Good Concept, More Detail Needed

10 December 2004
Good Concept, More Detail Needed

Dairy farmers are encouraged that Fonterra has examined all options and come up with a sound concept for a revised capital structure, said Kevin Wooding, Chairman of Dairy Farmers of New Zealand (DFNZ).

"It is now up to shareholders to learn as much as they can about the concept put up for discussion and feedback," said Mr Wooding.

Fonterra has proposed replacing peak notes with a seasonal pricing mechanism, allowing contract supply of milk to the co-operative, and more transparency between Fonterra's milk processing and 'value-added' businesses.

"DFNZ is generally positive about the work so far. The concept would appear to help relieve some of the tensions in the co-operative. It would also allow greater flexibility for farmers and Fonterra, which has to be good for its 12,200 shareholders," Mr Wooding said.

"However there is still much that has yet to be worked through. Indeed, DFNZ will be sending a written list of questions to Fonterra seeking more detailed information on the 'straw man' options.

"For example, one area of interest is the tendering mechanism for contract supply. We want to know why Fonterra plans to take the highest price for accepted tenders, rather than a range of prices as is more normal."

Mr Wooding gave Fonterra a nine out of 10 for its process so far and he hoped that the good level of consultation with farmers would continue ahead of finalising proposals for the new structure next year.

"Dairy farmers who supply Fonterra are committed to the survival of the co-operative model. It is essential that there are no hasty decisions which would alienate them from the decision-making process," Mr Wooding said.

DFNZ is the dairy industry group of Federated Farmers of New Zealand (Inc).

ENDS

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