Rural round-up

June 30, 2014

Rustling needs to be a specific offence:

Federated Farmers is asking political parties to develop policies to tackle the scourge of stock theft better known as rustling.

“We know stock theft or rustling has been estimated to cost the farming community some $120 million each year,” says Katie Milne, Federated Farmers rural security spokesperson.

“In recent weeks we’ve seen a lifestyler raided for breeding ewes in Waikato and over 200 sheep despicably shot in Otago.

“We’ve got to ask if the penalties imposed are serious enough to be a deterrent for either rustling or poaching. Based on our experience to date they are not. . .

Behaviour is the root cause of meat industry’s problems – Allan Barber:

I am not completely sure why we spend so much time and effort complaining about the meat industry or which problems we are trying to solve. However in the interests of encouraging progress and stimulating debate, I will try to define the problem: this appears to be that the meat processing and export sector is not profitable enough, whether in absolute terms or in comparison to dairy. Both may be true.

It is worth stating the unique challenges of the red meat sector up front. First, there is a market at both ends of the chain, procurement and sale of the products; second, New Zealand exports a higher percentage of its production than any other country which must travel further to reach its markets, not all of them equally buoyant; third, sheep and beef must be disassembled into multiple cuts of meat as well as many co-products, all of which are sold into a wide range of markets for variable returns; fourth the climate dictates when the grass will grow and livestock will be ready for slaughter; and last, but not least, the producer can choose when and where to send the livestock for slaughter except in a drought. . .

The recipe for future success:

Blue Sky Meats and its suppliers will be relieved the company is back in black after two challenging years.

The return to profitability – a $1.946 million after-tax profit for the year to March – came on the back of the only two losses in the Southland-based company’s 28-year history.

It has been a much better year for meat companies. Along with Blue Sky – and Lean Meats – the two big co-operatives, Alliance Group and Silver Fern Farms, who both report late in the year, have signalled profitable years. . .

Dairy recovery anticipated – by Christmas – Sally Rae:

Dairy commodity prices are predicted to stay in a trough period for another three to six months.

Speaking at the recent South Island Dairy Event in Invercargill, Rabobank’s director of dairy research for New Zealand and Asia, Hayley Moynihan, said it could be Christmas before there was a more sustained recovery in commodity prices.

It would be a ”reasonably prolonged” trough, as inventories were worked through and an additional seven billion litres of milk available on the world market in the first half of 2014 took time to ”find a home”. . .

Focus on consumers behind Pasture to Plate success – Sally Rae:

King Country farmer William Oliver’s belief in the consumer stemmed from his time studying at the University of Otago.

Mr Oliver and his wife Karen were the overall winners of the Silver Fern Farms’ Pasture to Plate Award.

Silver Fern Farms chairman Rob Hewett said the couple impressed the judges with their focus on the consumer. . . .

Simpler pesticide rules on the way:

The Environmental Protection Authority is aiming to simplify the rules covering pesticides and other hazardous substances.

The authority is marking its third anniversary as the country’s environmental regulator after being created from three agencies – the Environmental Risk Management Authority, the Ministry for the Environment and the Economic Development Ministry.

EPA chief executive Rob Forlong said one of its big achievements has been a wide ranging review of organophosphate chemicals, which resulted in controls on some pesticides being tightened and others phased out. . .

Final countdown for Ultimate Rural Challenge:

The showcase event of the rural calendar is only three days away!

The 2014 ANZ Young Farmer Contest Grand Final begins this Thursday 3 July, 4.30pm with the Official Opening at Lincoln University Library. Here, the top seven contestants will be introduced to the public and compete in their first head-to-head challenge.

The competition over the following two days is a testament to the sophistication of modern farming and level of skill and knowledge required to be successful in the field. The top seven young farmers have made it through to the Grand Final by competing in their local district competition and taking first place in their Regional Finals.  . .

