Westland revises forecast payout down

August 28, 2014

Westland has revised its forecast payout for milk:

New Zealand’s second largest dairy co-operative Westland Milk Products has revised its payout prediction for the 2014-15 season to $5.40 – $5.80 per kilogram of milk solids (kgMS) before retentions, down from $6.00 – $6.40 announced in July.

Westland Chief Executive Rod Quin said the revised payout prediction is a response to the conditions that all New Zealand dairy companies are experiencing at the moment.

“While the season is only just underway, we have always maintained a monthly revision process to provide shareholders with the most up to date forecast possible,” Quin said. “The reduction is driven by the falls in prices across the globe and the continued high value of the New Zealand dollar.”

While last week’s dairy auction saw an overall price drop of just 0.6%, Quin noted that the skim milk powder price – which represents a substantial proportion of Westland’s production – dropped 12%. He said there was still lacklustre demand from China and stock levels in distributor and customer warehouses was reportedly high.

“Higher prices last season caused a growth in milk supply growth in Europe, the USA and New Zealand, giving customers more options.”

Quin said the reduced payout will cause farmers to review their budgets. He said Westland’s board and management were very conscious of the stress this will put on some suppliers.

“We’ll be monitoring the situation and working closely with shareholders to help ensure they have the resources and tools to manage their way through this,” he said.

 “Westland will also continue its strategy to grow its capacity to produce higher value nutritional products such as infant formula. Our traditional reliance on bulk dairy commodities such as skim milk makes us more vulnerable to the cyclical swings of the international dairy market. Our recently announced investment in a $102 million nutritionals dryer at Hokitika will give us the capacity to shift more of our production to this end of the market where profits are higher and opportunities to lift pay-outs are better.”

The medium to long term outlook for milk prices is firmer but this is a sensible response to short-term volatility in the market.

Fonterra dropped its opening forecast to $6 and the board made no change to that at yesterday’s meeting.

 


Free trade fairest

August 28, 2014

Prime Minister John Key says free trade will lift kiwi incomes:

National today released a set of policies that reinforces the Party’s commitment to openness with the world as the path to lift New Zealanders’ incomes, in contrast with opposition parties that want to isolate us from the rest of the world.

“New Zealand’s economic prosperity relies on selling our goods and services to the rest of the world,” says National Party Leader John Key.  “The fewer barriers there are for our exporters, the better off New Zealanders will be.”

“That is why as Prime Minister I have been working hard on behalf of New Zealanders to crack open more doors to free trade, alongside Foreign Affairs Minister Murray McCully and Trade Minister Tim Groser.

“This includes pushing for a high-quality free trade agreement under the Trans-Pacific Partnership, which includes economic giants like the United States and Japan.

“The choice for voters in this area, like so many others, is stark.

“The Greens want to end free trade and Labour, riven by caucus division, is very confused about what it wants after previously being in favour of free trade.  The Dotcom party, of course, is totally opposed to free trade.

“There can be no doubt that this combination in government would damage the cause of New Zealand’s exporters and damage New Zealand’s economic prosperity.

“Raising barriers to the rest of the world and halting the momentum of trade agreements with key markets like the US, Japan and Korea, would be disastrous,” says Mr Key.

“Our policy to encourage free trade is one of the most important ways we can become more prosperous.

“Trade agreements allow New Zealand companies to access big international markets as if they were part of New Zealand’s domestic market.  For a small country they are hugely important.”

Mr Key made the comments at the opening of the New Zealand Winegrowers conference in Blenheim today as National released its Trade, Foreign Affairs and Tourism policies.

“The wine industry is a leading example of New Zealand companies thriving on the world stage,” says Mr Key.

“The policies we are releasing today show our commitment to remaining open to trade with the world, having an independent foreign policy, and encouraging and supporting our crucial tourism industry.

“Should National have the privilege of forming a government after the election, I would continue as Minister of Tourism, working hard to promote New Zealand as a tourism destination,” he says.

Mr Key also announced along with Education Minister Hekia Parata that the National Government has decided to create a $10 million fund over five years to increase the provision of Asian languages in schools.

“These policies together demonstrate National is committed to seeing New Zealand remaining open to the world, continuing to generate economic prosperity through good relations with other countries, and lowering barriers to trade.”

New Zealand would not be where it is economically or socially if it wasn’t for the free trade agreements negotiated by successive governments.

Until recently National and Labour have had a reasonable degree of consensus on the importance of free trade.

That is no longer the case.

