Wellington, Dec 1 NZPA - Fonterra says it will give its farmer shareholders two different independent valuations for their cooperative shares next season -- including a reduced valuation allowing for the fact that the shares can only be held by cooperative members.

Farmers will also be given an estimated fair value share price for the 2010-2011 season.

They will receive updated forecasts for the 2009-2010 share dividend -- the portion of their milk payout previously referred to as the "added value" component -- and will get a look at the board's dividend policy for future years.

The 10,500 farmers will have their first chance from next Monday to invest additional capital in the business -- up to 20 percent more than now available in their shareholdings linked to milkflows. The shares are now valued at $4.52.

The shareholders voted at last month's annual meeting to raise the maximum level of share ownership to 120 percent of their milk supply -- meaning up to 20 percent of their stake can be "dry" shares not covered by their production.

All shares will receive dividends, and the move is expected to lead to a formal debate in the new year on the potential for share trading between the farmers -- the planned third stage of the company's restructure programme.

Fonterra wants to escape the liability to redeem shares from farmers downsizing or quitting the cooperative, which it regards as a "redemption risk" if too many farmers decided to cash up in the same season, such as when a drought hits.

Requiring farmers to quit their shares by trading them to another farmer would relieve it of that risk.

Fonterra directors originally sought to persuade farmers the best option would be partial listing of shares in an operations company, but were knocked back by farmers concerned about a possible loss of control of both their company and the prices paid for their milk.

Some commentators have suggested that farmers trading shares among themselves and seeing the value constrained by the limited market may eventually support a wider stock market listing.

Fonterra chairman Sir Henry van der Heyden said it was entirely up to individual farmers to decide whether to buy any more shares.

"Even with the recent increase in this season's milk price forecast, cashflows are still tight for many farmers. Some of them may decide to wait until their financial position strengthens before buying extra shares, or only buy a small percentage extra right now -- it's up to them."

The share issue could theoretically raise up to $900 million, but Sir Henry had set no expectation on the amount of additional share capital that may be brought in during the initial application between December 7 and January 21, 2010, and noted that farmers could also decide to sell shares back to the company to retain only a stake matching their production.

Share application forms will be mailed to farmers later this week, with an updated prospectus.

The next "trading window" will be the end-of-season period in mid 2010.

Sir Henry said shareholders had made it clear they want Fonterra to remain wholly farmer-controlled. The opportunity to buy extra shares was their chance to back the cooperative and keep it strong.