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Feedback multiplies capital options
FARMERS WEEKLY – farmersweekly.co.nz – July 26, 2021 7 Feedback multiplies capital options
Hugh Stringleman hugh.stringleman@globalhq.co.nz
FONTERRA’S capital restructure consultation has drawn out many alternative proposals and feedback from farmers has already modified the company’s preferred option, introducing more farmer flexibility.
The minimum shareholding part of the revised proposal has changed from 25% of milk supply to 33%, in other words a share standard change from 1:1 at present to 1:3.
The board is also open to enabling sharemilkers and contract milkers to hold shares if the co-operative moves permanently to a farmer-only share market.
Retiring or exiting farmers may also have up to 10 or 15 years to sell down their shares, instead of three years currently.
New suppliers may also have up to six years to share up.
In two areas the restructuring proposal remains unchanged: a maximum shareholding 4x milk supply and voting rights to stay linked to share-backed supply.
The company will provide more information on business strategy and future performance to help farmers’ views on capital structure.
“In August and September, we will provide further information on our long-term strategy including the types of activities we will invest in, the returns we are targeting, and the measures against which we will track our progress,” the company said.
Fonterra chair Peter McBride says farmers’ views during the consultation so far had been varied and heartfelt.
“While we seek to cater for diversity it is impossible to incorporate every piece of feedback,” McBride said.
“We need to be pragmatic and open to compromise in order to find a way forward together that is in our best long-term interests.”
Fonterra is now reviewing the role of a market-maker in the supply shares and the fund units and how potential buy-back options might support liquidity in a farmer-only market.
Consultation themes have been consolidated and published under the heading of alternative farmer proposals and the company has provided responses.
Unshared milk supply and the possible return of share capital are two linked themes.
Buy-backs would reduce the total shares on issue and an equitable mechanism for distributing unshared supply would be needed.
“Unshared supply would be a separate and potentially significant group of stakeholders,” the company said.
McBride says unshared supply is available as a tool within the current constitution but there are limitations.
It would need to be available to all and the Commerce Commission and the Dairy Industry Restructuring Act would apply.
He says unshared supply in a big way would be unsustainable.
Chief financial officer Marc Rivers was asked to comment on the strength of the balance sheet and the priorities for share capital.
Rivers says share capital of the co-operative had not moved significantly as the number of supply shares had remained constant.
Deleveraging of Fonterra’s balance sheet was proceeding nicely after the sale of its China farms and the Beingmate stake.
More remained to sell to get to a debt-to-earnings ratio of 2.5-3.
“At that level we have an ability to withstand the inevitable shocks, to go after business opportunities, offer support to our farmers or provide a market maker, for example,” Rivers said.
“But the real determination is earnings and the returns we generate from our various businesses.
“There are many ways capital can be applied in a business like this.
“Where is the best return on capital – do you return it if you don’t have a better use for it?”
To summarise, McBride says consultation had again shown farmer ownership and control are paramount and that moves towards more flexibility also seem to need a farmer-only share market.
Alternative structures suggested by farmers, like nominal shareholding and a twocompany model, have been again dismissed.
Over the next two months Fonterra will conduct surveys and have focus groups to ask farmers specific questions and test different aspects of the potential changes.
A more detailed proposal should be ready for release around the time of the annual results in late September.
“We are still aiming at a farmer vote at our annual meeting in December,” McBride said.
WIDE RANGING: Fonterra chair Peter McBride says farmers’ views during the consultation so far had been varied and heartfelt.
Marc Rivers Fonterra
Ospri extends movement reporting deadlines
OSPRI is extending its timeframes for reporting livestock movements under the National Identification and Tracing (Nait) scheme in areas under a state of emergency after recent flooding.
The extensions will remain in place until state of emergency declarations are lifted in the Buller and Marlborough districts.
Ospri head of traceability Kevin Forward says Ospri wants to support farmers and communities.