Labour is back tracking on its commitment to open borders and it would be dragged further back if it needed the support of the Green, New Zealand First and Internet Mana parties to govern.

Only a National-led government will guarantee continuing focus on free trade and the economic and social benefits which come from that.

 


Fonterra expands in NZ and proposes partnership in China

August 27, 2014

A newsletter to suppliers from Fonterra chair John Wilson announces plans to expand processing in New Zealand and the proposal for a new partnership in China:

Your Board has given approval to build a new high efficiency milk powder drier in the North Island and further increase milk processing capacity in the South Island to help meet global demand for dairy products.

This investment, totalling $555 million, will grow the Co-operative’s processing capability and allow for more flexibility to better optimise production.

New Zealand is our most important milk pool.  Our strategy is to increase earnings by driving more of your milk into higher value categories.  It’s all about turning the wheel from commodities to higher-margin products.

Key points on the new Lichfield drier:

  • Capable of processing up to 4.4. million litres per day
  • Similar in size to the world’s largest drier at Darfield which produces up to 30 metric tonnes of Whole Milk Powder per hour, and 700 metric tonnes per day
  • Will use the latest energy-efficient processing and water reuse technology.

Three plants will also be installed at our Edendale site in Southland.  Key points are:

  • Milk Protein Concentrate (MPC) plant which separates protein from skim milk and turns it into protein powder – capable of processing 1.1 million litres per day
  • Reverse Osmosis (RO) plant which will increase capacity on an existing drier by 300,000 litres per day
  • Anhydrous Milk Fat (AMF) plant capable of processing 550,000 litres of milk into cream per day

In total, the development of Edendale will increase capacity by 1.4 million in milk, and 550,000 litres of cream processing per day.

Global Partnership with Beingmate

We are establishing a global partnership with Beingmate, which is one of the leading infant food manufacturers in China.  Beingmate is already a long-standing customer – and is a well-established and respected company in China.

Our partnership will be the next milestone for our strategy, as it will increase the volume and value of our ingredients and branded infant products exported to China.

Together we will create a fully integrated global supply chain from the farm gate direct to China’s consumers, using Fonterra’s milk pools and manufacturing sites in New Zealand, Australia, and Europe.

This global supply chain will see more of our high quality dairy ingredients and our Anmum™ brand exported from here in New Zealand. It will see more high value paediatric products made in Australia for China at the Darnum plant – that is our second milk pool. And it includes a third milk pool in Europe where whey specialty ingredients will be manufactured at our new JV plant in the Netherlands, and through our alliance with Dairy Crest in the UK.

This partnership is about volume and value.  The value will come from accessing Beingmate’s extensive distribution and sales network in the infant formula market in China.  This market is today worth around NZ$18 billion – and is expected to be worth nearly NZ$33 billion by 2017.

This partnership will come together in two phases:

We are starting the process to issue a partial tender offer to gain up to a 20 per cent stake in Beingmate. Depending on the response to the tender offer, Fonterra’s total investment in the global partnership will be in the range of NZ$615 million (including proceeds from the JV in Australia), funded through debt.  

After gaining regulatory approvals and Fonterra satisfactorily completing the partial tender offer, Fonterra and Beingmate will set up a joint venture to purchase Fonterra’s Darnum plant in Australia and establish a distribution agreement to sell Fonterra’s Anmum brand in China.

The purpose of the proposed joint venture will be to manufacture nutritional powders, including infant formula and growing up milk powder at Darnum, for Beingmate as well as Fonterra.

Beingmate will own 51 per cent of the JV to satisfy Chinese regulatory requirements.

The JV will be governed by a Board, and Fonterra and Beingmate will each appoint two directors. 

We will manage Darnum’s operations, under a formal management agreement.  We will also supply raw milk to Darnum.

Summary

Today’s announcements are a major step forward in our strategy to be a globally relevant co-operative so that we can will deliver increased returns to our farmers – through both the Milk Price and dividend – during the ups and downs of global dairy price volatility.  We are financing the increases to processing capacity and our partnership with Beingmate from a solid balance sheet position, and a strong gearing position will be maintained.  These investments are intended strengthen returns by:

  • Turning more New Zealand milk into higher value products  
  • Optimising the use of our Co-operative’s global assets  
  • Investing in capacity and flexibility of our New Zealand assets  
  • Building a fully integrated global supply chain. . . .

This is very good news for the company and the communities where it is expanding processing because of the jobs that will be created.

The board also decided to hold the forecast farmgate payout at $6 a kilo.

Along with a previously announced estimated dividend range of 20-25 cents per share, the forecast Cash Payout for the season is $6.20-$6.25.

