Farmer feedback to shape revised capital structure proposal


With the first phase of the consultation on Fonterra’s capital structure now complete, the cooperative is developing a revised proposal that aims to reflect the views of farmers.

A number of changes are being considered from the preferred option initially proposed in the consultation booklet in May, including adjusting the proposed minimum shareholding requirement for farmers and the possibility for milkers and milkers under contract to hold shares.

“Now is a good time for the board to step back and think about the comments, as most farmers will now be busy calving. Once they get through this particularly busy time of the season, we’ll be ready to consult with them on the updated proposal, ”said chairman Peter McBride.

The consultation has been extended to date, starting with the initial communication on May 6 and sending the consultation booklet to each farmer who owns it. Since:

  • The directors held
    90 farmers’ meetings, attended events such as the My Connect conference and Field Days, as well as 7 online webinars and speak directly with many farmers.
  • More than 5,000 farmers engaged directly through feedback channels, in addition to discussing options with each other.
  • The members of the board of directors and the management of Fonterra also discussed with other groups such as the Cooperative Council (formerly the Shareholders ‘Council), the Fonterra Shareholders’ Fund, the government, big banks and rural professionals. . This engagement will continue as the consultation progresses.

“We would like to thank our farmer owners for getting involved and approaching the consultation with an open mind,” said McBride.

“We also want to recognize the uncertainty that accompanies us in considering changes to our capital structure and the significant challenges this creates for some farmers. The best way to give certainty is to make sure that we have a full discussion as a cooperative and that we arrive at a quality result.

“The board maintains its belief that in a flat or potentially declining dairy environment, making changes early will put us in the best position to offer farmers more flexibility while protecting farmer property and enhancing sustainability. financial support of our cooperative. “

Summary of Farmer Comments

Many farmers said that more information about the cooperative’s business strategy and future performance would help them get a better idea of ​​the capital structure.

“In August and September, we will provide more information on our long-term strategy, including the types of businesses we will invest in, the returns we are targeting and the metrics against which we will monitor our progress.”

McBride says the farmers’ views have been varied and candid, but with clear themes that stand out.

“We will seek to address the diversity within our ownership base, but it is impossible to incorporate every piece of feedback. As a cooperative, we need to be pragmatic and open to compromise in order to jointly find a way forward that is in our best long-term interest.

A summary of comments is available here, while a high-level overview of alternative proposals submitted by farmers is available here.

Proposed areas of change

The Council is considering a number of changes as it considers what a final proposal might look like. These include:

  • Set the minimum shareholding requirement at 33% of the milk supply (or 1 part per 3 kgMS), rather than 25% (or 1 part per 4 kgMS) as initially defined in the preferred option.
  • Allow separate and contract milkers to own shares if the cooperative moves permanently to a farmer’s market.
  • Extend the entry period from five to six years.
  • Extend exit deadlines for all farmer owners on the date of the vote to 10 or 15 years, including those who have already ceased in recent seasons but still hold shares.
  • Examine the role of market maker and further examine how potential stock repurchase options might support liquidity in a farmer-only market.
  • Keep the maximum share at 4x the milk supply to help support liquidity as well.

“We have also reconsidered the voting rights in light of some feedback and at this point our preference is for the vote to continue to follow the share-backed offer as it currently does,” adds McBride.

Next steps in the consultation

Fonterra is committed to proceeding as quickly as possible with the review of the capital structure while taking the time necessary to consider all points of view.

Over the next few months, the cooperative plans to conduct surveys and organize focus groups to ask specific questions of farmers and test different aspects of potential changes.

“This will help us as we continue to develop a more detailed proposal to present to farmers at the time of our annual results at the end of September for further consultation. At this point, we are still aiming for a farmers vote at our annual meeting, which will be held in December. “

More information is available at

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