Rural round-up

February 22, 2019

Guy Trafford assesses how the Tax Working Group report would change signals to farmers, and how they are likely to respond – Guy Trafford:

Given the signals that have been coming out from the Tax Working Group over the last few months there haven’t been too many surprises as to what was revealed today. That may, probably will, come after the politicians have had their play with it.

From a farming perspective there are some pluses and minuses.

Succession planning
The roll over clause is attractive, but liable to alter land/business selling behaviour. It is only available as a succession tool in the event of the assets being passed on after the death. It is then made a liability in the event of the next generation deciding to sell at which point the value goes back to 2021 or whenever the older generation first took over the land. . . 

Grass on the A2 side of the dairy fence is looking greener – and the profits plusher – Point of Order:

The  contrasting   fortunes of  Fonterra  and  A2 Milk came into the  spotlight   this  week,  after the  latter  reported a  startling 55%  rise in  half-year net profit  to  $152m.  Fonterra  shareholders will be ruefelly recalling  their  company’s  performance last year  when  it  reported its  first-ever  net  loss  of  $196m.

A2 Milk  shareholders  are  marching to a  very  different  tune.  Despite  one market  analyst  reckoning its share price had  become over-priced, buyers  pushed  it up  by  more than  a dollar to  $13.95  as they absorbed  news  of   strong sales growth in all key product segments – infant formula, liquid milk and milk powders. . . 

Fatty milk Jersey cows in demand – Yvonne O’Hara:

”Fat is back” and no longer the ”ogre” it used to be, and that is good news for Jerseys as they have a higher fat content relative to protein than many other breeds.

DairyNZ’s New Zealand Animal Evaluation Unit (NZAEL) released its annual Economic Values (EV) index last week to reflect the increased global demand for high fat dairy products, compared to protein.

Economic Values is an estimate of a trait’s value to a dairy farmer’s production and profitability and contributes to cattle breeding worth (BW). . . 

LIC welcomes Fonterra’s a2 announcement:

The farmer-owned co-operative, which breeds up to 80% of the national dairy herd, says this increase in supply matches the demand it has experienced for its A2 genetics and testing services.

Last year, the co-operative introduced dedicated A2 bull teams and extended its test offering in anticipation of Fonterra’s next move with The a2 Milk Company.

LIC’s General Manager NZ Markets, Malcolm Ellis, who is also a Fonterra shareholder and farm owner, comments:

Fonterra scours world for $800m cash injection – Hugh Stringleman:

Where in the world will Fonterra get $800 million to reduce its debt while returning to profitability and making enough money to pay a good dividend on the $6 billion dairy farmers have invested in the co-operative? Hugh Stringleman looks for answers.

March 20 looms as the next milestone in Fonterra’s return to financial health and wellbeing when it declares first-half results for the 2019 year.

It will also say where asset sales, joint ventures and partnerships will be made or amended to improve the balance sheet. . .

Kiwifruit sector front-foots campaign to find pickers:

The kiwifruit industry is pulling out all the stops to make sure the 2019 harvest, which starts mid-March, isn’t short of workers – ensuring that quality Zespri kiwifruit is sent to overseas customers in premium condition.

New Zealand Kiwifruit Growers Incorporated (NZKGI) Chief Executive Officer Nikki Johnson says the amount of green and gold kiwifruit on the vines is forecast to be even higher than last year’s harvest, meaning around 18,000 workers will be needed. “Last year, the harvest was at least 1,200 workers short at the peak – we don’t want a repeat of that.” . . 

Central Districts Field Days has something for everyone:

More than 26,000 people are expected to flock to Manfeild in Feilding this month for New Zealand’s largest regional agricultural event, Central Districts Field Days.

Now in its 26th year, the 2019 event has plenty to offer all – from farmers and foodies to tech heads and townies.

“We’re really excited about this year’s event,” says Stuff Events & Sponsorship Director David Blackwell. “There are a record number of exhibitors and we have some great new areas and activities that are sure to make this year’s Central Districts Field Days a community event to remember.” . . 

Give it a go” – Bay or Plenty Young Grower of the Year  :

Alex Ashe, a technical advisor at Farmlands Te Puna, was named Bay of Plenty’s Young Fruit Grower for 2019 at an awards dinner in Tauranga last night.

The practical competition took place last Saturday, 9 February, at Te Puke Showgrounds, where the eight competitors tested their skills and ability to run a successful orchard in a series of challenges. These were followed by a speech competition discussing future disruptors to horticulture at the gala dinner last night. . .

Wine survey reveals profit, innovation and price on the up :

For only the third time in the history of the annual survey, all five winery tiers featured profitable results in 2018

Survey results indicate a positive correlation between innovation and financial performance.

2018 saw a 1.8 percent lift in average prices received by Kiwi wineries. . .