The decision to maintain the forecast Farmgate Milk Price reflects the longer term outlook for international prices for dairy. Current market views supported by our own forecasting indicate commodity prices improving later this year or in early 2015, with global demand for dairy continuing to grow year-on-year. 

While the long-term market fundamentals remain sound, we need to recognise that the current conditions are difficult and there remains further downside risk.

There is still volatility. This reflects challenges with supply and demand following a good dairy season globally. Given these factors, the forecast is our best judgement at this time.

It is early in the season, and it is important to continue exercising caution with your farming business budgets. The reality is, we expect to see ongoing volatility, and we will keep you informed as we move forward.

Russia’s decision to block European imports and cheaper grain prices which are leading to an increase in production in the USA will both have an impact on the supply of milk and other dairy products.

Fonterra and its suppliers are right to be cautious.

For more see media releases:

FONTERRA INCREASES PROCESSING CAPACITY TO HELP MEET GLOBAL DEMAND

FONTERRA AND BEINGMATE INITIATE GLOBAL PARTNERSHIP IN CHINA’S HIGH-VALUE INFANT FORMULA MARKET

FONTERRA MAINTAINS FORECAST FARMGATE MILK PRICE FOR 2014/15 SEASON


GDT down .6%, whole milk price up 3.4%

August 20, 2014

GlobalDairy Trade’s price index dropped .6% in this morning’s auction.

gdt20814

That is a relief after three successive big drops.

Better still, the price of whole milk powder which largely determines the farm gate price, increased 3.4%.

However, while world grain prices are low and demand in China is soft, there is unlikely to be much improvement in the short term.

get20.8

 


Rural round-up

August 19, 2014

Global grain prices in free-fall – Keith Woodford:

Last week I wrote how the OECD and FAO secretariats expect many agricultural prices to drop in real terms over the next ten years as supply ramps up across the world. This is particularly the case for staple crops such as wheat, corn and soybeans. However, in the last ten days it has become increasingly apparent that major price decreases are playing out right now in front of us. With the early Northern Hemisphere harvest reports for wheat now coming through, with increasingly positive pre-harvest reports for both corn and soybean, and with existing high global stocks, the prices have all been tumbling.

The first place to look when considering international grain prices is the USA. The USA is by far the most technologically advanced cereal growing country in the world, and has huge global influence. . .

Insights from Canada water trip – Sally Rae:

When Waitaki Irrigators Collective policy manager Elizabeth Soal headed to Canada recently, she wanted to learn more about how water issues were managed, given that nation’s similarities with New Zealand.

There were similar legal systems, similar amounts of water per capita and challenges similar to those in New Zealand, including rising pressure around intensification and urbanisation putting pressure on the resource.

While she did not return with all the answers she was looking for, which she acknowledged was to be expected – ”water issues are complex and hard to solve, nowhere in the world has solved it perfectly” – she described it as an ”incredible experience”. . .

Growsafe looking to rise to the challenge - Yvonne O’Hara:

If relevant regulations and improved training requirements are introduced for agrichemical users as a result of the new Health and Safety at Work Act, it is likely Growsafe will rise to the challenge.

Growsafe provides basic and advanced training in the use of agrichemicals and is run by the New Zealand Agrichemical Trust.

Growsafe chairman Graeme Peters said the Government, as part of the new health and safety requirements, might consider removing the approved handler regime and replacing it with an Australian model that tailored training to suit the need, rather than the present ”one size fits all” regime. . .

Changing guard at ‘Lake Cowal’ – Peter Austin:

WHEN Leppington Pastoral Company took possession of the “Lake Cowal” property adjoining its Billabong Station at Marsden earlier this month, history to some degree repeated itself.

It was precisely 80 years ago that an earlier resident of Billabong Station had crossed the Bland Creek that forms the boundary between the two properties to make a new home on “Lake Cowal”.

That earlier 1934 migrant was Herbert (“Bert”) Dent, who had managed “Billabong” since 1924 for the Ricketson and (later) Sanderson families before taking the plunge and setting up on his own. . . .

Rural Women New Zealand Journalism Award entries open:

Entries are now open for the Rural Women New Zealand Journalism Award 2014, which will be presented at the NZ Guild of Agricultural Journalists annual awards dinner in Wellington on 17 October.

The Rural Women NZ award encourages journalists to report on the achievements of women living and working in rural communities.

It’s a strategy that’s paid off, says Rural Women NZ national president, Wendy McGowan.

