Dairy debt and declining values create an equity pincer – Keith Woodford:
Some weeks back I wrote how the market value of dairy land is declining substantially. The biggest factor is a change in bank-lending policies such that local buyers cannot get funding. The second key factor is that foreign buyers can no longer buy land for dairy farming. A third factor is pessimism about the long-term future relating to environmental issues and labour availability.
The consequence of these factors is that although many dairy farmers would like to sell, there are very few buyers. This is despite three years of good dairy prices and now a fourth good year heading into the home straight with nearly all farmers making operating profits.
In this article, I build on that situation to explore the proportion of farmers who, with declining asset values, have either exhausted or are close to exhausting their previous equity. . .
New levy to hit farmers – Peter Burke:
The New Zealand Agricultural Aviation Association (NZAAA) is up in arms about a proposed new safety levy.
They say it unfairly targets the ag sector and will lead to increased costs of spreading fertiliser and spraying crops. NZAAA chairman Tony Michelle says his organisation is happy to pay levies set by the Civil Aviation Authority (CAA). However, he believes the new proposals are almost double the present ones and says there is a huge inconsistency in the way these would be applied.
Some operators believe the ag sector is seen as a soft target by the CAA, because it assumes the new charges will just be passed on to farmers.
Fonterra’s Te Awamutu site moves to pellet power:
Fonterra is taking another step forward in its commitment to renewable energy as it announces that its Te Awamutu site will be coal free next season.
Until now the site has used a combination of fuels to process milk – including coal. This latest move, follows a trial last year and means it will switch from using coal at the end of this season, starting the 2020/21 season powering the boiler with wood pellets.
Fonterra’s Sustainable Energy and Utility Manager Linda Thompson says it’s an exciting step for the Co-operative and, in particular, the Te Awamutu team. . .
China overtakes the US as top beef market:
China overtook the United States as the biggest market for New Zealand beef exports in 2019, Stats NZ said today.
In the year ended December 2019, beef exports to China rose $880 million (112 percent) from 2018 to reach $1.7 billion. In contrast, beef exports to the US fell $245 million (20 percent) to $956 million.
“China became the number one destination for beef exports from New Zealand in 2019,” international statistics manager Darren Allan said. . .
LIC half-year revenue up as farmers invest in ‘precision farming‘:
Performance Highlights H1 2019-20:
$163 million total revenue, up 1.4% from $161 million in the same period last year.
$30.3 million net profit after tax (NPAT), down 7.6% from $32.8 million in the same period last year.
$58.4 million earnings before interest, tax, depreciation and amortisation (EBITDA), down 1.5%.
$43.1 million earnings before interest and tax (EBIT), down 6.5%.
Underlying earnings (NPAT excl bull valuation change)* range remains forecast to be $21-25 million for year-end, up from $19.5 million in 2018-19. . .
Farm Debt Mediation Scheme – next steps:
The Ministry for Primary Industries (MPI) is taking steps to establish the new Farm Debt Mediation Scheme, which will begin operating on 1 July 2020.
From next week MPI will be able to consider applications from mediation organisations wanting to take part in this scheme.
“We’ve already heard from leading mediation organisations that are interested in participating. If an organisation is approved, they will then make sure their mediators are trained for the new scheme,” says Karen Adair, MPI’s deputy director-general of Agriculture and Investment Services.
The Farm Debt Mediation Act became law on 13 December 2019 and brings a new approach to farm debt mediation. . .
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