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Expert: Fonterra's TAF a poor excuse for a solution

An expert from the Netherlands on international cooperatives has expressed serious concerns about the recent TAF (Trading Among Farmers) agreement voted on by Fonterra's farmers.

An expert from the Netherlands on international cooperatives has expressed serious concerns about the recent TAF (Trading Among Farmers) agreement voted on by Fonterra's farmers.

Dr Onno Van Bekkum, speaking at the Federated Farmers of New Zealand conference on Wednesday, said Fonterra was an “amazing cooperative”, but TAF represented “a fundamental shift” in its operations.

Van Bekkum, who has 15 years of experience as a cooperative adviser and researcher, said under TAF there was the potential for a divergence in interests, with investor interests being slightly detached from supplier interests.

He also expressed doubts about the ability of the TAF scheme to uphold the promised 100 percent ownership and control of the cooperative.

Under TAF, farmer shareholders will be able to trade shares among themselves. Farmers can ‘share up’ when cash flow is stronger, and gain cash by selling the economic rights of some of their shares when cash flow is tight, according to a TAF summary sheet released by Fonterra. The TAF scheme also allows outside investors to gain limited access to Fonterra for the first time.

In his report on TAF, Van Bekkum stated the scheme would turn Fonterra from a cooperative into to a “farmer-owned business” or FOB.

“With TAF, Fonterra replaces an inherently deficient ‘fair’ value share with something that is, in terms of cooperative sustainability, even worse,” said Van Bekkum.

“This is an escape, but not a cooperative solution.”

Van Bekkum says TAF will leave the system out of balance, with a growing outstanding claim left behind in the cooperative each time a share is redeemed to an exiting member.

He is not the only one to have spoken out against TAF, which has been in development since 2010. Morris Roberts, former chairman of Kiwi Dairies, previously told Fairfax that “a large and growing number of farmers … now oppose TAF in its present form".

Roberts said with TAF, Fonterra directors were heading down “a dangerous path".

At a shareholders’ meeting on Monday, farmers voted in favour of the TAF scheme with 66 percent approval, although a related move to approve constitutional changes for TAF did not reach the required 75 percent threshold.