Fonterra has failed to deliver meaningful returns to its farmer shareholders since its inception, a report has found.

Findings of analysis carried out by Northington Partners on behalf of the Fonterra Shareholders' Council were released late last night.

The report claims New Zealand's largest dairy co-operative has failed to deliver meaningful returns over and above the cost of capital since it was formed 17 years ago.

It says that while milk growth over the past 15 years has been an impediment that is now largely historical, it is "critical" that the poor returns be addressed to ensure continued milk and capital.

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It also found that milk price has and continues to be the greatest driver for on-farm profitability and that given the relationship between milk price and earnings it is important that shareholders look at the total available for payout as a true measure.

Shareholders' Council chairman Duncan Coull said despite the findings it still believed the cooperative structure was what worked best.

"Notwithstanding the findings of this report, the council remains firmly of the view that the co-operative structure is the only structure that will provide for the enduring needs of our intergenerational farming families," said in a letter prefacing the report.

Coull said it commissioned the independent report in June after criticism about Fonterra's performance from shareholders and the media.

"This work was in response to a heightened level of commentary within the supplier base, media and the broader financial community in relation to the perceived performance of our co-op since it was formed in 2001."

He said the assessment clearly showed that Fonterra's financial performance since inception had been unsatisfactory.

"When considered as a standalone investment, the average returns generated by Fonterra since inception are lower than relevant benchmarks."

The assessment looked at shareholder returns, Fonterra's return on capital and how it compares to appropriate benchmarks and segment analysis - whether Fonterra earns a higher returns on capital from its value-add business units.

Coull said the results were unambiguous and should be used to inform a wider discussion between the board, management and shareholders around the continued evolution of the co-operative.

"... and in particular what can be done to ensure ongoing returns meet, as a minimum, the opportunity cost of farmers' capital invested in the co-operative."