GDT index up 1.4%

October 16, 2014

GlobalDairyTrade’s price index rose 1.4% in this morning’s auction.

That is welcome news after the big fall in the index at the previous auction.


GDT price index drops 7.3%

October 2, 2014

GlobalDairy Trade’s price index dropped 7.3% in this morn’ing’s auction.

That’s  not the news we were wanting, especially when whole milk powder, on which Fonterra’s payout is based dropped 10%.

Federated Farmers says the result is disappointing:

There’s no way to dress this up as anything but a kick in the guts,” says Andrew Hoggard, Federated Farmers Dairy chairperson.

“This is the auction result that brings the chickens roosting in the Eastern Ukraine home to us on-farm. Dislocated European Milk has definitely put a sinking lid on global dairy prices.

“Unlike most of our competitors who are subsidised there’s not one Kiwi farmer looking for a handout. We may not like what prices are doing but we know this is market forces at work and while it often runs in our favour, this season it isn’t.

“We don’t have subsidies, we have bankers and unlike subsidies you have to pay them back with interest.

“Any type of farming is a long run thing and you have to take the rough with the smooth. . . .

Quite.

Last season gave us record returns, this one is going to be much more difficult but that’s business.


The sky isn’t falling

September 25, 2014

The cut in Fonterra’s payout isn’t good news but it isn’t the disaster that many are proclaiming.

Nor was the timing the political conspiracy that Winston Peters suspects:

Just four days after the General Election the true state of the dairy industry is revealed – returns for milk that the New Zealand economy is reliant on have slumped.

“Questions need to be asked by New Zealand voters on why they were not informed about this serious decline before Election Day,” says New Zealand First Leader, Rt Hon Winston Peters.

“The drop in payout is a $5 billion hit to the New Zealand economy and 2 per cent off nominal GDP.

“It appears the government and Fonterra joined forces to keep the facts hidden from voters? . . .

Fonterra makes announcements on its previous season’s final payout and any revision to the current one at this time every year.

The record final payout for last season was no surprise. Nor was the cut in this season’s forecast.

Anyone with even cursory knowledge of the global milk market was expecting it after successive drops in the GlobalDairyTrade price index and with the knowledge that the milk supply here and around the world was outstripping demand.

Lower income will impact on farmers, those who service and supply them and the wider economy but the news isn’t all bad.

The value of our dollar fell after Fonterra’s announcement which will help all exporters.

And while dairy prices are falling, demand and prices for sheep meat and beef are improving:

Rabobank New Zealand CEO Ben Russell said the softening in overall rural confidence was clearly a reflection of the impact of the bearish global dairy outlook and lower milk prices on dairy farmer sentiment.

“Falling dairy commodity prices are the overwhelming factor at play here. At the time of the survey being taken, the globalDairyTrade auction prices fell six per cent, taking them down 45 per cent from their February peak,” Mr Russell said.

“And with global dairy supplies continuing to increase from all key exporting regions, a significant price recovery is not imminent.

“That said though, farm commodity prices move in cycles and, clearly, dairy commodity prices are entering a lower part of the cycle right now. While this is always a difficult time, the important thing to remember is the medium to long-term picture for the dairy industry is strong.”

Mr Russell said dairy farmers were also cautious with the dairy industry approaching a critical time in the year, with the peak production and selling period for New Zealand milk just weeks away.

The dampened confidence among dairy farmers was reflected in their business performance expectations in the coming 12 months.

Dairy farmers had the most pessimistic outlook of their own farm business performance. However, Mr Russell said, it should be noted this was coming off record highs for business performance expectations among dairy producers over the past 12 months.

The latest survey found almost half of dairy farmers surveyed (47 per cent) expect the performance of their own farm business to worsen in the coming 12 months, up from 30 per cent with that expectation in the previous quarter. Just 20 per cent expect an improvement in performance, compared with 27 per cent previously. A total of 32 per cent expected performance to remain stable.

While there was also a tempering in sentiment among beef and sheep farmers, after reaching three-year record highs in the previous survey, confidence in this sector remained at overall strong levels.

Mr Russell said lamb prices were up on the previous season and beef prices were currently hitting record highs due to tight global supply.

In terms of expectations of their own businesses, the number of beef and sheep farmers expecting improved performance declined from 57 per cent last quarter to 48 per cent this survey. However, the percentage expecting their farm business performance to worsen remained stable, at just seven per cent. A total of 42 per cent anticipated business performance would remain at the same level.

