* Board's preferred option will reduce mininum requirement for farmer owners
* Suspends conversion of farmer shares into the market
* Fonterra shares to remain suspended until Friday (Recasts and updates throughout with details, trading suspension)
May 6 (Reuters) - New Zealand dairy giant Fonterra FCG.NZ FSF.NZ on Thursday laid out a range of options to overhaul its capital structure and allow farmers easier entry to the cooperative as it seeks to firm up its financial future.
The Fonterra board said its preferred option was a structure that would reduce the number of shares a farmer must hold and either remove or cap the growth of the listed Fonterra Shareholders Fund, which is open to non-farmer investors.
Among the other options for the world's top dairy exporter were dual share structures to allow outside involvement, splitting the co-op between supply and processing businesses, and different classes of shares.
"The Co-op's future financial sustainability relies heavily on our ability to maintain a sustainable New Zealand milk supply and protect farmer ownership and control," Chairman Peter McBride said in a statement.
Dairy farming is crucial to both New Zealand's economy and politics, and the Auckland-based company said changes are needed to guard against potential milk supply declines due to climate change, regulation and alternative land uses.
Fonterra shares were suspended until Friday and the size of the Fund will be capped until November to give its more than 10,000 farmer shareholders time to discuss the options.
Under the board's preferred option, the minimum requirement for farmer owners would drop to one share for every four kilograms of milk solids (kgMS) they supply, from the current one share to one kilogram ratio.
"This would make it easier for new farmers to join the Co-op and give more flexibility to existing farmers who may want to free up capital or who are working through succession," McBride said.
"A key outcome of this change is that shares would be bought and sold between farmers in a farmer-only market."
Under the current structure, farmers trade their shares on a separate platform, the Fonterra Shareholders' Market, and can convert their holdings into shares on the listed Fund. That conversion ability will be suspended until November.
McBride said the company is "open-minded about adjusting" its preferred plan "based on farmer feedback on any of the options."
He noted the preferred changes could impact the share price and reduce liquidity in the market.