Rural round-up

September 23, 2016

Farmers must ‘lock in the gains’ as milk price lifts:

DairyNZ is encouraging farmers to lock in the gains achieved in the past two seasons, as a pasture-first farm system will continue to provide payback as the milk price rises.

Chief executive Tim Mackle says the increase to $5.25 per kg MS for the forecast 2016/17 Fonterra Farmgate milk price is terrific news for dairy farmers.

“This brings many farm businesses to around the 2016/17 break-even milk price of $5.05 per kg MS, once retrospective payments and dividends are taken into account. This means fewer farmers will need to borrow extra funds this season,” says Tim.

“Retrospective payments for next year have also been boosted by 20-25 cents in this announcement, to over $1 per kg MS. . . 

New funding for Mayfield Hinds irrigation scheme:

Primary Industries Minister Nathan Guy has welcomed $345,000 in new funding to investigate expansion of the Mayfield Hinds irrigation scheme in mid-Canterbury.

The funding comes from the Ministry for Primary Industries’ Irrigation Acceleration Fund (IAF)and will look at the feasibility of increasing the irrigated area of the current scheme by 4,500 hectare through piped extensions.

“Storing alpine water to use in dry times is crucial for rural communities to thrive, especially as the climate becomes more variable,” says Mr Guy.

“Well planned and managed irrigation schemes are good for rural economies and the environment. . . 

Fonterra says China well-poised for growth, regulatory changes will see 1800 brands disappear – Fiona Rotherham

(BusinessDesk) – Fonterra Cooperative Group chief executive Theo Spierings says legislation will mean drastic changes in the Chinese infant formula market with the removal of between 1800 and 2000 brands in the next 15 to 18 months.

Regulatory changes require each entity to have only three brands and three different recipes of infant formula in a bid to crack down on the grey market and allay consumers’ food safety concerns by reducing fake formula.

Spierings said Fonterra was well-positioned in every segment in China where it is already the global market leader for ingredients such as whole milk powder but a lot of things have changed in the past few years including a shift to sales from mother and baby shops to e-commerce. . . 

NZX milk futures fall from record after GDT, still above Fonterra payout forecast – Tina Morrison

(BusinessDesk) – New Zealand milk price futures have fallen in the wake of the latest GlobalDairyTrade auction, having reached a record in the run-up to this week’s sale, but remain above the payout level forecast by most of the country’s milk processors.

The NZX milk futures contract for the 2016/17 season hit a record $5.65 per kilogram of milk solids ahead of the GDT overnight on Tuesday, and recently traded at $5.50/kgMS. That’s still above the base milk price forecast by the country’s major milk processors, with Fonterra Cooperative Group this week updating its forecast to $5.25/kgMS, while Synlait Milk’s is at $5/kgMS, Westland Milk Products at $4.75-to-$5.15/kgMS, Miraka at $4.55-to-$4.80/kgMS, and Open Country Dairy at $4.60-to-$4.90/kgMS. Tatua sits above the futures with a current forecast of $5.50-to-$6/kgMS while Oceania Dairy didn’t immediately respond to a request for its forecast. . . 

NZ Merino and Silver Fern Farms set out new path for Silere:

The New Zealand Merino Company (NZM) and Silver Fern Farms have reached agreement for NZM to take 100 per cent ownership of Alpine Origin Merino Limited, previously owned jointly.

Alpine Origin Merino Limited was established 5 years ago as a joint venture between NZM and Silver Fern Farms to own the SILERE alpine origin merino brand and to fund the development and marketing of the SILERE merino meat range. Under the agreement NZM becomes the sole shareholder in Alpine Origin Merino Limited.

NZM Chief Executive John Brakenridge stated that “when we set out we needed to prove merino meat could be differentiated as a luxury eating experience and value created in market could be delivered to grower suppliers. . . 