Despite the decline in overall confidence, New Zealand farmers’ investment intentions were overall stable, the Rabobank survey showed.

Sheep and beef farmers increased their investment appetite – with 43 per cent indicating they intend to increase investment in their farm businesses over the next 12 months, up from 37 per cent previously. Only six per cent intended to decrease investment (compared with four per cent in the past quarter).

For dairy however, investment appetite had waned, with 21 per cent intending to invest less in their businesses (up from just seven per cent with that view in the previous survey) and 20 per cent expecting to increase investment (down from 27 per cent). This was the lowest level of dairy farmer investment intentions in more than five years (since August 2009).

Mr Russell said this change in sector investment dynamics may be an early indication the decline in the national sheep flock and the rate of dairy farm conversions were slowing. . .

Federated Farmers says farmers will be down but far from out:

Fonterra Cooperative Group farmer shareholders will welcome confirmation that the 2013/14 season has ended exactly as promised with a total payout of $8.50 per kilogram of milksolids (kg/MS).  That good news is balanced by a sharp revision downwards in the 2014/15 forecast.

“The 2014/15 season which offered so much has turned into a breakeven one for not just Fonterra suppliers but the entire industry,” says Andrew Hoggard, Federated Farmers Dairy chairperson.

“Like Synlait’s revision this week, there is a ‘good news and bad news’ dimension in this.   The good news is that we take the 2013/14 confirmed payout and the lowest revised forecast for 2014/15, we are talking an average total of $7kg/MS across the two seasons.

“A $5.30 kg/MS milkprice is also a lot higher than some commentators had expected if the forecast sticks.  If being a little word with a big meaning.

“Losing 70 cents kg/MS on the milkprice is really going to hurt.  Farmers will be kicking capital works into touch and will be pruning herds to rid themselves of any passengers.

“Speaking to DairyNZ, farm working expenses this season, before depreciation and interest payments, are expected to be around $4 kg/MS this season.  Feed, fertiliser as well as repairs and maintenance are going to be cut back.  We’ll only do what needs to be done.

“What we know from DairyNZ is that two-thirds of dairy farms have working expenses of between $3.25 and $4.75 kg/MS.  Of course when you start paying back the bank manager, the average cash costs on-farm head up to $5.40 kg/MS.

“As you can tell from what the forecast currently is, the current surplus is a wafer thin 15 to 25 cents kg/MS.  Expressed as retail milk, that’s about 1.25 to 2 cents a litre this season.

“It means that upwards of a quarter of our guys will be making a loss this season. 

“We also believe that unlike the Global Financial Crisis, dairy farmers have been listening and have focussed on building financial freeboard.  Sadly for some farmers, they’ll have to dip into that big time.

“Federated Farmers’ advice is to watch costs but to keep your bank, farm consultant, accountant and family fully in the loop.  Take a no surprises approach to get through.

“This season has been a perfect one for global milk with ideal conditions everywhere compounded by civil unrest in the Middle East and dislocation of European milk due to what is happening in Eastern Ukraine.

“We can only hope there is no more bad news but I am optimistic we may be back above $6 kg/MS for 2015/16,” Mr Hoggard concluded.

Agricultural prices are always cyclical.

Dairy farmers creamed it last season, now it’s sheep and beef farmers who have a brighter outlook. Both know that what goes up comes down and what comes down goes up again, sooner or later.


Rural round-up

September 24, 2014

Beef surges to record on US demand for hamburgers, outlook upbeat – Tina Morrison:

(BusinessDesk) – Prices for beef used in hamburger patties in the US are likely to hold at elevated levels after surging to a record in the past year as drought-ridden American farmers rebuild their herds, boding well for kiwi farmers, an analyst says.

The price for US imported 95CL bull beef, the raw ingredient for meat patties, has surged 59 percent to US$3.18 a pound in the past year, according to Agrifax data. In New Zealand dollar terms, the price is at $8.37 per kilogram, beating the previous record of $6.60/kg in 2001.

“It has just been rocketing up very sharply. It is well into record territory now,” said Nick Handley, senior sheep and beef analyst at Agrifax. “If prices can stay anywhere near these levels, it’s extremely positive for New Zealand because you expect a lot of that to flow through to New Zealand processors and New Zealand farmers.” . . .

Time right for large irrigation schemes:

Farming and irrigation lobby groups are eager for the new Government to change environmental rules and get large-scale irrigation schemes up and running.

