Fonterra 'wet share' sales option opens for farmers

A supply offer enabling Fonterra farmer shareholders to sell the economic rights of some of their shares will open today. They will have the opportunity to offer to sell the economic rights of up to 25% of their minimum required shares (wet shares) to the Fonterra Shareholders Fund.

The price they receive will be announced on May 16, having been calculated by reference to the average daily sales prices on the NZX for Fonterra units for each trading day between May 2 and 15 inclusive.

Farmer shareholders will then have a further week after the final price has been announced to confirm if they want to participate in the offer before it closes on May 23.

Supply offer booklets and forms will be mailed to all farmer shareholders this week. Those considering their options were encouraged to seek independent financial advice, Trading Among Farmers general manager Aaron Jenkins said in a statement. The outcome will be announced on May 27 and those farmers participating in the offer will receive payment for any economic rights to wet shares that they sell by June 6.

Fonterra is inviting suppliers to participate in a pilot scheme next season which it says will give farmers more certainty in their milk price.

The guaranteed milk price scheme meant farmers could choose to lock in a milk price announced at the beginning of a season for up to 75% of their milk supply.

The past few years had confirmed that volatility in commodity prices was ''here to stay'' and while most farmers could live with the market volatility, there were times when some would prefer more certainty, the co-operative's managing director of group optimisation and supply chain, Ian Palliser, said in a statement.

The scheme also had benefits for Fonterra as the co-operative would know what a certain proportion of its milk would cost it for the season and that provided it with another selling tool when talking to customers, some of whom were also looking for price certainty.

Fonterra would run the pilot for the 2013-14 season with interested farmers who would have a proportion of their production set at the opening milk price to be announced this month. The pilot scheme would ideally involve about 200 farmers throughout the country, at different stages of their farm operations and with varying herd sizes, he said.

The scheme would be monitored and feedback provided to all shareholders on both the benefits and the risks. Farmers could then see if it was something that might suit them in the future.

There would be a break fee for any farmer who decided to revert to the normal price system during the season.

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