Fonterra considers equity fund as part of Farms Source launch

Monday 29th September 2014

Fonterra Cooperative Group may establish an Equity Partners' Fund that would source capital from investors for farmers in New Zealand and Australia.

It's one of the new offerings rolled out today by the giant dairy co-operative under its new Farm Source hubs which will combine retail service, support, rewards, digital technology and financial options.

Speaking at today's launch in Methven, Fonterra chairman John Wilson said the idea for Farm Source followed discussions with farmers over the "together as one" principle behind co-operatives.

"Co-ops have always been about unity and collective strength and we have a lot of both. This is about putting it to work for our farmers so we all benefit."

Chief executive Theo Spierings said by supporting farmers to succeed, the co-operative will also grow its milk pool in New Zealand which is core to its business.

"We want to access a 30 billion litre global milk pool by 2025. Farm Source starts here in New Zealand. We will also look to adopt it in other markets where we are growing our milk pools, tailoring it to those local markets."

The existing 67 RD1 farm supplies stores will be rebranded Farm Source and a further four are in development. Each Farm Source hub will feature facilities that farmers and the local community can use including meeting rooms and a drop-in space with free wifi. Methven is the first one off the block.

A new loyalty programme will see Fonterra's 10,600 milk suppliers receive a Farm Source Rewards Card that will earn Farm Source dollars for every dollar spent with Farm Source (former RD1) and its partners. These Farm Source dollars can be converted to store vouchers or other products and services including travel. The partners offering exclusive discounts via the card include Mobil with an 18 cents per litre saving at the petrol pump, On Farm Fuel providing a 23 cents per litre fuel saving delivered to farms, and Carters Tyres offering up to 25 per cent savings on tyres.

On the digital side, the company has given its farmer internet service Fencepost an overhaul to allow farmers expanded advice, tools and information to manage their farm operations and financials on mobile, tablet and computer.

Under the financial toolbox the Equity Partners' Fund is suggested as a potential investment at the farm level to support farmers. However the company said the fund would only proceed if it enables farmers to "retain control of their futures".

The toolbox includes other existing measures designed to reduce farmers' need to borrow to buy shares such as the dividend reinvestment plan which allows farmers to receive shares in lieu of all or part of their cash dividend and the share up over time contracts which allow farmers to spread their share purchase requirements over a period of three to ten years. There's also the guaranteed milk price which allows farmers to lock in the opening forecast price for a small percentage of their milk.

BusinessDesk.co.nz

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