Kiwi moves to Pitt island, with no electricity or phones, for love – Ryan Bridge:

There’s no love without sacrifice, right? How far would you be willing to go to make it work?

Story met Amy Podjursky during our flight to the Chatham Islands, and discovered she was moving hundreds of kilometres to a remote island in the name of love.

There’s no electricity or cellphones on Pitt Island – and there’s only around 50 people who actually live there. It’s quite uninhabited and it’s the eastern-most point of New Zealand. . . 

 

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Not all superheroes wear capes. Some wear boots and know how to use a crock pot – PinkTractor.com


Rural round-up

September 22, 2016

The P epidemic has reached Waikato farms – Chris Lewis:

Federated Farmers runs an 0800 helpline for members, which is a popular way our members get value out of their subscriptions. Increasingly we are getting member calls around drugs and alcohol and advice on how to address this growing issue.

We’ve previously provided advice to farmers who have had multiple houses contaminated with P and even advice to a farmer for an entire workforce that tested positive for drugs. Some of the common questions being asked include: If I don’t have a drug and alcohol policy, how do I go about testing my staff? And, am I insured for my houses and business?

So what are our rights as employers? Should you turn a blind eye so your cows get milked? It is time to directly answer some of the questions, and for you to get answers from experts who work in this field. . . 

SFF ‘unleashed’ by assent – Dene Mackenzie:

Silver Fern Farms would be a ”company unleashed” now approval for Shanghai Maling to buy 50% of the Dunedin meat processor had been confirmed, SFF chairman Rob Hewett said yesterday.

After months of debate and some opposition from dissenting shareholders, Shanghai Maling received approval yesterday to inject $261million into SFF and take a 50% share.

The decision was never in doubt, although the Overseas Investment Office process was a ”black box”, Mr Hewett said in an interview. . . 

Govt defends Wairarapa water grant:

A Wairarapa irrigation system which didn’t stack up economically still got taxpayer cash from the Ministry for Primary Industries, says a damning study commissioned by Fish & Game.

But MPI is standing by its decision and says the report is flawed.

Fish & Game has released an independent analysis of the Wairarapa Water scheme’s successful application for $821,500 from MPI’s Irrigation Acceleration Fund for stage 2 of the scheme, which aims to irrigate 30,000ha.

The 2014 application was based on a long run farmgate milk price of $7.07 per kg of milksolids, which was questionable, and that 55 percent of the irrigated land would quickly be converted to dairy, says author Peter Fraser, of Ropere Consulting. . . 

Strong 2015/16 Profit Result for Fonterra, Encouraging Milk Price Signals Ahead for Fonterra Farmers

Fonterra Shareholders’ Council Chairman, Duncan Coull, said Fonterra’s recording of its highest ever EBIT, which resulted in Fonterra Farmers receiving a 60% increase on the earning per share received last season, was a positive result in an otherwise challenging environment.

Mr Coull: “The final payout of $4.30 for a fully shared-up Farmer is reflective of the very tough season we have endured.

“However, it is encouraging to see that Fonterra, assisted by the low Milk Price environment, has further driven volume into value and captured efficiency gains which have cumulated into a strong dividend while also serving to strengthen our Co-operative’s balance sheet. . .

Self-resetting rat traps 20 times better than standard traps -study:

Self-resetting rat traps are 20 times more effective at killing the pests than standard traps, a new study has shown.

The project – conducted by Bay of Plenty Polytechnic student Chantal Lillas – compared the amount of rats killed by self-resetting traps over a 10-day period last month, compared to the single-action traps more commonly used.

The self resetting traps were developed by the company Goodnature in collaboration with the Department to Conservation, and could reset up to 24 times before it needed to be reloaded. . . 

Zespri Board announces succession planning for new CEO:

The Board of Directors of Zespri will start a search process next year to select a new Chief Executive Officer. The succession is being planned with a view to having the new CEO in place by the beginning of 2018.

The current CEO Lain Jager, who was appointed Zespri CEO in December 2008, will remain in the role until the new CEO starts.

