How Fonterra suppliers could cash in without losing their chips

Published 13 April 16

A wealth management company has proposed a method for Fonterra to support its suppliers by freeing up cash. With New Zealand’s dairy sector feeling the effects of the current global dairy crisis, First NZ Capital believes the move could free up NZ$300mn to NZ$400mn of capital for farmers (£140mn--£186mn).

The proposal would allow farmers to sell part of the shares they hold which allow them to sell milk through the coop and are linked to annual production. These shares would effectively be split into two component parts: ‘vouchers’ and ‘units’. The ‘vouchers’ would remain linked to production and membership in the coop, while the ‘units’ could be traded. This would effectively allow farmers to sell part of their shareholding to raise cash.

First NZ Capital acknowledges that there are some policy considerations that may need to be looked at by Fonterra if it were to consider such an option.