“Last year the Rural Women New Zealand Journalism Award was one of the most popular categories.” . . .

Entries open for 2014 Air New Zealand Wine Awards:

Entries are open for the 2014 Air New Zealand Wine Awards.
Now in its 39th year, the Awards are a celebration of excellence in New Zealand winemaking and is widely considered to be the country’s most prestigious wine competition.

“Our industry is known for its commitment to quality, innovation and exceptional wines. The Air New Zealand Wine Awards is a fitting showcase for this,” says New Zealand Winegrowers’ Global Marketing Director, Chris Yorke. . .


Rural round-up

August 18, 2014

The circus of foreign ownership - Dr William Rolleston:

The Election has suddenly sparked into life. It was not a policy, a pratfall or a stunt, but Shanghai Pengxin Group’s Overseas Investment Office (OIO) application to buy Lochinver Station.

While Federated Farmers has taken the principled position of trying to learn what the ‘substantial and identifiable benefit’ to New Zealand is of this proposed sale, others have gone off the proverbial deep end.  National has been far too dismissive of concerns being raised in some quarters. Labour has gone to the opposite end by announcing they’d block the sale, along with the Greens.  Meanwhile, NZ First will go further and stop all foreign sales of New Zealand farmland.  That seems to be the position of Colin Craig, who stepped into Mr Peters shoes by breaking this story.

What everyone seems to have forgotten is process.  Our overseas investment rules are meant to operate on fair play under the guise of the OIO.  Instead, it has turned into an election political circus. The coverage of which, has gone global, given the media who have contacted me. . .

Meat and fibre’s time to shine - Rick Powdrell:

Boy oh boy, doesn’t it feel good to be a sheep and beef farmer for once. Of course it wasn’t always that way.  We were the dairy industry for decades, almost as soon as the Dunedin slipped out of Port Chalmers in1882, we rode the sheep’s back.  The good times operated under a simple business model.  We grew meat and fibre and Britain needed it.

Through war and peace, these good times seemed destined to run forever.  Our success blinded us to what the bright sparks at companies like DuPont were doing.  That was until they ‘wool-jacked’ us with oil based fibres.  That wasn’t helped by lamb being seen in the 1970s as your grans’ meal. You could have lamb cooked anyway you wanted as long as it came in a roasting tin.  Other meats became trendier and in some instances, cheaper, while our industry was trapped in a Sunday roast.  . .

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Demand drops for malting barley – Annette Scott:

A shrinking number of Kiwi beer drinkers is creating less demand for malting barley.

As beer consumption falls, coupled with higher prices for New Zealand barley, breweries require less malt and malting companies less barley.

Marton-based malting company Malteurop NZ operations manager Tiago Cabral said New Zealanders’ drinking habits were having an impact on the company. . .

 

Worth sharing - thanks The Horse Mafia

NSW $10m beef deal with China - Roderick Makim:

NSW beef suppliers have secured a $10 million export deal to the Chinese market.

Producers including Andrews Meat Industries in Lidcombe and the Northern Co-operative Meat Company Ltd in Casino are among the NSW suppliers involved in the deal, Deputy Premier Andrew Stoner said today.

Mr Stoner announced the deal while visiting Hong Kong and Shenzhen for a three-day trade mission along with representatives from a range of NSW food companies. . . .


Rural round-up

August 14, 2014

Whitebaiters urged to fish responsibly:

New Zealanders are being urged to keep their love of whitebait in check when the season begins or risk a $5000 fine.

The official whitebaiting season runs from mid August to the end of November, except for the South Island’s west coast which goes from September to mid November.

The Department of Conservation (DOC) says fishers need to stick to the regulations in place which are designed to protect the fishery’s juveniles.

Conservation grants for two west Coast groups:

Associate Conservation Minister Nicky Wagner today announced Conservation Volunteers New Zealand and West Coast branch of Forest and Bird have been awarded Community Conservation Partnership Fund grants.

Conservation Volunteers, which is a not for profit charitable entity, has been awarded $195,000 for a coastal amenities engagement programme.  It aims to develop community engagement in projects in Buller and Grey Districts.

“The grant, which will be spread over two years, will allow an engagement officer to be employed to encourage and manage community participation in critical conservation tasks on project sites at Punakaiki, Westport, Greymouth, Hokitika and Cobden Aromahana Sanctuary,” Ms Wagner says. . .

Fonterra and CSIRO Join Forces to Drive Sustainable Dairy Innovation:

Fonterra Co-operative Group Ltd. has signed a five-year strategic agreement with the Commonwealth Scientific and Industrial Research Organisation (CSIRO) to drive innovation in sustainable farming, manufacturing, health, nutrition and consumer dairy products.

