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.


What might have been

September 21, 2014

Thank you New Zealand voters from saving us from that.


Don’t vote for chaos

September 19, 2014

The choice is clear: continuing stable government that’s working for New Zealand and New Zealanders or chaos:

 

If you’re not already convinced what any government beholden to Winston Peters would be like, listen to Guyon Espiner (at 7:18) attempting to get a straight answer from him.

New Zealand First is likely to get at least 5% of the vote. Labour’s weakness would give him strength.

The higher National’s party vote is, the stronger its negotiating position will be and the more stable the government will be.


Rural round-up

September 18, 2014

The most boring bankrupt economic argument–“we export raw logs when we could be adding value and making jobs” : Eye to the Long Run:

The rot set in in the late 1940s on this. Jim Anderton was maybe the first in the modern era to believe we wantonly refused to profit from the blindingly obvious money and jobs to be had from processing timber.

In recent times only Winston Peters has been bright enough to see what the entire business sector has apparently completely missed.

Now, joining him as a value add timber processing expert we have the lawyer from Herne Bay – Mr Cunliffe who has spotted the opportunity.

It is, you understand, not so profitable that any of them would give up their day job… it never is, is it? . . .

Future of red meat promotion under threat – Allan Barber:

Next year’s Commodity Levy Act referendum is one of the factors concentrating meat industry minds on the question of red meat promotional investment. B+LNZ is currently conducting a consultation round with individual meat companies to find out how this critically important, if contentious, topic should be agreed for the benefit of all industry participants.

B+LNZ Chief Executive Scott Champion told me it’s too early to make any predictions about the outcome, at least until after completion of the consultation round at the end of September. With the referendum about 12 months away, the process is geared to providing time to gather enough detail for promotional strategy development before taking this out to farmers to test it in advance of the vote. . . 

New Zealand’s Hake and Ling Join Top 8% of World’s Sustainable Fisheries:

Hake and ling from New Zealand are now among the top 8% of global sustainable fish species after being recognised by the Marine Stewardship Council (MSC).

Each of the three New Zealand hake trawl fisheries, five ling trawl fisheries and five ling long line fisheries have been certified as sustainable against the MSC standard – the ‘gold standard’ for sustainable seafood production.

Only 8% of the world’s wild-capture harvest is certified through the global MSC programme which sets high internationally-accepted standards for sustainable fishing and provides consumers with assurance that MSC certified seafood is sustainable, based on sound, independent science. . .

 

Rural New Zealand wants gigabit equality:

Federated Farmers and TUANZ believe it is essential the next Government delivers better connectivity to rural New Zealand, and is keen to work with them to make that happen.

“We are encouraged by the National Party’s further commitment of $150million, if they’re re-elected, and hope to see a similar commitment from our next Government announced this Saturday” says Anders Crofoot, Federated Farmers Telecommunications Spokesperson.

“Federated Farmers and TUANZ support a Gigabit Agenda for Rural New Zealand that doesn’t leave our productive sector behind. We need to talk about gigabit speeds, where farmers can eventually get their gigabytes as fast as the townies do. . . .

 The right people trained the right way -  Craig Littin:

Our recently released Manifesto talks about building a sustainable farm system giving us the collective means to go forward as a nation.  We can and we will be more than we are today, but to do that we need the right people trained the right way.

Firstly we need to look at what we are trying to achieve. We need to have the young people of New Zealand believing that farming is the attractive career option that it is. We also need to put our money where our mouth is in terms of investing in education, science, research and innovation.

There are some great stories out there of the highly skilled people in our industry who have worked through the agricultural industry to now run multimillion dollar businesses, on very attractive salaries. These opportunities are available to anyone with the enthusiasm, intellect and discipline required to make it in the dairy industry, but we need sound education systems to get the right people into the industry. To do this we need to align the requirements and standards to fulfil job roles with the qualifications offered within primary industry training/education institutes. . . .

Molkerei Ammerland Completes First Sweet Whey Powder Auction on Globaldairytrade:

Sweet whey powder has been sold for the first time on GlobalDairyTrade (GDT), the world’s leading online dairy auction platform, with Molkerei Ammerland selling the product they offered at their first trading event.

Molkerei Ammerland CEO Ralf Hinrichs said the company was pleased with the results from the first SWP online auction.

“Through GDT we have been able to extend our reach to a larger number of customers, and to transact with them much faster. We’re looking forward to using GDT to grow our export market,” he said. . .

Tasman Tanks Appoints Craig Hemmings as Dairy Effluent Sector Manager:

Leading New Zealand and Australian storage tank company Tasman Tanks, has appointed Craig Hemmings as dairy effluent sector manager.

Mr Hemmings brings to his position more than a decade of management experience with nationally and internationally recognised agricultural companies.