Successful annual conference for Rural Contractors NZ:

More than 100 agricultural contractors from all over the country met in New Plymouth, last week, for Rural Contractors New Zealand’s (RCNZ) annual conference.

Rural Contractors New Zealand is the only national association for rural contractors in New Zealand.

Last week’s conference saw Wellsford-based Steve Levet re-elected as president of RCNZ, with Southland’s David Kean re-elected vice-president. . .

 


Farmers subsidisng NZ consumers

November 29, 2013

The question of why milk isn’t less expensive here when we produce so much is often asked.

What most people don’t know is  the retail price is well below the real cost.

. . . Chief executive Theo Spierings said the downside of strong demand for dairy commodities was increasing pressure on Fonterra’s NZ Milk Products division where profit margin remained under pressure.

To illustrate his point, Spierings said if the division were to pass on to consumers of a two litre bottle of milk in New Zealand the full price paid to farmers for their milk, the retail price would need to increase from $4 to $6 and the co-operative would be facing a media storm.

“And that would not be the worst of it…we would see the volume of dairy consumption in NZ going down very fast.”. . .

Fonterra and ultimately the farmers which supply it are subsidising consumers.

One reason for the higher cost is that we’re no longer low-cost producers.

The traditionally low-cost pasture-based dairying regions, such as New Zealand, have lost their cost advantage as input prices have risen, and now compete on the global market with a similar cost of production to producers with more intensive farming systems, according to a recently-released industry report.

In the report, No longer low-cost milk ‘down under’, agricultural banking specialist Rabobank says global milk production costs have converged between dairy-exporting countries, as the traditionally low-cost milk producers have seen their production costs rise, off the back of volatile global feed prices and the increasing use of feed in traditional pasture-based regions.

Report author, Rabobank director of dairy research, New Zealand and Asia Hayley Moynihan says New Zealand milk producers will need to structure their businesses and production systems to withstand ongoing high price volatility – for both dairy commodity prices and inputs.

Higher costs can be absorbed when the payout is higher but costs rarely drop quickly when the payout falls.

Ms Moynihan says lower-cost regions, like New Zealand, have already “largely capitalised their efficiency gains in a high milk-price environment into the price of land and other assets”.

Therefore there is a need to adapt to this loss of absolute competitive advantage in milk production as efficiency gains become more difficult to obtain.

“It is likely that optimal supply chain efficiency could at least partially mitigate this loss,” she says.

“Efficiencies achieved downstream in milk processing and marketing via a strong route to market and established supply chain relationships will likely play a greater role in differentiating competitive export companies and industries into the future.”

Ms Moynihan says to ensure that competitiveness is based on more than just the cost of producing milk, the New Zealand dairy industry will need to work hard to ensure that it stays ahead of the pack in supply chain efficiency, market access, marketing and sensible regulation. . .

We also have to safeguard our reputation for high quality, safe food.

The New Zealand dairy industry, most well-known for its low-cost production, has moved, perhaps irrevocably, to a higher cost farming system, the Rabobank report says.

Ms Moynihan says the structural increase in milk prices globally and locally has driven the quest for increased production, almost at any cost.

“The first signs were there in 2002 when , on the back of milk prices increasing 42 per cent over two seasons, farm working expenses surged 33 per cent per kilogramme of milk solids produced,” she says.

“The reality check of a 32 per cent lower milk price in 2003, which remained at a similar level over subsequent years soon saw expenses fall back into line.”

However, Ms Moynihan says the 72 per cent lift in milk prices in 2007/08, and higher prices on average in the years following, brought a steep increase in production costs Media Release November 27, 2013

that show little sign of abating without a significant change in farming systems or an economic crisis.

Farm working expenses increased 72 per cent in 2007/08 on the prior season and interest cost rose 29 per cent with both expenditure categories oscillating around these higher levels ever since, she says.

Additionally, higher interest costs per kgMS have been driven by New Zealand dairy farmers’ increased debt, not higher interest rates, Ms Moynihan says.

