You get to appreciate the run of the play more, and how one call can literally change the game.
Knowing that, and having eight years in the fray as chief executive of Fonterra, I have a strong view that TAF (trading among farmers) will be a game changer for Fonterra farmers, and that view has only been strengthened with the benefit of watching from the sidelines.
Why is it a game changer? Because with permanent capital, the co-op can finally deliver on all the dreams of its founders – New Zealand’s dairy farmers. Those dreams were to create a world-beating cooperative which would bring strong, long-lasting returns to farmers. TAF is the final piece in the puzzle to deliver that.
That is why I am puzzled that there seems to be a lot of nervousness creeping into the discussion. I have seen firsthand the years of work that has gone into TAF. That includes a huge amount of consultation with all stakeholders: with farmers, with the Shareholders’ Council, and even with the Government, to finally arrive at a solution that is in the best interests of farmer shareholders.
You simply do not see that level of engagement, at all levels, in the corporate world, that Fonterra and its shareholders had with TAF. And that engagement resulted in overwhelming support for TAF just two years ago. It is critical this support continues.
I remember well my first annual meeting as chief executive, just 10 days into the job, where I praised shareholders for their bold decision to create Fonterra – a critical decision designed to deliver a truly pre-eminent presence in the global industry, to bring long-term security to the milk price, and to create growing value for farmers above the milk price. I still admire the guts it took to make that call.
And I believe farmers can still act with the same decisiveness, while keeping control of their own destiny, to give Fonterra a much more certain chance to deliver on the aspirations of its founders.
There is no need for emotion to overrule logic. Everywhere I look I see reassurance for those shareholders who are mulling over their decision. First, they can be genuinely reassured by the unanimous support of the board and the overwhelming support given to TAF by the Shareholders’ Council.
I can say that, because in eight years of dealing with council, one quality stood out for me. Each of those councillors was intensely loyal to the co-op and acutely aware of the trust shareholders put in them. That showed through in the enormous amount of effort put into their own due diligence on the issues before them. They would not have given their support without being totally convinced TAF was in the best interests of the cooperative and its owners. This obviously goes for the board members as well.
Then there is the point about keeping the milk price intact. I was quietly pleased to see the Commerce Commission give its vote of confidence on how it is set.
It’s a subject close to my heart because of the work we put in to refine and improve how the price was set. The latest review was one of five over the years, and each time the system to set the milk price has held up under great scrutiny. So it should – it is a very rigorous process.
Again, this ought to give shareholders great comfort. I totally understand the value they put on the milk price and in making sure it can’t be tampered with. It is so fundamental to their individual farm budgets and decisions that there can be no room for doubt.
So I have to add my own perspective on the claims that external investors could attempt to manipulate the milk price to increase the dividends they would receive.
I believe these concerns can be ruled out. People looking into buying units in the fund, and and Fonterra shareholders, will be looking for one thing: certainty in the rules governing the milk price. Both parties want to know that consistent rules apply and that they cannot be changed on a whim. The method for setting the milk price gives that certainty. If potential unit buyers don’t like the rules, they won’t join the game. Investors simply want to know that the rules of the game won’t change, and then they can invest on the merits of the performance of Fonterra.
Sitting on the sidelines enables me to avoid the emotion of the fray, but it doesn’t diminish my belief in Fonterra and the importance of TAF to its future.
Fonterra has come a long way and has the potential to go much further. The next step does need some vision and courage, but that is something I have never seen lacking in New Zealand dairy farmers.
You don’t hold a chief executive job for eight years if you don’t care deeply about your business, and I care deeply about Fonterra.
I can see that it is natural for some shareholders to be nervous about breaking new ground, but that can be more than offset by confidence in the process.
Years have been spent getting this right. And it has been time well spent. Fonterra farmers now have a solution, which is not only truly workable, but it will make a significant contribution to strengthen the co-operative’s long-term future, its future performance and the returns to farmers. It deserves total shareholders’ support.
I am cheering you on from the sideline. I want to see Fonterra emerge as the true winner it is, and all of its shareholders gain from being on that winning team. Keep the faith. Support the more than 10 years of effort to deliver your champion.
• Andrew Ferrier was Fonterra’s chief executive from 2003-2011.