KEY POINTS:
Fonterra chairman Henry van der Heyden says the board's preferred capital restructure option has been "parked", no more work is being done on it and all possibilities are back on the table.
In November, Fonterra unveiled its preferred capital structure to deal with issues of capital for growth,
redemption risk and investor choice.
The restructure would have created an asset holding company to be listed on the stock exchange, with two votes needed to complete the journey.
However, the first vote due in May to create the two-entity structure was cancelled last month with the board saying it was highly unlikely to get 75 per cent support.
In a letter to farmers at that time, Van der Heyden said: "The board has spent two years looking at a large number of options and we remain firm in our view that the preferred option is the best solution to address redemption risk, shareholder choice and capital for growth but we appreciate that you have to share and be committed to that view if we are to go anywhere."
The language is explicitly clear - the board still backed its preferred choice but it was going to take longer to convince farmers.
The language has now changed and last week Van der Heyden did not give the preferred option such similar backing.
In fact the board is no longer saying the preferred option is the best choice, although Van der Heyden says it is a matter of emphasis.
"What I'm saying is more or less what's actually in that letter," he says.
"Now we're putting a lot more emphasis on the other options because that's what farmers want to start to actually talk about.
"That's why I think of it as evolution rather than a step backwards."
Van der Heyden does not say the preferred option, with its listing of an asset-holding company, is finished but the language, emphasis or not, is far from a ringing endorsement.
"We're not doing any further work on it, we're not employing advisers, the energy will go into reviewing all the other options ... we said we will go back and review so that's what we're going to do."
An evolutionary step backwards.
Industry leaders say farmers need more information before making any decisions but they do generally accept the need for change.
Opportunities will arise globally in the future and dairy farmers want the right structure so the company does not miss out.
However, rather than a consultation focused on selling the preferred option, the capital restructure process has been blown wide open.
Fonterra has done two years work examining the options - probably not cheap - and only four months into a three-year process the preferred option has been sidelined, begging the question how did they get so far down the track without knowing farmers would not bite without a full consultation?
Officially the preferred option may be only parked up but right now it's down a dark alley, jacked up on bricks with its wheels missing.
MEAT SANDWICH
Jim Anderton speaking at last week's Meat & Wool annual meeting made three things clear to the meat industry.
He'll support the creation of a mega-meat company if it makes sense, he won't stump up taxpayer money to make it happen and it will face Commerce Commission scrutiny like any other deal.
Alliance last month proposed creating a new entity to manage 80 per cent of the country's livestock supply from farm to market, with aims to lift farm returns by about $400 million a year and deliver short-term gains of about $15 a lamb.
It appears the Government is not going to clear a legislative path to help a meat merger as was done for the creation of its agricultural cousin Fonterra.
Fair enough. No special treatment and the Commerce Commission will provide another set of eyes to examine the net benefit or detriment of the deal - albeit from a local consumer perspective.
If local consumers are not harmed and it is what the industry wants then it's another tick to proceed and could provide a degree of protection from any subsequent criticism at home or abroad.
Alliance chairman Owen Poole says facing the commission will be a challenge but his only concern is it will add time to the process.
Poole would like to get a deal done by the end of the year, although he is realistic that it will be a challenge to meet that timeframe.
Other people in the sector have expressed hopes of a deal by October in time for the new season but the chance of such a quick conclusion to such a major undertaking looks like fantasy.
"If you have low expectations you get a poor result," Poole says. "The expectations are high and they want change as soon as we can effect it."
Poole says he can make a compelling case.
"The farmers support it and 90 per cent of the product is exported," he says.
Poole discussed the concept with North Island farmers for the first time last week after getting near-unanimous support from the South Island.
Talks have got underway with potential merger partners and although Poole is not saying who they are the heavyweight candidates are co-operative PPCS and private companies Affco and ANZCO.
"What I can tell you though is they all seem to be attracted to the idea. That doesn't seem to be an issue. They all seem to believe it will work," Poole says.
"The only debate is ... how does their model fit, how do we fit them in."
CULTURE CHANGE
Meat & Wool chairman Mike Petersen called for a change of culture from one of "them and us" during his speech at the organisation's annual meeting.
Criticism of poor performance among meat processors during the past two years has some validity, Petersen says.
"The industry has been guilty of focusing too much on keeping plants full at the expense of the market," he says.
But he also spreads the blame for the state of the industry onto farmers who he says consistently refuse to give companies surety of supply.
Drought and reform in Europe have forced an oversupply of sheep onto the market and many farmers are facing a third season of cash losses.
Petersen has previously described the mood among farmers as one of a crisis of confidence.
"I think it's a real seachange starting to happen. It's just a realisation that the current model is completely flawed."
Excitement is building about the Alliance mega meat company.
"There's a a real expectation amongst a lot of farmers I talk to that this thing just needs to happen."
INVESTMENT BOOST
Agriculture is back in the limelight as the economic powerhouse behind the nation not just for today but also for the future.
Could there ever have been any doubt?
Well, yes.
Not long ago, many developed countries in possession of long-established traditional heavy industries wanted sexy new sectors with lots of flashing lights and beeping computers.
All part of the so-called knowledge-based economy - where knowledge is more important than land, natural resources and labour.
Agriculture was as unfashionable as flares but then flares came back, and so now it seems has agriculture.
Last week the Government announced the NZ Fast Forward fund aimed at pastoral and food industries, committing $700 million up front, which with interest is expected to grow to about $1 billion during the next 10 to 15 years.
Agriculture is the heartbeat of our economy and we need to keep it fit.
The money will fund science and education, skills and technology, innovation, commercialisation, new companies and markets.
With industry expected to match the taxpayer dollars the eventual size of investments could hit a whopping $2 billion.
No small sum, although perhaps not unsurprisingly a political spat broke out.
National Party leader John Key says the fund model carries considerable risk.
"What will happen in a bad year? How will the money be invested? What are the forecast returns?" Key says.
"It is disappointing that it has taken until election year for the Labour Government to announce a gimmicky funding formula."
Minister of Agriculture Jim Anderton replies: "Our fund of $700 million will be spent, plus the interest, which could total $1 billion - What part of that doesn't he understand?"
"He's up against the whole food and pastoral sector which has come out strongly in support of this exciting plan for the future."
AgResearch boss Andrew West discounts the idea of electioneering, saying the fund would have needed considerable planning.
West sees the fund as part of a rethink for the agriculture sector.
There is also no guarantee that the non-ag related electorate would want so much of their money spent to benefit private companies.
Some voters hoping to get their money back in the form of a tax break may be scratching their chins and raising eyebrows.
However, tax dollars collected can get spread so thin when returned that many people would barely notice but if invested with enough weight they can make a significant difference to the country.
If it is merely an electioneering stunt it's a pretty a good effort - a billion bucks is no small potatoes. In fact it's enough to grow some bloody big ones.
