Terminally ill Northland farmer Ian Lupton has accused Fonterra of non-compassionate and inflexible enforcement of the share standard, resulting in his debt to the dairy co-operative exceeding $50,000.
Lupton, a dairy farmer and sole New Zealand breeder of the Fleckvieh European dairy-beef cattle breed, has told the media of his circumstances and waived his right to privacy.
The Fonterra share compliance department responded and the Northland regional and area managers have visited him.
They said Lupton’s options were to cease supply immediately on compassionate grounds or share up via Enforced Compliance Trading (ECT).
Because of what he said were payouts below the cost of production over two years, Lupton last season opted to feed more calves with milk and advise Fonterra with a Material Change Application that he would supply just 10,000kg milksolids compared with 45000kg and 49,000kg in the previous two seasons.
He said the dual-purpose nature of the Fleckviehs enabled him to swing between milk and beef production and feed more milk to male calves.
But he sent in nearly 33,000kg.
This season Fonterra applied a modified three-year supply average calculation, giving Lupton some latitude.
It notified Lupton he needed 25,299 shares this season and therefore had to buy 8177 shares before the ECT deadline of January 12.
Lupton refused to share up and pay the $50,000-plus expense, saying his circumstances had changed and his priority now was to pay his mortgage and keep farm expenses to a minimum.
The Lupton family had employed a dairy worker to operate the Dargaville farm in Ian’s illness.
In addition, he was in hospital for treatment for leukaemia throughout December and not able to raise money for a share purchase.
Fonterra said it could not make exceptions to the share standard for suppliers with unusual circumstances, such as illness or financial stress.
To do so would transgress the constitution and the rules that every shareholder in the co-operative signed up to.
It might be possible to agree to an early cessation of supply on compassionate grounds but Lupton said that was no option for the family financially.
In communications with Fonterra, Lupton quoted the co-operative values of honesty, openness, social responsibility and caring for others.
“We have a responsibility to all other shareholders to enforce the share standard so that all shareholders are treated equally,” general manager of share compliance Christine Burr said.
ECT consisted of Craigs’ brokers buying shares in the NZX-run market on behalf of the farmer, then adding an administration fee of 0.65% and a fixed fee of $150.
The cost was to be reimbursed from the January (paid February) milk statement and any subsequent statements as necessary, while incurring 12.8% interest on the debt balance.
Burr said all shareholders were advised of their shareholding requirement in early June and had until December 1 to meet that standard.
Those who didn’t were given a “final opportunity to comply” letter.