Veganism is on the rise, but experts say the cons of the diet outweigh the pros – Martin Cohen and Frederic Leroy:

After decades in which the number of people choosing to cut out meat from their diet has steadily increased, 2019 is set to be the year the world changes the way that it eats. Or at least, that’s the ambitious aim of a major campaign under the umbrella of an organisation simply called EAT. The core message is to discourage meat and dairy, seen as part of an “over-consumption of protein” – and specifically to target consumption of beef.

The push comes at a time when consumer behaviour already seems to be shifting. In the three years following 2014, according to research firm GlobalData, there was a six-fold increase in people identifying as vegans in the US, a huge rise – albeit from a very low base. It’s a similar story in the UK, where the number of vegans has increased by 350 per cent, compared to a decade ago, at least according to research commissioned by the Vegan Society. . . 

 


More than a CGT

February 22, 2019

The proposed capital gains tax (CGT) has got most of the attention, but worryingly there’s more, including the proposal of a water tax that would affect everyone:

IrrigationNZ says a proposed nationwide water tax would affect all Kiwis, and there needs to be more discussion about how this would impact households, farmers and businesses.

“The Tax Working Party has recommended the government consider introducing a water tax on all types of water use including hydro-generation, household use and commercial water use,” says Nicky Hyslop, IrrigationNZ Chair.

“This would result in higher power and food prices for households and businesses and higher rates bills to pay for the irrigation of parks and reserves as well as direct water tax on household and business water use.”

An increase in the cost of production inevitably leads to an increase in the cost of what’s produced.

The working party is proposing that the water tax could be used to fund the restoration of waterways.

“While we all want to see cleaner rivers, often the solutions to improving rivers require people to change their existing practices both on farm and to prevent urban wastewater discharges into rivers. Just allocating money will not be the most effective solution,” says Mrs Hyslop.

This was proposed before the last election and was rightly criticised for taxing the good to clean up after the bad.

“We need to think about whether a water tax is equitable as water use varies hugely across regions based on rainfall. For example a Christchurch resident uses an average of 146,700 litres of water per year, while the average for a New Zealander is 82,800. Someone living in Christchurch would pay nearly twice as much in a water tax as someone living elsewhere and would also pay more in rates because in a dryer climate the Council will use more water to irrigate their local parks. Is taxing dryer regions such as Canterbury, Otago, Hawke’s Bay and Marlborough more heavily with a water tax a fair way to fund river restoration nationwide?”

Mrs Hyslop says there are similar equity issues for farmers and growers.

“Some regions receive a significant amount of rainfall and farmers don’t need to use irrigation. Central Otago receives less than half the rainfall of Auckland, so farmers and growers rely on irrigation to grow stonefruit, wine and for pastoral farming to provide feed for animals. Only 7% of farmers use irrigation nationwide – why are those farmers being targeted to pay a tax which 93% of farmers won’t pay when there are many regions which have very poor waterways but little use of irrigation?”

Generally waterways with more irrigation are cleaner than those with less or none.

Mrs Hyslop says that a water tax on hydro-electric power generation would also add to power bills for households and businesses and this tax doesn’t make sense at a time when the government wants to encourage the use of renewable energy to meet climate change targets.

The poor already struggle to pay their power bills, why make it worse for no environmental gain?

“Currently a number of regions are suffering from very dry conditions and we need to be developing more water storage as climate change is predicted to bring more frequent droughts in the future,” she adds.

“We disagree with the suggestion in the report that introducing a water tax will encourage greater investment in water storage. If you look at the most recently approved water storage project – the Waimea Dam – a price increase for the dam construction nearly resulted in it not being built. Introducing a new tax on water use will add to be long-term costs of this and similar projects and make them less viable and less likely to be built. We really need more investment in these projects to ensure we have enough water to supply our growing population and get through more frequent future droughts.”

“We also have concerns that farmers and growers in many regions may face significant water tax costs in excess of $10,000 a year which will make it more difficult to fund the environmental improvements we all want to see to improve waterways,” she says.

“The report discusses how a water tax will encourage more efficient water use. There are already a number of existing incentives that encourage efficient water use including electricity costs and regulatory nutrient limit rules which require farmers to only use water when needed. The biggest improvements in water use efficiency come from modernising irrigation systems.Farmers and irrigation schemes have already invested $1.7 billion to modernise their systems since 2011, resulting in significant improvements in water efficiency. Introducing a major new tax will reduce farmers ability to replace an older irrigation system with a more water efficient model.” 

The capital gains and water taxes aren’t the only monsters unleashed by the TWG .

The Tax Working Group has gone much further than a Capital Gains Tax with a raft of new taxes targeting hard-working New Zealanders, National Leader Simon Bridges says.

