Wednesday, July 6, 2022

TAF off to heady start

The ringing of a cowbell and a flurry of trading activity heralded the launch of dairy co-operative Fonterra’s Trading Among Farmers, with the share price reaching a remarkable $6.70 within 10 minutes of trading. co-op celebrated the historic first day of trading at its new Darfield plant in Canterbury, tying in the opening of the plant with the start of trading in the Fonterra Shareholders' Fund and Fonterra Shareholders' Market.

Trading in FSF units started on the NZX main board at noon on Friday with a flurry of trading and an opening price of $6.67, up 21% on the open reference price of $5.50 – an impressive start.

That meant for every 100,000 kilograms of milksolids fully backed by shares, farmers saw the money they have invested in those shares jump $214,000 – if sold as units – in a matter of minutes.

In the first half hour of trading 10.3 million units changed hands at a value of $68.9 million. Buying interest was strong, although selling interest was lighter, as expected.

Chief executive Theo Spierings, chairman-elect John Wilson and NZX chief executive Tim Bennett joined guests in raising a glass of milk to toast the launch.

Spierings described it as an historic day for farmers, an historic day for Fonterra's employees and the business "and I think for New Zealand".

He outlined Fonterra's global strategy of delivering in NZ and offshore, but cautioned it could not become arrogant and must remain true to its grassroots origins. The community connection was important and 75% of workers at the plant were recruited locally.

Less than two years earlier the Darfield site was just a bare paddock – today it is a world-class dairy processing plant. It is the first new processing site for Fonterra in 14 years.

Prime Minister John Key, who arrived in a milk tanker, was on hand to officially declare the site open.

It was an important day for Fonterra, in terms of both a new plant on such a massive scale and the partial listing on the NZX, he said.

He told guests Fonterra was the only truly global champion NZ had, "and it may be the only truly global champion NZ ever has".

"It is the one name that's known around the corporate world. The growth story internationally is potentially massive."

Key said he had paid a visit to the bakery down the road and it was booming, largely thanks to the new plant. "They have a run on their pies, not just today, it's every day – they love you."

He also endorsed Wilson, saying: "I congratulate you in advance on your upcoming election as chairman. I always like it when John wins an election."

Labour’s Primary Industries spokesman Damien O’Connor, commenting on Key’s involvement in the launch, said it signalled the death knell of the co-operative as farmers knew it.

“The Prime Minister has long been a supporter of strengthening the capital markets and providing opportunities for traders in New Zealand,” he said.

“While investors have been hugely enthusiastic about TAF, our farmers should be extremely wary of that, given the upward pressure on share price and the additional cost that it will mean for Kiwis wanting to get into dairy.”

Canterbury dairy farmers Graham and Adele Wells, who milk more than 800 cows, were at the launch and said the interest in fund units and opening price showed the positiveness farmers had about their business was now being reflected by those outside the industry.

But they don't want to be distracted from their core business, of profitably producing milk, by the hype surrounding the fund and farmer sharemarket launch.

Chairman Henry van der Heyden, who had accepted an award for chairman of the year at a function the night before (see page 5) sent his apologies.

An hour after the start of trading the FSF share price had eased, coming back to $6.57.

The FSM, for farmers to buy and sell among themselves, was quiet by comparison to the FSF.

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