“We understand those impacted people will have a lot to deal with at present, whether it be land or property and the recovery will be long-term,” Forward said.
“Ospri wants to help lessen the load by giving people a bit of breathing room during this distressing and uncertain period.”
As a result of the extended times the following conditions apply: - Register as a PICA (people in charge of animals) within seven days after the local state of emergency ends. - Declare all animal movements within seven days after the local state of emergency ends. - Animals that arrive untagged must be tagged and registered in Nait within seven days after the local state of emergency ends. - Declare animal deaths and losses within 21 days after the local state of emergency ends.
Given the importance of animal traceability and biosecurity, Ospri is advising farmers to still tag and register their animals before moving.
MORE:
Anyone who needs help with domestic or lifestyle animals should contact Renwick (Blenheim) SPCA on (03) 572 9156, or Westport SPCA on (03) 789 7520. For commercial farm assistance call MPI on 0800 00 83 33. Those who need emergency feed, help moving stock or cleaning up, can call Federated Farmers freephone 0800 376 646, option 2 or the Rural Support Trust on 0800 787 254. If you require more information about tagging and registering your animals over this period, go to https://www. ospri.co.nz/farmers-and-livestock-owners/help-with-tags-andtagging/
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News Groundswell mum on future
Gerald Piddock gerald.piddock@globalhq.co.nz
GROUNDSWELL will keep its word and take no further action until August 16 to give the Government time to respond to its concerns that its farming regulations are unworkable.
The protests on July 16 saw thousands of farmers and their vehicles head to 57 towns and cities across the country to protest policies around freshwater, climate change and biodiversity.
“There’s definitely nothing to add to the protest because we have to wait until August 16 and we’ve given the Government until then to make a response,” Groundswell co-founder Bryce McKenzie said.
“But we have got other irons in the fire. There are other subjects we will be commenting on or putting stuff out on for people to look at separate to the protest,” he said.
This will help maintain the momentum the protests had generated.
“We’re certainly not going to do nothing,” he said.
McKenzie says it was overwhelming to think the protest had such an impact on people across New Zealand.
The turnout still surprised him, despite Groundswell coordinators around the country telling him prior to the protest that it was gathering momentum.
He attended the Gore protest and the sheer volume of tractors driven by protesters blew him away.
“I remember thinking ‘my gosh, there’s some tractors there’, so it was a bit breathtaking in that respect and I remember when I got up to speak and I looked out at the crowd, I was really taken aback.
“There was an enormous crowd,” he said.
He also thanked all of those who drove tractors for maintaining such a high standard of safety during the protest.
“To take your heavy machinery from the country into towns and cities like that and for there to be no reports of damage is a real credit to those people handling that machinery,” he said.
McKenzie believed the protest was successful because people wanted to show they have had enough.
“I think it resonated because there are so many things – if you haven’t got caught with one thing, you’ve got caught with another, or two things or three or four. These things have come in and you’ve had no say and you can’t fathom why you’ve got all of this hanging over you,” he said.
In Waikato, retired farmer and former Waikato Regional Council chair Peter Buckley says rural people are hurting, despite the high commodity prices and export returns they were getting.
Their margins are being eroded by additional compliance costs and paperwork.
“I know of one farmer who has had enough. He’s told the real estate agent that he’s having an auction on July 26 and he wants out,” Buckley said.
Prior to selling his dairy farm, Buckley says he spent $850,000 to construct a wetland to treat the water coming off the property and the neighbouring quarry. In 2015, he was recognised by winning the catchment improvement award at the Waikato Farm Environment Awards.
It annoyed him that while some farmers had spent millions on similar projects, other sectors had a lot of catching up to do.
“On each individual farm, if you add it all up, the billions they have spent is huge and the water standards coming off farmland is now far better than that in the towns and cities,” he said.
He questioned the value of requiring resource consents to develop areas classified as significant natural areas (SNAs) by the Government.
