BusinessDesk: Fonterra tightens TAF rules to safeguard 100% farmer ownership

BusinessDesk: Fonterra tightens TAF rules to safeguard 100% farmer ownership

By Jonathan Underhill

Fonterra Cooperative Group will tighten the rules for the proposed Trading Among Farmers scheme after feedback from its shareholders’ council and advisers to control the size of the fund and safeguard 100 percent ownership of the world’s biggest dairy exporter.

The farmer-owned cooperative agreed to the changes at a board meeting yesterday. Shareholders are to vote again on TAF at a special meeting on June 25. While they approved the scheme in principal two years ago, next month’s meeting gives them an opportunity to renew Fonterra’s mandate for the biggest capital restructuring since it was created a decade ago.

“It has always been acknowledged that the size of the Fonterra Shareholders’ Fund has to be managed carefully to ensure 100 percent farmer control and ownership is protected,” chairman Henry van der Heyden said in a statement today.

“Following input from Fonterra’s Shareholders’ Council and our due diligence advisors, we will recommend tightening up some of the previously agreed thresholds on the size of the fund, as a prudent measure,” he said. “These thresholds will be enshrined in our constitution – subject to a 75% farmer shareholder vote.”

No details of the changes were released. The final version of the proposals is to be mailed out to farmers at the end of this month.

Fonterra yesterday cut its forecast 2012 milk price and flagged lower payments in 2013 in response to a slide in global prices for dairy commodities. The 2011/2012 forecast Farmgate Milk Price was lowered by 30 cents to $6.05 a kilogram, while the net profit component of its payment unchanged in a range of 40 cents to 50 cents. That reduces the forecast payout range to $6.45-$6.55.

The outlook for 2013 is for further weakening in prices, with increased global milk production “flowing through to lower international dairy prices." As a result, Fonterra had an opening forecast for the Farmgate Milk Price of $5.50 a kilogram and a net profit component of 45 cents to 55 cents, making a total payout of $5.95 to $6.05.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Why would anyone invest in this thing? 
There is no asset which your shares actually own, they are controlled 100% by the farmers whole incidentally control the price and supply of the co-ops largest materials. You have no say in material events - Dividends, Retentions, Price paid to Farmers, Issuing new shares, M&A activity and have no representative on the Board.
This is almost as worse as Dairy Equities 
This should be priced like a Fixed Income product - totally driven by Dividend Yield, a massive minority discount and the hope that one-day the whole thing de-mutualises
Fonterra must be delusional that any serious, mature investor will touch this. Although having stupid mum and dad kiwi investor won’t be a problem.
FYI - I'm totally against TAF. A co-operative should be a traditional co-operative $1 in and $1 out. The capital is the societies and there for the future, not for this current generation to cash on on all the hard work of all the dairy farmers before them whom built the industry yet received little capital rewards. This action will unquestionably lead to the co-operative being a company, will set TAF investors against farmers against management against the board and against the shareholders council - its going to be nasty. 
All driven so the highly leveraged can cash out quick to pay down debt

Overseas pension funds and kiwi saver funds are apparently the target investors. ;-)
If we don't vote in TAF govt will set our share price at $5.69 - so I heard at a taf meeting recently.  One of the biggest hurdles the co-op faces from shareholders appears to be the significant numbers of shareholders who simply do not trust the Board and say they will vote accordingly - regardless of their thoughts on TAF.  The Chairman should have stepped down last year.

Wondering what you make of the "Shareholder Centre" on the fencepost website CO? Is this for the benefit of supplying shareholders or investing shareholders?
van der Hayden knew capital structure was the achilles heel at formation, he tried to float the co-op in 2007, and is determined on implementing a structure ripe for floating now, and shareholders have let him get away with it. Votes tied to shareholding has left the co-op open to be unduely influenced by the board during crucial votes.

Hadn't really looked at it before. No new information there. Both? Investing unit holders don't you mean ;-)

 Investing unit holders don't you mean ;-). So I thought, but no it's definetly titled "Shareholder Centre", but as I think you're suggesting, the terms are synomonous.

What a relief, we are being told TAF is being tightened. 100% ownership and control of what? Can't be a cooperative, as TAF is going to blow that structure out the window.
Goldenfox, I concur wholeheartedly with your sentiments on TAF and the destabilisation of the cooperative industry.