Lobby groups Federated Farmers and Irrigation New Zealand say the time is right, with the National Party being re-elected by a handsome margin for the Resource Management Act to be reformed.

Irrigation New Zealand chief executive Andrew Curtis said today that proposals by Labour and the Green parties to tax water did not find favour with irrigators, and National’s resounding win on Saturday gives them more confidence.

Mr Curtis said Irrigation New Zealand wants to see changes to the RMA. . .

Farmers Disappointed with Milk Price Drop, Cautious Approach Required:

Fonterra Shareholders’ Council Chairman, Ian Brown said Farmers will be disappointed following the Co-operative’s latest drop in its 2014/15 forecast farmgate Milk Price to $5.30 per kg/MS.
The Co-op also announced an estimated dividend range of 25-35 cents per share.

Mr Brown: “Even though Farmers are aware of the prevailing market conditions and the effect they have on the price they receive for their milk the announcement will add to the challenges being faced on-farm.

“It is in these seasons that Farmers will want to receive the full benefit from the integrated supply chain that their Co-op provides. . .

Great Result for Farmers Following Challenging Year for Co-Op:

Fonterra Shareholders’ Council Chairman, Ian Brown said the 2013/14 season was one of real complexities for the Co-operative yet produced a great result for Farmers.

Mr Brown: “The farmgate Milk Price of $8.40 per kg/MS has come on the back of a season in which good production was supported by strong demand and high prices.”

“This will be very well received by Farmers.”

Mr Brown said it was important to recognise that the same factors which positively affected the farmgate Milk Price, such as the demand for milk powders, contributed to the challenges faced by the business in terms of profit as evidenced by the Earnings Before Interest and Tax (EBIT) figures. . .

 Couple give their farm to university – Jill Galloway:

It was a time for celebrating.

After 10 years, Bulls-Marton farm owners Jim and Diana Howard found they could work with Lincoln University and it had a deal with local iwi Ngati Apa.

It had not been for lack of trying to find a like-minded partner.

But now it has come together – a demonstration farm that local farmers can look over the fence at, and get good ideas, as well as a farm to train people in sheep and beef and cropping.

That was what the Howards wanted and they have given their farm to the Lincoln Westoe Trust. . .

Candidates for Fonterra Board of Directors’ Election Confirmed:

Candidates for the Fonterra Directors’ Election were announced by the Returning Officer, Warwick Lampp today following the completion of the Candidate Assessment Panel (CAP) process.

This year there are six candidates standing for the Board of Directors. They are Gray Baldwin, Leonie Guiney, David MacLeod, John Monaghan, Garry Reymer and Grant Rowan.

As in previous years, the CAP process was available to assess the capabilities, experience and qualifications of Director candidates and provide Fonterra shareholders with more information to help in making an informed vote. While the CAP process is open to all Director candidates, it is not compulsory. This year all candidates went through CAP. . .

 

Pahiatua Company Announced as New Zealand Innovators Awards Finalist:

Pahiatua company, DTexH2o, has been named as a finalist in the Innovation in Agriculture & Environment category of the prestigious New Zealand Innovators Awards.

The company’s innovative product, DTexH2o, is an in-line electronic probe that detects the difference between milk and water in the cowshed milk line.

Founders of the company, Graeme and Alison Franklin, said the DTexH2o uses an alarm to stop farmers spilling milk down the drain or getting water in the milk vat during wash-down.

“When a farmer washes-up the milk line, water is pumped through the pipes, pushing the last milk through into the vat. The farmer must manually turn the valve to re-route the water to stop it going in the vat,” Alison said. . .

New Chairman Excited by Gimblett Gravels Opportunities:

Less than a week into his role, new Gimblett Gravels Winegrowers Association (GGWA) Chairman, Gordon Russell, is already working on plans for GIMBLETT GRAVELS future success.

Esk Valley’s Senior Winemaker, Gordon says, “I am honoured to become Chairman of this talented group of growers and wine producers. I would like to carry on the work of outgoing Chairman, Tony Bish of Sacred Hill, whose strategic direction and dedication over the last two years has significantly raised the profile of GIMBLETT GRAVELS wines, both in New Zealand and on the international stage. . .


Fonterra drops payout, ups dividend

September 24, 2014

Fonterra has dropped its forecast payout for this season but increased the forecast dividend:

Fonterra Co-operative Group Limited today reduced its forecast Farmgate Milk Price for the 2014/15 season from $6.00 to $5.30 per kgMS, and increased and widened the estimated dividend range from 20-25 cents per share to 25-35 cents – amounting to a forecast Cash Payout of $5.55-$5.65 for the current season.

