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Fonterra runs into problems with farmers

Rural News
Fonterra runs into problems with farmers

Fonterra directors have flip-flopped on the coop's controversial capital restructuring and their advocacy for floating shares in an operational arm. "The board will investigate options that would see Fonterra remain a fully integrated farmer-owned co-operative," Shareholders' Council chairman Blue Read said to Stuff.  Fonterra is in the middle of a major bid to rejig its capital structure, but has run into problems with farmers who do not like its preferred option of floating the shares of an operational subsidiary. "Despite considerable initiatives to outline Fonterra's strategy, there remains a lack of buy-in among farmers," the council said today. But Mr Read said today the council is worried that the gutted investment in China and the debacle over changes to the cooperative's capital structure may erode farmer confidence in its governance and future direction. Some farmers have been concerned that the outside investment would create a tension between achieving the lowest possible price milk to boost margins and dividends, and their own ambition to receive the highest possible milk price. There were also concerns that the co-operative's directors could dilute their initial 65% stake in the listed subsidiary to just above 50%, without further consulting farmers. The shareholder council warned today that farmers set the bar higher when considering the merits of Fonterra strategies that might in any way jeopardise the co-operative and their farms and homes. "Many respondents questioned the wisdom of opening up the co-operative to non-supplying shareholders," it said. A number expressed concern about the co-operative's international investment strategy because of the risks.

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