Bernard Hickey, would you be so kind to share your opinion on TAF? From what I understand your position to be regarding the baby boomer generation leveraging the living standards of future generations, your views on the real estate sector (including farms), the efforts made to expose the folly associated with Crafarms, I and I would find your thoughts illuminating; as it could be argued there is relevance which connects all the issues above. The financial media celebraties that work for example at the NZ Herald, peddle the repetitous corporate spiel of poorly funded balance sheets hobbling grandiose ambitions and hysterical hayseed shareholders suspicious of motives of our intellectually superior and cultured city brethren. I'm one of those hysterical hayseeds, do you think my anxiety is valid? What are your thoughts on TAF?

Hmm.  No idea about the politics of this - but from the sounds of it a significant number of shareholders don't trust the Board.  The proposals are put on the table by the Board and shareholders have some months to mobilize discussion among themselves.  Feedback from the trenches suggests isn't looking good for the Board, so they make some amendments to the proposal ... don't release those amendments immediately - instead saying they'll get them out to shareholders by month's end.  
The vote being some three weeks later.
Doesn't leave alot of time therefore for shareholders to re-group and re-consider.

Say what ?
Fonterra Board of Directors
There are up to 13 directors on the Board of Directors. Nine are elected by shareholders and the rest are appointed by the Board.
Shareholders' Council
The Shareholders' Council looks after our shareholders. It is made up of 35 shareholders representing 35 wards all over New Zealand. The Council operates independently of Fonterra and its main responsibility is to make sure the needs of supplier shareholders are recognised by the Board.
The members have greater than 50% control of the board. Are you suggesting the members don't trust their own people? Or has there been apathy among members electing their representatives.

CO said this above;
One of the biggest hurdles the co-op faces from shareholders appears to be the significant numbers of shareholders who simply do not trust the Board.

That is a problem .. because Fonterra is a democratic co-operative .. the shareholders vote on who represents them .. they elect the majority of the board .. the majority rules .. there will always be a minority .. significant or not ...

Mist42's comment, 22 May 12, 10:45pm

The real democratic issue is the size of the big-shareholders
If you count the share vote the minority lose

Casual Observer may be right that on a head-count basis the majority of members don't trust the board and would, if they could, change the make-up of the board .. but when it comes to a straight shoot-out they lose. They are the minority vote-wise. Even though they may be the majority head-count wise.

Carter Holt, and the big one Landcorp, have huge holdings, plus Crafar .. now Penxgin

But, see, there has been no discussion about that here has there ..

Casual Observer achieves little by expressing such a view here. Not the place. Nothing achieved. The solution is to change the constitution. As Christov has already suggested .. send out the smoke-signals .. rally the troops .. start a ginger-group .. mobilise the council .. communicate .. grapevine .. hope she has done that.

Interesting comments, thanks iconoclast.
I was wondering if you have any clarity on what a democratic cooperative constitutes, especially in your reference above stating the majority are a minority? This alone is good reason not to trust the board, in allowing the cooperative to be governed in such a manner. I wonder, have you had a look at the independent directors on the board over the years, and have a view on their affiliations and what they bring to the cooperative?
If you get a chance have a look at this link to a successful Australian cooperative, and see if their cooperative principles are consistent with Fonterra.
I respect that you think there is little value expressing frustration at the Fonterra boards governance inadequacies on this site, Bernard Hickey appears to have no interest whatsoever. But there is similarity in that the current generation is misappropriating cooperative capital accumulated by previous generations for their own use. Sounds similar to Bernards assertion that current generation are disenfranchising future generations by living beyond their means so to speak. I would argue that the example of Fonterra is more blantantly sinister.
As far as the shareholders council goes, they are divided, and historically have acted more as a lap dog than a watchdog. One thing they have that the board doesn't, and that is an ethics committee, for what it's worth.
So not many places to turn if you're a shareholder with concerns.

