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Thread: FSF - Fonterra

  1. #11
    Guru Dr_Who's Avatar
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    I ve actually thought about that also, Mcduffy. The only problem is that with the recent PGW, PGC and SCF problem, investors may shy away from rural sector investment for awhile.

    I a still struggling to see how Fonterra can raise cash without issuing shares to the public.
    Having got ourselves into a debt-induced economic crisis, the only permanent way out is to reduce the debt – either directly by abolishing large slabs of it, or indirectly by inflating it away.

  2. #12
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    Yes, rural type companies are doing it tough at the moment, a far cry from the heydays of Dalgety's, Wright Stephenson's, Williams and Kettle, Southland Frozen Meat and others. Corporate farming has never really been a success either, at least in the public listed company form.

    But if we believe in the future of farming in NZ, there's got to be an opportunity there for the right people, the right methods and the right structure.

  3. #13
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    Quote Originally Posted by macduffy View Post
    Yes, rural type companies are doing it tough at the moment, a far cry from the heydays of Dalgety's, Wright Stephenson's, Williams and Kettle, Southland Frozen Meat and others. Corporate farming has never really been a success either, at least in the public listed company form.

    But if we believe in the future of farming in NZ, there's got to be an opportunity there for the right people, the right methods and the right structure.
    I think that in general, the margins for the rural supply stores have been reduced so much by competition (down to about 10% average), that they then concentrate only on fast-moving items, not necesarily the items that will deliver real value for farmers longer-term. So if farmers then only buy the gear they see in the stores, the uptake of new technology is slower than it should be. On the other side, some consultants are now saying "look at the profit per kg of drymatter fed, and base all of your purchases and effort around that". This leads to more use of grass (protecting it, growing it better). It's NZ's major crop, our competitive advantage.

    In a high payout year, those dairy farmers feeding supplements and with high stocking ratios win big. But they're quieter this year. The lack of money flowing about is very noticeable.

    You're right macduffy, to get in on the ground floor with some of these farms would be interesting. Just needs a long-term approach, and of course the capital gain on the land is where most of the action is.

  4. #14
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    Quote Originally Posted by Dr_Who View Post
    So the farmers dont wanna list on the market, how will they pay for a huge capital raising by Fonterra? The rural sector is leveraged to the max, I assume.

    I, for one was looking forward to buying some Fonterra shares in the IPO.

    Hey, average NZers should have the opportunity to participate in NZ's largest industry.
    Dr Who, you WILL be able to participate in a listing - it will just take more time. It is inevitable that there will be a public offering.
    I think it has been forgotten that this has been brewing for nine years now - with a slow, often glacial march towards listing.
    Consider the history - it was the Dairy Board that heavily lobbied government to disestablish the board - not the other way round. The first real change was the amalgamation of the remaining big dairy cos - Kiwi and NZDG - That got rid of any other board and CEOs other than that vested with Fonterra - now it has centralised control of the supply chain from 'cow to customer'. Simultaneously, the number and depth of 'joint ventures' overseas was ramped up. Experiments were tried with developing parts of the business into consumer and end market operations - sometimes successful, sometimes a total failure - but again, it is a slow and relentless march away from a bulk commodity supplier with large fixed contracts to direct market placement.
    Over that period of time, the product mix changed as well - no longer suited to the 'marketing Board' model and more suited to a company that should be structured like the Nestles and Krafts.
    This change has been a long evolution - (for good reason - in that if the farmers had realised that the present situation would occur - they would not have let the companies amalgamate and might have realised what was actually happening) - but because it has been over a long time, the multiple big changes that have already occurred are not too noticeable - - thus the listing or partial float or whatever vehicle that will be used to give Fonterra a 'normal' equity structure is in reality not that big.
    Whatever happens - they will find a way of succeeding. It was always in the plan.

  5. #15
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    It continues to surprise me that a large number of firms dont plan for the bad times during the good times. Dont they know the party dont last forever?

    The public should have a chance to participate in NZs largest industry, esp when we have given Fonterra a monopoly status that is detriment to the dairy retail prices at the grocery stores.

    I am still struggling to understand how the farmers will fund Fonterra and the other rural sector companies in dire need for capital. The NZ rural sector is in debt and desperate for new capital. Time for them to wake up to reality and become part of the real world.
    Last edited by Dr_Who; 19-09-2009 at 06:48 AM.
    Having got ourselves into a debt-induced economic crisis, the only permanent way out is to reduce the debt – either directly by abolishing large slabs of it, or indirectly by inflating it away.

  6. #16
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    But Fonterra isn't a typical firm, doc.

    It's a collective of dairy farmers who see their prosperity in terms of the payout price for milk. A great pity because it is NZ's biggest exporter and has huge further potential if it were to be organised and managed as a Sothern Hemisphere "Nestle".
    But the owners have decided otherwise so we will just have to leave them to get on with things in their own way.

  7. #17
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    Macd...., Dint forget that Kraft Foods of the U S made a offer to buy the N Z Dairy Group in the mid 70's and nearly succeeded if it wasnt for a % of die hard stick in the mud types, the rest is history and the N Z dairy land scape would be much different to day if they had succeeded, Im not suce for better or worse, we'll never know but having gone down that road cockies will never want to lose control of their industry.

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    "Beware of the Butterfly Effect"

    The bigger the organisation the bigger the effect it has on its environment around it. If it occupies a small environment then the effects are magnified.


    ...As a NZer why do I feel so uncomfortable about Fonterra ???

  9. #19
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    Quote Originally Posted by Hoop View Post


    ...As a NZer why do I feel so uncomfortable about Fonterra ???
    Because...

    1. You dont have a say in it?
    2. You cant participate in it, even thou it is NZ's largest industry?
    3. Your milk, yogurt, cheese etc at the dairy cost more than the ones overseas even thou NZ is one of the largest milk producers in the world?
    Having got ourselves into a debt-induced economic crisis, the only permanent way out is to reduce the debt – either directly by abolishing large slabs of it, or indirectly by inflating it away.

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    .......and, of course, as NZ's biggest export earner, how Fonterra fares is vital to the country's future but it's hard to be confident because of the company's "keep it in the family" policy.

    Or, rather, the Fonterra shareholders' insistence on that policy.


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