Dairy giant warns of global food security risk from overseas investment

Henry van der Heyden. Photo / Sarah Ivey

Overseas investment in the dairy industry poses a risk to Fonterra, says the dairy giant.

Chairman Sir Henry van der Heyden said food security globally had become a bigger issue.

"If you just look at what's actually happened to the industry here in New Zealand you've seen many competitors come in from all parts of the world," van der Heyden said.

Hong Kong stock exchange listed Natural Dairy (NZ) Holdings was trying to raise $1.5 billion to fund an acquisition spree in New Zealand.

Van der Heyden said countries that had invested in New Zealand included Japan, Russia and Singapore, with speculation that other parts of Asia were starting to invest.

"The Fonterra board sees that as a real risk to Fonterra."

The farmer co-operative supported competition but it had to be on a level playing field, he said.

"Some of these entities are well resourced and well capitalised and if they have the ability to take a much longer term view strategically around sourcing good high quality food ... they will have the ability to pay our farmers a bloody good milk price at the end of the day."

If Fonterra lost milk supply it lost capital, van der Heyden said.

"This stage three [proposal of] trading amongst farmers deals with the fundamental issue of redemption risk," he said.

Under proposed changes to the capital structure farmers would buy and sell shares from one another at a market price rather than having them issued or redeemed by Fonterra.

"Fonterra the co-operative needs to get redemption risk off the table."