“What’s that going to achieve compared to what we already do? I have real issues with people wanting to put all of these conditions on and the costs they involve,” he said.
Amplifying all of these issues, he says, was the nationwide labour shortages being felt across the primary sector.
He rejected claims that it was a sign that farmers were behind the times.
“Farmers realise they have to change, but let’s change in a way that we can manage it in a timeframe and the timeframe that this government wants is just too tight. It’s just going to destroy,” he said.
Buckley says farmers were not asking for a free ride or a handout, but with regulations that support them, rather than being tied up with red tape.
KICKER KICKER: Howl of a Protest organisers Laurie Paterson and Bryce McKenzie. McKenzie says it was overwhelming to think the protest had such an impact on people across New Zealand.
Peter Buckley Retired farmer
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We are listening, PM tells farmers
Neal Wallace neal.wallace@globalhq.co.nz
THE Government is listening and responding to concerns raised by rural New Zealand, but will not back down from their legislative programme or the pace of change, Prime Minister Jacinda Ardern says.
Speaking after the Howl of a Protest rallies organised by the Groundswell groups and held in more than 50 centres across the country, Ardern says she is not surprised by the degree of support it drew or the concerns raised.
“The most important point is that some of the issues raised we have absolutely heard, we understand and appreciate,” Arden said.
The Prime Minister promised to continue to listen to the concerns of rural communities, but will not alter the volume, scope and cost of new regulations or the one-sizefits all policies.
Ardern says the group she meets with most regularly is the Food and Fibre Leaders Forum and they raise with her most of the issues aired by the protesters.
She says the Government has responded to concerns, such as working with producer groups to develop the He Waka Eke Noa agreement to reduce agricultural greenhouse gas emissions, made changes to intensive winter grazing rules and extended temporary working visas.
“We asked the Food and Fibre leaders their priority: space at MIQ facilities or worker certainty by extending the visas of lowerskilled migrants by 12 months?” she said.
“They were clear that they wanted worker certainty.”
She called the He Waka Eke Noa agreement “a leap of faith together”.
But Ardern says she would not be doing her job if she ignored challenges such as climate change, addressing environmental issues and reflecting the concerns of trading partners.
“We are the best in the world but we cannot allow our exports to slip down the world ranking,” she said.
She rejected claims the Government is not listening to the sector, saying climate change and freshwater policy followed years of consultation and they have amended policy after submissions by the sector.
“There is a lot going on but we are also being asked to do a lot by those we trade with,” she said.
Ardern says the Government is being unfairly targeted with the concerns over the significant natural areas (SNAs) policy, which is being implemented by councils.
Identifying SNAs has been a requirement since the Resource Management Act (RMA) became law and while 60% of councils have implemented the policy, the remainder recently started to map SNAs.
She appreciates that this could cause anxiety among landowners.
Agriculture Minister Damien O’Connor says the Government has been listening to farmer concerns and it continues to listen.
“To claim the Government is not listening to their concerns is inaccurate,” O’Connor said.
“Through the whole process we have had our ears and eyes open to feedback.”
The Government has partnered with industry on climate change and has consulted extensively on other issues.
O’Connor says he did not attend the protest and while not dismissing those that did so, he noted they did not represent all rural people.
Asked if Wellington-based government officials understood farming, O’Connor says that is why they consult with the industry and meet regularly with sector leaders.
“The view that they don’t understand farming is ridiculous,” he said.
O’Connor says the concept of one-rule for all is a consequence of policy.
“In the end, any Government is challenged with laying down laws, which of course do not fit everyone.
“We are trying to find the best mix of laws which supports the majority.”
INACCURATE: Prime Minister Jacinda Ardern rejected claims the Government is not listening to the sector, saying climate change and freshwater policy followed years of consultation.