Iconoclast Landcorp are not the big shareholders Joe Public thinks they are.  They only hold 763,600 shares.  Landcorp supply four different processors, of which Fonterra is one. They maybe supplying milk under contract, but that milk attracts no voting rights as it's not shared up.  A number of the Carter Holt farms also supply on contract.  Their contracts will be ending in the next year or two (why so you think Hart was selling them - they will need to be shared up). I heard recently that over half of them are now sold.
One farm one vote has been discussed over the years but that is lost to us now.  That is the reality.  The best way for shareholders to 'stir' in order to make the top table take notice is to use the media, as has been done in the case of TAF.  The TAF dissent was started quite some time ago by Leonie Guiney a shareholder from Fairlie, who was pretty much treated as a 'crazy lady' by Fonterra. Her submission to the Select Committee against TAF and DIRA represented over 700 farmers.  In the Eastern Bay of Plenty, Donna Smit presented a submission to the Select Committee representing 120+ farmers, so the ginger groups are there.
We do vote, using STV, for our directors.  Three directors are voted for, on rotation every year to serve a three year term. About three years ago a director was voted off, much to the surprise of the Chairman, as the director was one of 'Henry's men' on the Board.  It was a warning shot that suppliers weren't happy. Depending on which directors come up for re-election this year it could see more voted off.  The Chairman is the problem on the Board, too much power for too long. It is he who shareholder's don't trust, hence him 'standing down' this year.  It wasn't a choice.
A shareholder asked at a meeting why a farmer who 'sells the economic rights and no longer has legal title to the shares, should be able to vote if TAF comes in'.  Because they will have a voucher that will allow them to do so was the reply.
Maybe I do achieve little making comments here such as you refer to,- but this site is a vehicle for communication/information sharing as well as discussion. ;-)

Thanks for that CO. However your point on ‘one farm one vote’ being oft discussed and now not an option is news to me. I have often questioned the shareholders rep on the inequity of voting rights in proportion to share standard, and always get fed the same mantra that 350 cow suppliers make up the bulk of the shareholders. That reasoning doesn't justify the inequity inherent in voting power. This is what has led to Henry standing down due to lobbying techniques that have allowed him to direct the company as he sees fit. In other words the cooperative does his bidding, not the other way around, and were have we arrived? Do you see any similarities in TAF with this assertion?
The link in the post above is to a successful cooperative in WA who expanded operations regionally and globally, whilst adhering faithfully to cooperative principles. I think I understand your point about being difficult to rebalance the vote, but I'd argue it's essential for the survival of the cooperative if we survive TAF. It should be one shareholder one vote. As pointed out individuals and entities own multiple farms, many of which are over leveraged and performing poorly, why let them dominate direction?
The government hobbled us with DIRA, surely they have the power to force a constitutional change to rebalance the vote making it more democratic and transparent for all.
I agree with your sentiments about this forum being one of the few to engage in debate and receive feedback. What are your thoughts on the level of comprehension amongst the supplying shareholders regarding TAF, and the debate initiated by the board and executive?
Leonie Guiney, Donna Smitt and others are righteous souls and should be congratulated for bringing into the light of day.

Not quite mist.  They honoured some of the existing contracts - so until they expired they were still contract suppliers.

Perhaps your supply wasn't big enough to be a problem if you left Fonterra to supply elsewhere? ;-)
I would get back to your source and ask a 'please explain' in regards to Landcorp and also Dairy Holdings.  The latter has one farm that supplies Westland. 

Mist, my remarks re Landcorp supplying other processors.  They supply ALL their Hauraki Plains farms to OCC, they supply most, if not all of their West Coast milk to Westland, and Central Plateau milk goes to Fonterra.  I am aware of the suppliers handbook.  I was referring to whole of farm supply.  There is absolutely nothing in the handbook that says if I own two farms I have to supply milk to Fonterra from both farms, if they are owned under different names.  In fact I know suppliers who have multiple farms and supply Synlait and Fonterra or OCC and Fonterra.  DIRA allows for a supplier to supply up to 20% of their farm milk to an alternative company.  Some farmers do this to niche product processors like cheese, organic product etc.
Thanks for the explanation re TAF above.

Not that convincing mist42, when looking at evidence of successful co-ops elsewhere . one vote per shareholder is the most democratic and balanced form of sharing power, and unlikely the hayseed from Wairapa will upset the applecart despite your experience.
And no, an equity partnership handling 1 million kgs does not signify efficiency of a processing co-op. Take level of debt in farming and operating costs.
Agree about the power of economic rights, one of the many good reasons TAF needs to be canned.

