Rural round-up

March 30, 2014

Deutsche Bank keeps ‘sell’ rating on Fonterra, seeks more transparency – Pattrick Smellie:

(BusinessDesk) – Fonterra Cooperative Group needs to make it far clearer to farmers and other investors how its business model operates, says Deutsche Bank after the dairy exporter shored up a slump in half-year profits by intervening in the regulated price it pays for milk at the farm gate.

Deutsche Bank retains its ‘sell’ rating on Fonterra Shareholders Fund units, with a 12-month target price of $5.64. The units slipped 0.2 percent by mid-afternoon to $6.08, and have fallen from a closing price of $6.15 on March 26, when the result for the six months to Jan. 31 was declared.

Fonterra posted a 53 percent fall in first-half net profit to $217 million, a result that would have been far worse if the cooperative had not taken the unprecedented action last December of deciding to reduce the regulated Farm Gate Milk Price (FGMP) to farmer-shareholders by 70 cents per kilogram of milk solids. . . .

New Zealand dairy farmers are responding to high prices by cranking the handle on their production to cash in on record payout – Jeff Smith:

Our dairy farmers are “cranking the handle” on production in response to high prices they are receiving for their milk.

As a result nationwide dairy production is expected to be up by 11% this current season.

Strong dairy prices have “handed the baton” to strong dairy volumes, ASB says in its economic update released today.

Volumes would be higher than normal this year as farmers had bought extra feed to increase milk production in anticipation of higher prices, ASB Bank rural economist Nathan Penny told interest.co.nz today. . . .

Farmer lands $30,000 in prizes - Elliot Parker:

Hard work has its merits.

Hinakura farmer Donald McCreary can attest to this after winning the award for the Beef and Lamb Wairarapa Farm Business of the Year and in the process scoring himself $30,000 in prizes.

McCleary has been farming in Hinakura, east of Martinborough, since 2004 on a 1375 ha property which is predominantly steep, hill country.

The property contains 6700 ewes and 225 breeding cattle.

McCreary says his approach to good farming is to be well versed in all areas of farm management. . .

Meat industry on the rise - Carmen Hall:

Higher lambing percentages and export carcass weights are helping offset a dramatic drop in sheep numbers.

Numbers have almost halved since 1991, but the amount of product being exported has remained stable as farmers focus on improving their systems.

Negative publicity has overshadowed the fact farmers have made significant gains in productivity and the industry has the potential to cash in on future growth, industry leaders are saying. Beef and Lamb New Zealand chief executive Scott Champion says the organisation focused on “best practice behind the farm gate”. . .

Finance support adds up for farmers :

Tauranga HR company Teaming Up hopes to connect accountancy firms with farmers in an economic development project that could generate millions of dollars.

The company spearheaded the Beyond Reasonable Drought inaugural road shows in the Bay of Plenty and East Coast last month, which attracted nearly 1000 people.

Marlborough sheep and beef farmer Doug Avery, who was on the brink of disaster 15 years ago after consecutive droughts, presented the seminars. He overcame adversity by adopting a scientific approach to agriculture and introducing deep-rooted, drought-tolerant lucerne. He employs six full-time staff, including son Frazer, and his business is a profitable operation that promotes high-reward, low-impact farming. . .

Honey lovers could get stung:

Honey prices could rise as much as 20 percent due to one of the worst seasons in decades.

Beekeepers say lower than usual temperatures in January meant the insects stayed inside their hives during the peak season and produced less honey. . .


Not quite like winning Lotto

August 1, 2013

The 50 cent increase in Fonterra’s forecast payout announced yesterday will mean another $500,000 for farms producing a million kilos of milk solids.

One farmer described it as like winning Lotto but it’s not quite like that.

It doesn’t come from gambling a few dollars and luck. It’s the result of a large investment and a lot of hard work by the farmers and their staff, and by Fonterra and its board and staff.

But it is good news for farmers and the wider economy:

. . . While dairy farmers aren’t getting too ahead of themselves, economists are not only predicting higher milk prices but also increased production. Economists predict the lift in milk prices and an increase in milk production could boost the New Zealand economy by $3.5 billion. . .

The high payout provides reassurance for farmers who feared that enabling shares to be traded would come at their cost:

. . .But what’s great news for Fonterra’s farmers and the economy is not such good news for outsiders who invested in the Fonterra Shareholders’ Fund.

The more Fonterra pays for its raw milk, the worse it gets for them.

The forecast milk price is going up fast, but Fonterra’s share price fell today. It seems that for investors, Fonterra can have too much of a good thing.

“The increased payments to farmers actually results in higher costs to Fonterra and therefore lower profit margins made on its products that it sells to the consumer,” says Brooke Bone of Milford Asset Management.

Investors in the Fonterra Shareholders’ Fund don’t receive the raw milk payout. They receive dividends from the money Fonterra earns turning that raw milk into finished products, and that market’s just getting tougher. . .

The higher payout will make dairying more attractive for those considering expanding or converting and the lower share price will make it a little easier for those who then choose to supply Fonterra.

There is one similarity between a Lotto win and the higher payout – both provide opportunities and choices.

But most farmers will put most, if not all the extra money into the business – reducing debt, upgrading plant and machinery, environmental enhancement . . . there’s a long list of things on which the money could be spent and there will be tax to pay on it.

