26 Jun 2012

Farmers return to the fold after company failure

8:46 am on 26 June 2012

Farmer-suppliers of the failed New Zealand Dairies' milk processing plant at Studholme, near Waimate, say signing a new contract with Fonterra has been a bitter-sweet experience.

When the Russian-owned factory went into receivership in May, 27 South Canterbury and North Otago farmers were left $25 million out of pocket.

Fonterra has signed a conditional agreement to buy the plant but will need Commerce Commission clearance.

As part of the purchase agreement, Fonterra will pay the farmers what they are still owed for last season's milk and allow them to keep supplying the plant during the sale process.

They would also be locked-in to supplying Fonterra for six years.

A spokesperson for the suppliers, Robert Borst, says signing up with Fonterra was a tough but necessary decision.

"It's a relief, in the sense that we're going to get 100 cents in the dollar once it has gone through the Commerce Commission," says Mr Borst.

"It's a fairly big commitment of seven years with Fonterra, especially considering a lot of us had come from Fonterra ... for a whole lot of different reasons," he says.

"We just need to move on, and get on with farming, I suppose".

Commerce Commission processes to vet Fonterra's contract and purchase agreement are expected to take between two and four months, says Mr Borst.

Rival Canterbury dairy processor Synlait, which also made a bid for the plant, says it's watching that process with interest.