We _really_  - and I can't stress that enough, *really* don't give a flying shit about "democratic and balanced".  So you are a corporate processor supplier mist42nz.  If you aren't you should be.  Afterall they are only interested in the bottom line and have no interest in having a say in the direction or otherwise of the processor they supply.
Thing with a 1M kgMS business is it has to be grown and has to be able to handle market forces; whereas 20 solo farms that only handle 1 or 2 staff and have inherited their systems and kept plonking away gaining no new ground is not going to be able to effectively influence policy and decisions for an enterprise size corporation like Fonterra.
So I take it mist42nz that you believe that the only farms of value to Fonterra are the large corporate farms and that family sized farms have little or no value to Fonterra.  I find it interesting that you assert that farms with only 1 or 2 staff have 'inherited' systems. I take that to be that you are stating that all 1 and 2 staff farms are inherited.  You couldn't be further from the truth. In some pockets of the country that may be true but in the majority of cases that is most definitely not true.
Over 50% of Fonterra supply comes from farms supplying 200,000kgs or less.  To say that they should have little or no say in the direction of the company, because bigger is more efficient, is quite a long bow to draw. 
It is interesting that the Germans and Irish have been busy buying Southland farms in the 400-600cow size - more financially efficient and a more stable employee base.  They are targetting the 'family' size farms, which you imply are not efficient simply because of their size. You also imply that farms up to 400 cows (that's about max for 2 employees) are simply 'plonking away'.
 But instead of an "Old Black" (old All blacks) team everyone together each plays a part; we seem to have ended up with "New Blacks" where each star member gets paid big paychecks and has their own media show and image deal to worry about...  Given that this has come about by large farms have a larger vote than the smaller farms it is possible that we would have had a different outcome had it being one farm one vote?  I've been in the industry long enough to know that that isn't coming back - or isn't anytime soon and there are other ways to get heard.
All it took was a pack of diehards, and the whole would be wrangled to a stalemate/standstill - and we got some real "interesting" folks, with some truly and surprising "interesting" theories. Yet despite this the merger went through. The likes of modern day 'interesting' folks are Leonie Guiney and Donna Smit.  Yet it is acknowledged by some Fonterra staff that theirs and others 'interesting theories' is resulting in some beneficial changes to the TAF proposals. It is also as a result of their 'interesting theories', that shareholders are getting a second vote.  But I guess you don't believe that there should be a 2nd vote.
The strength of a co-op is it's sense of democracy. As you said, we are talking about real families - not corporates who live in urban towers, or are based offshore, yet it is these latter groups who have much say in decision making. It doesn't matter what your size - you have to be able to handle market forces.

Ah.... perhaps you and I represent the two sides of the shareholder base mist.  Those who have got to where they are by working in the industry as their chosen field and those who haven't but are corporate investors.  Though I accept that you have had practical farming experience. Our philosophies of what we expect from a co-op are probably different.  We may also have different organisational roles within our farming companies.  The MOTH and I work in partnership, each with our own areas of responsibility. In my one I do all the admin/legal stuff and the MOTH does all the practical stuff, though I have served my 'apprenticeship' in the practical in days past.  We both do the financial as we both have different strengths in that regards.  I am also the one that does all the industry voting. MOTH and I have different networks that we use within Fonterra and discuss what each of us finds out.  This approach means that one person is not being swamped with everything.  Employing 50/50 sharemilkers also requires a slightly different perspective to what we had when we used to employ farm staff as employees.  Our setup is probably the norm in farming circles in the non-Queen st owner farms.  Surveys have shown that women are significant decision makers in dairy farms, though this is not well  recognised by those that do business with us.  It is improving though. :-)
I do understand what you are saying with regards to size of business requiring different skill sets.  Continuing education is a must for farmers to get off the 'basic' level and when you look at those who have been farmers all their working life, it is usually those who have taken advantage of all the upskilling available out there, either formal or informal, who grow their business. But it isn't for everyone. Andy why should it be - diversity is also a strength of a co-op.
So who's going to be the next Chair of Fonterra? The Chair designate will be announced soon.  Potentially three candidates for that position will be up for re-election this year.

Thanks-can understand where you are coming from now.    Make sure you take time to stop and smell the roses.  It's pretty tough doing it all on your own, unless you get decent breaks.

