$1/km for stock transport and rising

June 10, 2008

The owner of a transport company told us a couple of weeks ago he bdugeted on $1 a kilometre for stock trucks.

That was before today’s price rise about which Poneke opines here.


Meat Prices Going Up

June 10, 2008

Westpac economists  predict rising prices for meat.

Lamb prices in the UK have gone up 34% in the past year and in the US beef prices have risen $21%.

Drought and dairy conversions have lowered the number of breeding sheep here and drought in Australia has also lowered the supply of lamb in international markets.

“We expect stronger world prices and forecast farmgate lamb prices to average 439c/kg over the 2008/09 season, up from an estimated 383 c/kg this season,” the bank’s economists said.

This included an average exchange rate for the NZ dollar of 0.37 pence against the pound sterling, and 0.49 euros against the EU currency through the 2008/09 season. Beef prices are also expected to rise.

“We forecast NZ bull beef prices to average 336c/kg over the 2008/09 season, up from an estimated 316c/kg this season,” the economists said.

I haven’t noticed the price of meat in supermarkets matching the low prices farmers have been receiving in the last couple of years. But rising international prices will impact on domestic prices – and what’s the bet some misguided person or party then starts calling for subsidies. 


Petrol up 6c

June 10, 2008

Ouch: Caltex has put the price of petrol up by 6 cents to 206.9 cents/litre for 91 octane; 95 is 211 and diesel is 179.9.

The first impact is on everyone’s pockets; it will also boost inflation because transport is involved somewhere in just about everything we do.

The continually rising price of fuel is also one of the reasons that extra money thrown at health, education and other taxpayer-funded sectors hasn’t made much impact on services – it’s gone on rising costs leaving less for the front-line services.


Was Value Drop of Fair Value Shares Fair?

June 10, 2008

A Dunedin law firm is considering taking class action against Fonterra after the end of season drop in the value of its fair value share.

Southland dairy farmer Greg Roberts said he decided to sell his 400-cow farm and spoke to a Fonterra representative about cashing in his shares.

“[I asked] should we take the default price or the June price and he said ‘Take the June price because the shares are going up’.”

However, Fonterra last month set the fair value share for the coming season at $5.57, down on both the $6.79 price the previous season and an interim valuation for the coming season of $7.01 made in December.

The shares are a cost to farmers for supplying Fonterra and are based on the amount of milk they supply. New companies are promising farmers who sign up to them a similar payout to Fonterra’s without the need to buy shares which makes supplying them cheaper.

Fonterra has said farmers enjoyed good returns as suppliers to the co-operative with the forecast payout a record $7.90 a kilogram of milksolids but unstable global financial markets, high commodity prices cutting into ingredients margins and the higher milk price had impacted on their investment.

Competition from new companies must also have been a consideration.

Roberts said if the fair value share had been $7.01, he would be $200,000 better off than he is now. “We had no idea the fair value share was going down and were led to believe it was at $7 and rising,” he said.

Friends sold shares at the end of the season to buy more cows. The drop in value cost them $500,000 but I don’t know whether they’d been advised to take the end of season price.

When Fonterra set the interim fair value share for the coming season at $7.01 in December it chose the mid-point of a valuation range of $6.49 to $7.54 by independent valuers Duff & Phelps. Chairman Henry van der Heyden said in December the valuer had recognised that compression of ingredients margins had been more than made up for by improvements in Australian operations and the Soprole investment in Chile.

The valuer had also recognised additional business efficiencies and cost savings initiatives. However, in May the fair value share was set at a lower $5.57 for 2008-09, 11c below the mid-point of another Duff & Phelps valuation range of between $5.26 to $6.11 a share.

Fonterra increased the forecast payout to dairy farmer by 60c to $7.90 a kilogram of milksolids, while also setting a record opening forecast of $7 for the new season. The fair value share drop was said to be broadly comparable with the year’s drop in share price in New Zealand.

For the record: I’m a partner in a dairy farm which supplies Fonterra.


School boycott

June 10, 2008

Fifteen North Shore Schools are boycotting the Government’s  School Plus initiative until their dire funding situation is recognised.

In an open letter to Education Minister Chris Carter, the principals detailed Government innovations they claimed were not fully funded and had increased pressure on already-stretched finances.

The list of 21 included pandemic planning, maintaining electronic student management systems and running the healthy lifestyle programme Mission On.

We respectfully suggest you provide for the current demands before introducing new and more underfunded priorities,” the principals wrote. They said more and more schools nationally were operating budget deficits.

“We are deeply concerned about the future of New Zealand’s schools,” the principals’ letter read. “We do not concur with your statements that current funding is enough to provide a quality basic education.”

There are two issues here: the underfunding of schools and the School Plus policy.

Last week a former Balclutha principal  was charged last week with tampering with roll figures so her school received more funding. Her actions can’t be condoned but they do show the financial pressure schools are facing.

As for School Plus, it would be better to put more money into helping much earlier with the basics so that those who choose to leave school at 16 or 17 are equipped for work and life rather than keeping unwilling pupils in the classroom for an other year or two.

Some kids don’t fit in at school, are not ready for training but would be happy in work so National’s Youth Guarantee  with its carrot and stick approach  – to fund 16 & 17 year olds in approved institutuions but not allow them access to the dole – is better. It supports them in school or training or allows them to work but doesn’t pay them to do nothing.

On farms we sometimes have young people who hated school and don’t want any formal training do well when they start work. When they get over their anti-school feelings and realise there are benefits from training they’re happy to enrol in AG ITO courses, but forcing them to do that training straight from school wouldn’t work.


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