Family secret

While the environmental consequences of dairy-farming are
currently gaining a great deal of attention, and rightly so,
and while the prospect of Chinese ownership of dairy farms
is exercising the minds of many, a titanic struggle is going
on for the heart and soul of the New Zealand dairying
system, namely, its co-operative structure, by means of
which virtually every dairy farmer has a stake in the
company that collects and on-sells the milk produced by
their cows. This company, which in its former incarnation
was known for much of the 20th century as the Dairy Board,
itself a co-operative made out of hundreds of smaller
co-ops, is today a global force called Fonterra. And
Fonterra wants—as global forces do—to grow. Already the
world’s biggest exporter of dairy produce, with farms and
factories in several other countries, it lives in mortal fear of
being overtaken or even swallowed by competitors and
therefore, according to the imperious logic of capitalism,
must expand or die. To do so, however, it needs more
capital—a lot more. The usual way of going about this is to
list as a public company (plc) on the stock exchange and
invite investment from anyone from Canadian pension
funds to what are tiresomely called ‘Mum and Dad
investors.’ Alas for Fonterra’s power-hungry executives:
the 10,537 farmers who already co-operatively own it don’t
like that idea. When, three years ago, management tried to
change the company’s capital structure with a partial public
listing, the farmers said no. Now the executives are having
another go. Last year they succeeded in boosting the
potential share capital by getting farmers to agree to a
system whereby they, the farmers, can buy 20% more
shares in Fonterra than their milk production would
normally entitle them to. Now the executives are pitching to
the farmers the idea of share-trading among themselves,
which, by creating a sort of internal market within the
company, rather like the stock market outside it, will
enable Fonterra—according to chairman Henry van der
Heyden—to manage its cash flows better. The real agenda,
however, remains the executives’ desire to open Fonterra
up to the world; for all their honeyed words about
‘protecting and strengthening the co-operative’ they clearly
regard the co-operative structure as a creaky old brake on
their accelerating ambitions, something even embarrassing,
like a family secret, out of keeping with the polished world
in which they move, a world where money is supposed to be
free to do whatever it wants and go wherever it will. The
farmers, for their part, are highly suspicious, because they
know that once Fonterra is floating free as a plc, it's wide
open to all sorts of investor machinations; before long, one
feels certain, it would become an amorphous transnational
entity owned by big anonymous money and taking milk
from any old where, with New Zealand dairy-farmers no
better than unprotected suppliers subject to the vagaries of
owners and/or investors in Baltimore, Berne and Bangkok.
Federated Farmers, for once, is right on the money when it
rejects outright any public listing of the company that,
whatever its international reach now, owes its entire
existence to thousands of anonymous New Zealanders
who, over the past 170 years, have laboured to make farms
and milk cows and who don’t want to see their livelihood
become the plaything of the global money-go-round. There
are few enough major New Zealand companies still owned
purely by New Zealanders; if Fonterra goes, you can just
about kiss goodbye to the already tattered prospect of this
country being in any sense master of its own economic fate.