“The significant increase in dairy land values over the past decade combined with an increased focus on land acquisition resulted in aggregate farm debt across the dairy industry more than doubling since 2002 to almost NZD 20 per kgMS produced,” she says.

New Zealand producers are likely to experience upward pressure on milk production costs over the coming years as they are confronted by a rising interest rate market and the likely impact of future environmental regulations on farming systems and milk production levels.

“Tackling environmental issues is likely to result in a variety of measures that may include increased infrastructure on-farm, altering pasture management or decreased intensity of farming systems which all impact production cost dynamics”.

Ms Moynihan says milk producers in New Zealand should consider where the competitive advantage lies for their own operations.

“Increased exposure to the global dairy market for some milk producers and greater intensification on-farm for others has added complexity to many dairy farm businesses,” she says.

“A flexible production system at a higher average cost may still be competitive if it provides resilience during a downturn.”

With high volatility expected to continue for both milk prices and production costs, the ability to lower inputs and/or costs during periods of abundant global supply would be a distinct advantage, Ms Moynihan says.

“Southern Hemisphere producers previously survived global market downturns for prolonged periods due to the size of their absolute comparative cost advantage,” she says.

“With this cost advantage now minimal to non-existent, other strategies to survive the inevitable downturns – albeit likely short-term – will be required.”

Any dairy farmer not doing well with this season’s forecast record payout shouldn’t be in the business.

But next season’s payout will almost certainly be lower and even the best farmers have to keep a rein on costs to ensure they can cope with less money.

Businesses which service and supply farms also have to be aware that while they might be making hay under this year’s sun, next season could be cloudier.


Rural round-up

July 14, 2013

Global forces need smart response – Sally Brooker:

New Zealand dairy farmers and milk processors need robust business structures to withstand market movements, Hayley Moynihan says.

Delivering a keynote address at the South Island Dairy Event in Lincoln on June 24, the Rabobank food and agribusiness research and advisory senior dairy analyst said milk price volatility was not going away. We needed to aspire to where there was opportunity to enter more lucrative markets.

Rising consumer expectations were presenting a continuing challenge, Ms Moynihan said.  . . .

Waikato farmers set the record for Agrecovery:

Federated Farmers is applauding the way Waikato farmers have embraced Agrecovery rural recycling. A record six tonne of hazardous horticultural, agricultural and veterinary chemicals was collected during the Waikato regional collection, finishing last week.

“Farmers are choosing to dispose of their chemical waste responsibly due to the convenience of the service,” says James Houghton, Federated Farmers’ Waikato provincial president.

“It is great to see increasing numbers of farmers using Agrecovery. It is another example of farmers changing their behaviour and working for the good of the environment without the need for legislation. . .

Warm, wet weather inhibits rabbits - Ruth Grundy:

Wet and warm springs and summers are keeping rabbit numbers down across Canterbury.

Environment Canterbury biosecurity team leader Brent Glentworth said for the past two seasons warm, wet weather during the first rabbit breeding cycle had been largely responsible for keeping the population in check.

Young rabbits had a low survival rate in those conditions because they succumbed to pneumonia or coccidiosis – a liver disease ”very prevalent” in warm, wet weather, Mr Glentworth said. . .

Mounting cost to irrigation schemes – Ruth Grndy:

Irrigation companies in the Waitaki river catchment are facing significant clean up bills after last month’s flooding damaged irrigation schemes.

Waitaki residents say the rain and flooding from the storm which lashed the country was the worst seen in decades.

The Danseys Pass bridge was destroyed after about 160mm of rain fell in the space of three days.

Maerewhenua District Water Resource Company chairman Kelvin Weir said the scheme had been ”very lucky” and ”survived pretty well” considering the amount of rain and high river flow. . . .

