Part 1: FELDA – The smell of easy money
Part 2: FELDA – The smell of easy money
Part 3: FELDA – The smell of easy money
Part 4: FELDA – The smell of easy money
Part 5: FELDA- The smell of easy money
Part 6: FELDA – The smell of easy money
- In 1871, the first dairy cooperatives that was set up by dairy farmers in New Zealand (NZ). In 2001 after many rounds of cooperative mergers, a single giant cooperative known as Fonterra emerged. It represented 84% of dairy farmers in New Zealand. Today it is NZ multinational dairy co-operative owned by almost 10,500 New Zealand farmers. It is responsible for approximately 30% of the world’s dairy exports and with revenue exceeding NZ$19.87 billion is New Zealand’s largest company. From the tiny islands of NZ, their milks from farms across the country served the whole wide world (www). Interestingly if one studies the background of the board and the management committee, none of them are politicians. They members arrived from a diverse background and they sit on boards of many successful companies. Is Fonterra a public listed entity? NO
- In the early days Felda is a cooperative. In reality, agriculture business thrives on cooperative models where members help each other to produce their goods, distribute using a common platform to reach consumers globally. The aim is to reduce cost of production and increase the network of market distribution and ensure that they get the best price for their goods. We can be proud that despite many handicaps, to a limited extent the early days of Felda did help the farmers. It is proven that in farming businesses cooperative is the best model. Farmers who understand the business are in reality the source of solution to their problems. If the government is serious about helping the settlers, they should educate the settlers about business management. They should sent key personnel and learn from organizations like Fonterra. They should let the farmers make informed decisions. The government should not think that they know best.
- If the government has applied the same cooperative model to Malaysian dairy farmers, feedlot business and other agriculture business, we would not have failures like NFC. In Malaysia, Department of Veterinary Services operates MCC. They buy milk from farmers and then sell it to private dairy processing plants. It has been the same since 70’s when I milked the animals by hand. Today milking is done by machine but from business perspective, nothing else has change. The number of farmers has dwindled and the business it self is still traditionally run After 40 years, the system is still the same. Wouldn’t it have been better if the government educate the farmers to develop a cooperative and eventually take over the MCC?
- In Malaysia when politicians get involved in any business, it will fail. The business failed because the politicians have poor knowledge of the business, they lack business skills and have a totally different agenda. NFC is a good example. The RM250 mill could have been given as a grant to set up a feedlot farmer cooperative. Instead it was given to 1-Family. Is the government planning to kill Felda Cooperatives?
The Transformation Plan: For step by step plan, SEE HERE
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Looking at the proposed restructuring, one critical issue is the valuation of the FGV shares. If what is reported regarding how badly FGV had fared financially, I would think the listing is just so they can mix the good fruits with the less good. It is called creative accounting. Oil plam estate are being sold for easily RM30k to RM50 per acre. Land with devlopment potential is worth more. If listing is the route to go, I would suggest that the coop go on their own. Look at the KLK group. The parent Batu Kawan is listed and so is KLK.
Doc.., Just to side track from the current topic.. is tomorrow 5 January 2012 the D-Day for KPF. Or has the EGM being postponed?
I am digressing… I have experienced driving from North Island crossed the Cook Straits and across the South Island and back to North Island, NZ. Stopped by many fruit farms and cattle ranches. We have lots of fresh fruits and fresh salmons. We stayed for a few days at the foot of Mount Cook by the meadows, snow-capped mountains and streams. It is just so refreshingly beautiful…. I am planning for a return trip soon.. I think you can guess when and you also know why…
O yes.. I also have experienced driving through the Namibian desert for 1500km… with the Atlantic Ocean on one side and the desert and sand dunes on the other under the cloudless blue sky.. Night in the desert… it was an exhilarating experience… And just last week we played host to a Cape Malay family from Cape Town, South Africa.
I agree with Hua Yong… politics is dirty but menjual air liur pun sakit kepala dan stressful and sometime you just feel that you want to Que sera, sera…
I read somewhere settlers manage to get court injunction to block the EGM
I heard that the court postponed the EGM sine die for FELDA to study the fonterra financial restructuring model. Thanks to you Doc…
zul…,
jazakallah.. for the sharing of the fonterra structural changes without going to listing.
their cooperatives farmers fear of losing control is the same fear that strikes the peneroka.. (those who are awakes and realize the demon that face them..)
there must be an alternative route achieve the same goal.. without sacrificing the peneroka’s stakes.
anak peneroka
anak peneroka…,
afwan…
Salam….. zul
Fonterra’s success is more than just the formal structure. Its the spirit behind the structure.
Its a true Cooperative.