Industry leaders won’t back down
Neal Wallace neal.wallace@globalhq.co.nz
POLITICIANS and government officials will have noticed the size of Growndswell’s protests, but a primary sector leader says it will not be persuaded to back down on their reform agenda.
Mike Petersen, the independent chair of the Food and Fibre Leaders Forum which meets regularly with politicians and officials, says the Government will not agree to Groundswell’s sevenpoint wish list.
“We have a single party majority Government with a reform agenda and to think we can convince them to change big pieces of legislation they are working on, is almost impossible to achieve,” Petersen said.
He says the Government is convinced it has an elected mandate for its policies, which it wants passed.
“They genuinely believe that this is the direction the country needs to go in and genuinely believe they were elected on that mandate,” he said.
“It is too easy to say it is ideology or all about politics.
“I take the view that the only way to get outcomes for the sector is to have a conversation with the decision-makers.”
With five large reforms under way affecting agriculture – climate change, Resource Management Act, Essential Freshwater, Indigenous Biodiversity and Three Waters – Petersen says the forum has highlighted the need for timely consultation when farming is not so busy.
On climate change it advocated for He Waka Eke Noa, an industry-wide approach to reduce emissions but was unsuccessful advocating for a similar approach for water.
The forum is seeking Government incentives for farmers to register areas of significant indigenous biodiversity to avoid the controversy that is erupting over loss of control with the significant natural areas (SNAs) approach.
Beef + Lamb NZ chair Andrew Morrison says he and fellow leaders regularly advise the Government that farmers are swamped by the volume and degree of change, a message reinforced by the size of the protest.
“I hope the Government picks up that message because it is a message we’ve been saying,” Morrison said.
DairyNZ chair Jim van der Poel agrees.
“The amount of people that came out ... to show their frustration was more than I expected and it will raise the level of awareness around the amount of concern out there,” Van der Poel said.
Both leaders say they are disappointed the Government will not collaborate on policies, with Morrison adding that they need to have faith in those they work with.
“The question of whether they are prepared to listen is their prerogative,” Morrison said.
Van der Poel says his organisation regularly asks the Government to ease up and look at the big picture of what farmers are currently having to deal with.
“Government needs to slow down both the pace and the scale of changes and consider regulations in a holistic way, not in isolation,” Van der Poel said.
Asked if criticism that producer boards are too placating is valid, he says it is in the interests of levy payers that they build relationships and work collaboratively with government and officials.
“We have got to act on behalf of farmers, find solutions that work, are practical and equitable and the only way to do that is to work constructively,” he said.
Federated Farmers president Andrew Hoggard was heartened by the support of urban people, which will highlight to politicians that it is not just a vocal minority feeling under pressure and anxious about the same issues.
“What I am getting frustrated about, the vast majority of rural NZ is getting frustrated about,” Hoggard said.
He has heard calls for the federation to become more militant, but says it is important they sit down with politicians and officials.
“The challenge we face is if we are militant all the time, then we’ll get ignored and left out of the room. They will not listen to us,” he said.
“The benefit of being in the room is sometimes they listen when we point out things that are wrong, dumb or will not work and we get to help fix them.”
SPOTLIGHT: Federated Farmers president Andrew Hoggard was heartened by the support of urban people, which will highlight to politicians that it is not just a vocal minority feeling under pressure and anxious about the same issues.
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TAWERA NIKAU
65 ha in seed from Corson Maize
Restoration through progressive and sustainable farming practices was central to Tawera Nikau’s vision and that of the Nikau Farms’ Whanau Trust for their land and nearby Lake Waikere. Tawera saw the benefits that could be gained through partnering with a business like Corson Maize to provide expertise, direction and the key ingredient ‘maize’, to not only provide the revenue to allow the trust to reinvest in the land, but crop advice to enhance the soil profile of the farm. But to Tawera and the trustees it was more than just a business arrangement. In Corson Maize they found a group of people that aligned with their family values and walked with them on their journey to realising their vision.