Zespri Chairman Peter McBride says the Board is balancing continuity and renewal in the leadership of the organisation. “The Zespri Board has set out a process for succession at an optimal time. The timeframe helps to ensure continuity through this transition, which is important given Zespri’s critical role in the value chain for kiwifruit growers and customers globally.” . . 

NZ Merino lifts annual profit 19%, meets growth targets – Tina Morrison:

Sept. 21 (BusinessDesk) – New Zealand Merino Co, a wool marketer that aims to develop higher-value markets for sheep products, posted a 19 percent lift in annual profit and said its business has doubled in value over the past three years.

Profit rose to $2.7 million in the year ended June 30, from $2.3 million a year earlier, according to the Christchurch-based company’s 2016 annual report. Revenue rose 4.9 percent to $114.7 million, while cost of sales gained 5.7 percent to $104 million. It will pay its more than 500 growers a total dividend of $1.36 million, up from $1.1 million the previous year and in line with its policy of returning 50 percent of profit to shareholders. . . 

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Don’t complain about a farmer with your mouth full.


Value-add shows value of co-operative

September 22, 2016

Fonterra has announced a 65% increase in net profit after tax to $834 million which the company says reflects a stronger business despite ongoing challenges in global dairy markets.

Highlights:

Sales volume increased 4% to 23.7 billion Liquid Milk Equivalents (LME)

· Revenue $17.2 billion, down 9%

· Normalised EBIT $1.4 billion, up 39%

· Net profit after tax $834 million, up 65%

· Return on capital 12.4%, up from 8.9%

· Ingredients inventories down 25%

· Gearing ratio reduced to 44.3% from 49.7%

· Debt reduced by $1.6 billion to $5.5 billion

· Earnings per share 51 cents

· Cash Payout $4.30

– Farmgate Milk Price $3.90 per kgMS

– Dividend of 40 cents per share

 . . . Chairman John Wilson said that the 2015/16 season had been incredibly difficult for farmers, their families and rural communities, with global dairy prices at unsustainable levels.

“Our Co-operative has responded. We continued with the significant and necessary changes we began in the business over three years ago to support our strategy and its priorities, and worked hard to return every possible cent of value back to our farmers.

“Our business strategy is serving us well. We are moving more milk into higher-returning consumer and foodservice products while securing sustainable ingredients margins over the GlobalDairyTrade benchmarks, especially through speciality ingredients and service offerings.

“Through increased earnings and continuing financial discipline we have increased the return on capital and strengthened our balance sheet by significantly reducing debt.

“We have done what we can to support our farmers with the Co-operative Support Loan, and early payment of dividends.

“After a period of deliberate and disciplined attention to the business, we have become a stronger Co-operative operationally, financially and in our mindset with a clear sense of direction and a structure which will support real momentum in our strategy going forward,” said Mr Wilson.

Mr Wilson said farmers’ decisions to reduce stocking rates and supplementary feeding to help lower costs resulted in milk collection across New Zealand for the 2015/16 season declining to 1,566 million kgMS, down three per cent on the previous season.

Strong volume and value growth

Chief Executive Theo Spierings said more volumes of milk sold at higher value is at the heart of Fonterra’s strategy.

“For our farmers, the promise is that we will make the most of their milk. We’re keeping that promise.

“We’ve seen the real strength of our ingredients business this year. The money our farmers have invested in stainless steel is giving us more choice, and we have matched production to the highest value customer demand. In a difficult market, we increased ingredients normalised EBIT this year by 24 per cent to $1,204 million.

“In consumer and foodservice, we converted an additional 380 million litres of liquid milk equivalents (LME) into higher returning products, bringing our total volumes in this business up from 4.5 billion LME to 4.9 billion. Increasing our consumer and foodservice volumes, and especially our foodservice growth, meant we increased our normalised EBIT in this business by 42 per cent to $580 million.