There are eight new taxes including; an agriculture tax, a tax on empty residential land, a water tax, a fertiliser tax, an environmental footprint tax, a natural capital enhancement tax, a waste levy and a Capital Gains Tax.

“This is an attack on the Kiwi way of life. This would hit every New Zealander with a Kiwi Saver, shares, investment property, a small business, a lifestyle block, a bach or even an empty section,” Mr Bridges says.

“For farmers, who are the backbone of our economy, this is a declaration of war on their businesses and way of life. They would pay to water their stock, feed their crops and even when they sell up for retirement.

“Labour claims this is about fairness, but that’s rubbish. The CGT would apply to small business owners like the local plumber, but not to investors with a multi-million dollar art collection or a super yacht who won’t pay a cent more.

“The TWG has recommended one of the highest rates of Capital Gains Tax in the world. The Government would reap $8.3 billion extra in its first five years from ordinary Kiwis – small business owners, farmers, investors, bach and lifestyle block owners. After 10 years it would be taking $6 billion a year from Kiwis.

“It will lead to boom times for tax lawyers and accountants and even Iwi advisers, given recommendations for exclusions that include Māori land in multiple ownership.

“We believe New Zealanders already pay enough tax and the Government should be looking at tax relief, not taking even more out of the pockets of New Zealand families.

“National says no to new taxes. We would repeal a Capital Gains Tax, index tax thresholds to the cost of living and let Kiwis keep more of what they earn.”

The government keeps trying to counter the accusation it’s not a good economic manager.

Introducing new and higher taxes is not the way to do it.

It should be aiming for higher quality spending not more spending and reducing the burden of tax to allow us all to keep more of our own money.

 


CGT would hit middle hardest

February 22, 2019

It there’s such a thing as a fair tax, it’s not one based on misplaced envy as the Tax Working Group’s capital gains tax appears to be.

No photo description available.
Fairness is desirable but not at any cost and  it’s best achieved by helping the poor up not pulling the better-off down, especially when those who will be hit hardest are those with modest investments, not the really wealthy, and worse still, they’d be hit by one of the most penal CGTs in the world:

The Tax Working Group’s report released today proposes a broad-based top rate of 33% capital gains tax (CGT).

The New Zealand Initiative argues in a new policy note, The Pitfalls of CGT, that headline rate would immediately push New Zealand to the top of the international CGT rankings among industrialised economies, just behind Denmark and Finland.

“The proposal is conspicuous by a lack of exemptions and concessions around business investment, so a full rate would arguably qualify New Zealand’s CGT regime as one of the harshest in the world,” said Dr Patrick Carvalho, Research Fellow and author of the note.

“Worse, given New Zealand’s recognisably low-income tax thresholds by international standards, a new CGT would disproportionately hit middle-income earners already struggling to invest for retirement.”

“New Zealand should be cautious about siren calls for a top-ranking CGT. Trying to punch above our weight can sometimes place us in the wrong fight category,” concludes Dr Carvalho.

A good tax would foster investment that would help businesses grow, produce more and employ more.

A good tax would encourage and reward thrift and delayed gratification.

A good tax would improve productivity and promote growth.

The CTG as proposed would do the opposite.

New Zealand needs foreign investment because we don’t have enough of our own capital. The CGT would aggravate that by making investing overseas more attractive than investing domestically:

The Tax Working Group (TWG) proposals released this morning would skew New Zealand investors away from local assets, distort the KiwiSaver market and mangle the portfolio investment entity (PIE) regime if introduced, according to the founder of the country’s largest direct-to-consumer managed fund platform.

Anthony Edmonds, InvestNow founder, said while the TWG final report includes some welcome reforms, overall the capital gains tax (CGT) recommendations would add cost, complexity and confusion to New Zealand’s relatively efficient managed funds market.

“For example, the TWG’s plan to increase tax on New Zealand shares by applying CGT while leaving the fair dividend rate (FDR) tax for offshore shares unchanged would naturally drag capital offshore at the expense of local assets – at a time when New Zealand needs to fund major infrastructure projects,” Edmonds said. “In trying to discourage people from investing in residential property, the TWG has created a tax disincentive for Kiwi shares, which can only distort investment allocation decisions.”

Essentially, the TWG recommendation to tax unrealised capital gains on PIE funds marks a return to the ‘bad old days’ when Kiwis paid more tax on managed funds than direct share investments. . .

Concern over the housing shortage is one of the motivating factors for a CGT but It won’t improve home affordability in the long term:

Bindi Norwell, Chief Executive at REINZ says: “In the short-term there may be some initial relief in house price affordability as investors look to sell their property to avoid paying CGT. This may create opportunities for first home buyers.

“However, in the long term it’s likely to push house prices up as people look to invest more money in the family home, as there will be less incentive to invest in rental properties or other forms of investment e.g. equities.

