Rumblings from within Fonterra's ranks will surprise some farmers, as strong dairy prices and further dairy conversions all point to an optimistic future.
But the very core and history of industry structure is the co-operative model, which some see as being watered down under the proposed Trading Among Farmer s model. Control by those that produce the product is what the hard core co-operative followers believe is the bottom line, and some see selling some shares to outside investors is the 'thin edge of the wedge' resulting in a loss of control to the prinicples that started this successful company.
To continue to grow this company with extra capital, and get security from capital flight when times are tough, is where these changes are directed, but at the cost of some shareholding control.
Do you share the concerns of some members of the Shareholders council as to the Trading Among Farmers scheme that will create "two masters" that have conflicting profit interests? Share your views on this issue.
Fonterra chairman Sir Henry van der Heyden says political opportunism is behind new shareholder questions threatening to destabilise the company's plan to introduce share trading among farmers with a restricted public listing reports Stuff.The giant dairy co-operative's 10,500 farmers last year voted overwhelmingly in support of Trading Among Farmers (TAF), which would offer listed dividend-carrying units in farmer shares to outside investors, while farmers retained control and ownership of the shares.
Meanwhile, several official inquiries have been launched into domestic milk markets and Fonterra's milk price setting in response to public and industry complaints about high dairy prices. Out of what Sir Henry calls "the vacuum" created by the delay have emerged fresh concerns about the security of continued farmer control of the $16 billion revenue company, particularly among South Island farmers. He is facing the possibility his second attempt to lead a major capital restructure of Fonterra may fail. While he attributed a looming election for a farmer director vacancy on the board, and the general election, for creating unrest, it is understood a proposed recent fundamental change to TAF by his board has fuelled it.
It is understood the board is proposing that the title to farmer-owned shares be given to TAF's proposed independent "custodian" body, rattling farmers who voted for TAF on the condition they retained 100 per cent control and ownership of the world's biggest dairy exporter.Infighting within shareholder watchdog the Shareholders' Council is also understood to be undermining TAF, with last year's council blamed for agreeing to a TAF deal which allowed the board to make changes.
Shareholders' Council chairman Simon Couper agreed some farmers had developed concerns since last year's vote, and that there were concerns within the council itself. But the company was in the middle of a process and final details of TAF had yet to be seen, so it was too early to make a judgment call, he said.Sir Henry said while critics claimed TAF would never work because Fonterra would have "two masters" – farmers wanting the highest possible milk price, and unit holders requiring a strong dividend – farmers would be the only master.
He said Government inquiries into Fonterra's milk price setting, whose transparency is pivotal to acceptance of TAF by farmers and investors, were driven by struggling rival processors."We are going to show good strong profits above the value of milk, while competitors have struggled to have a profit above the milk price."
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