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DFNZ call for Moratorium on Peak Notes

DFNZ call for Moratorium on Peak Notes

Dairy Farmers of New Zealand is asking Fonterra to place a moratorium on the distribution of Peak Notes to Shareholders given increased pressure on farm incomes.

Based on their actual seasonal production pattern Fonterra suppliers are required to purchase peak notes to pay for peak processing capacity costs.

"Many shareholders are going to be hit a double whammy. They are going to be forced to pay Fonterra many thousands of dollars at the same time as receiving a dramatic reduction in payout," says DFNZ Chairman Kevin Wooding.

"Because of the way the peak is calculated, the drier weather means many farmers risk having to buy additional peak notes, if forced to dry off their cows early - even though their peak milk production is unchanged the rate of decline will trigger a requirement to purchase peak notes

"The dramatic reductions in Fonterra's payout will impact on Shareholders' ability to pay for new peak notes.

"The retrospective nature of the program gives poor market signals and may lead to bad management decisions at the farm level.

"Fonterra should place an immediate moratorium on the obligation to purchase peak notes until the review can be completed."

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