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Fonterra in turmoil

Fonterra, the New Zealand company that markets the nation’s milk, is in turmoil.

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Fonterra, the New Zealand company that markets the nation’s milk, is in turmoil.

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The key issue is declining milk supplies due to adoption of environment protection measures, loss of farms to urban expansion and conversions from dairy to horticulture-crops production.

Another issue is the way investments are structured with one class of shares that dairy farmers must own to have a right to market their milk, the other class for investors who are not dairy farmers.

There are concerns that dairy farmers will be banned from selling their shares to investors so the company will remain in the hands of dairy farmers, but other concerns that limiting ownership to dairy farmers will eventually lead to collapse.

Some dairy farmers want to limit their market to New Zealand. Others want the company to continue to seek export markets, including overseas milk production and processing to serve those markets.

The board of directors has set out some proposals that put these issues and options up for debate., prompting farmers’ share price to decline by about 15 per cent and investor share prices to decline by about 13 per cent.

That decline amounts to more than $930 million Cdn.

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