Farmers have no choice in PPCS supplier shares plan

Keith Cooper

Farmers are being told they have to buy shares in the country's biggest meat processor if they want to keep supplying stock.

Otago co-op PPCS wants to raise around $40 million over three years by issuing a new class of supplier shares to farmers supplying livestock.

Last week it confirmed it was going ahead with the scheme.

PPCS admits some farmers have had trouble accepting the new system.

"The lack of choice is the bit that psychologically annoys them, I suppose," chief operating officer Keith Cooper said yesterday.

"The money's not the issue ... it's probably the fact that it's, dare I say it, compulsory."

At present only "rebate shareholders" - who share profits from selling meat through a pooling system - have capital locked up in PPCS, which has operations throughout the country.

PPCS said it had been holding meetings to explain the new scheme to farmers and the reaction had been positive.

The amount of shares farmers have to buy will be based on the amount of stock they supply.

No supplier will need to hold more than 15,000 shares. At a cost of 90c a share, that indicates a maximum outlay of $13,500.

The September release and last week's statement did not explicitly state that all suppliers would have to hold the new shares, but communication to farmers does make this clear.

PPCS's investment statement says "an application for shares is made if you elect to supply livestock to PPCS from November 1".

Asked yesterday about the fact that farmers had to hold shares to keep supplying, Cooper said if suppliers did not want to buy the new shares they would have to send stock elsewhere.

But he said the shares were reasonably priced and were due to receive dividends.

Making all suppliers own shares was no different from co-ops such as Fonterra.

Cooper said once the rationale for the new shares was explained, most farmers understood why it was happening.

He said last month that the scheme was aimed at increasing supplier loyalty to the co-op, building up its capital base and positioning it to take part in meat sector rationalisation.

Federated Farmers meat and wool section head Keith Kelly said yesterday having to buy shares could be hard for some farmers to swallow unless the stock guaranteed a set return.

But Cooper said prices paid to farmers would continue to vary as they did now.