fbpx
Print this page
Tuesday, 21 March 2017 08:55

Backing for non-NZ Fonterra supplier owners

Written by  Sudesh Kissun
Andrew Hoggard. Andrew Hoggard.

Dairy industry leader Andrew Hoggard supports the idea of opening Fonterra shares to overseas milk suppliers – but not townies.

Hoggard says he would be more comfortable sharing Fonterra’s spoils with farmers in Chile and Australia than with investors in Auckland.

Fonterra is not ruling out offering shares to overseas milk suppliers, as its overseas milk pool grows; of the 23 billion L of milk processed by Fonterra last year, New Zealand farmers supplied 17.5b L. The rest is collected and processed in Australia, South America, China, Sri Lanka and Europe.

Fonterra chairman John Wilson recently told a NZ Co-op business leaders’ forum that overseas milk suppliers could be allowed to own shares in the co-op.

Wilson did not rule out a co-op linkage with farmer suppliers in other countries. “The opportunity to form some sort of cooperative linkage we certainly believe is possible,” he says. “It won’t be easy – surprise, surprise – but it is possible. Those opportunities are becoming more real today than in the past.”

Hoggard points to the Dutch co-op Arla, which has expanded and is now owned by 12,500 farmers in seven countries in Northern Europe. He believes it would be a “just way” of keeping farmers involved with the co-op and as shareholders they would be loyal.

This would allow all farmer suppliers to share in each other’s pain and gain, Hoggard says.

“At our low point in payout there were high payouts for suppliers in Australia and Chile – eroding our profits, as it were. If those guys share in our pain and gain… they’re farmers like us and we have a lot in common. I’m more comfortable with farmers in Chile and Australia than with investors in Auckland.”

However, expanding ownership beyond NZ would be complicated. It would require strong support from Fonterra shareholders in NZ.

Hoggard believes milk price would be an issue. “We [would] have to calculate separate milk prices for those countries…. Each country could have individual milk price manuals.”

He says the issue of expanding the shareholder base should have been discussed during the trading among farmers (TAF) debate five years ago. Under TAF, investors can buy units; unit holders receive only economic rights to shares held in the Fonterra shareholders fund.

Speaking at the forum, Fonterra director Nicola Shadbolt said there was an appetite among overseas suppliers to own Fonterra shares, but capital could be an issue.

In her travels around the world she is often asked by farmer suppliers about the possibility of owning Fonterra shares. “The ‘belonging’ is the bit they are missing,” she says. But this also means coughing up $880,000, so there’s “a slight cost” involved.

“But if there are other ways of structuring that, the belonging can still happen at no capital cost.... Some co-ops in the Netherlands have class A and class B members. Class B members don’t have all the rights of class A members, so there are ways, but this is an evolving issue.”

Shadbolt says Fonterra needs more milk to grow the business.

“As demand for dairy grows, we need to have stickability with dairy farmers in other parts of the world. We don’t want not to have the milk.”

More like this

A significant fertiliser breakthrough?

Former ACT MP and Federated Farmers president Owen Jennings believes he's come across a new fertilising method in Australia that yields "outstanding results".

Marlborough drought declaration welcomed

Marlborough Federated Farmers has got some real concern about the mental wellbeing of farmers and their families in the region because of the drought and there’s a lot of pressure starting to build.

SNAs will go - eventually

Despite some earlier confusion around the exact timing, the new Government is moving to reform the way local bodies implement Significant Natural Areas (SNAs) rules on farmland.

Featured

Sheep drench resistance costly

Analysis by Dunedin-based Techion New Zealand shows the cost of undetected drench resistance in sheep has exploded to an estimated $98 million a year.

Dairy sheep and goat turmoil

Dairy sheep and goat farmers are being told to reduce milk supply as processors face a slump in global demand for their products.

Hurry up and slow down!

OPINION: We have good friends from way back who had lived in one of our major cities for many years.

National

Knowing bugs means fewer drugs

A mastitis management company claims to deliver the fastest and most accurate mastitis testing available at scale for New Zealand…

Machinery & Products

AGTEK and ARGO part ways

After 12 years of representing the Landini and McCormick brands in New Zealand, Bay of Plenty-based AGTEK and the brands’…

100 years of Farmall Tractors

Returning after an enforced break, the Wheat and Wheels Rally will take place on the Lauriston -Barhill Road, North-East of…

JD unveils its latest beast

John Deere has unveiled its most powerful tractor ever, with the launch of the all new 9RX Series Tractor line-up…

Biggest Quadtrac coming to NZ!

In the biggest announcement that Case IH Australia/New Zealand has made around its tractor range, its biggest tractor is about…