“Our results show that we continue to do what we said we would do right across the Co-op. We are single-minded about transforming our business to get the best results. We have cut our operating expenses, increased our free cash flow, reduced our working capital days, driven debt down, and reduced our capex and our gearing.

“All of this effort, combined with higher earnings and margins meant our measure of return on capital has increased from 8.9 per cent to 12.4 per cent.

“Our results show how our strategy is creating value for our shareholders. We are driving more volume into higher value products, and we are achieving results with increasing efficiency. We will continue to build on this strong platform to keep improving and delivering results to our farmers.

Investing in our communities and future

“At the same time, we have kept our promise to share great dairy nutrition with our communities through Fonterra Milk for Schools, and through our Grass Roots Fund and Living Water partnership, we are looking after local communities and the environment.

“We can only do all of this with the support and commitment of our farmers, investors and employees. Throughout the year we have challenged our people to adapt how we work to better manage the shifts in the global market. It has been a real team effort and I want to thank all of our people in New Zealand and around the world,” said Mr Spierings.

Future outlook

With a forecast Farmgate Milk Price of $5.25 per kilogram of milksolids (kgMS), the forecast total payout available to farmers in the 2016/17 season is $5.75 to $5.85 before retentions. This includes a forecast earnings per share range of 50 to 60 cents.

Mr Wilson said over the past three years the Co-operative had worked hard to align its structure to its strategy with a focus on achieving more value for the volumes of milk produced by its farmers.

“The higher forecast earnings per share range reflects the performance improvements the business will continue making.

“It is still early in the season, and we expect continuing volatility as reflected in price improvements in recent GDT auctions.

“Current global milk prices remain at unrealistically low levels, but as the signs in the market improve, we are very strongly positioned to build on a good result in the year to come,” said Mr Wilson.

The last season was a very tough one for dairying with the milk price well below the $5.05 almost all farms need to break even.

However, lower milk price makes it easier for the company to make money on its value-added products.

This shows the value of  the co-operative model. It enables producers to share the dividends which off-set the low milk price, and it is why Fonterra suppliers are determined to retain ownership of the company.

In businesses which aren’t co-operatives, higher dividends can come at the expense of producers.

You can see the annual results here.


366 days of gratitude

September 21, 2016

Today’s increase in Fonterra’s forecast payout was unexpected and has raised a couple of questions:

  • Given last year when an increase in the forecast price was proved to be premature and later reversed, wouldn’t it have been more prudent to wait to make sure the upward trend in demand for milk is going to continue?
  • Why make the announcement today, instead of waiting until tomorrow when the company will present its annual results?

The cynic in me thinks these are valid concerns but the optimist is hopeful that Fonterra learned from last year and its forecast will prove to be at worst accurate and might even be conservative.

Dairying has had a couple of tough seasons, the impacts of which have spread off-farm.

Today’s 50 cent lift in the forecast payment has provided more than a glimmer of light at the end of the tunnel and I’m grateful for that.


Rural round-up

September 21, 2016

Improved dairy sector expectations see New Zealand farmer confidence surge higher:

Results at a Glance

· Overall confidence in the agricultural economy has improved considerably from the previous quarter

· Farmers’ expectations for their own business performance also improved, driven by sizeable improvement in expectations among dairy farmers

· While overall confidence was up among all sectors, sheep and beef farmers registered small decline in expectations of their own business performance

· Horticulturalists’ business performance expectations also fell, but remain at elevated levels

· Farm business investment intentions remained stable. . . 

Young role model inspires primary sector job seekers – Gerard Hutching:

Ellie Cranswick knew New Zealand was different to the United Kingdom the moment she saw drench being advertised on TV.

She noticed on arrival that there were a number of differences between the two agricultural industries, from the end markets, to the genetics, to systems used.

Originally from Dorset, 27-year-old Cranswick now has her red bands firmly grounded in New Zealand soil after five years in the country. . .

