And to be fair the link is a bit tenuous, but bear with me.

There are two arguments for wanting to get more capital into the co-op: to manage “redemption risk”; and to fund growth.

Redemption risk is the risk that farmers will give up on Fonterra for some reason and cash in their shares. In that case, the co-op stands ready to buy them out. While there are some cyclical ups and downs, the main risk is of a “run on the bank”, where selling up could look rational simply to avoid being one of those left behind paying all the redemption bills. The only real way of managing that risk is by performing well as a business, so farmers will want to stay. If a decent fraction of them become disillusioned and quit, those that remain will be much worse off. This is true irrespective of whether the co-op does has cash lying around to make the payouts, or needs to borrow it. So at this point I’m pretty sceptical of redemption risk as an argument for more capital.

Funding for growth makes sense though. Growth could involve commodity processing in foreign countries or advanced product development of the sort that has made Tatua rich. Either way there is risky investment capital required. We all have different appetites for risk and my guess (based on casual observation) is that many dairy farmers are fairly risk averse. So an obvious solution is for the co-op to form joint ventures with other investors to pursue growth, along the lines suggested by Harry Bayliss and Michael Joyce last time around.

The co-op would take a cornerstone stake in each JV, and would recruit entrepreneurial capital from others. Ideally individual farmers could also subscribe for a slice of the action on specific projects.

There will be more to say on these subjects after the announcements, but in the meantime, the change of thinking apparent in the decision not to float, and all this redemption risk chatter, got me thinking of these lines from Bob Marley’s classic Redemption Song:

Emancipate yourselves from mental slavery

None but ourselves can free our minds

We can but hope for more of that!

In yesterday’s NZ Herald Canvas magazine, Greg Dixon rejoices in the hope that these actions will induce some firms to stop playing music altogether:

So bring on the PPNZ fee brouhaha. Try making ‘em all pay for inflicting bloody Beyonce or Britney on the rest of us and hasten the hopeful consequence: the blessed return of the sound of silence.

I agree entirely, and many people with nuanced musical tastes might share this view: either play what I love, as it is meant to be played, or leave me in peace.

Instead, it seems that commercial (eg retail) music programmers go for broad appeal, and in the process they annoy most people who actually care about music. Cementing the irony, they manage the annoyance risk through the volume, which is why if we ever do luck onto a great track in public, we miss most of it in the ambient clutter.

Here is the question those firms approached by PPNZ should ask themselves:  should I pay for the right to annoy music lovers so that I can offer wallpaper music on people who don’t really care about music? I reckon silence would be definitely worth a shot for broad-based situations like supermarkets.

By raising the price, PPNZ might also find that diversion happens in other ways. For example, those firms that think they have a good idea of their target demographic could just tune into the most appropriate radio station, which has already paid the royalty. And maybe gyms that need highly specialised hard driving music for their workouts will consider direct deals with some of NZ’s enterprising domestic drum’n'bass purveyors?