Fonterra will next week start consulting shareholders on the final stage of its capital restructuring, the trading of shares between farmers, amid allegations from a competitor its implementation could have trade implications.
Consultation would begin with a television broadcast to shareholders at 1pm on Wednesday, followed by a series of farmer meetings a week later.
This is the third stage of the company's capital restructuring.
Shareholders have already approved changes to the number of shares they can own to give them production flexibility, and restricted the share value to reflect the fact it operates on a closed register.
The final and most contentious step would bring an end to Fonterra redeeming shares, with farmers instead trading shares among themselves.
But Open Country Dairy chairman Laurie Margrain said eliminating the requirement for Fonterra to redeem shares at full value for those suppliers switching processors, locking shareholders in to Fonterra, would threaten the establishment of a competitive milk market and therefore create trade implications.
Previously, shareholders have been required to have one share for each kg of milksolids produced each season, but the three changes were designed to reduce Fonterra's exposure to redemption risk and provide it with a permanent share capital base regardless of the volume of milk produced.
However, Europe and the United States have already expressed concern at New Zealand's dairy structure, Mr Margrain said.
"Just last week, 30 US senators openly criticised New Zealand for what they perceive as anticompetitive practices in international dairy trade which already reflects the powerful opposition we face.
"It is imperative that we act in the best interests of our dairy industry and the national economy as a whole."
Fonterra shareholders at the annual meeting in November approved the two initial changes with almost 90% support, but the third proposal may have a tougher road even though the concept has the support of the Fonterra board and the company watchdog, the Fonterra Shareholders' Council.
The council said it was vital for the business that the impact of share redemption on Fonterra's balance sheet be addressed and it supported the concept of share trading among farmers and the principles behind it.
"The guiding principles of trading among farmers include eliminating redemption risk, keeping co-operative voting linked to share-backed milk supply, creating a stable farmer-only share trading regime, providing a tradeable pool of shares and ensuring there is a robust and transparent milk price," it said.
