TAF has changed forever the co-operative culture

19:09, Oct 31 2012

In the talk about Trading Among Farmers (TAF), I keep wondering why Fonterra doesn't have a deputy chairman.

In the brave new world of TAF, market assurance on succession at the top of our biggest company would be good.

It certainly seems the easiest fix because Fonterra shareholders pay their directors and staff a lot of money to perform.

Last year, Sir Henry van der Heyden took home more in director fees than what we paid our deputy prime minister. I personally don't have an issue with that so long as Fonterra delivers the goods. If we had 20 people pulling in what CEO Theo Spierings is on, we'd have 20 Fonterra-sized companies and Kiwis would collectively be wealthy. TAF really puts the acid on the board, management and shareholders council to deliver what has been promised in Fonterra's strategy refresh and the total available balance sheet. The small Waikato co-operative, Tatua, shows there is headroom to work with and I put the challenge to those in the hot seat to show us what they are made of.

My initial reaction to TAF was probably shared by many. There will be more than a few bank managers rubbing their hands and starting countdown timers.

TAF won't unleash an inflationary bomb. I suspect a large chunk of half a billion dollars it will unleash will instead cross the Tasman to the banks.


At least farmers have an option that never existed before and I think some will take it up. All right, the sums we are talking about will be low when spread among 10,500 shareholders. But do you see how the thinking has just subtly changed in writing that? I foresee farmers egged on by their financiers to vote with their debt and not their heads.

Individual "mums and dads" will get a slice of the action as indirect investors in NZX-listed funds. That said, the more they learn, the more they may become pleasantly surprised we are environmental champions and not the wreckers of media myth.

Of course, if each supplier- shareholder invested $50,000 to buy back what they currently own, it would hit the $525 million upper limit set for the Shareholders' Fund. It won't happen but we know there will be a high level of industry interest. Using "friendly capital" from retired farmers, sharemilkers and even Fonterra's own staff, gets a big tick from me.

"Friends of Fonterra" could reinvigorate sharemilking because any units they buy are convertible to shares, should a unit holder decide to go farming in their own right. It is a real means to build capital toward farm ownership.

A big positive for active farmers is the end to that seasonal black hole we know as "sharing up". While shares will still be based on production, it becomes spread over three seasons and shares will be purchased off the farmer- shareholder market. It is in our hands to make it all work.

So all positive stuff then, but in life it isn't where you start out, but where you end up. TAF has changed forever the co-operative culture we once had.

Gone is the real oil any farmer could get by calling up a director. Doing that is illegal under securities law as it could be insider trading and could mean a trip to jail. Farmers will only learn how well our co-operative is doing at the same time as the "markets" do. There will be a greater focus on dividend so this makes for a very different beast going forward.

I am not saying this is bad, but it means a different future; we are talking about a new Fonterra.

I am also reminded of that saying of being careful what you want. Management, directors and the Fonterra Shareholders Council now have all the tools they said were needed to take Fonterra to the next level. Okay, now go off and deliver.

Being the "union", and I suppose that makes me the "shop steward," Federated Farmers will keep the blighters honest.

Willy Leferink is dairy chairman of Federated Farmers.

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