That’s the judgement of Shane Ardern, dairy farmer at Te Kiri in Taranaki and chairman of Parliament’s Primary Production Committee. His committee considered submissions on the legislation which introduced the share trading scheme.
“The anxiety we had at the time was that this would be the thin edge of the wedge in allowing outside investment to start influencing the direction of the company and income flow,” he said.
“So far this hasn’t been the case.”
The share value reflected the strength of the company’s performance and the forecasts showed the outlook was good.
One concern raised by smaller processors had been that Fonterra’s strong balance sheet enabled it to manipulate the value of its shares. This enabled it to pay a premium for milk, which made it anti-competitive.
The transparency provided by TAF meant this concern was no longer valid, Ardern said.
From a political point of view, this was the most wonderful thing to come out of the TAF reform, he said.
“It has kneecapped that argument.”
He was also sure TAF had changed views of a farmer’s assets and borrowing capacity. The first question asked by bankers when farmers seek a loan is to find how many shares they own, he said.
“I have seen businesses on paper that were technically insolvent, but the lift in the share price [because of TAF] has lifted their equity.”
But this was a double-edged sword: the banks could pressure farmers to sell their Fonterra shares and supply a rival company to repay chunks of their loans.
“I think to some extent this has happened.”
But he qualified this by saying it was only in a few extreme cases.
