The first phase of Fonterra's Trading Among Farmer's share trading scheme will get under away tomorrow when the cooperative starts to gauge the level at which farmers would be prepared to sell the economic rights to their shares in the cooperative.

The process will involve so called "book-builds" when participants are invited to indicate at what level they would be willing to buy and sell at.

Rights to the shares will go into the Fonterra Shareholders Fund, which the investing public will be able to gain access to, and which is expected to be worth not less than $500 million.

If there is a shortfall, Fonterra said it would make up the difference but has said it does not intend to retain permanently the resulting equity.


In the farmer-supplier book-build, farmers will be asked to indicate how many rights to shares they are willing to sell, and at what level, from three indicative ranges - $4.60 to $4.90, $4.90 to $5.20 and $5.20 to $5.50. Another book-build aimed at brokers and investors associated with Fonterra will start on Monday. An institutional book-build will take place on November 26 and 27.

Fonterra's chief financial officer Jonathan Mason said executives had been holding meetings with farmer groups up and down the country.

About 60 per cent of inquiries were about the shareholders fund and 40 per cent about the Fonterra shareholders market, which will allow farmers to trade shares among themselves.

"Farmers have been very interested in exactly how the two funds will work and what it will mean for them," Mason said.

Pricing and allocations will be announced on November 27 and the units are expected to start trading on the ASX and NZX on November 30.

Upon listing, the Fonterra Shareholders Fund will be the biggest sharemarket float in Australia or New Zealand since the partial privatisation of Queensland Rail late in 2010.

The units will form an integral part of Trading Among Farmers, which is aimed at offsetting so-called redemption risk and giving farmers increased financial flexibility.

As it stands, Fonterra has to buy farmers' shares when they choose to exit the industry, which exposes the co-operative when many choose to sell at the same time. Under the plan farmers will be able to place shares with the shareholders' fund and be paid for the rights to dividends and any change in market value, while retaining voting rights.