OPINION: Some farmers appear to have forgotten why Fonterra is introducing Trading Among Farmers (TAF) and where we could be without it.
There was a general acceptance around the time of the first vote the status quo was not an option. Now some are saying we don't need TAF.
That's like deciding not to repair a leaking roof because the weather is fine.
If money is to be retained from distributable profit to fund investment, then we should reasonably expect our dividend and share price to go up over time.
Under the current situation, Fonterra has to have sufficient reserves to pay out exiting shareholders if called upon.
The most likely reason for loss of milk is severe drought or climatic conditions but, just as easily, it could be overseas interests with access to cheap capital setting up more independent processing and luring away milk. This is a significant risk to our co-op as loyal shareholders would be penalised by having to foot the bill for those who leave.
Under TAF, those removing capital from the co-op would receive what someone entering is prepared to pay.
Over the last couple of years I have been fortunate to travel to South America, Australia and China to see firsthand what New Zealand dairy farmers own through Fonterra.
In Brazil we saw Fonterra working in a 50/50 partnership with Nestle through its company Dairy Partners of America, which buys locally produced milk, processes it, and sells it back to the Brazilians as yoghurt and flavoured milk under the Nestle brand.
Half the profits come back to New Zealand farmers.
Just one of the large factories we saw sold enough yoghurt and flavoured milk to satisfy the entire domestic market of New Zealand and Australia. At the time we were getting something like a 29 cent return for every dollar invested. That's what I call good business.
The same thing was going on in Chile where Fonterra's Saprole brand is the market leader in most fast-moving dairy consumer goods.
There are about 200 million people in Brazil, not to mention the 1.4 billion in China.
These are the sorts of opportunities Fonterra needs to continue to invest in to make sure the next generation of shareholders in our co-op are as well or better rewarded than we are.
We have elected a board of farmer directors to govern the company and a shareholders' council to represent us. Both these groups have spent an enormous amount of time and energy going over all the details of TAF and assessing the potential risks.
They agree TAF is the appropriate way to deal with redemption risk and to provide a solid base on which to grow Fonterra's business around the world while still protecting ownership and control and making sure milk price is tamperproof.
Let's let them get on with it.
* Rob Poole, of Auroa, is a Fonterra shareholder and dairy farmer.
- © Fairfax NZ News
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