mist42 one vote per shareholder is the only way to go to ensure stability and sustainability and by default profitability of a cooperative. The cooperative will maximise payment for your milk supplied, that's all it has to do.  Collective democracy is a central tenant and strength of a cooperative compared to the subterfuge and manipulation of the corporate model of governance characterising Fonterra. One vote per shareholder won't hobble governance, quite the contrary it will ensure greater performance and accountability, lessen ability to manipulate votes.
Look at the state of Fonterra and agriculture in general, targi'comic. Like residential housing, speculation on capital gain is what has shaped us, certainly not profit focused efficiency due to innovation. Small scale (family) farms have got 100+ years of proof that they are the best at innovative and efficient business practices. Corporate? Afraid not mist42, bit of a miff actually. Neo-liberal reform instituted by nominal labour/national governments since (‘1984’, uncanny), based on absolutely fundamentally flawed so called 'free market' capitalist principles have been the death knell of family farms and agriculture in NZ. Neo-liberal reform and the rise of capital gain has facilitated the rise of corporate farming and corresponding undermining of traditional family scale farms. Hasn’t added any economic or productivity value to NZ or the world.
Corporate efficiency and profitably through distancing governance from the shareholder base on the premise of efficiency doesn’t seem to have worked. Henry can apply whatever corporate model he likes, so long as the shareholder base can have a fair vote when necessary. Check out the following link, what a crock
The benefits of so called corporate governance, particularly informed by so called 'free market' capitalist principles are without foundation. Fonterra has applied this model with passion and doesn't out perform the other dairy coops in NZ, Australia (from Henry_Tull post in prior thread) or the world.
I don't understand the point in differentiating corporate farms from smaller scale intergenerational. Are you implying one is more innovative or economically efficient than the other? I hope not because that's a myth mist.
CO it's probably already a lost cause considering the unbelievable position of the shareholders council, and therefore shareholder base; but it is anyway if we are blessed with a no vote to TAF, and don't reform back to a cooperative. Where do you think it's going to end so to speak?

Don't be too quick to judge the Shareholders Council Omnologo. ;-)
I think the 'TAF game' is a little way from being played yet.  The votes (we will be voting on more than one issue) on June 25th can go one of three ways, a total yes, total no, and a mix of yes to some of the questions and no to others.  Total no, is self explanatory. Total yes, will then be contingent on getting the $500m, and I am hearing mixed responses as to whether or not Fonterra will have to step in to ensure the target is reached.  You will initially only be allowed to sell 'wet' shares, not dry shares so it will be interesting to see if the shares are offered up to cover the target.  Some suppliers think they will get 'good money' for their shares, I think they may be disappointed and they may find they will get less than current value.  If the vote results in a mixed response to vote questions, then I think it all could very interesting.

I judged on the utterances of Henry's right hand lacky, Ian Brown, but suspect you're right that there is a little spine left in the council yet. Lets hope;-)

 The votes are proxied, the pool will get voted with the proportions of the rest of the vote. The votes aren't proxied.  The voting rights remain with the shareholder who sold the economic rights.

It is the issuing of a 'voucher' to shareholders selling economic rights, that gives the shareholder voting rights, even though the Custodian is the legal owner - so I have been told. This is the consistent message I am being given as I have asked around on this one. I am interested to read your view though.  I don't have access to a copy of the constitution but apparently it refers to 'shares or certificates' to enable voting rights, and these 'vouchers' will qualify as 'certificates'. Why are they being referred to as vouchers, if they are in fact certificates, I don't feel I have had a satidfactory answer to.  I'm not intending to sell any 'economic rights' so it won't personally impact on me - I hope.

Mmm.... I was enjoying a beautiful, warm, sunny day iconoclast and quite happy I didn't have access to the constitution, but I guess thanks to you I have some bed time reading.  Thanks - I think ;-)

Good cure for insomnia I imagine CO.

This just out:
Couper resigns as Shareholders’ Council Chair

Simon Couper has resigned his position as Chair of the Fonterra Shareholders’ Council effective immediately.
Couper’s resignation came about due to his lack of comfort with some aspects of the Trading Among Farmers proposal.
The Council today endorsed Council’s Deputy Chair, Ian Brown to move into the position of Chair.
Ian Brown:  “The Council would like to thank Simon for the dedication he brought to the Council over the past eight years.”
The Fonterra Shareholders’ Council represents the interests of Fonterra farmers to the Board of the Co-operative and plays an active role in monitoring and assessing the governance and performance of Fonterra.  There are 35 Councillors who are all Shareholders elected by their fellow farmers in wards across New Zealand.

Thank you Gareth, massive news for Fonterra, and speaks volumes of the 'cooperative. Simon had the intelligence to see TAF for the fallacy it is, and the strength to stand up to Henry van der Hayden. I voiced my concerns last year to our shareholders councilor and he put Ian Brown onto me, and after a confusing conversation I would conclude he doesn't have the same ability to think independently as Simon. Lap dog, not watchdog.
Fonterra is divided. A vote for TAF will not unite us. What will the future hold?

