Farmers are positive on share trades, says Fonterra

Sir Henry van der Heyden says farmers will retain ownership of Fonterra under the plan. Photo / Paul Escourt

Proposals by co-operative Fonterra to start farmer share trading is getting a positive reception in the paddock, says the dairy giant.

Farmers currently buy and sell shares from Fonterra based on their level of production but under the new proposal would start trading among themselves - a move Fonterra said would stop the redemption risk of money washing in and out of the co-operative.

Fonterra chairman Sir Henry van der Heyden said 74 meetings had been held across the country last week involving about 2300 farmers.

"Right across the country generally it's been really positive feedback," van der Heyden said.

"Just about all the meetings were points of clarification."

Questions had been asked about possible Registered Volume Providers and a Fonterra Shareholders Fund, including what percentage the fund should be capped at compared to Fonterra.

The Fonterra Shareholders Fund would help farmers free-up cash by paying them for the right to receive dividends and the gain, or loss, from any change in value of shares.

The fund could raise money by selling investment units and investors could include sharemilkers, retired farmers, institutions and members of the public.

However, Fonterra has said the fund and its investors would not have any voting rights in Fonterra and farmers would retain ownership of their shares.

Federated Farmers dairy chairman Lachlan McKenzie had spoken to a few farmers who he said were either muted or expressed general support.

There was a lot of discussion about the Fonterra Shareholders Fund, McKenzie said

"There is still some clarity needed to be put around what that share fund is," he said. "There is a misunderstanding that some people think that the fund does own shares, they don't."

The idea behind the fund was sound.

"It's a form [for] investors in New Zealand being able to put equity up for farmers to borrow to invest in the dairy industry."

It had been suggested the co-operative could raise the voting threshold on demutualisation to 90 per cent from the current 75 per cent, McKenzie said.

A spokesman for the Shareholders' Council said the farmer share trading concept had got a good reception.

The most important matter for farmers that came through the meetings was related to the milk price.

"Certainly they're looking at the [protection of the] robustness for the milk price under any changed structure," he said.

During the next couple of weeks smaller meetings would be held with farmers before another major round scheduled for the middle of May.

A special meeting could be held in June or early July, with Fonterra needing 75 per cent support from farmers and the earliest a share trading system could be up and running would be June, 2011.

The first two steps in the capital re-structure were approved in November, changing the way shares were valued and allowing farmers to buy non-voting shares beyond those required by production.