Fonterra payout good for country

May 31, 2008

The ODT see more pluses than minuses in the increased Fonterra payout:

The good:

Fonterra announces record payout to farmers of $7.90 kg of milk solids for this season; up from $4.46 last season.

The higher payout increases by $4 billion the cash injection into the economy.

It will be worth an extra $30 million to the Otago economy and an extra $70,000 in gross income to an average Otago farmer.

2008-09 opening forecast payout $7 kg of milk solids.

The bad news: Consumer dairy-product costs will rise, putting pressure on already stretched grocery budgets.

Another plus for the country, which might not be appreciated by farmers, is the increased tax that will be paid. Last season’s payout meant that most farmers made small, if any, profits. Even with the increased costs of fertiliser, feed, fuel, power and wages most farmers will have very healthy taxable profits this season.

 

The opening forecast of $7 for next season is also very good news – even with the cautionary advice that actual payouts can be higher or lower than initial forecasts and the uncertain international finanancail situation might mean the final payout could drop. Of course it could, but the growing demand for protein makes that unlikely.

 

Largely overlooked in the excitement over the increased payout was the news  that Fonterra’s fair value share price has dropped from $6.79 to $5.22.

 That’s disappointing for those wanting to get out of the industry or change suppliers – friends who are selling found themselves around $500,000 poorer after the announcement. But it will make it a little easier for people planning to sign up to Fonterra because it reduces the cost of entry. And one reason for the drop in the share price could be competition from other companies which don’t require new suppliers to buy shares, making it much cheaper for them to get in to the industry.

 

The increased payout and good forecast will make dairying more attractive, but excitement will be tempered by the knowledge that costs will also rise, and most won’t go down if/when the payout does. Fertiliser prices have already risen: superphosphate was $270 a tonne and is now $511; urea has gone from $690 to $948 and the price of DAP has more than doubled from $706 to $1526.

 

 

The price rise is being driven by increased international demand. It won’t be welcomed by those in dairying and will be even less welcome for sheep farmers.


Green-Maori deal could falter because of EFA

May 31, 2008

The Greens want to strike a deal  in the Maori seats to maximise the electorate vote for the Maori Party and Party vote for the Greens.

This initiative might be complicated by the Electoral Finance Act because anything which encourages people to vote for or against a party or candidate has to be authorised and accounted for. I think this would mean both parties would have to authorise and account for any spending on material in which either party sought either electorate or party votes for the other.

A post on kiwiblog  noted David Benson-Pope might have similiar problems with the Act if he ran as an independent while seeking party votes for Labour – Mike Smith would have to authorise, and account for the expense of, any material which said vote Labour.


Greens want Fonterra to subsidise consumers

May 31, 2008

Green co-leader Jeannete Fitzsimons has called on Fonterra to drop the price of milk on the domestic market.

“Today I want to issue a challenge to Fonterra. Show us you are a good Kiwi company. “Give something back to the country that has provided you with a great climate, cheap energy and hard working farmers that have allowed you to become so successful.

“Sell your products in New Zealand at a price our people can afford.”

Why just Fonterra, Jeanette? The farmers’ share  is only 35% or about three glasses, of a two litre bottle of milk. If you want consumers to be subsidised by the processor and producer why not the retailers, wholesalers, transporters and everyone else involved in getting the milk from the paddock to the shelf?

  And if you want us to subsidise you when the price is high, are you going to subsidise us when it’s low?

Oh yes, you do want to subsidise growers:

 Ms Fitzsimons also advocated a return to more traditional styles of producing food, including government subsidies for communal vegetable gardens, farmers’ markets and for schools to grow more fruit trees and vegetables.

 Where does the money from these subsidies come from? Ah yes, the tax payers, who just happen to be the same New Zealanders who Jeanette worries can’t afford food. And will this improve productivity and make food more affordable? No.

 Update: No Minister is not impressed by this suggestion either.

 

 

 

 

 

 

 

 


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