Farmers Have A Plan B

MEDIA RELEASE

There is a gaping hole in the reporting around TAF - Fonterra says they have no plan B.

Well the owners of Fonterra see a very clear plan B.

It is to retain the cooperative as farmer owned and farmer focused, a multi - year rolling average stable share price, valued as the cooperative share it is , enabled by the much improved legislation now in Parliament , implemented with a sensible retention policy, that is now in place, and a transparent dividend.

Why would any farmer want to leave a coop with such a robust future and ability to deliver milk price to the farmers? Only TAF can set up a structure that makes farmers want to leave (by focusing on putting value in the cooperative share) Only TAF can hand CONTROL to Fonterra the company at expense of cooperative control, by shifting accountability to farmers off Fonterra. It’s the owners of the cooperative that should be in the drivers seat.

Giving management a free hand to leverage our balance sheet by ridding themselves of accountability to the farmers’ needs is hands over the keys.

That’s what TAF does – it shifts the risk off the company onto the farmer’s personal balance sheet to allow the company to leverage what was our balance sheet, more aggressively.

In so doing it offers no benefit to the farmer, only to Fonterra the company while putting the cooperative strength at risk. It creates the very real risk of us in future being unable to keep that new plant in Darfield full. We rid Fonterra the company of its capital redemption risk and replace it with supply redemption risk.

This is the mechanism by which the farmer’s lose control as we lose our collective strength. . We can instead retain control, and with it on farm profitability and cooperative unity, by rejecting the flawed logic behind TAF and putting the above solutions in place.

Re Plan B solutions

I neglected to add that bonds and capital notes can act as a backstop for redemption risk, a redemption risk that is much reduced by
1/ A more realistic and stable cooperative share valuation
2/ Coop members secure in the governance of their coop and clarity of purpose to retain farmer only ownership in the interests of prioritising their milk price.

Leonie Guiney

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