As dairy effluent sector manager for Tasman Tanks, Mr Hemmings will oversee the operational management of the company’s dairy effluent division in New Zealand.

“From small beginnings in 1996, Tasman Tanks has built its reputation on designing, manufacturing and installing fully engineered and certified tanks,” said Mr Hemmings. . .

 Central Otago Wine Industry no longer a “One Trick Pony”:

As we have come to expect, Central Otago wines dominated the medals for pinot noir at the 2014 New Zealand International Wine Show, taking out 10 of the 15 Gold Medals awarded. But what is more interesting about the results of this show is that Central Otago wines won medals in a total of 10 different wine categories – Methode Traditionelle, Riesling, Sauvignon Blanc, Pinot Gris, Gewürztraminer, Chardonnay, Dessert Wine, Rose, Pinot Noir, and Syrah.

Now in its tenth year, The New Zealand International Wine Show is firmly established as the largest wine competition held in New Zealand each year. The 2014 New Zealand International Wine Show was judged from 8th to 10th September in Auckland and attracted a total of 2130 entries. Trophies will be awarded at the Awards Dinner on 27 September. . .


25ish + 7ish = too few

September 16, 2014

Winston Peters is mulling over a Labour New Zealand First coalition:

New Zealand First leader Winston Peters said today that voters should consider a Labour-New Zealand First as a potential alternative Government, not Labour and Greens, in what is the most definitive statement from him yet on post-election options.

That suggests that would keep the Green Party away from the cabinet table in any Labour-Led Government as he did in 2005.

He expressed respect today for both Labour’s finance spokesman David Parker and for Finance Minister Bill English and said: “I see both of them as capable of being Ministers of Finance.”

“This is not indicating a choice,” he said “but the media seem to have overlooked one option entirely, a Labour-New Zealand First combination on coalition or confidence and supply.”

In Colin James’ latest poll of polls Labour had 25.2% support and NZ First had 7.1%

That comes to only 32.3% which is well short of the 50% plus one seat needed for a majority.

It could of course try to be a minority government but that would require a lot of negotiating to get any legislation passed and the other parties who are hoping to be in government wouldn’t necessarily be feeling generous.

In 2005, Helen Clark led a minority Government with the support of New Zealand First, United Future, and the Greens on confidence and supply but at the behest of Mr Peters, restricted ministerial posts to only himself and Peter Dunne of United Future. . .

Lest we forget, that’s the government that spent wildly and put the country into recession before the rest of the world.

Many NZ First supporters would prefer the party went left rather than right so all Peters is doing is playing to the gallery.


Stronger voice for Maori with National

September 8, 2014

Helen Clark called the Maori Party the last cab off the rank.

That comment soured relationships between Labour and the Maori Party.

John Key recognised the mana of co-leaders Tariana Turia, Pita Sharples and their party by inviting them into coalition in 2008 and 2011 even though he could have governed without them.

Although it voted with  National for confidence and supply the Maori party often voted against it on other legislation and it has said it could support either a National or Labour government.

But David Cunliffe isn’t prepared to offer them that opportunity:

. . . Speaking to Newstalk ZB’s Mike Hosking this morning, Mr Cunliffe said he intended to only include the Green Party and NZ First in any government.

Asked if he was also ruling out the Maori Party, he said he would possibly talk to Maori Party co-leader Te Ururoa Flavell after the election but “I just won’t have them in Government.”

He did not believe Mr Flavell would opt to side with Labour if it was in a kingmaker position, despite Mr Flavell saying they were open to working with either side and would take their lead from what Maori voters wanted.

“People need to know before the election that a vote for the Maori Party is a vote for the National Party.” . . .

This is the man who earlier in the year was doing a Winston Peters in yeah-nahing over whether he’d work with Internet Mana because it was up to voters to decide.

Now he’s ruling out the much more moderate Maori Party.

He’s probably gambling that this will hurt the Maori Party but the message he’s sending Maori is that they’ll have a much stronger voice and more influence with a National-led government.

Tama Iti has already got that message:

. . .  Iti said he had always supported the Maori Party and had decided to stand to boost the party’s support and because he endorsed the work it had done in government.

“Not very long ago I wouldn’t have thought about it but I see there’s more achievement…with National in terms of the treaty settlements so we have come a long way,” he said.

Having a Maori voice in power had led to gains in areas such as health and social services for Maori and it was important for Maori “to be sitting on the table rather than across the road throwing rocks at each other”. . .

Labour took the Maori seats for granted for years and now it’s ruling the Maori party out of any government it would lead.


Whyte warns of Frankenstein monster

September 7, 2014

Act leader Jamie Whyte warns the parties of the left, including New Zealand First, could still get enough votes to form a government:

A Frankenstein Labour-Green-Internet-Mana-New Zealand First government may be unthinkable, but it is not impossible.  . .

