Dairy Farmers are about to be asked to make some decisions about the future of Fonterra.
The farmers have always been scared about outside investment worrying that it would mean they would lose control.
Brent has done a very neat dissection of the issue. It's a brave article. Journalists should add Wheeler to their list of "go to" people for comment as the round of farmers meetings are rolled out across the country.
Take this pithy take on the robustness of the model. He contends that it only exists by state coercion through legislation.
No one else needs or gets that hand up. If this model is so robust why is force needed? This is anti smacking stuff for farmers. A large number of nursery rhymes about collective behaviour, weak selling and such like have circulated for years while the evidence says, unsurprisingly, that these people are price takers not price setters and no amount of collusion can stop competition for long - ask OPEC.
He has concerns about the fact that Fonterra in its current form is exposed on many fronts and is by and large run via a political process.
And he scoffs at the fact that farmers are being forced to accept high risk and paying top dollar for an equity stake.
Third, "their" company is asking them to invest at a cost of equity about which little is known other than the fact that it's limited liquidity, its rules around ownership and the dependence of the model on state imposed monopoly all combine to drive risk higher than standard levels. Paying over the top for equity in a company you have a compulsory sales arrangement with in which the company sets the price is, at the very least, bizarre.
He thinks that the whole set up is Schizoid
Thus capital comes and goes with redemption and growth fighting one another in a process which never sees a stable capital structure. The value of permanent capital was recognised by the Dutch and the English in the middle of the 17th century.
Just what price is "enough" for the rights to be a part of all this? We don't know but may be about to find out. What is for sure is that it's pointless looking for objective answers from farmer politicians who have everything to lose and nothing to gain.
And why should we be asking questions?
Well that's simple says Wheeler.
It would be useful if a few more critics turned some serious spotlight on the political roadshows to come - after all, that monopoly is granted by taxpayers - not farmers, not by suppliers to Fonterra, not by Fonterra management and certainly not by farmer politicians. Taxpayers too are owed some accountability.
Brent has mapped out some of the key areas for debate. We will return to Eye2theLongRun
as the issue progresses.
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