Irrigation extending potato, onion output - Ruth Grundy:

Easier access to water in Canterbury is not only fuelling dairying production but also a significant growth in the production of potatoes and onions.

The 2012 agricultural production census, conducted by the Department of Statistics, shows the Canterbury potato harvest accounted for half the national harvested area in June 2012.

And, the land put into onions increased from 690ha in June 2007 to 1040ha in June 2012 – about a 50% increase. . .

New ASB sponsorship will improve financial literacy of dairying women:

ASB has confirmed it is a new gold sponsor of the Dairy Women’s Network (DWN). The partnership, which took effect on 1 July, will boost the work already being done by the DWN to improve the financial literacy skills of the country’s dairy farming women.

DairyNZ modelling shows there is an opportunity to improve the industry’s profitability by more than $1B per year, or approximately $1000 per hectare, by improving financial literacy and management capabilities.

The industry body has also identified there is a significant range in profitability between dairy farmers, with a contributing factor being management capability. . .


Rural round-up

June 29, 2013

Holding costs dairying’s challenge – Tim Cronshaw:

Keeping costs down could be the major challenge dairy farmers face in retaining New Zealand’s edge in global dairy markets.

Buyers had been making tougher conditions for food safety, sustainability, traceability and animal ethics and the list would grow, said Rabobank dairy research director Hayley Moynihan at the SIDE conference this week.

Milk-production costs were up “everywhere”, she said, and, with milk prices increasing to an expected $7 a kilogram of milksolids – about US50 cents a litre – other countries could be expected to want to supply this market. . .

Indian food demands might prove costly - Richard Rennie:

Pressure to comply with Indian dairy market requirements could hit farmers with higher feed costs as stock feed operators are forced to re-jig feed formulas and plant.

Dairy companies keen to get established in the growing Indian market may need to change stock-feed formulations and increase traceability around bought-in dairy farm feed.

Hindu religious leaders are pushing the dairy companies, saying imported milk products cannot contain animal tissue at any point in the process. . .

Cutting edge nitrate loss at SDF:

FOR MOST months of last year the Tomoporakau Stream leaving the Southland Demonstration Farm contained less nitrate than when it flowed onto the property.

While that finding from ground-breaking research by Lincoln University – with funding from Ravensdown – is good news for the farm and possibly the wider dairy industry, it is just a first year finding, stress the researchers involved.

“This is a really challenging but interesting project,” Lincoln University’s Prof Keith Cameron told a recent focus day held near the farm. . .

Tackling water limits in Otago:

IT’S GOING to take time and considerable investment to meet the measures Otago Regional Council is promoting to improve water quality, judging by the comments of two south Otago sheep and beef farmers to a recent Beef + Lamb New Zealand nutrient nous seminar.

However, both accept the need for change and are already taking steps to reduce their farms’ impacts.

At Taumata, Ken Campbell says he’s “pretty lucky” to have most waterways already fenced, with extensive planting, thanks to his parents’ hard work. . .

Big money for Busy Brook – Diane Bishop:

A five year-old pedigree Holstein Friesian cow is believed to have set a New Zealand record when it sold for $28,500 at the Southern Gold Medal Sale in Gore.

Taieri dairy farmers Nathan and Amanda Bayne, of the Henley Farming Company on the Taieri Plains, sold a two-third share in Holstein Friesian cow Busy Brook AP Rana for $28,500 to Australian dairy farmers Peter and Jessica Fullerton.

Sale manager Bruce Eade said it was the highest price paid for a Holstein Friesian cow this year, eclipsing the price of $24,000 paid for a Holstein Friesian cow at the Royal Presentation sale in Cambridge in June. . .

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Global food security and strong trade links key for NZ Ag

February 12, 2013

The world’s increasing focus on global food security and safety and New Zealand’s strong trade links will be key factors in the international competitiveness of New Zealand’s agriculture in 2013.

