By LIAM DANN
Federated Farmers is to publish an independent review of the issues surrounding the debate over Fonterra's capital structure.
Fonterra has just started consulting its farmer shareholders about possible changes to its capital structure, a move industry analysts believe it is one of the most important issues the dairy giant
has faced since it was formed in 2001.
Federated Farmers has decided it will not take a political stance on the debate, but will present its 8500 dairy farmer members with a range of potential capital structures.
Federated Farmers spokesman Graeme Peters said the review would not attempt to direct farmers on which option was best, or even if change was needed at all.
Senior policy analyst John Pask has written a four-part report on the issue, which will be progressively released over a two-month period.
Peters said it was a busy time of the year for dairy farmers, so it did not make sense to overwhelm them with one long, complex document.
The first instalment will go to farmers in the first week of next month. It will summarise the current capital structure.
The second instalment will focus on the strengths and weaknesses of the system and the third on the kind of features that should be considered in a good capital structure.
The final part, due to be published in November, will outline a range of capital structure options that could work for Fonterra.
Peters said Fonterra management was consulted during the research for the report, but would have no direct influence on its findings.
Fonterra chairman Henry van der Heyden has said there are three pillars to Fonterra's structure that would not change.
They were: that it remained a farmer owned co-operative; that it continued to be the lowest-cost mass producer of dairy products in the world; and that it continued to expand its value-added activities.
Under scrutiny
* Fonterra is consulting shareholders about possible changes to its capital structure.
* Some farmers have concerns about the rising value of the Fonterra share price relative to the payouts they receive for producing milk.
* The peak note system - which requires farmers to buy special shares reflecting the varying cost of processing milk at different times of the season - is also up for review.
