Sharemilkers urged to claim dividend cash

Fonterra's sharemilkers have been urged to claim their share of the cooperative's new dividend payments, which will be paid directly to farm owners.

Some dairy farmers take on sharemilkers, giving them a 50 percent - or less - share in milk payouts, usually with the sharemilkers providing the dairy herd, milking the cows, and often paying some of the other costs such as fertiliser or supplementary feed.

But Fonterra has changed the format of its payouts with its current forecast of $6.05/kg milksolids made up of $5.70 milk price and a 35c dividend.

An industry adviser, Sue Hagenson of Farmwise, said today the changes meant there was potential for Fonterra shareholders to take financial advantage of sharemilkers: Fonterra is legally required to pay the dividend to the shareholder farmer.

The situation is further complicated by farmers buying additional "dry" shares in the cooperative, in excess of the historical ration of one share for each kilo of milksolids produced.

The shares linked to milk production are known as "wet" shares, and are the shareholding on which sharemilkers are entitled to part of the dividend.

"Right now sharemilkers under existing agreements are legally entitled to receive the same percentage of the payout they were entitled to prior to the restructure," she said. "This includes the dividend.

"If the sharemilker does not receive their share of the dividend payment their income is effectively reduced by 6 percent," she said.

"This translates to an income loss of $17,500 for a 50:50 sharemilker on a dairy farm producing 100,000 kg of milksolids."

Ms Hagenson said she was concerned that there were farm owners and sharemilkers who did not understand the issue and would fail to fill out a "dividend relative pay adjustment" (DRPA) form designed to help then determine how the dividend is divided between both parties.

These forms needed to be returned to Fonterra before the end of this month.

Farmers who failed to do this would be left in breach of their sharemilker agreement.

If a farmer failed to offer a 50:50 sharemilker the right percentage of the payment, the actual split would be closer to 40:60, because the sharemilker would incur 50 percent of costs while receiving less income.

Cases where farmers kept 100 percent of the dividend could result in disgruntled sharemilkers and potentially costly conciliation, arbitration or legal proceedings.