“They must get independent, expert analysis on all aspects of payout and co-operative membership.
“All the figures I have seen from recent seasons show a significant gap between Fonterra’s higher milk prices and those of its competitors, except Tatua.
“That was at the milk price level, not including dividends and the significant value of Farm Source prices and services.”
Wilson said Fonterra farmers had between $30 and $50/kg of milksolids invested in dairy farming.
“To invest a further $6/share in the co-operative and underwrite the whole business seems to me a no-brainer.
“In the past two or three years our farmers have seen the absolute benefits of permanent capital.
“We stayed on strategy, maximised payout and earnings and quickly came out of the downturn.
“That is why Fonterra’s farmers are now some of the highest paid in the world again.
“We strive to maximise payout. That is not the same driver for the non-co-operatives.”
When refusing to call Open Country a “strong competitor” because of the alleged payout differences, Wilson ruled out any Waikato regional incentives to retain suppliers.
That possibility was included in the constitution when Fonterra was formed but in recent years it had chosen to treat all shareholders around the country equally.
Fonterra had run radio advertisements in the region to emphasise the benefits of payout transparency and the need for farmers to understand the alternative proposition thoroughly.
The ads questioned the complexity of the OCD payment model and whether it delivered returns for milk equal to those paid by Fonterra.
“If you are a Fonterra dairy farmer being offered a good deal by another dairy company, make sure it really is a good deal,” the ads said.
OCD was expanding its processing facilities in Waikato and seeking more milk supply, chairman Laurie Margrain said.
At the National Fieldays it distributed a new corporate profile booklet called A Partnership by Choice.
The booklet emphasised the opportunity for a farmer transferring to OCD to unlock share capital and reinvest it elsewhere.
“With Open Country there are no caps, quotas or capacity adjustments – you produce, we pay,” it said.
OCD was proceeding with a fourth processing site, its second in Waikato, at Horotiu, and would start production for the 2018-19 season.
It had not yet disclosed the size or facilities of the new plant, Margrain said.
The company also recently obtained Waikato Regional Council resource consent to expand at Waharoa, in eastern Waikato, and build a second powder drier and a third boiler.
Those facilities would lift Waharoa’s capacity to five million litres a day of milk supply.
The Open Country booklet also contained a stylised graph called a cashflow comparison, picturing its three settlement period model.
It said the OCD model would deliver a higher progressive return during the season than the “industry standard model”, without saying what that was or mentioning Fonterra.
The final payment of settlement period three (February to May) was in August, versus October for Fonterra.
Many rural professionals in Waikato had the OCD and Fonterra payment models in their computers to provide comparisons for individual farms, which varied according to the milk curve.
Without expansionary growth in milk production in Waikato and the Central Plateau, competition for supply between existing processors should be hot.
A recent report by TDB Advisory said OCD had grown supply by 10% annually compounded over the past five years and that it planned to grow by another 20% to fill a new powder plant at Horotiu.
OCD’s total present intake was reported by TDB director Geoff Taylor to be 6% of the national production or about 115m kilograms or 1.35 billion litres a year.
The Horotiu growth target, therefore, would be about 20m kilograms or 250m litres a year. That was equal to supply from 130 average farms.
Taylor was also a director of Dairy Investment Fund, a 6.7% shareholder in OCD. The majority shareholder with 75% was Talleys.
