New Zealand dairy co-operative Fonterra is considering launching a NZ$100 million ($77.4 million) fund in the next year which would tap external capital to lend to its farmer shareholders in the face of falling global dairy prices.
Theo Spierings, Fonterra’s chief executive, said on Monday the world’s largest dairy exporter is looking at ways to give its shareholders access to cash that would allow them to expand after it cut its farmgate milk price forecast to a six-year low last week. Fonterra is owned by 10,600 farmers.
«With the milk price being low and the share prices being strong, farmers really will be constrained for cash,» Spierings told Reuters in an interview.
«We shouldn’t force them to go to the bank to borrow a whole lot of money. We should make it available ourselves.»
The fund would initially raise as much as NZ$100 million from investors looking to invest in the global dairy industry. Demand for milk and dairy produce has soared in Asian countries like China, leading to what’s been dubbed a «white gold rush».
«We have to go around our farmer base to really get a good feel about what the size could be, but my initial feel would be NZ$50 million to NZ$100 million,» Spierings said.
If the plan goes ahead, it would be the co-op’s second fund capitalised by outside investors. In 2012 it raised $400 million to create a market for farmer shareholders to trade their co-op shares.
Fonterra last week slashed its milk payout forecast to a six-year low of NZ$5.30 per kg of milk solids for the current season. Prices have been hit by a Russian dairy import ban, rising global supply, and moderating Chinese demand due to pent-up inventories.
The forecast means farmer incomes will fall by more than NZ$5 billion through July compared with a year ago. It would also shrink margins, making it difficult for highly indebted farmers to service debts as the country’s interest rates rise.
Source: Reuters