Fonterra's rural supplies chain to offer interest-free terms

Friday 10th July 2009

Fonterra Cooperative Group’s rural supplies chain will offer interest-free terms for dairy farmers facing declining returns so they can purchase essential dairy supplies.

Fonterra will lend its 50%-owned RD1 rural retailer $15 million until April 30 next year, to enable it to make the offer.

The world’s largest exporter of dairy products in May warned it may cut its milk payments to farmers by 13% in the 2010 season, as a resurgent New Zealand dollar and weakening world prices eroded its revenue. It said prices are also being hurt by the reintroduction of dairy export subsidies in the US and Europe.

Last month PGG Wrightson, New Zealand’s biggest rural services company, said operating earnings in the year through June 30 fell to between $30 million and $32 million, from a year-earlier $39.2 million reflecting the downturn in dairy and tepid spending by sheep and beef farmers.

Wrightson shares fell 0.9% to $1.08 on the NZX today and have declined 14% this year.

RD1’s interest-free terms offer “opens up another option and some flexibility for farmers needing essential supplies to keep their farms running in what is going to be a difficult season for many,” Fonterra director of milk supply Barry Harris said. “It’s a tough time for our farmers.”

Businesswire.co.nz

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