In its flagship Agriculture in Focus 2013 report – examining the outlook for New Zealand and Australian agriculture – specialist food and agribusiness bank Rabobank identifies key opportunities and challenges for the competitiveness of New Zealand agricultural commodities in the year ahead.

Overall, the report finds the outlook for New Zealand agri commodities remains generally robust, despite some ongoing challenges to competitiveness.

“Global supply and demand fundamentals indicate an increased reliance on exportable supplies from New Zealand in 2013, which should help bolster local prices, largely off-setting the currency drag (from the high dollar),” the report says.

However, the report cautions, maintaining competitiveness is vital in order to take full advantage of the opportunities.

“Enhancing the international competitiveness of New Zealand agribusiness is becoming increasingly challenging. Where possible, these challenges must be tackled in 2013 to mitigate the impacts of the elevated New Zealand dollar and to unlock the growing opportunities for the sector into the future,” it says.

Food security and safety

Chief among the opportunities for the New Zealand agricultural sector are those presented by the pressing global need to provide food security to rapidly-expanding and increasingly wealthy populations, particularly in developing Asian economies.

The report says New Zealand, like its near-neighbour Australia, is well placed to increase the volume of agricultural exports into the Asian region due to its competitive advantages, including superior product quality, developed trade linkages and geographic proximity.

“The issues of food security and food safety provide enormous opportunities for New Zealand and Australia’s agricultural sectors,” the report says. “Both countries have ample supply of high quality food and agricultural products, and comfortably sit on the doorstep of a fast-growing region.”

However, extracting and retaining maximum value for that production – along with maintaining and developing competitive advantages – will be key to ongoing growth in exports, says Rabobank senior analyst Hayley Moynihan.

“The New Zealand agribusiness sector is expected to play a major role as a reliable supplier of high-quality, safe food over the next decade, however it is not the only country eyeing the opportunities presented by the increasing food demand from a rising middle class in Asia. Maintaining competitiveness is vital to take full advantage of the opportunities,” she said.

Food safety is also an important factor identified by the report. “Plagued by local food safety issues, many trading partners are seeking the assurance of high quality imported food and agricultural products,” Ms Moynihan said. “And stringent food quality and safety frameworks already underpin production systems in New Zealand.”

Trade links

Throughout 2013, New Zealand’s strength in international trade links with key importing markets is expected to be a distinct competitive advantage for the country’s agri exporters, according to the Rabobank report.

“The inability of many, particularly developing countries, to feed growing populations through domestic production means that governments are aiming to facilitate trade flows and offshore investment in agriculture as a means of securing food supply,” Ms Moynihan said.

“Trade relationships and agreements are integral in developing and maintaining efficient access to global markets. The continued facilitation of trade flows to ensure stable food stocks globally in 2013 is expected to help support the local prices of agri commodities in New Zealand.”

For New Zealand, a key focus is the ongoing negotiations with Russia, Belarus and Kazakhstan to form a Free Trade Agreement.

The report says foreign interest in New Zealand’s agricultural assets also looks set to continue in 2013, with the country’s reputation for quality food production making it an attractive destination for investors.

Other issues

Other key issues facing the agricultural sector in 2013 identified by the Rabobank report include the strong New Zealand dollar, increasing regulatory pressures and sector employment.

The New Zealand dollar is forecast to remain elevated for at least another 12 months, challenging the competitiveness and profitability of the country’s agricultural exports, the report says.Media Release February 11, 2013 3

“The elevated currency makes the pursuit of future productivity gains in New Zealand agriculture all the more critical,” Ms Moynihan said.

In addition, increasing regulatory pressures are creating some extra headwinds across the agricultural sector adding to the cost of production, as well as creating uncertainty, limiting resource availability and driving change in farming practices.

While attracting current and future generations to agriculture is a priority for all of the farming sector, Ms Moynihan says. “The challenge is not just meeting and being able to afford immediate labour requirements to get the job done, but identifying from where the next generation of farm owners, managers and agribusiness leaders will emerge,” she said.