“This will also have a flow on effect for the rental market with fewer rental properties available for tenants, thereby further pushing up weekly rental prices when they are already at an all-time high.

“The report even recognises that any impact on housing affordability could be small, therefore, we question whether all of the administrative burden and cost to implement GCT is worth it? Especially as CGT coming at the end of a raft of legislative changes the housing market has faced recently including the foreign buyer ban, ban on letting fees, insulation, healthy homes and ring fencing. . .

A tax that results in fewer and more costly rentals and more expensive homes is not a good one.

Nor is a tax that is fatally flawed:

Today’s Tax Working Group report recommendation for a new capital gains tax will not address residential housing affordability but it will penalise business owners and create costly complexity in our tax system, meaning it is fatally flawed, according to Business Central.

“New Zealand’s tax system is envied worldwide. The proposed capital gains tax increases compliance costs without boosting productivity,” says Business Central Chief Executive John Milford.

“Business Central agrees with the conclusions of the minority view on the Tax Working Group.

“A capital gains tax is just another cost on business, nothing more. . .

It would hit small and medium businesses hardest:

Key areas of the Tax Working Group Final Report released today were disappointing, says Canterbury Employers’ Chamber of Commerce Chief Executive Leeann Watson. . . 

Ms Watson says the proposed capital gains rules should not be implemented because of the significant impact on small and medium-sized enterprises (SMEs).

“We support the Government’s review to ensure that our tax system is fit for purpose for a changing business environment. However, there is very real concern that taxing both shares and business assets under a comprehensive capital gains tax regime would create double taxation.

“This could disadvantage New Zealanders owning shares in New Zealand and create inconsistencies around overall taxation on investment.”

Ms Watson says a capital gains tax would be unlikely to achieve the desired outcome for business.

“There is concern around the effect for capital markets in a capital constrained economy with a long-term savings deficit. Adding further tax on the savings and investment of those New Zealanders in the middle-income bracket won’t drive the deepening and broadening of the capital base that we need for business investment, which is higher productivity and wages.

“While the impetus behind the changes are aspirational, there is little to indicate they would significantly reduce overinvestment in housing or increase ‘tax fairness’. In addition, there is concern that additional administration costs and investment distortions could outweigh any benefits and potentially discourage much-needed investment and innovation by locking businesses into current asset holdings.

“It is vitally important that we remain competitive as a country and are not continuing to add further compliance for business and in particular small business, who represent 97% of all businesses in our economy.”

Ms Watson says there needs to be a viable business case for any changes to the current tax system.

“There seems to be a real focus on ‘fairness’ in the system design, as opposed to revenue-building, so we need to be careful that any tax changes are for the right reasons and are backed by a clear, practical and sustainable business case. We currently have a fairly simple and efficient tax system that should be kept and better enforced, with changes to specific rules where needed.” . . 

The costs of a good tax would not outweigh the benefits:

The Employers and Manufacturers Association (EMA) says the key issue in the Tax Working Group’s proposal released today is that the cost of its capital gains tax rules will outweigh any benefits.

Chief executive Brett O’Riley says any gains from such a broad-based capital gains tax would be eaten up by administration and other costs, leaving little revenue.

“Fundamentally the proposed capital gains rules don’t address the Tax Working Group’s objectives of reducing over-investment in housing and increasing tax fairness,” he says.

Mr O’Riley is also concerned that capital gains tax on business assets could discourage investment and innovation, locking businesses into their current asset holdings. He says there are other policy settings that could be changed to increase investment in different asset classes, away from property.

“I also fail to see how taxing growth on the value of assets from the proposed commencement date of 1 April 2021 would work, because it would be open to conflicting valuations,” he says. “It could also act as a further disincentive to growth when New Zealand already has issues with business not growing from SME’s into larger scale operations and a CGT may also limit the availability of capital to reinvest in businesses as smaller businesses face an additional tax bill.

“It’s difficult to see any benefits for the business community from implementing the proposed capital gains tax rules, as taxing both shares and business assets appears to be double taxation,” says Mr O’Riley.

It is relevant to note that a number of the Tax Working Group do not favour its recommendations on capital gains tax. The minority view summary is available here

One reason for dissension was compliance costs:

Former IRD Deputy Commissioner Robin Oliver was one of the 11 in the Tax Working Group.

Along with two others from the group, he believes the costs and bureaucratic red tape involved in adopting all the capital gains options outweigh the benefits.  

“We didn’t agree that this was in the best interest of the country to go the full extent, particularly in the business area, taxing share gains which result in double taxation,” he said.

“To get a valuation for all business assets in all parts business and all business will easily cost over a billion dollars in compliance costs. The amount of revenue you’ll get is relatively minor.”