Chairman John Wilson said the lower forecast Farmgate Milk Price reflected continuing volatility, with the GlobalDairyTrade price index declining 6 per cent in the past two trading events.

“The market is currently influenced by strong milk production globally, the impact of Russia’s ban on the importation of dairy products, and the levels of inventory in China. Some relief has been provided by exchange rates, with the NZ dollar recently showing some signs of falling against the US dollar.

“Under the current market conditions, there is further downside risk.  However, the forecast reflects expectations that prices will increase in the medium term,” Mr Wilson said.

Chief Executive Theo Spierings said the estimated dividend range reflected the positive impact of a lower forecast Farmgate Milk Price on product margins but also significant volatility in commodity prices.

“A lower forecast Farmgate Milk Price reduces input costs in our consumer and foodservice businesses. In turn, we do expect to deliver increased returns as a result of a recovery in margins on our products.

“In addition, stream returns for Non-Reference Commodity Products such as cheese and casein are currently making a positive earnings contribution, but it is still very early in the financial year.

“With volatility in commodity prices, a wide range of outcomes are possible in relation to stream returns. The wider dividend range reflects this volatility, and at this stage of the financial year, it is not realistic to be able to accurately forecast the final result for the year within a narrower range.”

Mr Wilson said that the forecast Farmgate Milk Price remained reliant on increasing dairy prices in the medium term.

“The forecast Farmgate Milk Price is reduced based on current estimates of future pricing. There remains significant volatility in international dairy commodity prices and given this, this forecast is our best judgment at this time.

“As always, we recommend caution with regards to on-farm budgets in this environment of continuing uncertainty.”

The news wasn’t all bad. Fonterra confirmed a record payout for last season:

Fonterra Co-operative Group announced today a final Cash Payout of $8.50 for the 2014 year for a 100 percent share-backed farmer, comprising a Farmgate Milk Price of $8.40 per kgMS and a dividend of 10 cents per share.

Chairman John Wilson said that the Cash Payout to the Co-operative’s 10,500 farmer shareholders was the highest ever made since Fonterra’s formation in 2001.

“The Farmgate Milk Price on its own represents an injection of more than $13.3 billion to the New Zealand economy for the season.

“It is a strong result, reflecting the determination of our farmer shareholders to lift on-farm performance, matched within the business by a focus on driving revenue.

“Our farmers took advantage of good conditions to produce 1,584 million kgMS, eight percent more than last season, to make the most of the good prevailing prices early in the season.

“North Island volumes were up nine percent at 969 million kgMS, while the South Island delivered a seven per cent rise in volumes to 615 million kgMS.

“A very good spring saw our farmer shareholders achieve record milk production through an extended peak, stretching our production capacity for powders. This led to early impacts on stream returns from the less valuable products we were forced to make.”

Fonterra CEO Theo Spierings said the Co-operative had come through a very demanding year.

“We have continued to stay on track with our strategy, focusing on securing the best returns to our farmer shareholders.

“We achieved record revenue of $22.3 billion for the year, a direct result of the focus on achieving the highest possible revenue line that is good for the Farmgate Milk Price.

“Constrained margins in our foodservice and consumer businesses and on non-milk powder products were the knock-on effect, contributing to a 27 per cent rise to $19.8 billion in the cost of goods sold. However, we maintained our focus on efficiency and achieved a two per cent reduction of $46 million in our operating costs.

“Our higher cost of goods sold, along with higher interest and taxation, saw our net profit after tax decline by 76 per cent to $179 million.” . . .

The cut in this season’s forecast was expected and last season’s record payout will be some compensation.

However, the reduced payout will impact not just on farmers but the people and businesses who service and supply them and the wider economy.

When the price goes up there’s always calls from the left for farmers to subsidise consumers.

There won’t be a call to subsidise farmers now the price has gone down, nor would we want it.


Rural round-up

September 17, 2014

Beef + Lamb New Zealand Outlines Priorities Ahead of General Election:

Beef + Lamb New Zealand has outlined what it sees as the policy priorities for the incoming government.

Beef + Lamb New Zealand Chairman, James Parsons says the policy manifesto covers a range of issues that will support a confident and profitable sheep and beef sector.

“The red meat sector is hugely important to the New Zealand economy – worth $8.5 billion a year, so it’s critical that the incoming government is aware of the issues that affect our sheep and beef farmers,” Parsons said.

