Understanding the new sharemilking agreement
Released 20 Dec 2010
Ann Thompson, Federated Farmers Dairy policy advisor
Federated Farmers is pleased to announce that its Herd Owning Sharemilking Agreement, also known as the 50:50 Sharemilking Agreement, will now include updated clauses to deal with payments to sharemilkers for milk.
The updated Agreement accommodates the way Fonterra is now paying its shareholders, however, the new clauses will prove useful for farmers supplying any milk processor.
Recent changes to Fonterra's capital structure added a layer of complication for those farm owners who use sharemilkers. The Sharemilking Agreement Review Committee of Federated Farmers has worked with Fonterra to anticipate any difficulties splitting the dividend from the milk payment will bring, especially with the ability to hold ‘dry shares', the advent of Trading Among Farmers (TAF) and the ability to change the level of shares held throughout the season
This ability to change caused considerable debate within the review committee, because it alters the amount of dividend paid to the shareholder and for those who opt to pay their sharemilkers a portion of the dividend via the Dividend Related Payment Adjustment (DRPA) option, this is complicated.
Before signing their sharemilking agreement, sharemilkers should consider, "Will I still get the dividend if my farm owner sells some of their shares through TAF?" and; "If I increase production, will I get paid out on extra production for my extra effort if shareholding is based on rolling three year production?"
To address these types of issues, Federated Farmers will hold meetings around the country from 14 December, for sharemilkers, farm owners who use sharemilkers and rural professionals. Representatives from both the Federated Farmers Dairy Sharemilkers' Section and the Sharemilker Employers' Section will address the meeting, followed by a Fonterra representative, outlining the options available and the issues that need addressing when making payment agreements to sharemilkers for milk.
For more information or to purchase Herd Owning Agreements please contact Federated Farmers, phone 0800 327 646.