As for taxing shares, Mr Oliver said it would result in New Zealanders who invest in New Zealand companies paying more tax when foreigners investing in New Zealand companies will pay no more tax. Furthermore, New Zealanders investing in foreign companies will pay no more tax.

“The obvious conclusion is New Zealanders will own less New Zealand companies and more foreign companies, and foreigners will own our companies,” he said. . . 

The proposed tax is no panacea for fairness:

Deloitte tax partner Patrick McCalman warns that a CGT is not a panacea for tax fairness.

“At one level, there is an attractiveness in the argument that a ‘buck is a buck’ and everyone should bear the same tax burden on every dollar earned. However, when one delves into the detail of the design, other issues of fairness emerge,” says Mr McCalman.

“For example, is it fair that property could pass on death without an immediate CGT cost, while gifts made during one’s life would be taxed? For family businesses, wouldn’t it be more productive to be able to pass assets from generation to generation before death,” he says.

“Accordingly, we need to be cautious as to how much ‘fairness’ a CGT will introduce. It may simply change where the ‘unfairness’ is perceived to sit within the tax system, creating new tax exemptions that would distort where investments are made.”

Complicating matters further is the political dimension. And MMP only exacerbates the political difficulty and increases the likelihood of whatever ultimately sees the light of day being less coherent from a policy perspective. . . 

The Deloitte paper raises several questions about fairness:

At one level there is an attractiveness in the argument that a “buck is a buck” and everyone should therefore bear the same tax burden on every dollar earned. However, when one delves into the detail, other issues of fairness emerge including new tax exemptions which would distort where investments are made – in effect, in seeking to create fairness, the proposal creates a number of layers of unfairness. For example:

    • With a CGT applying at full rates with no inflation indexation, is it fair that someone who buys an asset is taxed on the full amount of any gain when part of that gain is simply inflation? How will they be able to re-invest in a new asset if the inflation element is taxed?
    • Is it fair that the family home and artwork are excluded but most other property is not? Consider a plumber who has a $500,000 house and a $500,000 commercial building who would be taxed on the disposal of the commercial building. Should they have instead bought a $1,000,000 house, rented a business premise and enjoyed a tax free capital gain?
    • Is it fair that that investors in New Zealand shares would pay tax on capital gains but investors in foreign shares would continue to be subject (as they are presently) to the 5% FDR rate (even if gains are less or more)?
    • Is it fair that small business (turnover less than $5 million) could sell assets and defer the CGT bill if they reinvest the proceeds, while medium and larger size business cannot?
    • Is it fair that property could pass on death without an immediate CGT cost but gifts made to children during one’s life would be taxed?
    • Is it fair that there are proposed tax reductions for KiwiSaver to compensate for CGT but not for other forms of investment?

At one level, true fairness can only exist if all asset classes and forms of remuneration are subject to the same tax rate. But even then, anomalies will always arise. . . 

The proposed tax would be especially bad for farming and farmers:

Federated Farmers has said from the outset that a capital gains tax is a mangy dog, that will add unacceptably high costs and complexity.

“There is nothing in the Tax Working Group’s final report, released today, that persuades us otherwise,” Feds Vice-President and Commerce spokesperson Andrew Hoggard says.

“A CGT would make our well-regarded tax system more complex, it will impose hefty costs, both in compliance for taxpayers and in administration for Inland Revenue, and it will do little or nothing to ease the housing crisis.”

It is notable that even the members of the working group could not agree on the best way forward, with three deciding a tax on capital gains should only apply to the sale of residential rental properties and the other eight recommending it should be broadened to also include land and buildings, assets, intangible property and shares.

“Federated Farmers believes that the majority on the tax working group have badly under-estimated the complexity and compliance costs of what they’re proposing, and over-estimated the returns.”

The recommended ‘valuation day’ approach to establishing the value of assets, even with a five-year window, will be a feeding frenzy for valuers and tax advisors, “and just the start of the compliance headaches for farmers and other operators of small businesses that are the driving force of the New Zealand society and economy. . .

Farm succession is difficult enough as it is.

A CTG would make it harder still and encourage older farmers to hold on to their farms. That would lead to more absentee ownership and leasing with less investment in improvements as happens in other countries.

New Zealand doesn’t have a lot of many wealthy people and while those relatively few would pay more with the CGT as proposed, if their accountants and lawyers didn’t help them find ways to minimise their liability, they’d still be wealthy.

The many small business owners and more modest investors would not. They’d have the reward for their hard work and thrift cut back and lose enough of the value of their investments to hurt – unless they’d invested in art, cars or yachts which would be exempt.

That sends the message that such luxuries are good while investing in businesses and productive assets is not.

Where’s the fairness in that?


