Fonterra ownership may be opened up to sharemilkers

Dairy farm owners look set to lose their monopoly on the right to own Fonterra shares as the dairy giant considers allowing sharemilkers to buy into the company.

Fonterra Milk Supply's general manager of sustainable milk growth, Mark Leslie, told the Business Herald yesterday he agreed with Federated Farmers that the middle of next year was a good target for introducing sharemilker share ownership.

Such a move would effectively bring current "private arrangements" between sharemilkers and farmers over share benefits formally within the Fonterra system.

Sharemilkers - who farm on land owned by someone else - reportedly produce about 40 per cent of the country's milk.

Herd-owning 50:50 sharemilkers provide the cows, staff and equipment, while farmer partners provide land. It is this class of sharemilker Federated Farmers wants shares to be available to.

But, under Fonterra policy, they cannot own shares in their own name. Only actual farm owners can hold shares - a policy said to reflect a belief that Fonterra voting rights should stay with farm-owners.

However, Federated Farmers sharemilkers' section chairman Dean Bailey said there had been discussions with Fonterra for the past six months about opening up share ownership.

A recent survey of nearly 340 dairy members found 96 per cent of sharemilkers wanted the option of buying Fonterra shares, and 64 per cent of their farm-owning employers approved.

Bailey wanted herd-owning 50:50 sharemilkers to be able to buy shares by June next year and thus have a greater say in the way Fonterra is run.

"We're a bloody important part of the industry - 40 per cent."

He imagined sharemilkers' shares would stay linked to an actual farm.

Fonterra suppliers are required to hold shares in relation to their production, and can be required to buy more when production rises.

Bailey said the benefits of sharemilkers buying shares included:

* Farmers being able to cash up shares but keep their farms in full milk production.

* Shareholders being able to increase productivity without requiring more capital input from farmers.

* Sharemilkers can be "stifled or capped because the farm owner decided he didn't want to purchase shares".

He felt shares sold by sharemilkers in future would have to stay within the dairy industry.

Bailey and Leslie said sharemilkers and farmers could come to private arrangements where share benefits went to sharemilkers.

But these agreements were seen as untidy and could create extra legal expenses.

Leslie said having sharemilkers being able to buy would "make things a lot tidier".