Fonterra digs into kitty for shareholders

Fonterra has stumped up $15 million to help struggling dairy farmers pay for essential supplies as they are squeezed between high debt-servicing costs and lower payout levels reports The NZ Herald. The co-operative will lend the money to its 50 per cent owned rural servicing subsidiary RD1, which will in turn extend existing interest-free terms for farmers on key dairy supplies. "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," said Fonterra director of milk supply Barry Harris. After two years of pointed warnings from the Reserve Bank about soaring levels of rural debt, particularly in the dairy sector, falling milk payouts from Fonterra have sparked concerns many new entrants have their backs to the wall. "It's a tough time for a lot of suppliers," Fonterra's general manager for milk supply, Jason Minkhorst, told the Weekend Herald yesterday, "but the levels of farm debt have been overstated in some reports. There is a small minority of farmers who are under pressure and need support. Fonterra is doing all we can to help." Tough times for some farmers have stoked fears that animal welfare may suffer, and while Minkhorst said the measures announced yesterday were primarily focused on helping with farmers' cash flows, livestock should benefit "given the lines that are targeted include cleaning and animal remedies". Federated Farmers chairman Lachlan McKenzie said the supplies available under the arrangement included "the goods that ensure farmers remain productive, and no doubt it will help some avoid false economies". McKenzie also said the assistance "fully vindicates the co-operative model as I couldn't imagine a non-co-operative acting in this way".