Monday, 12 January 2009


We have been watching Fonterra with some interest since the San Lu scandal. Initially we thought they shouldbe given the benefit of the doubt over how they handled the initial crisis. Now we think that the whole issue was handled badly.

Now this appears in the Agridata blog so we are beginning to feel some unease.

And we wonder what is happening to shareholder confidence.

Manawatu/Rangitikei Fed Farmers VP Andrew Hoggard says Fonterra’s announcement it is considering raising $300 million won’t affect dairy farmers, but he is worried the co-operative is raising capital to pay the bills. Fonterra said in February it expects to offer senior retail bonds, with the ability to accept oversubscriptions. The co-operative said it intends to use any money raised for general business purposes, including working capital requirements.

Read more here

But it is this speculation in the final paragraph that is perhaps the most worrying.

Mr Hoggard said although concerned about the $300 million, there are other worries for dairy farmer shareholders. “We have heard that all Fonterra’s storage is full, meaning it is stockpiling product. That means it’s not selling.” He said these are worrying times for all farmers. “There will be serious belt tightening in the coming year as dairy farmers cope with the lower payout and have less money to use for any spending.

1 comment:

Anonymous said...

Having worked for what was the New Zeland Dairy Board back in the 80's, full storage is nothing new, in fact I spent a LOT of time auditing butter stockpiles in many "odd" locations around the country - including the newly combusted Southdown Freezing works, which was a marathon task due to the rabbit warren that that place was. Remember it is the middle of the production season now and having full storage is not necessarily a sign of lack of sales, possibly it is a sign of good warehouse/production management. I would be looking for signs Fonterra is using storage outside of what they themselves have prior to jumping to the conclusion that they are not selling.