Fonterra has made the right call by accelerating dividend payments instead of extending its dairy farmer shareholders more support through a loan package which will hit $383 million by April.
This is a move which will also find favour with bankers to the stressed dairy sector.
The Reserve Bank has stress-tested the effect of various farmer debt scenarios on the New Zealand banking system.
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Not only will the early dividends ensure that farmers get access to additional cash at time when cash flows are under extreme pressure. But it will also ensure that farmers do not unnecessarily pile on more debt - assuming their bankers will allow this in the first place - and instead focus them on achieving further efficiencies to get their stressed balance sheets into shape.