Changing agri-food perspectives – Keith Woodford:

When I was an undergraduate back in the 1960s – in some ways it seems just yesterday – the dominant agricultural paradigms were about farm production and management.  As students, we learned nothing about marketing. And when marketing did come in vogue in the following decades, the dominant perspective was that marketing was what happened at the end rather than the beginning of the agri-food chain.

To a considerable extent, that perspective of a value chain that starts with production still survives within our animal-based agricultural industries. In contrast, the plant-based industries have been more successful in making the transition to a consumer-led position. And that may well be why, in an evolving world, our horticultural industries are currently succeeding where our traditional pastoral industries are currently struggling.

Our three big plant industries that are leading the way are viticulture, kiwifruit and apples. And then there are some other such as cherries which are also making good progress, plus seed crops such as carrots. . . 

Hope wallaby tracks ‘isolated incident’ – Lynda van Kempen:

The spread of wallabies is a serious concern and the last thing Otago needs is another destructive animal pest, a regional council director says.

Otago Regional Council environmental monitoring and operations director Scott MacLean, commenting about wallaby tracks being found at Galloway, near Alexandra, recently, said the council was treating the sighting seriously.

“Given that at this stage, only wallaby sign was sighted, I would like to think, and certainly hope, that this is an isolated incident. . . 

$3.1m funding for climate change projects:

Primary Industries Ministers Nathan Guy and Jo Goodhew have welcomed $3.1 million in new funding for 13 climate change research projects in the agriculture and forestry sectors.

The grants were announced today by the Ministry for Primary Industries through the Sustainable Land Management and Climate Change (SLMACC) research programme.

“This funding plays an important part in helping our primary industries prepare for the future challenges of climate change,” says Mr Guy.

“$935,000 is being invested in three projects to analyse soil carbon on hill country farms and under irrigation systems. . . 

Mighty mite makes easy meal of Marlborough broom – Mike Watson:

A tiny insect with a big appetite is making short work of invasive scotch broom plants in dry areas around Marlborough.

The broom gall mite was released by the Marlborough District Council biosecurity team into an area south of Blenheim in 2011.

In the past five years, the biocontrol agent has been spread by wind to surrounding farmland on the Redwood Pass and Dashwood Pass. . . 

Using wood fuel is heating up:

With the continual growth in the use of wood fuel for heating the Bioenergy Association is increasing its support for wood fuelled heat plant operators and maintenance staff, helping plant owners improve the performance of their plant and encourage others to move from coal to wood fuel.

“The amount of wood fuel replacing coal is growing each year and we want to ensure heat plant operating and maintenance staff are well supported,” says the Association’s Executive Officer Brian Cox.

The Bioenergy Association is holding a forum for heat plant owners, operators and maintenance staff in Christchurch on 27 September. . . 

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GDT and Fonterra’s forecast payout up

September 21, 2016

The GlobalDairyTrade price index increased by 1.7% in this morning’s auction.

That was less than analysts and expected and whole milk was down .2%.

However, Fonterra is obviously confident that the upward trend in prices will continue and has increased its farm gate forecast milk price:

Fonterra Co-operative Group Limited today increased its 2016/17 forecast Farmgate Milk Price by 50 cents to $5.25 per kgMS.

When combined with the forecast earnings per share range for the 2017 financial year of 50 to 60 cents, the total payout available to farmers in the current season is forecast to be $5.75 to $5.85 before retentions.

Chairman John Wilson said that since the Co-operative last reviewed its forecast Milk Price in August, global milk supply has continued to reduce and demand has remained stable.

“Milk production in key dairying regions globally is reducing in response to low milk prices. Milk production in the EU for 2016 is beginning to flatten out and our New Zealand milk collection is currently more than 3 per cent lower than last season.

“While we have seen some improvement in GDT auction prices recently, the high NZD/USD exchange rate is offsetting some of these gains.