“Our first priority is securing investment in research and development that will increase farm productivity and continue adding value to our sheepmeat and beef products. . . .

 

It all depends on China – Keith Woodford:

New Zealand agribusiness, led by dairy, has hit a rough spot. Some will see this as confirmation that dependence on China involves big risks. More important, is the need to recognise that China is also the solution.

Chinese demand for dairy products in particular has grown so rapidly that it was inevitable there would be speed wobbles. With hindsight, we can see that it was the New Zealand drought of autumn 2013, combined with increasing Chinese demand, that led to shortages of milk products in Chinese supermarkets during late 2013. The Chinese importers then over-reacted, and purchased heavily during our summer months. Increased autumn production in the current year has then coincided with Chinese inventories already fully replenished. . .

Water quality rules ‘work in progress’:

The national water industry body says rules on water quality are not set in concrete and will develop further.

New national fresh water standards which, for the first time, set minimum quality requirements for rivers, lakes and aquifers were announced earlier in the year.

Water New Zealand is holding its annual conference in Hamilton from today. Chief executive Murray Gibb said the rules are a work in progress and would be reviewed in 2016.

“There’s been debate as to whether or not it’s sufficiently tight and there’s been a lot of debate over whether or not the corner-stone policy that it imposes a requirement on councils to maintain and improve overall water quality within their regions might lead to declining water quality in some water bodies. . . .

Make a fuss of scheme:

    The prime minister was in Ashburton last Thursday. He then visited Timaru to wander up and down the main street, talking to voters.

A slight detour between those two destinations would have taken him to the seven massive ponds that are the Rangitata South Irrigation Scheme, at the very time they were being filled to capacity for the first time.

It would have been a great photo op for the prime minister, and a fitting tribute to the scheme’s backers, to have the PM officially “open” the out-of-river storage project.

Maybe such a function is planned but chances are it’s not. And that’s not a snub to the prime minister, but a reflection more of the personality of the man behind the scheme, Gary Rooney.

He’s a doer, not a talker. He doesn’t go looking for pats on the back.

Where the Herald had plenty of coverage of the Opuha Dam as it was being built in the 1990s, with this project it has been like drawing teeth to get updates.

It’s not that Rooney and his workers were being obstructive, they just did not see the need to speak to the media. They were too busy building the thing.

But if he’s not going to blow his trumpet on the project, we will. . .

Generations of shearing in Brett’s family blood – Sally Rae:

Brett Roberts was destined to a shearer.

Not only does his grandfather, Cliff Waihape, have a shearing contracting business based in Mataura, but four of his uncles, Chad, Chop, Cliff jun and Cody, are also shearers.

”Our family, it’s in our blood,” he said.

Mr Roberts (20) started shearing at a young age, while still at school in Menzies College, Wyndham, with his family members showing him the ropes. . .

 

Southland swede group underway:

A cross-sector industry-led working group is coming together to co-ordinate research and advice to farmers following an issue with swedes affecting dairy cattle this season.

Across Southland, there has been a number of cases of cows becoming ill, and in some cases dying, while (or shortly after) grazing on swede crops.

A joint working group with representatives from a range of sector groups will be chaired by industry body DairyNZ and meet for the first time on Wednesday September 17. The group includes representatives from Southland veterinary practices, Federated Farmers, Beef+Lamb NZ and PGG Wrightson Seeds. It will also bring in specialist advisors on veterinary pathology and plant science.
DairyNZ has already sent an email survey to more than 2,600 Southland and South Otago farmers seeking information on whether they have been affected by the issue. It has also been advising farmers to be vigilant if their cows are feeding on swede. . .

 

New appointments at Dairy Women’s Network:

As Dairy Women’s Network grows from strength to strength, so too does its number of professionals grow.

The organisation has most recently acquired an events manager in Kym Gibson of Hamilton and a third regional convenor coordinator in Megan Edmeades of Manawaru (near Te Aroha).

Creating environments and experiences that resonate is a passion for Gibson, and something she is looking forward to fulfilling at the organisation’s 30-plus annual events.

Learning more about the “diverse and dynamic” organisation that is DWN is Gibson’s first challenge in the role, which she started in earlier this month. . . .

 

 


GDT price index stable

September 17, 2014

The GlobalDairyTrade price index didn’t change in this morning’s auction which is a relief after five consecutive falls.

gdt17914

gdt17.9.14


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