Rural round-up

September 30, 2012

The return of milk scarcity – Rabobank on dairy:

The global dairy market appears to be heading for a period of renewed supply scarcity in the coming 12 months, according to Rabobank.

Rabobank senior dairy analyst Hayley Moynihan says the impetus for tightening emanates largely from the supply side, where low milk prices, extreme feed costs and pockets of unfavourable weather are expected to slow growth in milk production in export regions.

“We fear that much of the market has been lulled into a false sense of security by the phenomenal growth seasons we saw late in 2011 and early 2012, with the next 12 months to provide a rude awakening,” Ms Moynihan says. . . .

Dairy farming New Zealand can be proud of – Milking on the Moove:

I’ve changed my header to the Milking On The Moove logo. My goal is to create a dairy farming system that New Zealanders can be proud of.

I’m passionate about dairy farming and agriculture. While I have blogged about aspects that I think should change, I’m a fan of the industry. I’m concerned that Fonterra seems to get so much flack from the New Zealand public, which includes individual farmers.

I can understand left leaning environmentalists having a dim view of Fonterra, as that would be in keeping with their attitude towards corporates and big business in general. I’m concerned by the attitudes of middle New Zealand. It seems that many view Fonterra as a money hungry corporate giant that is screwing New Zealand consumers. I’m prepared to be a little understanding of a middle of the road New Zealander, who knows nothing about farming being influenced by the media. . .

Organics – Milking on the Moove:

Research out of Stanford University has shown that organic produce has no greater nutritional value than non-organic produce.

That’s not news to me, but I don’t think people buy organic food because they feel it is has a higher nutritional value, but rather because it is not covered in sprays and pesticides.

Jacqueline Rowarth points out repeatedly that organics generally produce 20% less yield than conventional farming methods. These farmers need to receive the premium that organics provides in order to stay profitable. But as the world begins to meet the needs of a growing population, all the figures I’m seeing require more product being produced from less and with a lower environmental impact. I’m doubtful that organics can achieve this.. .

 

Tokyo launch for coat range - Sally Rae:

A range of coats using merino wool from Closeburn Station in the Maniototo has been launched in Tokyo to much media interest.

Suit makers Konaka Co Ltd launched a range of 15-micron New Zealand wool coats to rival cashmere, under the label Limited Wool Premium. . .

 

New tech can help farmers head off enforced regulation

Farmers have an opportunity to put themselves ahead of the game regarding fertiliser application and avoid tough regulations being imposed on them, the annual meeting of Ravensdown was told in New Plymouth on Monday night.

Ravensdown Chief Executive Rodney Green told 500 shareholders that the company had developed new tools to enable farmers to get the most value out of their fertiliser regime, while still dealing with concerns raised by the likes of the Environment Court’s recent decision in favour of the nitrogen limits set by the Horizons Regional Council.

“We stood with Federated Farmers, Horticulture NZ and Fonterra making many submissions on behalf of farmers that were ultimately not given sufficient weight by the Environment Court,” said Rodney Green. “One thing, however, that is not in dispute is the fact that reducing the environmental footprint of New Zealand farming is increasingly important. Sustainable practices are an important part of the story to tell overseas customers about our farming produce and can also help deliver better results for the farmer’s bottom line.” . . .

Ngai Tahu boosts earnings from commercial operations, eyes bigger dairy development -  Paul McBeth:

Ngai Tahu Holdings, which manages the South Island iwi’s commercial operations, boosted earnings across all of its units and is looking to ramp up its exposure in dairy.

Net profit climbed to $95.7 million in the 12 months ended June 30, from $15.9 million a year earlier, the iwi said in its annual report. Operating earnings, which strip out gains from asset sales and property values, climbed 48 percent to $55.1 million on sales of $209.36 million.

