Can farmers fund Fonterra?

Fonterra has ruled out a public listing, a decision which is supported by most of the cooperative’s shareholders.

Suppliers are wary of a public listing because they want higher returns from the milk they produce and that might not be the primary aim of outside shareholders.

Having ruled out listing the company has to look for other ways of funding expansion and will be making an announcement tomorrow afternoon.

It is likely to include a change to the way shares are redeemed.

At the moment farmers can sell shares back to Fonterra if they want to stop supplying the company or if production drops below the level of their shareholding.

That can help farmers with cash flows if, for example, their milk supply falls because of drought. But it also allows them to sell out when the share price is high, supply another company for a year or two then buy in again when the share price has fallen.

It would be better for the company if farmers had to sell to other suppliers or wait a few years – at least three and up to five – before redeeming their shares and if the price for redemption was set at a three or five year rolling average.  

Adolf at No Minister  and Cactus Kate have posts on this topic.

4 Responses to Can farmers fund Fonterra?

  1. Buggerlugs says:

    they might be announcing a 15c per kg/ms increase in the payout in the next day or so from what I hear…

    Like

  2. homepaddock says:

    There’s an announcement tomorrow – there will a lot of happy people if you’re right about that figure.

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  3. JC says:

    The farmers are severely limiting their future by turning down a public listing.

    Like it or not, dairying is not just milk but extremely high priced land and high cost management systems.. also it used to be a boast of the industry that it created 10 new viable by products from milk every year.

    Dairy farming and Fonterra’s future should be in milk, by products, real estate, tourism, science etc.. not just producing milk for the lowest cost.

    JC

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  4. Cactus Kate says:

    Buggerlugs….then another announcement that it is down then up then down, meanwhile the dollar keeps going up……

    Like

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