8 Aug 2012

LIC farmer co-op says share trading works well for it

7:03 pm on 8 August 2012

A farmer co-operative that's been running a share trading scheme for the past eight years says it has worked well for it and increased the share value for its dairy farmer owners.

The livestock improvement and genetics company, LIC, listed on the Alternative Stock Exchange in 2004, allowing farmer shareholders to trade shares with each other.

LIC chairman, Nelson and Canterbury dairy farmer Murray King, acknowledges there are big differences between it and the Fonterra dairy co-operative, which is proposing to introduce its own much debated trading among farmers plan later this year.

He says since LIC introduced its tradeable share arrangement it has benefited farmer shareholders by about $200 million in share value and dividends.

Mr King says LIC has a two tiered share structure, so there is a co-operative control share and anyone who buys products and services off LIC must be a co-operative shareholder.

"By being a co-operative shareholder they have control over the company, ultimately but by having those shares they're then able to invest in investment shares which are listed on the NZ alternative index and those shares are freely traded amongst that restricted market of co-operative shareholders".

Mr King estimates since its inception the scheme has put about $200 million back into farmers' balance sheets through the appreciation in the value of those shares, which includes about $40 million in the last year.

He says farmers also receive dividends from their co-operative shares.

LIC will pay a total dividend of almost $12 million on both co-operative and investment shares for the past year. That compares with $13.6 million, and $7.3 million in 2010.

He says only dairy farmers and sharemilkers using LIC products and services can be share-holders.

And LIC doesn't have the shareholders fund arrangements that Fonterra is planning that will allow non-farmers to invest in dividend rights from shares.

Mr King says LIC doesn't see the need to consider investment from non-farmers at this stage.

He says LIC is also a lot smaller than Fonterra and doesn't trade in international markets in the way that Fonterra does.