Ngai Tahu Holdings invested $39 million in property development, $19 million in investment property mainly to do with dairy, and $22 million in the Agrodome and Rainbow Springs tourism operations. . .

 

‘ve changed my header to the Milking On The Moove logo. My goal is to create a dairy farming system that New Zealanders can be proud of.

I’m passionate about dairy farming and agriculture. While I have blogged about aspects that I think should change, I’m a fan of the industry. I’m concerned that Fonterra seems to get so much flack from the New Zealand public, which includes individual farmers.

I can understand left leaning environmentalists having a dim view of Fonterra, as that would be in keeping with their attitude towards corporates and big business in general. I’m concerned by the attitudes of middle New Zealand. It seems that many view Fonterra as a money hungry corporate giant that is screwing New Zealand consumers. I’m prepared to be a little understanding of a middle of the road New Zealander, who knows nothing about farming being influenced by the media.


Sheep, cattle numbers holding, prices not

August 4, 2012

Sheep and beef cattle numbers increased by 2.6% and 1% respectively in the year to the end of June.

Beef + Lamb New Zealand Economic Service director Rob Davison says this compensated for the 4.4 per cent decline in sheep and 2.6 per cent decline in beef cattle the previous year.

B+LNZ’s annual stock number survey, which establishes the productive base of livestock for 2012-13, shows that while sheep numbers were up 2.6 per cent most of this increase will be stock carried over for slaughter in July-September.

“Breeding ewe numbers at 20.61 million are almost static (+0.6%) on the previous June when ewe numbers fell 6.0% per cent to a low of 20.49 million. Strong mutton prices earlier in the year encouraged a high slaughter of cull ewes for the second year in a row. The offset to this was a high retention of ewe hoggets (+10%) last July which by 30 June 2012 were mature first time in lamb ewes.

“Ewe condition is good across the country. Scanning results for most regions show in-lamb ewes are carrying more multiple lambs with the general comment that scanning percentages are up 5 to 10 per cent on last year.

“All we need now is an excellent spring to ensure high survival of the lambs born.”

Davison said the scanning results lead to expectations that the 2012 lamb crop could be up on last spring by 1.0 million lambs (+4%). This outcome would lift the ewe flock performance measured by lambing percentage to around the highest achieved, which in 2009-10 was 123 per cent. There is potential to exceed this performance level. Each 1 percentage point change in lambing percentage equates to 200,000 lambs.

Beef cattle numbers increased 1.0 per cent to 3.88 million and partly reversed the 2.6 per cent decline for the previous year. North Island beef cattle numbers increased 3.6 per cent with increases in both the beef cow herd and weaner cattle numbers.

The South Island beef herd in contrast decreased 5.7 per cent. This decrease came from earlier slaughter due to good seasonal conditions so that fewer cattle were on hand at 30 June 2012, coupled to pressure from alternative land uses that include dairy grazing.

Davison says the Economic Service estimates the dairy herd increased 3.2 per cent with part of this increase a carry-over of older cows in the North Island due to excellent growing conditions.

Numbers might be holding but demand might not a report from Rabobank says:

While New Zealand sheepmeat producers have been enjoying a ‘full cup’ in recent times – with strong farmgate returns – a ‘steady hand’ will be required to balance future production levels with demand uncertainty across European markets, Rabobank reports.

In its recently-released report Sheepmeat – full cup, steady hand, the global agribusiness banking specialist says the New Zealand sheepmeat sector has been enjoying strong farmgate returns in the past two seasons as a result of retail price increases and limited supply availability.

However, the report cautions, a ‘steady hand’ will be required to manage the sector’s immediate future due to demand uncertainty across European markets as consumers feel the pressure of rising food costs against wage stagnation.

Report co-author Rabobank senior analyst Hayley Moynihan says global sheepmeat supplies are forecast to increase from 2013, off a low production base, although this volume growth is expected to be modest and availability will not fully recover 2010 levels until 2015.

