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Fonterra to lend NZ$15 mln to subsidiary to extend interest-free terms for farmers

Posted in News

Dairy giant Fonterra announced it would lend up to NZ$15 million to its 50% owned subsidiary, rural retailer RD1 Limited, so that RD1 can extend interest-free terms for farmers for "essential dairy supplies." The Fonterra loan to RD1, which is interest bearing and due to be fully repaid by April 30 next year, will be to assist farmers under financial pressure due to the current lower payout environment, Fonterra Director of Milk Supply Barry Harris said. "It's a tough time for our farmers and we have been looking at every avenue we can to help them, particularly in finding ways to cut costs and manage cash flows while continuing to keep their farms productive," Harris said. "This opens up another option and some flexibility for farmers needing essential supplies to keep their farms running in what is going to be a difficult season for many," he said.

RD1 CEO John Lea said RD1 would be "promoting the details of the offer to farmers over the coming months, and continuing to offer practical advice about managing farm input costs." "We have a real partnership with our dairy farmer customers, and it's great to be able to offer this additional flexibility at a time when things are so tight. The other good news is that we're seeing international prices come back for major inputs like fertilisers, which will flow through to farmers as we go through this season," Lea said. RD1 is New Zealand's largest retailer of agricultural services to dairy farmers. It is 50% owned by Fonterra, with the other 50% owned by Australia's Landmark Rural Holdings Limited. Fonterra's Barry Harris is also a director of RD1 Limited.

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Why don't fonterra give the

Why don't fonterra give the farmers the $0.30 that they stole off them in the form of retention the season before last?

We are not amused! (or

We are not amused! (or surprised...)

http://www.interest.co.nz/ratesblog/index.php/2009/06/19/big-problems-wi...

How did it get this bad?

Is that not Farmers (

Is that not Farmers ( who own Fonterra, or thought they did ) lending to themselves? Funny old world we live in. Cheers

The press release raises questions

The press release raises questions rather than provides answers. The money available is less than $1,500 per farmer - unless it is targetted to only a few which will have equity issues as it is then a subsidy from the others.

Why is RD1 borrowing from Fonterra rather than a financial institution?

Why extend credit interest free?

It has to be something of a PR exercise by Fonterra.

Only 15 mil, that is

Only 15 mil, that is crazy. Every year at this time they run a promo, interest free for 3 or 4 months. If any thing it sounds less than any other year. And if it is less, why?

William. From what you say

William.

From what you say it sounds like RD1 needs $15 million additional working capital and wasn't going to get it elsewhere at reasonable rates.

Interest free always has a cost, and it will have been built into prices.