Divided you seem to be. With 35 district councils how do you all commmunicate? Considering the member shareholders are spread far and wide around the country, the "shareholders council" would be the logical organisation to operate a forum. Went looking for a public forum. Couldn't find one. Does one exist? If it doesnt, why doesnt it. It would seem you are being self-muzzled. There are plenty of "off-the-shelf" inexpensive forum packages available.

So, what you are saying is the councils don't exist to enable the members to have their views heard and collated and fed up the line. Whose problem is that?

"Heard" was used intentionally. You can air your views as much as you like, but whether they are "heard" further up the pipeline is another question.

There is a forum where free thought can be expressed, but it has nothing to do with Fonterra.  It is the Dairywoman's network email blog ( - only available to members, but I know shareholder councillors of the male variety are referred to it when there is something there they need to see.  It has 'robust' debate at times. Women are increasingly making decisions on who to vote for in industry matters (I'm the one who casts the votes in industry elections in our business and have done so for years).
Fonterra does have a suppliers forum but I have never seen it really being used much.  Trademe is another place sometimes to see issues discussed. But as mist says, shareholders are aware that some concerns could be commercially sensitive.
We have a very good Shareholder Councillor for our farm area. Very approachable and is a straightup talking chap - typical of Southlanders :-)

Definitely big news omnologo. Originally van der heyden said tag would go ahead with 100% shareholder councillor support. Now it is down to 50%. Simon had integrity. Van der geyden wouldn't know the meaning of the word.

Touché CO, hope this generates a bit more meaningful debate. If so TAF should be history and a reform of DIRA implemented. 
Mist42 made a good case for shareholder apathy; my farm has suffered from spending too much time embroiled in this debate.
I've heard the board (that being Henry) operate a divide and conquer policy when communicating (manipulating) with shareholders, i.e. small meetings where firebrands can be quelled.
Shareholders in my area converted in mid 90s and were gifted cooperative capital in the form of nominal shares. Henry can do no wrong in their eyes, and is the one they trust, despite wiping a significant amount of capital off their balance sheets at formation of Fonterra, due to capital imbalance between Kiwi and NZ dairy group.
It was predicted with the formation of Fonterra, the then Labour government (supported by nominal opposition) wanted to see the dairy industry fully exposed to the vagaries of free market economics, with the prediction of corporate dominance, foreign ownership and disenfranchisement of the many for the benefit of the few (Henry and friends). Looks like their wish is coming true.

Omnologo, can you tell me if it will still be possible for shareholders to redeem their Fonterra shares at the end of this season i.e. now if the legislation enabling TAF becomes law in late June or July?

I don't know Colin, have only heard board not allowing purchase of dry shares. If you were wishing to cease supply I believe you had to notify by April with the option of withdrawing notification by May.

O.K. That window of opportunity/escape has probably passed.

It TAF successful will share value be bid up in short to medium term?

On which market Omonologo-the farmers market or the Fonterra Shareholders Fund.;-)  At two taf meetings recently we have been told that shares on the farmers market will be slightly cheaper than those on the FSF.  The key is going to see how easily they get shareholders parting with $500m shares.

The best answer to your question may be another question. So:
What is going determine Fonterra's share price if it is set by a market?
Some ideas in answer to that:
1. The dividend - that is essentially fictitious and heavily influenced by how much Fonterra chooses to take out of the milk price.
2. The state of Fonterra's accounts and particularly net tangible asset backing per share.
3. Perceptions of Fonterra's competence, strategy and performance.
Longer term I expect all three to suffer and the share price to fall a long way. In the short term the share price is likely to be 'maintained' by various forms of perception management.
Whether that share price 'maintenance' can be extended into the medium term is questionable - Fonterra appears to have lost control of its message.
I doubt Fonterra will ever get back the control of message it once had.

