The national dairy farmers' chairman says the low number of farmer-suppliers interested in participating in Fonterra's new Shareholders Fund comes as no surprise.
More than 2500 current farmer shareholders, sharemilkers, staff, retired farmers and Australian suppliers have applied to buy units in the fund, which would entitle them to the dividends from shares that the co-operative's farmer-owners deposit in the fund.
There are also indications of strong interest by outside investors.
In contrast, only 250 of Fonterra's 10,500 farmer-suppliers have offered to deposit shares in exchange for their cash value, leaving Fonterra having to issue extra shares itself to make up the bulk of the $500 million minimum that the fund requires.
Federated Farmers dairy chair Willy Leferink says it was predictable that most farmer-shareholders are unwilling to give up the dividend rights to some of their shares at this stage.
He says farmers are being cautious, but he also agrees with Fonterra that it shows they have a strong level of confidence in the co-operative.
Fonterra underestimated how many farmers would hold off selling
Fonterra says it always expected to have to issue shares to make up its shareholder fund and get investor interest in the scheme.
But Fonterra chief financial officer Jonathan Mason concedes it underestimated the large number of farmers who would hold off to see how the units traded before deciding whether to sell the economic rights to their shares.
He says the fund has been structured to provide flexibility for farmer-shareholders and it will allow farmers to stay in the co-operative who might otherwise leave.
Mr Mason says that if there was a drought, for example, the fund could allow farmers whose production was down 15 - 20% to stay in the co-op and get through that difficult time by selling the economic rights of their shares into the fund, but keeping the vote and full milk supply from Fonterra, and buying those shares back when times got better.
He says Fonterra farmers will get further opportunities to participate in the fund. The next time may be after Fonterra posts its half year results in about March next year.
He says trading of shares under Fonterra's wider Trading Among Farmers scheme will start on 3 December.
Fonterra says the issuing of shares would, at the most, affect its earnings per share by about 1 cent.
The Shareholders Fund is part of the Trading Among Farmers (TAF) proposals voted on by Fonterra shareholders earlier this year.
A listing price will be decided once demand from financial institutions such as stockbrokers has been determined.