Farmers likely to approve deal
South Canterbury farmers supplying the failed Studholme New Zealand Dairies factory are likely to take up six-year Fonterra contracts to recoup millions in unpaid milk fees, the suppliers’ committee chairman says.
Fonterra’s offer is part of its proposal to buy the factory from the receivers of the Russian-owned company, which must be approved by competition watchdog the Commerce Commission.
Under the proposal, farmers will get everything they are owed by the company, which is understood to be about $25 million.
The dairy giant co-operative will run the factory for the receivers while the commission decision is pending as part of the deal to make sure farmers who sign up can supply their milk for the upcoming season which begins on August 1.
Fonterra offered the 30 farms contracts for three years supplying milk, fol-
Ready to resume: lowed by three years to buy shares in the co-operative.
The company has said its purchase of the factory was dependent on getting farmersuppliers on board, and the offer expired at 5pm yesterday.
NZ Dairies suppliers committee chairman Robert Borst said he expected all farmers to take the double-edged offer.
It was a market for their milk which would otherwise go to waste in the rapidly approaching season and full repayment of what they were owed – a fantastic result, he said.
Many of the farmers had previously supplied Fonterra and had moved, for various reasons, to an independent processor, he said.
For some, having to sign up to the co-operative for a considerable amount of time would be a bitter pill, he said.
‘‘But that’s just business and life.’’
A combination of fiscal pressure from two missed milk payments and an imminent milking season meant farmers were compelled to jump to Fonterra for the six years, he said.
‘‘I think we haven’t got a lot of other options at this stage.’’
The suppliers would be paid less by Fonterra. However, there had been a risk premium in the payments from NZ Dairies which had been illustrated by the company’s failure, he said.
New Zealand had few independent processors and the loss of one in NZ Dairies was a pity, he said.
‘‘The country needs a strong Fonterra . . . but we need a few independents around to keep them on their toes, and it’s a shame to see [NZ Dairies] go.’’
NZ Dairies failed last month after its Russian owner, baby-food producer Nutritek, failed to sell its multimillion-dollar factory which can make 200 million litres of milk into milk powder each season.