Farmers should take their time making financial decisions

Westpac NZ Head of Agribusiness Richard Anderson shares his thoughts on what Fonterra shareholders should be considering before committing their payout.

For the past couple of months up and down the country, farmgate and kitchen table conversations with Fonterra suppliers have been dominated by the potential divestment of the company’s consumer brands division and if approved, how farmers would use this tax-free capital payment. Last week Fonterra shareholders voted overwhelmingly in favour of divesting the company’s consumer dairy brands to Lactalis.  

The decision means that in the first half of next year, subject to regulatory approvals, Fonterra will be distributing $3.2 billion to its shareholders. And while individual amounts received will vary, many farmers are likely to receive a substantial windfall – our economists agree with estimates that many farmers will receive $200k or more.

Our Westpac Agribusiness team have already had pre-emptory conversations with many of our Fonterra customers about their plans and I’ve no doubt we’ll be having many more over the next few months. The key theme of all those conversations? Take your time before committing to a decision.

A lump sum of cash can be intoxicating, but it’s critical to take the time to think carefully about your long-term goals – both financial and personal.

Talking to rural professionals is a good idea – your accountant or banker will be able to support you with your strategy, while registered financial advisors can provide you with advice and feedback on any plans. 

We know some of our customers are keen to pay down debt, while others will choose to reinvest in their business. Others will opt to make investments outside their farm – and we know of one customer keen to put some funds towards a long overdue engagement ring!

Even within these general areas, there are a lot of points to consider. For instance, it’s often simpler to use cash for projects rather than applying to increase your borrowing. So, if you’re thinking about something like building a new cowshed in the next year or two, don’t rush into committing all your funds to paying off term debt. You could instead apply it to a flexible business revolving account facility which can be repaid and redrawn.

If you’re considering long-term investments, think about whether you want to keep some money aside in a more readily accessible investment, in case of a rainy day. And on the other side of the coin, don’t commit too much money to a short-term savings account with a lower interest rate or you could miss out on better returns elsewhere.

And one thing you should watch out for is investment scams. Unfortunately, these continue to pop up regularly, often on social media and the internet. Be wary of anyone offering you an investment opportunity that seems too good to be true and never respond to social media messages about investment opportunities or click on ads promoting them.

If you’re thinking about investing, seek advice from a qualified financial advisor – you can make sure the entity you’re dealing with is registered to provide financial products and services to New Zealanders by checking the Financial Service Provider Register (FSPR) and contacting them directly. Our Westpac Wealth Office also has a team of qualified financial advisors who are happy to help with any queries – you can find more information about them here.   

The capital return from the Fonterra consumer brands divestment and forecast payout of $10 per kgMS means 2026 is shaping up to be a good year for many dairy farmers. At Westpac we’re looking forward to supporting our customers to achieve their goals. Whatever your aspirations may be, taking a bit of time now to put a good financial plan in place will pay dividends for the future.