The agreement will see CSIRO applying its expertise to the co-operative’s global dairy chain using its broad range of industrial know-how and scientific capability in remote sensing, resource engineering, ecosystem, food and water to help propel Fonterra’s V3 strategy.

Fonterra Chief Technology Officer Dr Jeremy Hill said, “We intend our partnership with CSIRO to develop a range of solutions to address Fonterra’s science and technology needs.” . . .

Fonterra in Australian research deal:

Fonterra says it’s not turning its back on New Zealand research organisations in an agreement it’s just signed with Australia’s Commonwealth Scientific and Industrial Research Organisation, CSIRO.

The five-year strategic agreement will cover research ranging from herd productivity, effluent management and milk quality, to processing and analytical technology, food design and consumer health.

Fonterra’s chief technology officer Dr Jeremy Hill was quick to point out that it would complement rather than compete with the work the dairy co-operative was doing with New Zealand research providers.

“CSIRO’s an extremely broad and diverse organisation, so it has science and technology capbilities in agriculture and food, but also in such areas as mining,(and) information technology,” said Dr Hill. . .

Companies collaborate in China:

Six New Zealand primary industry companies have formed a new collaboration to ease entry into the China market.

Primary Collaboration New Zealand Limited has established a China services company (ServeCo) as a wholly foreign owned enterprise (WFOE) in Shanghai to provide ‘in-market’ services. The collaboration stems from the inaugural New Zealand Primary Sector Bootcamp held by industry CEOs and government agency leaders at Stanford University in 2012.

The collaboration will initially involve Sealord, Silver Fern Farms, Synlait Milk, Villa Maria Estate, Kono and Pacific Pace (a collaboration between Hawke’s Bay horticulture businesses Mr Apple, CrasbornGroup and J M Bostock Group). . .

Livestock numbers forecast shows little change – unlikely to achieve MPI’s optimistic revenue forecasts - Allan Barber:

The Beef + Lamb New Zealand Economic Service’s latest stock numbers survey shows only minor changes in next season’s predicted volumes. However total sheep numbers are estimated to fall below 30 million for the first time.

A small increase in lamb numbers is forecast as a result of a better lambing percentage, although this still depends on a normal spring, especially in the main sheep breeding areas of the East Coast, lower North Island, and the South Island. The total sheep flock declined by 3.2% or nearly 1 million sheep. However the drop in the number of breeding ewes was only 1.4%, whereas hogget numbers were down 750,000.

The decline was more pronounced in the South Island because of continuing land use change from Canterbury to Southland; in the North Island the drought conditions in Northland had the main impact, while the rest of the island was relatively stable. The fall in the number of hoggets retained compared with the previous year poses a further threat to breeding ewe numbers for the following season. . .

DairyNZ reshapes senior roles:

DairyNZ has appointed David McCall to a new role of general manager of research and development as part of a plan to more closely integrate its research work with the products, tools, resources and services developed for farmers.

DairyNZ chief executive Tim Mackle says the change will see DairyNZ’s research and development teams merge into one new group from this month. The new appointment follows last month’s retirement of DairyNZ’s chief scientist, Dr Eric Hillerton.

“It is timely with Eric leaving to re-think the role of the research leadership position. We also have a new industry strategy with some ambitious targets and we need to think about how to organise ourselves to best deliver those for farmers. I’m keen to see greater integration because one of the dairy industry’s key strategic objectives is to research and develop innovative technologies and solutions to meet the current and future needs of dairy farms. . .

Tongues And Cheeks Among the Best:

What do water buffalo, pig’s cheeks and hare’s legs have in common? They’re all key ingredients in the dishes that have made the cut in the Monteith’s Wild Food Challenge.

After a month long feast, daring New Zealanders have voted for their favourite wild dish and together with a panel of judges, have selected 12 finalists in the Monteith’s Wild Food challenge. Expert judges have travelled the length of New Zealand, tried 122 dishes and pushed their palates to new levels in the hunt for the finest feast and the best flavourable Monteith’s companion.

“I’ve seen many innovations since the inception of the Challenge 17 years ago and am always surprised and delighted by the combinations of Monteith’s and wild foods created by talented New Zealand chefs,” says Head Judge Kerry Tyack. . . .

This almost made me cry laughing. I'm sure not a ton of people will agree, but those that do ... high five!!!!!! And Props to the person that stopped to take the picture and took the time to post it! I <3 farmers !!!


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