Northland Federated Farmers president Colin Hannah says a $200 million windfall for the region’s dairy farmers is likely to be used to pay off debt, with some of the money being saved, given the uncertain times globally.
Northland Federated Farmers president Colin Hannah says a $200 million windfall for the region’s dairy farmers is likely to be used to pay off debt, with some of the money being saved, given the uncertain times globally.
Northland dairy farmers will get a $200 million windfall from Fonterra’s $4.2 billion sale of its dairy brands, but there’s unlikely to be a big spend-up, with most going to pay off debt.
Northland Federated Farmers president Colin Hannah said the tax-free payout was a huge bonus for the region’sdairy farmers.
But with some big issues facing the sector, including a glut of milk powder worldwide, storm after storm, rising fuel prices and global uncertainty, most would likely pay down debt and save some until the global situation became more settled.
Tuesday was the payday for around 8000 shareholders of the co-operative for the divestment of its Mainland Group consumer brands business of well-known products like Anchor butter and Mainland cheese, to French dairy giant Lactalis.
Proceeds to farmer-shareholders will vary, but the payout was calculated to be around $400,000 on average each, which is now trickling into bank accounts.
It followed overwhelming support for the deal, with 98% of shareholders voting in favour of it, in February.
With around 400 Fonterra dairy farmers in Northland, that will provide a tax-free cash fillip of a least $160m across the region, but Hannah says the real total is more than $200m.
While some farmers have sold their farms in recent years, they have retained their Fonterra shares so will get some or all of the payout, he said.
‘‘The average debt for Northland dairy farmers is about $20 per kilo of milk produced, so that’s reasonably high. And given the turmoil around the world, a lot will tighten their belts even more so.
White-liquid gold: Northland dairy farmers are set for a $200 million tax-free payout from Fonterra’s $4.2 billion sale of its dairy brands to French giant Lactalis.
“Sure, a few of the younger ones may spend, say buy another farm, but most will pay down debt, and put some away.”
Hannah said when speaking to farmers (about this payout) at the Northland Field Days and the Bay of Islands A&P Show, when asked if they’d be buying a bach or new car, many said they were going to sit on it because they just don’t know what’s ahead.
“That’s very interesting as that’s the very first time farmers have spoken like that, and a sign of where things are at – pay debt off and/or save it due to the uncertainty,” he said.
Compounding issues for the farmers was the rising cost of fuel, with diesel skyrocketing and the extra expense having a big impact.
“I went to fill the tractor up the other day, and it cost $1500. It would have been $600-800 before [prices started rising due to the Iran War],” he said.
“And other farm costs are going up as a result, suppliers are putting up their costs due to rising fuel prices. There’s a big gap between the farm costs in Northland compared to the returns.”
The sale to Lactalis involves some of Fonterra’s most recognised brands, including Anchor and Mainland. Fonterra says although its consumer business was profitable, the capital tied up in it was better directed to the co-operative’s ingredients and foodservice businesses, which offer better returns on the capital.
While $3.2b will be returned to farmers, Fonterra aims to retain about $1b to invest over the next three to four years in projects to generate further value through its remaining ingredients and foodservice businesses.