Rural round-up

February 21, 2019

Urban run-off floods nearby farms :

Farming on the city limits presents a paradox for Papamoa farmer Andrew Dovaston, one that on his bad days farming sometimes has him thinking about the benefits of cashing up to keen developers.

He is one of about a dozen farmers remaining down Bell Road, the boundary between Western Bay of Plenty District and Tauranga City and over the years he has seen the city’s lights creep ever closer as development pushes southwards from the country’s fastest-growing city.

The second-generation Dovaston family property was developed by Dovaston’s parents when they moved from Britain, initially intent on leaving their farming careers there behind and buying a service station.  . .

Golden Bay farmers suffering under one-in-20-year drought – Tracey Neal:

Nelson-Tasman is struggling with its driest weather in decades, with Golden Bay now in a one-in-20-year drought.

The district’s already ailing farmers and growers are in some areas operating on about 30 percent of their normal water allowances for irrigating crops.

In urban areas like Richmond and Mapua, gardens have dried up due to the total ban on watering.

Meanwhile, the State of Civil Defence Emergency will now be extended a further week as firefighters continue to battle the Tasman fire. . . 

The pain of Mycoplasma bovis is not being shared fairly – Keith Woodford:

Anyone reading the official information from MPI would be entitled to believe that the Mycoplasma bovis eradication campaign was going remarkably well. However, amongst the directly afflicted farmers, things remain far from sweet.

MPI has acknowledged that afflicted farmers have taken a hit on behalf of the industry, but as one greatly afflicted farmer said recently to me, this is the only team that he has been part of where, as a team member, he gets left behind.

I know of three farmers who have had to put their farms up for sale due to the Mycoplasma bovis outbreak and its implications.  There are others heading that way. I have yet to meet an afflicted farmer who does not feel hard done by. . . 

A2 more than doubles 1H net profit – Rebecca Howard:

 (BusinessDesk) – A2 Milk’s first-half profit lifted 55.1 percent as infant formula revenue continued to soar.

Net profit rose to $152.7 million in the six months ended Dec. 31 from $98.5 million a year earlier as sales climbed 41 percent to $613.1 million, Auckland-based, Sydney-headquartered a2 said.

Sales of infant formula totalled $495.5 million for the half – an increase of 45.3 percent on the prior year driven by share gains in China and Australia. . . 

It’s not shear luck – Luke Chivers:

Record-breaking shearer Aaron Haynes has sheared his way to land ownership. Luke Chivers reports on his successes.

It was a rare moment at the Central Hawke’s Bay A and P Show in November when the open shearing final was won by a competitor who had never previously a top grade title.

That competitor was Aaron Haynes. And if his name sounds familiar there is good reason why. . .

Drought, pests could force India to grant duty-free corn imports – Rajendra Jadhav:

 Below-normal monsoon rains and an infestation of the fall armyworm, which devastated African crops in 2017, have slashed India’s corn output and boosted prices, increasing the chances the government will grant duty-free corn imports for the first time since 2016. 

The shift to imports in the world’s seventh-largest corn producer, which typically exports to Asia, highlights the breadth of the crop losses due to the drought and armyworm. It also demonstrates the potential harm that the armyworm may wreak on India’s agricultural economy, which supports nearly half of India’s 1.3 billion people.

India harvests two sets of corn crops a year, a winter crop from March and a summer crop from September. . . 

Stop slugs munching your profit margin:

In the last few planting seasons we have seen favourable conditions for slugs, and if favourable conditions occur again this autumn, slug populations will quickly bounce back from the hot and dry summer and pose a risk to autumn-sown crops and grass.

We all know that slugs can be devastating to newly sown crops and pastures, so it makes sense to check paddocks before sowing to see how bad the risk of slug damage is. . .


Mooving to a2 milk

February 20, 2019

Fonterra is signing up farms to supply the a2 Milk company:

Mike Cronin, Fonterra Managing Director of Co-operative Affairs, says “Signing up New Zealand farms to significantly increase supply of high quality milk to The a2 Milk Company is a positive step forward. It clearly shows the strength of our strategic relationship, and our shared commitment to fast-track market growth and enable farmers to create additional value from their milk.”

The Co-op’s initial milk pool will be based in the Waikato around its Hautapu site and will support the production of ingredients. It is anticipated around 100 farms will be needed for next season.

Jayne Hrdlicka, The a2 Milk Company Managing Director and CEO, says “The a2 Milk Company is pleased to be making progress on our relationship with Fonterra. These farms will help support new growth areas for our company across existing and new markets. This is the next step in what we believe will be a fruitful long-term relationship with tremendous potential.”

The location of the milk pool was determined by several factors. Most importantly, the site needed the ability to manufacture the specific product in demand, produce relatively small batches and adapt easily to any product demand changes.

