Check out dividend terms, sharemilkers told

Sharemilkers who don't do their homework on changes to the way Fonterra pays the dividend portion of its payout could lose thousands of dollars in income, Federated Farmers is warning.

Under standard sharemilking agreements farm owners and sharemilkers split the payout, made up of a milk production portion and a value-added share based on actual profit, equally between them.

The change, voted in at the annual meeting in November, means the value-added portion is now a dividend which can be paid only to the shareholding farm owner.

Federated Farmers sharemilkers section chairman Matthew Richards was worried some farm owners might try to avoid paying the sharemilkers' percentage of dividend, even though they were legally entitled to it.

"It's up to sharemilkers to talk with their farmers and let them know they're entitled to a share of that," he said.

"That could, in some cases, cause a few issues and that's what we're concerned about."

The average 50-50 sharemilker agreement on a farm producing 150,000 kilograms of milksolids a year could potentially lose $15,000 next year, Mr Richards said.

But if milk prices remained high and that portion of the payment grew as Fonterra predicted, they could potentially be out of pocket by $50,000.

Craig Littin, chairman of Waikato Federated Farmers' sharemilkers section, advised sharemilkers signing new agreements next season to take legal advice before they picked up their pens.

"I would say to contact Federated Farmers and get legal advice," he said.

"Sharemilkers need to ensure they understand their agreement and their milk production and dividend is going to be paid to them."

Mr Littin said Federated Farmers and Fonterra were holding a series of meetings around the country to discuss the issue, with dates for the Waikato yet to be set.

Fonterra general manager commercial, trade and operations Jason Minkhorst said all payments were made to the farmer, with whom Fonterra had contractual arrangements, and the farmer paid the sharemilker according to their agreement.

Fonterra has recognised the changes affect the payment terms between farmer shareholders and sharemilkers and has devised a new payment system that would allow Fonterra to take out of the milk-price portion the equivalent dividend amount owed to the sharemilker.

Mr Richards said farmers had to provide a written agreement to do this by February 28 to ensure the payment terms agreed were honoured. Otherwise, the entire dividend portion would be paid to the shareholder on April 20 and sharemilkers would face a more difficult challenge to get the share of the payout they were entitled to, he said.

- © Fairfax NZ News