“There is still volatility in global dairy markets and we will continue to keep our forecast updated for our farmers over the coming months,” said Mr Wilson.

It’s only a forecast.

Farmers and sharemilkers will still be very cautious but it’s very welcome news for the industry, those who service and supply it and the wider economy.


Rural round-up

September 20, 2016

Prisoners train to fill farming labour gap – Alexa Cook:

New Zealand needs to fill 50,000 new jobs in the farming sector over the next decade, and hundreds of prisoners are training up to fill the gap.

More than 400 prisoners nationwide have earned NCEA qualifications from Level 1 to 4 in agriculture and horticulture in the past year.

Graeme Allomes works for Land Based Training and is the main tutor for Manawatu Prison’s agriculture course.

Each class starts with a maths lesson and Mr Allomes said this got the prisoners’ minds ticking for the day, before moving on to animal care, quad bikes and fencing. . . 

Lincoln keen to see Telford improve – Samuel White:

It is too early to say how a review of Lincoln University’s operations will affect South Otago institution Telford’s future, but everything is on the table, and there is concern about how many students are advancing from the Balclutha campus to complete degrees at Lincoln,  the man in charge of the review says.

“The students who are doing certificates may not have any aspiration or need for a bachelor degree and …  we do respect that, but that was one of the original aspirations [for students] but it has not happened,” vice-chancellor Prof Robin Pollard said.

Lincoln University took over the Telford Polytechnic campus in 2010. . . 

All for cheese in China – Emma Brannam:

Say cheese in China and you might get a grin, especially if you’re a Kiwi.

Sales of the food are up more than 20 percent a year, with much of it shipping from New Zealand.

“It’s not something we had as children, so we’re naturally drawn to it,” said Brian Gu, who owns a restaurant in KeriKeri.

“In China, cheese is regarded as healthy, full of calcium. We want to give our children the best food possible and New Zealand products are regarded as really pure.

“We’re only just beginning to learn all the different ways cheese can be included in the diet.” . . .

Stopping the rain from washing away dairy farmers’ profits:

Dairy farmers who have been experiencing wet weather could be facing unexpected soil nutrient loss due to a common misconception about how urea fertiliser behaves when soils are moist from previous rainfall events.

This misconception is based on a common belief that volatilisation, the process where nitrogen is lost through conversion into ammonia gas, is minimised if urea fertiliser is applied to moist soils or before a heavy dew or light rain.

Ballance Agri-Nutrients Science Manager Aaron Stafford says that while he can’t predict the weather, the good news is that a strategic look at your nitrogen fertiliser applications and some smart science can help to get the best from your investment, rain or shine. . . 

Hemp Awareness week next week 19-25th September 2016:

The NZHIA are focused on raising the public’s awareness of the legitimate, regulated industry which is set to massively benefit rural and regional New Zealand.

Industrial hemp can provide, seed and fibre for all mediums of industry, from soap to 3D printing; the naturally grown plant could radically change local business. We have business owners right now making a difference to their bottom line and the economy. And this is set to take off in the future.

Richard Barge from the NZHIA who is part of a road show for hemp awareness week, which starts next week says “we are promoting all the markets for Hemp the seed, stems, roots and leaves.” . . 

Cashmanager RURAL launches new farming forum – join the conversation:

Cashmanager RURAL is committed to improving farm performance and our latest development, Rural Community, delivers on this promise.

Our new interactive forum, Rural Community, has launched.

Rural Community provides a place for like-minded rural people to share news, views, discuss topics and ask questions.

It is a forum where general farming topics can be discussed and our lead moderators will regularly post discussion points related to the farming community.

Also launched today is a new improved Help Centre where our clients can engage with, and learn more about our Cashmanager RURAL product. This could be by using FAQ walk-throughs and video tutorials, or exchanging ideas and opinions and learning from one another. . . 

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Success is the sum of small efforts, repeated day in and day out – Robert Collier.


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