The milk crisis in China may erode farmer confidence in the governance and strategy of dairy giant Fonterra, says its farmer shareholders.
The annual report of the Fonterra Shareholders' Council - an independent body representing the co-operative's farmer shareholders - said the 2007/08 season had since been overshadowedby the devastating poisoning of milk in China.
Fonterra's 43 per cent-owned Chinese dairy company San Lu was one of 22 firms caught up in a scandal, in which the industrial chemical melamine was added to watered-down milk to boost protein levels.
Tens of thousands of infants were made ill and at least four died.
"The council is concerned that Fonterra's experience in China, together with uncertainty about the future capital structure, may erode farmers' confidence in Fonterra's governance and its future direction.
"Without the unequivocal support and confidence of supplying shareholders ... implementation of Fonterra's strategy may be jeopardised."
But council chairman Blue Read said the organisation supported the growth strategy.
"What we need to recognise - all farmers need to recognise - is there's very little growth opportunity really left in New Zealand and so the only place to get it is offshore."
