Radio New Zealand - Te Reo Irirangi o Aotearoa

Pros and cons in Fonterra's trading system

Updated at 12:07 am on 4 December 2012

A dairy farmer representative thinks most farmers supplying Fonterra will be buoyed by the strong response to the co-operative's new Shareholders Fund, which started trading on Friday.

The fund allows outsiders to invest in Fonterra for the first time by buying units giving them the dividend rights to shares deposited by farmers and the company.

The fund made a strong debut on the NZX at noon on Friday.

After just half a day trading the unit price, which launched at $5.50, stood at at $6.85 at the close.

Federated Farmers Taranaki dairy chair Derek Gibson says most farmer shareholders will be pleased with that because it means the value of their shares, linked to the unit price, is suddenly a lot higher.

He says it shows there is still a lot of confidence in the dairy industry.

However, Mr Gibson acknowledges, the higher share price increases the cost for farmers who need to buy shares to join the co-op or buy more to match an increase in milk production.

Labour Party primary industries spokesperson Damien O'Connor says that uncertainty in terms of capital requirement will be another challenge for those who might want to become dairy farmers or those who want to expand their operation.

Fonterra says other primary producers should be encouraged by the company's successful share float.

Chief executive Theo Spierings says other primary producers in New Zealand should take note.

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