“While other regions were thoroughly considered, ultimately the decision must be demand-led. The ability to efficiently manufacture a range of products to meet that demand was the over-riding factor in choosing a site.As demand and product lines grow, we’ll look to expand the milk pool to enable more farmers to participate,” said Mr Cronin.

Most of the value from the relationship with The a2 Milk Company will be returned to all Co-op farmers through the dividend. Participating farms will also receive a premium for their milk.

Today’s development follows the national launch of the a2 Milk™ brand by Anchor from late September 2018.

A2 milk mostly lacks a form of β-casein proteins called A1 and instead has mostly the A2 form.

There is debate about A2’s health benefits but it attracts a premium price.

Fonterra missed the opportunity to lead with A2 milk and the a2 company has prospered.

Most herds have some cows which produce A2 milk and if Fonterra wanted to corner the market it could require its suppliers to use A2 semen for artificial insemination and in a few years all cows would be producing A2 milk.

That it’s seeking suppliers to supply a2 suggests it won’t be taking that approach.

 


Rural round-up

February 20, 2019

Fonterra wants many DIRA changes – Hugh Stringleman:

Fonterra wants to ditch the requirement for it to take all milk if its market share drops below 75% in a region.

It also wants to exclude big processors except Goodman Fielder from accessing its milk at the regulated raw milk price.

Instead it wants to introduce a 12c/kg handling fee, it says in its submission to the Primary Industries Ministry’s review of the Dairy Industry Restructuring Act.

All other processors should be required to publish their average milk price paid to farmers and details of how they set it, Fonterra said.

DIRA should evolve to cover the whole dairy industry and not just control Fonterra. . . 

Otago young farmers lay claim to two titles – Sally Rae:

Otago can lay claim to three new national champions – all in the rural sector. Luke Kane (30) and Isaac Johnston (25), from West Otago, won the national fencing competition held recently as part of the New Zealand Young Farmers conference.

Elizabeth Graham (21), who lives on her parents’ farm at Hindon, won the national stock-judging title. . .

Duck eggs hatch into growing business – Luke Chivers:

Taranaki duck farmers Dawn and Glen Bendall are earning a living out of making people, including themselves, healthier. Luke Chivers reports. 

It is 7.30am in deepest, darkest winter.

As daylight breaks on mountainous, coastal Taranaki Urenui duck farmer Dawn Bendall is preparing her children for school before fossicking around in wood shavings up to 25 centimetres deep to retrieve 400 eggs.

“The ducks will dig up, they’ll lay and then they will cover the egg up again.

“It’s their little way of not letting the vermin get to the egg so I don’t know what they think of me,” she says, laughing. . . 

Riparian planting cleans Waikato dairy farm river – Hunter Calder:

From above it looks like any other river.

But up close, the Marokopa River through Ruawai Farm in Te Anga is exceptionally clear.

Data collected by Waikato Regional Council shows the water quality is some of the best in the region.

The river rates particularly highly for macroinvertebrates – tiny creatures without backbones such as insects and worms. The more of those, the healthier the water. . . 

Bounce in deer numbers :

Farmed deer numbers, including the number of breeding hinds and fawns, increased in 2018 according to provisional agriculture census figures released by Statistics New Zealand.

This follows a small recovery in stag numbers in the 2017 census.

Deer Industry NZ (DINZ) chief executive Dan Coup says the trend is a strong indication of growing farmer confidence in the viability of deer in a drystock farming operation. . . 

Wrightson cleared to sell seeds business – Gavin Evans

(BusinessDesk) – PGG Wrightson has been cleared to sell its seeds business to Denmark’s DLF Seeds.

The Commerce Commission said the $434 million transaction, announced in August, was unlikely to substantially reduce competition in any of the markets it assessed.

DLF is not at present a close competitor of PGG Wrightson Seeds in respect of ryegrass seeds containing endophytes and is unlikely to be so in the future,” deputy chair Sue Begg said. . .

Trade deals with Africa would help continent grow – Marian L. Tupy :

In December 2018, Donald Trump approved a new strategy for Africa that includes increasing US commercial ties with the continent. According to the Wall Street Journal, Trump’s strategy “is part of a broader effort…to fight for global supremacy with Russia and China”. Geopolitical considerations aside, freer trade between the United States and Africa makes good economic sense that’s bound to become more obvious over time.

Today, the economy of sub-Saharan Africa (SSA) is small, accounting for some 2 per cent of global Gross Domestic Product (GDP). Between 1960 and 2017, SSA GDP grew from $252 billion to $1.75 trillion. The world economy grew from $11.3 trillion to $80 trillion (all figures are in 2010 US dollars). That amounts to an average annual compounded growth rate of about 3.4 per cent and 3.43 per cent respectively.

