on farmers as well as the company.
"My theory is that if TAF does go through, the share value will increase and put the co-operative at risk."
Mr O'Connor says Labour will not be supporting the Bill allowing the introduction of TAF, as it currently stands.
Fonterra says it will no longer be in control of its own destiny if Trading Among Farmers does not proceed.
Fonterra chief executive Theo Spierings says huge amount of time and effort has been spent to ensure Trading Among Farmers (TAF) strengthened the co-operative's capital structure and protected 100% farmer control and ownership.
But he says a no vote does not mean the company just goes back to the status quo.
Mr Spierings says it would need to go back to the drawing board to resolve redemption risk and would have to put on hold projects to increase the volume and value of its dairy exports.
The make or break part of the TAF proposal is the shareholders' fund, where outside investors could buy the dividend rights of shares deposited by farmers.
Critics argue that has the potential to undermine farmer ownership and control of the co-operative.
Fonterra says it needs a decisive vote for TAF to go ahead and company representatives have been fronting up to extra meetings this week, following the series of 50 or so scheduled farmer meetings.
At the latest of those, in Hawera on Monday, Mr Spierings spoke to about 200 Taranaki farmers who turned up at short notice.
They included former Shareholders Council chairman Blue Read who headed the farmer watchdog body when farmers initially gave the TAF scheme strong backing.
Mr Read says he'll be among those voting for it following what he called a robust process after which safeguards have been introduced.
He says the TAF proposal is a very neat way round current issues.
"Some of the constraints we have on our company now were introduced as a cost of forming something that was almost effectively a monopoly in New Zealand. Its a very unusual situation internationally."
Mr Read thinks it is likely the TAF plan will get a majority vote, but says it will be the strength of the vote that will count.
A group of farmers opposed to the TAF plan and the threat they see from outside investors buying dividend rights to shares have also been lobbying their fellow shareholders.
One of the group, Canterbury dairy farmer Leonie Guiney, is questioning the sort of pressure Fonterra is putting on farmers to support TAF.
Farmers can vote by internet, post or fax up until Saturday, or vote in person or by proxy at the special meeting on Monday at one of eight venues around the country.
The Shareholders Council says about 35% of the 10,500 farmer-shareholders have voted so far, with about half of those voting on-line.
Copyright © 2012, Radio New Zealand
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