The farmers work hard, they pool their financial and physical resources, support a common marketing and supply chain which is now one of the world’s largest milk suppliers (Fernleaf, Anlene, Anmum etc.). Its not for a quick buck….
I doubt the people behind the FGV deal have such a Commonwealth anywhere in their heart…..
,
,
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this is a fair and equitable solution.
this is certainly not in the minds of pendek- isa and mat sabri.
the two are bent on ‘unlocking’ the ‘treasure ‘ that is in the felda assets
just like slater walker [ also jailed by the singapore gomen].try to do with
a singapore plc
can we expect the boleland court to emulate the sin court?
no way.
the mats in the courts with a tun-y and tan-tan -ship are just too rural minded /slow on the uptake to follow good practices!
“They should sent key personnel and learn from organizations like Fonterra.”
I read this in en.wikipedia.org/wiki/Fonterra, which I think is worth pondering.
Proposed changes to capital structure
In November 2007, the board of directors announced a two-year consultation programme regarding their preferred capital re-structuring option: putting the business operations in a separate listed company, with the co-operative maintaining a controlling interest. The aim was to give more access to funds for global growth.
Praised by some as a bold move which would allow better access to outside capital, the proposals encountered significant opposition from both farmer shareholders and the government (who would be required to pass enabling legislation). Despite including a range of safeguards, farmers were clearly concerned at the risk of losing control; in what was sometimes described as a demutualization.
The board responded in 2008 by shelving the November 2007 proposal and continuing consultation and discussion with farmer shareholders. In September 2009, the board announced a three-step process to revamp Fonterra’s capital structure. The new approach abandoned thoughts of a public listing of Fonterra shares and retained 100% farmer control and ownership of the co-operative.
A key goal of the capital structure changes was to stop large amounts of money washing in and out of Fonterra’s balance sheet each year as milk production fluctuates. Under the previous structure, farmers matched their shareholding with their milk production by owning one co-operative share for each kilogram of milksolids (kgMS) produced annually. If their milk production dropped in any season, they could redeem shares back to the co-operative, which was required to buy the shares back off them. Consequently, Fonterra faced the risk of losing large amounts of share capital through redemptions during times of declining milk production. For instance, after milk production fell during the 2007/08 drought, Fonterra had to pay out $742 million of share capital to farmers via redemptions.
The capital structure changes also sought to provide greater incentives for farmers to increase their investment in Fonterra shares, helping ensure Fonterra has sufficient share capital to fund profitable business opportunities and drive a higher payout to dairy farmers.
The first two steps of capital structure change received good support from farmer shareholders at Fonterra’s annual meeting in November 2009. The first step allowed farmers to hold” shares above their level of annual milk production; farmers could now own an additional 20% of “dry” shares (i.e. up to a maximum of 1.2 shares per kgMS). There were also enhanced incentives for farmers to hold shares even if their production falls. The rules about the pricing of end of season share transactions were also tidied up.
The second step changed the way Fonterra shares were valued to reflect that share ownership is restricted to farmers only. Previously, Fonterra shares were valued on a theoretical basis as if the shares were freely traded like a public share. An independent valuer subsequently assessed that the restricted market value should be at a 25% discount to the freely traded value.
The third step, titled “Trading Among Farmers”, involves more far-reaching change to Fonterra’s capital structure. The co-operative would no longer be obliged to issue or redeem shares at a price established via an independent valuation process. Instead, farmers would buy or sell shares among themselves at market prices through a farmer-only share trading market. This would have the effect of making Fonterra shares permanent capital, providing the co-operative with more confidence to invest in long-term projects without fear that some of its share capital might be needed to fund redemptions in future years.
As part of the changes, farmers would have greater flexibility with their Fonterra shareholding. The maximum shareholding would be 2 times production (up from the 1.2 times approved in step one) and farmers would have up to three years to comply with shareholding rules when entering/exiting the co-operative or increasing/decreasing their milk production.
Additionally, Fonterra would set up a special fund that would financially help farmers purchase shares (or retain shares they would otherwise have to sell). The fund would pay farmers for the right to receive dividends and the gain/loss from any changes in value of some of their shares, but the farmer would still be the owner of the shares. The fund would raise the money it needed to pay farmer shareholders by selling investment units to investors. Fonterra would require the fund to target “friendly” investors such as sharemilkers, retired farmers and offshore Fonterra suppliers, although the public and institutions would also be able to participate.
The “Trading Among Farmers” proposal went before a special meeting on 30 June 2010 and received 89% support from farmer shareholders voting, easily exceeding the 75% threshold required for a favourable vote. Fonterra is now progressing implementation of farmer share trading with the new system possibly taking effect from mid 2011.