As more than one has commented, if they won Lotto, they’d just keep farming til it was gone.


Fonterra shares too expensive for farmers?

February 25, 2013

The grapevine tells us that more than 30 dairy conversions are underway in Canterbury and none will be supplying Fonterra.

The reason given is that the shares have become too expensive.

. . . Many councillors agreed the Fonterra Shareholders Fund unit price was too high ($7.25 on Friday) and that was stifling trading on the share market.

Brown agreed before the dairy council meeting in Waitangi last week unit fund trading was driving share value, because farmers hadn’t started trading yet.

“Only one half of the market is working at present,” he said, before the interim result is declared in March and the six-month moratorium, which began on November 30, is over. . .

Fonterra is facing stiffer competition from dairy companies which aren’t co-operatives and don’t require suppliers to buy shares.

Conversion is an expensive business and not having to buy shares is an easy way to reduce costs.


Rural round-up

November 21, 2012

Fonterra scotches speculation of US$450m Indian acquisition – Paul McBeth:

Fonterra Cooperative Group, the world’s biggest dairy exporter, has dismissed speculation the company is among potential bidders for India’s Tirumala Milk Products.

The New Zealand cooperative scotched a Times of India report naming it with French food conglomerate Danone as vying for a controlling stake in Hyderabad-based Tirumala, with a spokesman for the dairy exporter calling it “rubbish”. The US$450 million enterprise value figure reported would be material for Fonterra and would need to be disclosed, he said. . .

Water allocation and limit setting in a changing climate – Waiology:

Last week, the Land and Water Forum released its third and final report on water management in New Zealand. It is a substantial piece of collaborative work with 67 recommendations. Number 29 is that allocation limits be set by taking into account “any flow and water level fluctuations caused by seasonal or other climate variations”. While this primarily refers to natural variability, such as the Interdecadal Pacific Oscillation, it’s also important to consider climate change. And along the same lines, last year’s National Policy Statement for Freshwater Management stated the need to account for the “foreseeable impacts” of climate change.

This is an important issue, as climate change is expected to bring about a raft of changes to New Zealand’s freshwaters (more details on that soon). Among these changes are reductions or increases in the amount of water available for use. Also importantly, climate change makes assessments of future water resources less certain. . .

Fonterra shareholder fund pricing uncertainty leaves Morningstar cold – Paul McBeth:

Investors should steer of the Fonterra Shareholders’ Fund, which seeks to raise up to $525 million to reduce the dairy cooperative’s redemption risk, until the units start trading, according to Morningstar Research.

However, the units have too many pricing uncertainties in the bookbuild phase.

The research firm gives a ‘do not subscribe’ recommendation for the fund’s initial public offering, saying Fonterra Cooperative Group lacks pricing power over its dairy commodities, generates low returns compared to its multinational peers, and investors won’t know the price they are paying until after the bookbuild process is completed on Nov. 27. . .

A2 in talks with NZX about shifting to main board – Paul McBeth:

A2 Corp, which markets milk products with a protein variant claimed to have health benefits, is in talks with the New Zealand Stock Exchange about shifting its listing on the main board.

The company, currently listed on the alternative market, qualifies for listing on the NZX main board, and managing director Geoffrey Babidge says that is a more recognised market and can provide better transparency and investor protection, according to a presentation at today’s annual meeting.

“A move to the NZX main board may provide greater liquidity and increase access to capital,” Babidge said. “To this end, the company has commenced discussions with NZX regarding a move to the NZX main board.” . . .

Kiwifruit vines credited as carbon sinks:

Three years of research by a Bay of Plenty company has found that kiwifruit orchards store a significant quantity of organic carbon in the soil.

PlusGroup Research received funding from the former Ministry of Agriculture’s sustainability farming fund to do the research, which investigated soil samples from more than 120 kiwifruit orchards across different growing regions. . .

Beef + Lamb NZ director elections:

Nominations are being called for two farmer-elected positions on the Board of Beef + Lamb New Zealand.

The positions are for the Western North Island and Central South Island electorates.

Nominations must be submitted on the official form obtained from the Returning Officer, Warwick Lampp, free phone 0508 666 003. The nominations need to be received by 5 pm on 20 December 2012. . .

Better Look Over Your Shoulder – Fish & Game Warning To Poachers:

The latest camouflaged ‘poacher cams’ are proving their worth in the Rotorua lakes district – giving trout poachers even more reason to look over their shoulder.

That’s according to Eastern Region Fish & Game, which has released information on the number of offenders caught over the last three months.

Fish & Game Officer Anthony van Dorp says that over the past three months (ending November) they’ve dealt with 30 people for a variety of offences ranging from fishing without a licence and fishing closed waters – to serious poaching offences. . .

Celebrating 150 Years in the Valley of Gold & Cardrona Vintage Fair

The historical and picturesque township of Cardrona in the breathtaking Cardrona Valley turns 150 years Gold this year. To celebrate, the iconic Cardrona Hotel and the greater community are opening their doors, hearts and rabbit cookbook’s for a birthday bash guaranteed to delight all ages.

Saturday 8th December – 150 Years of Gold celebration

From the excitement of highly trained heading dogs competing in the Dog Trials to trying your hand at gold panning, the 150 Years of Gold celebrations are local-jam-packed with fun and fascinating events for everyone. . .


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