If ACT succeeds, New Zealand will have three more years of stable center-right government. If we fail, New Zealand faces the prospect of a chaotic left-wing Frankenstein government.

It’s not pretty, but we should look at that monster.

Part of the monster – the crazy tangled mess of hair stitched onto the scalp – is the Internet-Mana party.

This is a party of hard-left socialists – Hone Harawera, Laila Harre, Annette Sykes and John Minto – funded by a convicted fraudster wanted for copyright violation in America.

Their lunatic policies include shutting down all the prisons (perhaps on the suggestion of their fugitive sponsor).

In a televised debate, Hone explained that prisons are unnecessary because if boys are sent on Kapa Haka courses, they commit no crimes.

If only they had Kapa Haka in Germany, Kim Dotcom would not be a wanted man!

As I said to Hone at the time, it’s a very nice idea. But let’s not get ahead of ourselves. Why don’t you send all the boys for Haka training and then, after the crime rate falls to zero, we will close the prisons. In the meantime, let’s keep them open – just in case you are wrong about the transformative power of Kapa Haka.

It’s not just Internet and Mana together or separately that’s the worry, it’s the puppet master Kim Dotcom who is funding them and pulling their strings.

The Greens are the monster’s face, grinning inanely below its swivel-eyes.

In the nicest possible way, they intend to force everyone to live as the Greens prefer. They will tax the things they don’t like, such dairy farming, and subsidize the things they do like, such as solar panel manufacturers.

The Greens are not so much a political party as a religious movement, worshipping snails and ferns and all that makes up Gaia, except us humans of course.

For the Greens, humans fall into two categories: the helpless, who smart green politicians must save, and the wicked, who smart green politicians must stop.

In virtue, and intellect, Russel Norman and Meteria Turei are so vastly superior to everyone else that it is their moral duty to subjugate us.

The lovely, soft green – with a small g – concern for the environment that many people find appealing camouflages a lot of hard red policies.

The big flabby torso of the monster is the Labour Party.

It was briefly a thing of beauty and strength. We have the Labour government of Roger Douglas and Richard Prebble to thank for the fact that New Zealand is not now a basket-case like Argentina.

But the Labour Party has gone horribly to seed.

Nothing reveals this more clearly than its finance spokesman, David Parker – the man who now occupies the position once held by the great Roger Douglas.

Mr Parker fancies himself the smartest boy in the fourth-form. But he has not even the weakest grip on basic economics.

At the recent Queenstown Chamber of Commerce political debate Mr Parker explained his party’s desire to reduce immigration to New Zealand. He claimed that economic output requires increasingly little labour to produce. So immigrants cause unemployment.

This nonsense has been peddled by economic fools since the invention of the weaving loom. In fact, I imagine it got started when someone first thought of killing animals with a sharp stick instead of bare hands.

For the sake of Mr Parker’s education, here is what really happens when workers become more productive. People produce and consume more.

And not just more of the same, but entirely new things. Even Mr Parker has surely noticed that, over the past 30 years, as worker productivity and the population have both risen, unemployment has not increased.

Instead, we are consuming more than we ever have. And we are consuming better goods and services than ever before.

Everyone, please, get your cell phones out and wave them in the air so that Mr Parker might understand.

That Parker is regarded as one of the more reasonable voices in Labour merely reflects the dearth of talent in its caucus.

Finally, we come to Winton Peters and his New Zealand First, the stumpy little legs of the monster. Little legs that remain idle for 2 years and 10 months out of every three years and then spend two months running around furiously kicking everyone in sight – foreigners, journalists, bankers, you name it: everyone except pensioners.

After all, it’s common sense.

That’s Winston’s slogan: it’s common sense.

I am not sure what “it” refers to but that doesn’t really matter. Because, as my old PhD supervisor used to say, “sense isn’t common”.

And there is no better example of this fact than Winston himself.

Winston’s big economic policy for this election is removing GST from food. That would reduce government revenue by 3 billion dollars.

But Winston has no plan to cut government spending by 3 billion dollars. On the contrary, he plans to increase government spending massively.

Where will he get all the money?

Winston’s answer: by cracking down on tax evasion.

Honestly. He claims that he can raise 7 billion by cracking down on tax evasion.

That’s not sense, common or otherwise. That’s bollocks.

When a politician tells you that he is going to fund his spending promises by cracking down on tax evasion, you know he is either a fool or a charlatan. And Winston ain’t no fool. . .

Labour is also trying convince us it would fund some of its expensive promises by cracking down on tax evasion.

Some people aren’t yet convinced to vote for a National-led government but these are compelling reasons to vote against a Labour-led one.


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