Number 1 is simply Fonterra using the milk price formula with 'appropriate' settings to deliver dividends broadly in line with what it wants. Fonterra may then choose to retain much of those dividends.
Rather than get in legal trouble Fonterra instead has competing processors complaining that it is paying too much for raw milk. Is there a ommonality of interest amongst processors?
But all this has been covered before on earlier threads that have effectively now disappeared.  

and you tell me Fonterra is paying too much....... :(
Not at all. I started by suggesting that Fonterra was paying less for milk than its value in producing dairy commodities. I said that competing processors complain that Fonterra is paying too much for raw milk. The implication being that all dairy processors want to pay less for raw milk than its international value for processing into commodities.
Fonterra has over $2 billion of overheads. That's overheads - not operating costs, and equates to approximately $1.50 per Kg of milk solids. As you say:
Some of the projects undertaken by Fonterra have been "somewhat extravagant" in their nature, in order to achieve some rather dubious strategic values.  But that is some of the nature of an enterprise that scale, as is a tendenacy to have poor return on satelitte assets (because it costs to much to track and deal with them and be certain you've got them all)
So how much has to be taken out of the milk price to cover overheads from Fonterra's wish to be an international consumer brands business?

So we can hardly blame Fonterra for pushing up its profits at the customers expense.
But is that 'dividend' at the customer's expense, or the suppliers?
I start by working out what a Kg of milk solids is worth processed into basic SMP and WMP plus byproducts (AMF, BMP) at prevailing export prices. Not just for one month but over rolling 12 month periods (or 14 months when accounting dates changed to July from May). And then question the gap between what milk solids are worth converted to commodities and what milk producers are paid. Especially compared to international processing costs. So you are right:
Yet if Fonterra has $2B in overheads (not opex) and the other processors -still- can't undercut them.... that speaks volumes.  Either the other processors are more poorly run (very likely) have worse overheads (very likely, and probably shareholder costs too) or can't compete on the sales end.  And a businessperson, if other peoples' companies can't ompete with mine, and I'm doing a quality product, at a good price, that my customers like, is sustainable.... well I'm not going to shed a lot of tears.
Until a processor appears that isn't up to its eyeballs in debt and that doesn't have bloated overheads - and is able to pay more than Fonterra for high quality raw milk. 
My opinion and
the common opinion [of the marketplace] is the value of raw milk is less than what Fonterra is paying.   ie that Fonterra is overpaying
are far from the same. I have done the analysis but suspect 'common opinion' may not have.

Apologies, false post

Illuminating, thanks Colin.

The process of Henry getting this cow to market is news, it in fact is news that will have a bearing on N.Z. inc.future Export earnings and how they are dived up, and to the benifit of whom.
 Henry is charged with getting this cow to market... to feed a fat pig.(I believe)
 The process thus far appears full of Corporate manipultion to achieve a predetermined It's a done deal Henry ,put it in the bag for Chrissake.
I don't think they figured on any agro from the Yokels.....nor one of the team to go rogue on them.
 Sure as hell it's not going as smooth as the "market interests" would like.
If it were me I'd go offshore with the story to get some spotlight back on home turf.
Remember not everybody loves Fonterra.( even in it's current form)
 While Interest .Co has been sympathetic in allowing concern to be aired unfettered, there has been a decided lack of investigative journalism by the media at large for reasons known only to themselves.
Have any of the main participants in these threads forwarded the original link from ...
to the Editor of the ...?...?.etc. to shuffle through and see if the tree is worth a shake or is it a case of sensitivity to managing risk that some bad apples might fall from the tree.
Ultimately the voters need to share information that may affect the circumstances of the Co-operative in it's entirety..........and that may not serve the immediate need of  some individuals, but preserves the principals on which the Co-operative was founded.

It may or may not be a done deal yet Christov (though possibly is). It certainly is a bowl of spaghetti.  If farmers vote yes to one of the parts of the vote on 25 June but no to others the Shareholder Council could repeal their support, which will put henry right in the middle of spaghetti juction at peak hour traffic time. So the vote on June 25 may or may not be the end of it. :-)

I'm enjoying this debate.. not that I have any answer of my own.. just a first year shareholder and thinking it's a good thing to reflect on the events ten + years ago that led to foundation of  Fonterra. So far I have been incredibly impressed with its performance/values/how it carries them through... and I do want this co-op to succeed down the track.. but I think I may vote against the TAF project after all.

Thanks for contributing Seafarmer. I've been involved in farming all my life, but relatively new to the dairy industry (1998).
They way I see it the crucible in which the values and principles attributed to the apparent success of Fonterra were forged in the 100 years of dairy industry cooperative development prior to formation. I would love someone to enlighten me in how Fonterra has honoured and contributed to those values.
I'm totally against TAF, its divided Fonterra and there's nothing remotely cooperative about it. It's the final insult to the generations who strived to develop a successful cooperative industry.

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