Last week was a good week for Fonterra, but in the interests of the New Zealand economy, it had to be.
Positivity started 10 days ago, with widespread approval at Fonterra's proposed new capital structure.
It continued last week, with the maintaining of last year's forecast payout - an improved forecast payout for the coming season and annual accounts, in which all the main indicators were headed in the right direction.
Do not underestimate the economic importance of the dairy co-operative.
The economic impact alone of the announcement last week, that Fonterra expected to pay an extra 55c a kg of milk solids this season, was almost equivalent to the total annual export earnings of the wine industry.
It was vital that Fonterra addressed issues in its accounts such as debt equity and a balance sheet considered weak, and it did so, despite the global recession, European dairy farmers dumping milk because of low prices, and the European Union and United States resuming export subsidies.
Fonterra chief executive Andrew Ferrier said the company's performance showed the benefit of having a global spread - when one market was not performing, others were.
Fonterra did that by holding back stock late last year when prices were low, almost doubling half-year inventories, and selling when prices improved.
He was tentative when asked in an interview whether Fonterra had come of age, saying he would like to think so, but evidence of that would be continued growth and farmers viewing it as the co-operative they wanted to supply.
Fonterra had to insulate itself from commodity cycles by developing relationships with customers and growing the added value business, and it appeared to have done so, the added value contribution rising from 31c kg/ms two years ago to 49c kg/ms last year.
Mr Ferrier said the flurry of announcements would give farmer-shareholders some confidence after a tough 12 months, but he tempered that by adding the world economy was volatile.
Lincoln University head of agribusiness Keith Woodford agreed it had been a good week for the dairy co-operative, but he said its equity was still too low, especially when calculated with the same formula as used for the New Zealand Stock Exchange, which he said showed equity at 34% and liabilities at 66%.
Comparative ratios at the half-year revealed equity at 21% and liabilities at 79%.
Fonterra calculated its end-of-year equity as 57.4%.
"It's a big improvement, but the figures are still not good enough, and that is why its capital structure is so important," Prof Woodford said.
Importantly for cash-strapped farmers, Fonterra had increased its advanced payout from $2.90 to $3.35 a kg/ms a month, an extra cash injection that would be felt from next month.
While Fonterra's turnaround was welcomed and needed, it did not signal a return to the rampant growth of two years ago.
Prof Woodford said there were "hundreds" of farms on the market, but not all were advertised.
His view was supported by Greg Roberts, the founder of a new Southland dairy farm investment company, Farm Equities Ltd.
Mr Roberts said the company was seeking a minimum of $50 million from investors, which would be invested as long-term equity stakes in existing farms.
He estimated 10% of Southland's 650 dairy farms were for sale, as farmers struggled to balance budgets after seeing equity eroded, but many could be turned around by an injection of cash.
The time was right for such a venture, with land prices 20% to 30% lower than 12 to 18 months ago, he said; but the outlook for the future was considerably brighter.
"I think most farmers have run their rough course; they've had their rough time, and we're on the way up."
He said they had indications so far of $10 million in investments.