“While sheepmeat demand has softened in developed markets, we expect retail prices will normalise at new levels – typically 10 per cent higher than the three-year average for most regions,” she says.

“For New Zealand producers, a positive outlook will persist in export markets as the economic outlook improves and the market balance remains tipped in their favour.”

That confidence in the future is reassuring because prices dropped throughout last season and the wise are not budgeting on any increase in the coming one.

However, she cautions that problems in Europe pose challenges.

In real terms, Ms Moynihan says, the increased cost of living for the average EU consumer is likely to exceed any growth in income – at least for the next 12 to 24 months.

“Added to this, annual food price inflation is running at three per cent and has been above total inflation since November 2011,” she says.

“Meat price inflation has led the charge, averaging 4.5 per cent year-on-year, with eastern European countries experiencing increases as high as 10 per cent in 2011.
These factors can be expected to weigh heavily on sheepmeat demand and to limit growth prospects.”

When we were in England in June we visited several supermarkets. The least expensive lamb we saw was about 8 pound a kilo – and that was marked down to half price. It was sitting beside pork and chicken which were about half that price again.

We can’t compete with those alternative sources of protein on price, we have to compete on quality. But as the European economies stutter fewer people will be able to go for quality rather than price.

The economic outlook for developed economies is for a slow recovery through to the end of 2013, Ms Moynihan says.

“Consumers in these markets will have to contend with protracted low real wage growth, which will limit sheepmeat demand growth and the potential for extracting further value gains,” she says.

“Emerging markets will continue to grow, albeit slightly below the rate of previous years, and offer opportunities for sheepmeat demand growth.”

The Rabobank report says retail prices will also be influenced by continued strength of competing meat prices; the impact of lower beef production from the US and EU on global supplies; and the rising beef production costs from Brazil, China and Australia.

“These factors are likely to mean that retail price movements for lower-value cuts will continue to rise faster than high-end cuts. This will be particularly evident across emerging economies and consequently will only provide limited upward pressure on farmgate returns for exporters,” it says.

People in some emerging economies were demand for sheepmeat is growing have a preference for lower value cuts.

We visited a packing house in England where they had responded to tougher times by packaging meat for human consumption from cuts which in better times had been used for pet food.

Ms Moynihan says by 2015, sheepmeat production from key exporting regions is expected to lift by an additional 135,000 tonnes per annum, which would bring global export supply back to 2010 levels.

“With potential economic growth in Asia and the Middle East, continued pressure on flocks in continental Europe and economic recovery in the EU, a bust in prices is not likely,” she says.

“With the cup of farmgate returns for sheepmeat in Oceania above half full, a steady hand will be required to ensure production grows in line with global market requirements.”

The next season or two might be difficult but it is reassuring to see a brighter forecast for the medium term.


Glimmers of hope for dairy industry

February 5, 2009

Fonterra may not be flavour of the month but that hasn’t put investors off.

The company has raised $800 million in less than a week with a bond offer that was oversubscribed by 267%.

This is a sign that investors have more faith in Fonterra and the dairy industry than the doomsayers who’ve been prophesying disaster by focussing on the difference in this year’s payout compared with last years without pointing out that $5.10 is still the third best payout the company has made.

Those whose glasses are perpetually half empty also don’t take into account that while the figures in the income column are smaller, so are those in the expenditure one thanks to big drops in interest rates and the price of fuel and fertiliser.

We may not be rolling in clover, but we’re still growing grass and converting it to protein and while the world may not be paying as much as it was a few months ago there’s still a market for milk.

Rabobank’s senior analyst Hayley Moynihan  says the medium to long term outlook is still good and that global supply is contracting in Europe and the USA  while falling prices are making dairy products more competive which will increase demand.

There’s another glimmer of hope for us from DairyCo which reports that the British  milk supply is declining.

It’s too soon to break out the champagne again, but there’s enough hope there to postpone the order for hair shirts.


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