The allure of a high share price is proving too much for a growing number of Fonterra's farmers, with more choosing to sell up and move to competing cooperatives and dairy companies, says Fonterra's director of milk supply, Steve Murphy.
Before the advent of the Trading Among Farmers (TAF) scheme, shares in Fonterra - which new entrants must buy in order to supply the cooperative, or which existing farmers must acquire to increase their supply - were set at $4.52 each.
Under TAF, shares are "fungible' with the newly-listed units in the Fonterra Shareholders' Fund, which means they closely track each other.
The units were issued at $5.50 and went straight to $6.66 upon listing on the NZX in November. They went as high as $8.09 early last month.
Murphy said there was an increased level of activity "but within the realms of what normally happens" at around the end of the season, when suppliers have an option to look at other alternatives.
"I guess this year they have an added opportunity, given the price of the shares," he said.
"There is a particular short-term financial driver that exists with the share price the way it is, and for some farmers that makes sense today," he said. "Net-net it's a very small amount of milk solids we're talking about."
Murphy said Fonterra spent a lot of time with farmers to make them aware of Fonterra's strategic, long-term plans, which is what the value of the share was tied to.
"We try to point out that there is a lot more to Fonterra than just the share price."
The second biggest dairy cooperative after Fonterra, Westland Milk, which processes about 4 per cent of the country's dairy supply, has been attracting a small number of Fonterra farmers - mostly from Canterbury. Westland Milk farmers pay just $1.50 per share for the right to supply.
Westland's chief executive, Rod Quin, said in April that interest from Canterbury dairy farmers wanting to join the company had increased significantly in recent months.
When Fonterra was formed in 2001, Westland and Morrinsville-based Tatua opted to go it alone. The rest of the processing market is made up of dairy companies such as Canterbury's Synlait and the North Island's Open Country.
The price of Fonterra shares and units has fallen this week on the back of broker reports that downgraded Fonterra's earnings prospects.
The units closed down 7c yesterday at $7.61, while the shares were down 18c at $7.60.
Fonterra this week forecast a farm-gate milk price of $7 per kg of milk solids for the 2013/14 season, up $1.20 per kg from this season, but was cautious about its earnings outlook.
Chief executive Theo Spierings said shareholders and Fonterra unit holders should expect the strong lift in international dairy powder prices to create "a more challenging environment" for Fonterra's earnings in the first half of the 2014 financial year to July 31.