By LIAM DANN
Fonterra should consider allowing its farmers to sell their shares and supply milk on a contract basis, a Federated Farmers report says.
The proposal is one of the more radical options the farmer organisation has included in its own list of solutions to Fonterra's capital structure problems.
The report was
released yesterday - just weeks before Fonterra is due to produce its own list of options for capital structure reform.
It includes dramatic options touted by Fonterra critics - such as creating two categories of share and inviting in outside investors - as well as more moderate solutions, such as providing a phase-in period for new members to buy their shares.
Fonterra launched a capital structure review in September to address "tensions" which limit the opportunity for new farmers to join the co-operative and encourage existing farmers to exit.
Fonterra farmers are required to buy shares in the company relative to the amount of milk they supply.
As the share price has risen, farmers have become concerned about the level of capital they have tied up in the company.
Dairy Farmers of New Zealand chairman Kevin Wooding said the point of the document was not to promote any one idea in particular but to generate some healthy debate among farmers.
A list of pros and cons is attached to each of the 11 options in the report.
The controversial option of outside investors is included even though Fonterra's strong commitment to retaining the co-operative structure meant it will almost certainly be rejected.
The report says allowing farmers who have not invested in shares to supply milk to the company is another contentious issue, but it is one that Fonterra should take a serious look at.
Wooding said Fonterra held discussions with Federated Farmers about capital structure reform before the drafting of the report but had no input into its content.
A Fonterra spokesperson said the company would not comment on the details of the report before the release of its own reform options.
Fed Farm