The United Nations estimates that over the next 50 years, the SSA and world populations will grow at average compounded annual rates of 2.05 per cent and 0.63 per cent respectively. SSA’s population will thus increase from 1.1 billion to 3.1 billion and the world’s population will increase from 7.7 billion to 10.6 billion. That means that SSA will account for roughly 30 per cent of the world’s population in 2070. . . 

Trace elements a solution close to home :

Despite New Zealand’s relatively benign climate lending itself so well to pastoral farming, its soils can hide some chronic mineral deficiencies that can undo the efforts of the best farm managers as they try to get the most out of their stock.

Richard Sides, Boehringer Ingelheim Animal Health NZ technical veterinarian is urging farmers to look harder at what may be holding their stock’s performance back, and says the answer may be easier to find than they first thought. . . 


Rural round-up

February 19, 2019

Tasman facing serious drought – Tracey Neal:

First there were floods, then fire and now drought.

The Waimea Plains, cradled between two mountain ranges, are usually immune to such extremes in the weather.

But a Tasman District Council water scientist says the wider area is facing its worst drought since 2001. . .

Explainer: Why NZ can’t afford to mess with China – Aimee Shaw:

China and New Zealand have enjoyed decades of mutual benefits.

The global powerhouse and New Zealand signed a Free Trade Agreement in 2008 and since then have phased in provisions to ease trade between the two countries.

China is now New Zealand’s largest trading partner, followed by Australia. Suffice to say it’s a relationship New Zealand can’t afford to lose.

Fallout from the Government taking the United States stance on the Huawei debate and now reports of people not wanting to come to New Zealand as a result are threatening the country’s long-standing friendly relationship. . . 

Year of the Pig means feast of exports for Fonterra :

Celebrations have been underway around the world to celebrate the festive Chinese New Year season — welcoming the Year of the Pig.

In China itself those celebrations are likely to have included family feasts including dairy produced in Waipa’s Fonterra plants.

Fonterra’s Te Awamutu site exported around $175 million in products to China for consumption in 2017/18. That’s about $12,500 per person in Te Awamutu. . . 

Optimistic report on ‘M bovis’ response – Sally Rae:

Improvements are already being made in many areas highlighted in the Mycoplasma bovis Technical Advisory Group’s report, response head Geoff Gwyn says.

Work is under way to develop a new surveillance approach for the beef industry and the focus is increasing on improving communication to affected farmers, the public and staff.

The report, released this month and following the group’s meeting in late November, provided independent validation the eradication programme was ”on track”, he said.

Mr Gwyn said the findings and recommendations were not surprising. Some of the recommendations were relatively simple to implement or were already in train, while others would need careful consideration before a decision was made. . . 

Open Country challenges validity of Fonterra 2018 milk price – Paul McBeth:

(BusinessDesk) – Open Country Dairy is seeking a judicial review of the way Fonterra Cooperative Group set its milk price in the 2018 season, despite the Commerce Commission giving the price-setting process a pass mark.

The commission noted the judicial review on its website, saying Open Country Dairy brought proceedings against certain conclusions in its 2018 report.

In that report, the regulator was satisfied that Fonterra’s calculation was largely in line with the efficiency and contestability elements required by law governing the dairy sector. . . 

Unusual beefalo meat in demand – Ken Muir:

A chance meeting with an engineer building a cowshed on a neighbouring farm next door to Nadia and Blair Wisely introduced them to bison and from there they’ve taken to producing beefalo – a bison beef cross – on their Isla Bank farm.

”We met Dennis Greenland by chance and he had purchased animals from a Marlborough breeder Bob Blake”, Mr Wisely said.

”He told us about the animals and that piqued our interest.”

The Wiselys purchased a bison bull, crossed it with a range of cows and Netherton Farm Beefalo was born. . . 

Wild horses go under the hammer in Hanmer

Twenty horses, all aged two or three years old, were mustered from the isolated Ada Valley and sold by auction at cattle yards in the St James Conservation Area, where there was once an 80,000-hectare cattle station.

The two-day biennial muster is a family tradition.

Hugh Dampier-Crossley, a sheep and beef farmer near Cheviot, has been mustering the horses since he was ten.

“The Stevensons owned the property. Jim Stevenson was my grandfather, they bought the place in 1927. He taught me how to break in horses and shoe horses so it’s become a bit of a passion,” he said. . . 

Plan to plant genetically engineered trees throughout US to save dying forests – John Gabattis:

Inserting genes to protect against foreign diseases and pests could bring species back from brink of extinction

Plans are under way to plant swathes of genetically engineered trees across the ailing forests of North America in a bid to save them from the ravages of disease and pests. 

Species such as the ash tree and whitebark pine have faced catastrophic declines of up to half their populations after creatures introduced from overseas tore through their defences. . .

 


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