The Rubicon River Julius Caesar crossed 2000 years ago has come to represent a point of no return. To some dairy farmers that expression sums up Fonterra's proposed shareholders fund.

The shareholders fund, if we strip things to the naked truth, could be looked on as being either the partial demutualisation of our largest co-operative company or the dilution of its share value.

If Fonterra's farmer-shareholders vote for the fund in late June it will allow farmers to trade their shares in for cash.

Title to the shares will be held by an impressive sounding "farmer custodian", in reality, a share parking lot.


Farmers will have a say in how Fonterra is run backed by a voucher but their dividends will flow to the fund instead.

The promise of safe Fonterra dividends in our largest business will entice "mum and dad" investors to buy units in the fund.

Fonterra will get "at least" $500 million for "at least" 8 per cent of its equity, but there is a snag.

Investors may be "mums and dads" but will they be Kiwi mums and dads?

Fonterra's constitution means if a fund is approved by us farmer-shareholders, it could in fact grow to a quarter of Fonterra's equity before further shareholder approval is needed.

That is why the amending Dairy Industry Restructuring Bill before Parliament tags "at least" to the $500 million sum.

I'm not adverse to a shareholders fund but its potential size places it outside my comfort zone and my support.

Those with longer memories will recall how asset managers enthusiastically cited Kerry as the reason Fonterra should have floated in 2007.

In 1986, Kerry Group transformed itself into a listed company with the co-operative retaining 51 per cent as a cornerstone.

Over 26 years this has slumped to 17.1 per cent but the Irish Farmers Journal put it best last year: "Where would this then leave Kerry milk suppliers? No one can foresee the future, but Kerry Group's journey has been an enormous success for all stakeholders to date ... Kerry milk suppliers were once the envy of all other Irish dairy farmers; could this change and could they find themselves outside the negotiating room and reverting to where they were in the early 1970s?"

That's why over 85 per cent of the world's milk is traded through co-operatives.

Farmers formed co-operatives to give small suppliers scale and control over the means of production.

If you trade this in for short-term gain you risk becoming a small cog in the production wheel.

So how has Fonterra performed recently?

In 2008, it took Fonterra 14 months to generate revenue of $19.5 billion. In 2011, Fonterra generated revenues of $19.9 billion but took only 12 months to do so.

As if there's no other way, asset managers talk up floats and funds as giving Fonterra the capital it needs to grow.

Milford Asset Management's Brian Gaynor said on radio that Fonterra's international growth ambitions were not as important to farmers as the milk price.

Federated Farmers predicts Fonterra may this season crack corporate New Zealand's four-minute mile, $20 billion in revenue.

One reason behind Fonterra's growth is that it now holds on to some of the payout farmers receive.

Unbelievably, no such policy existed before 2009 and Federated Farmers knew this was not sustainable.

In 2010/11, retentions amounted to $470 million and is only slightly less than the shareholders fund promises. The exception being it is a one-off whereas retentions are on-going.

Retentions can also be much larger if it was sold to shareholders.

While we celebrate Fonterra revenues being two times Ireland's Kerry, Mars Corporation, of M&M fame, has revenues one-third larger than Fonterra's again.

Despite this Mars remains a family-owned company; there is more than one way to skin the cat here.

Fonterra's core strengths are in processing, marketing and supply chain logistics, not being a corporate dairy farmer in China, Brazil and potentially India.

After San Lu, Fonterra rightfully moved to protect in-market milk supply by piloting farms of its own.

This gave it direct control over milk supply but as things move well beyond a pilot, the risk of something adverse increases.

Being a Fonterra farmer-shareholder I have reservations my reputation and that of Fonterra hinge on the actions of a farm worker overseas.

I would be relaxed if Fonterra spun off these farming operations into a separately branded and listed company.

While the number of in-market farms is small, Fonterra now has systems, processes and a market that could see rapid expansion of its model.

Here lies one route for capital while guaranteeing in-market milk for Fonterra.

It would also firewall Fonterra's core business and brand, but would New Zealand be the place in which to list?

Federated Farmers got its wish for farmers to have a final say on the controversial shareholders fund.

It is now up to farmers to get together and discuss the pros and cons ahead of the collective fork in the road we've reached.

Is our future down the co-operative road or the Kerry one? Or can we go down another one nobody has gone before?

At least Fonterra's farmer-shareholders, the ones with skin in the game, have their chance to decide.

Willy Leferink is Federated Farmers Dairy chairman and an Ashburton dairy farmer. He is also a Fonterra farmer-shareholder.