increase font size
Fonterra will no longer be in control of its own destiny if Trading Among Farmers does not proceed, Fonterra CEO Theo Spierings says.
Spierings says huge time and effort had been spent to ensure Trading Among Farmers (TAF) strengthened the cooperative's capital structure and protected 100% farmer control and ownership.
"I know some people fear change but a 'no' vote on TAF doesn't mean we just go back to the status quo – things will change," Spierings says.
"We will need to go back to the drawing board to resolve redemption risk and we will also have to put on hold key projects to increase the volume and value of our dairy exports.
"We will have to come up with a Plan B to resolve redemption risk. That could mean up to two years of talking to the Government about new legislation. Given we've already spent more than three years developing TAF, this would put us in a five year holding pattern.
"Our Strategy Refresh gives us a clear path forward but we cannot implement this without a stable capital base.
"We will have to pursue fewer projects as we will need to hold back more capital because of redemption risk.
"Our competitors will take advantage of this and we will lose our window of opportunity to grow returns."
Spierings says without TAF, the Government would require Fonterra to return to a Fair Value Share instead of its current Restricted Market Value. This would mean that the share price would be closer to $5.57 than $4.52 (based on the latest independent valuation).
"This sort of higher value would mean it would cost farmers more to share up and our redemption risk will become much bigger."
For example this year, a lot of farmers will have to buy additional shares at $4.52 because of production increases. If production fell over the next couple of seasons, and we don't have TAF, farmers would end up selling those shares – at the unrestricted price. This is likely to be much higher than the price they bought them for.
If this was the case then Fonterra would have to find tens of millions of extra dollars to fund these redemptions.
"If TAF goes ahead, the Government's concerns will be satisfied – they will leave us to get on with it. With TAF, we control our own destiny," says Spierings.
Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.
OPINION: Farmer shareholders of two of New Zealand's largest co-operatives have an important decision to make this month and what they decide could change the landscape of the dairy and meat sectors in New Zealand.
OPINION: As CEO of the Dairy Board in the 1980s I was fortunate to work with a team of experienced and capable executives who made most of the brand investments that created the international consumer business Fonterra inherited. Soprole in Chile was the largest, but there were more than 20 countries where consumer marketing companies were established and Anchor and other brands were successfully launched.
Fonterra has delivered a fifth straight year of record organic milk price for farmer suppliers.
Fonterra says favourable weather conditions supporting pasture growth is boosting milk production.
Like many manufacturers around the world, European agricultural machinery and tractor manufacturers are currently operating in a difficult market environment. But they are heading to the world’s largest agricultural machinery event in Hanover next month with a degree of cautious optimism.
Established in 2021, the John Deere Technician of the Year Awards champion the important contribution parts and service technicians make to the Australian and New Zealand agriculture, construction and forestry industries.
Beef + Lamb New Zealand (B+LNZ) is calling on farmers from all regions to take part in the final season of the Sheep Poo Study aiming to build a clearer picture of how facial eczema (FE) affects farms across New Zealand.
New Zealand is closer to eradicating bovine TB than ever before, but possums remain a threat, says Beef + Lamb New Zealand.
Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.
The ACT Party says media reports that global dairy giant Nestle has withdrawn from the Dairy Methane Action Alliance shows why New Zealand needs to rethink its approach to climate.
