30 Jun 2010

Farmers endorse Fonterra's share trading plan

10:06 pm on 30 June 2010

The Fonterra dairy co-operative has been given the go-ahead to introduce share trading among its 10,500 farmer-shareholders.

In a record response, almost four-fifths of farmer shareholders voted, with just under 90% of them backing the move. The figure is well above the 75% shareholder approval Fonterra needed to proceed.

Fonterra says it will take up to 18 months to set up the share trading system, which will give both the company and its shareholders more financial stability.

Blue Read, who heads the shareholders' council, says genuine consultation is one reason for farmers' overwhelming support for the proposal.

He says farmers have made the best decision for the co-operative and for themselves, because their wealth depends on Fonterra's ability to operate and the dairy co-operative now has a rock solid balance sheet.

The proposal is a radical departure from the present system, under which farmers have to buy shares from the company to match their milk supply, and sell them back when they leave the co-operative or reduce milk production.

Fonterra has been trying to eliminate the current system's financial uncertainty, which means millions of dollars flow in and out of its books as milk production fluctuates.

Share trading will allow more investment - Ferrier

Chief executive Andrew Ferrier told Checkpoint Wednesday's show of support will enable the dairy co-operative to further strengthen its competitive position in dairying.

He says it gives Fonterra the freedom to be able to invest more capital into the business without having to worry about redemption.

"It means building both new processing plants for product in New Zealand, but more importantly it means investing to be more efficient in getting the product out of New Zealand."

Mr Ferrier says the move will allow investment in research and development to investigate ways of adding value to basic dairy commodities.