Fonterra/RD1 assistance highlights why cooperatives work

Fonterra’s extension of a $15 million facility to RD1, a rural services retailer part owned by Fonterra, will continue an interest free service RD1 has been offering its customers.

“This $15 million facility will aid farmers but it’s important to realise RD1’s interest free terms are not new,” says Lachlan McKenzie, Federated Farmers Dairy chairman.

“The loan will enable RD1 to extend interest free terms on the goods dairy farmers need.

“This includes everything from drenches right through to the magnesium I bought this morning. It’s the goods that ensure farmers remain productive and no doubt, it will help some avoid false economies.

“While the $15 million facility extended by Fonterra equates to around $1,500 per Fonterra shareholder, people have to appreciate that farming is big business.

“Over spring, most farmers will be spending at least $10,000 a month on agricultural supplies including a period where there’s no cash coming into their businesses. Most farmers will not have significant cash flow until October when they get paid for the milk produced in September.

“In terms of Fonterra’s financial management, this seems to be a commercial loan to its subsidiary, RD1. It has to be repaid next April with RD1 covering the interest charges that will accrue.

“A really big thing about this assistance is that farmers are acting in the interests of farmers. It fully vindicates the cooperative model as I couldn’t imagine a non-cooperative acting in this way.

“I think both Fonterra and more importantly, RD1, deserve praise for proactively working with farmers where they need it,” Mr McKenzie concluded.