Wellington, Dec 12 NZPA - Fonterra Cooperative Group Ltd today carved $1.10 (19.7 per cent) from the value of its cooperative shares, blaming "unprecedented turmoil" in financial markets and global economic gloom.

From August 2009, the shares will be worth $4.47 each -- partly due to a full write-off of investments in its Chinese joint venture, Sanlu, which poisoned children with melamine-contaminated milk.

This season's share price had already been cut by 18 percent, down by $1.22 to $5.57 from $6.79 last year, driving down the total shareholder return -- a key business indicator for farmers -- by 13.4 percent.

Today's announcement will mean a further slump in total shareholder return and if confirmed next year it will be the lowest share since the season ended 2003.

It will take Fonterra's 10,724 farmers nearly back to where they started in 2001 -- when the board set the 2002-2003 fair value share price at $3.85.

The latest estimated price is the mid-point of the valuer's range.

Fonterra chairman Henry van der Heyden said the fall reflected the unprecedented turmoil in world equity and financial markets and the difficult global economic outlook.

Key factors that influenced the lower price range were the sharp decline in share values around the world and the related global credit crunch, which restricted access to and increased the cost of capital.

These factors were partly offset by the lower New Zealand dollar, said Mr van der Heyden.

"Although as a co-operative our share price does not reflect daily market fluctuations, we are not immune to the same pressures that have affected listed companies," he said.

Share prices of selected listed companies most comparable to Fonterra had declined by roughly 25 to 35 percent since last year, he said.

"The global economic and business landscape is extremely volatile and uncertain," he said.

Global dairy prices have slumped as consumer demand has been hurt by last season's high prices, and as global milkflows rise as North American and European farmers boost production.

Milk powder prices fell to their lowest in more than two years at auction earlier this month and prices were unlikely to recover before mid-2009, according to Fonterra.

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