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Fonterra Proposal Causes Problems

Fonterra's capacity adjustment proposal is complex and may cause problems for both farm owners and sharemilkers who are Fonterra suppliers says Joy Thomas, Chair of the Sharemilkers Section and Michael Joyce, Chair of the Sharemilker Employers Section of Dairy Farmers of New Zealand

Fonterra's alternative to the current peak notes capital structure is to be voted on by shareholders on September 10 without complete support of the Sharemilkers Employers or the Sharemilkers Sections.

Sharemilker managed farms provide around 40% of Fonterra's supply. Yet the impact on the various sharemilker/employer relationships has not been properly worked through.

Many farm owner shareholders will be required to contribute capital to Fonterra in order to bring their shareholding up to the required level. These same farm owners will be required to share a higher payout with their sharemilkers.

Other farm owners will receive a capital payment from Fonterra when surplus peak notes are converted to fair value shares. These shareholders are then likely to receive a lower payout which will in turn mean that their sharemilker's income will also be adversely affected.

“I am concerned at the lack of consultation by Fonterra with sharemilkers. Although we do not have a vote on the new system, what is proposed will directly affect the relationship between sharemilkers and their employers says Mrs Thomas.

“Shareholders will need to carefully consider the importance of sharemilking to the wider industry before casting their vote” concluded Mr Joyce.

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