Wellington  - The world's biggest exporter of dairy products, New Zealand's Fonterra Cooperative Group Ltd, asked its 11,000 farmer-shareholders Friday to put up more money to finance expansion plans to compete with other multinational food companies on international world markets.

Fonterra had earlier dropped a proposal to raise capital by floating part of the company on the stock exchange after its farmers insisted that they wanted to retain 100-per-cent control of the business.

Fonterra is the world's biggest seller of milk powders, butter and cheese, exporting to 140 countries with annual sales of about 17 billion New Zealand dollars (12 billion US dollars).

Chairman Sir Henry van der Heyden said the company needed more capital and the existing system, under which farmers hold shares equivalent to their annual milk production, left its equity base uncertain.

When a farmer's milk production falls, as in times of drought, the cooperative is bound to buy back shares equal to the fall, wiping huge sums off its balance sheet.

"Fonterra can't afford to have hundreds of millions of dollars washing in and out of the balance sheet every time milk production fluctuates, for whatever reason," van der Heyden said.

He proposed that farmers put up more money to hold shares up to 120 per cent of production - which would effectively lift the company's capital base by 20 per cent, or about 1 billion New Zealand dollars, if all the shareholders participated.

But analysts said many farmers have high debts and it was uncertain how many would be prepared to ask their banks for new loans to finance the scheme.

Others parts of the proposal included eventually persuading farmers to trade shares between themselves instead of buying and redeeming them through Fonterra.

"This would provide permanent equity for Fonterra and would give the cooperative certainty about its capital whatever might happen to milk production in any season," a company statement said. (dpa)