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.


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 14, 2016

Success outside of big cities:

We asked some of New Zealand’s leading business people about their bravest moment in business. In the sixth story of our series for Spark, Whitestone Cheese CEO Simon Berry.

“Bravest moment? I reckon moving from Vancouver to Oamaru!”

Simon Berry, CEO of Oamaru’s Whitestone Cheese, comes from a long line of Otago farmers.

When the 1980s arrived so did the rural downturn. Noticing the tide was about to turn, Simon’s father Bob made the bold decision to forego beef and sheep for cheese.

“Dad was always good at reading markets,” says Simon. “‘In those days, the only cheese you could find in Kiwi supermarkets was the 1kg block. So my parents would visit their neighbours in Karitane who ran a small business called Evansdale Cheese.”

“Everyone raved about their green, mouldy farmhouse cheese!” . . 

Lessons from Australian dairy – Keith Woodford:

Our Australian dairy cousins are currently going through difficult times, particularly for those who supply Murray Goulburn, and to a lesser extent Fonterra.  There are lessons to be learned, although there may be alternative perspectives as to the specifics thereof.

Right now, production in Australia has plummeted. It will take a month or two to see how it all settles out, but early season production is down 10 percent.  Fonterra’s production is down 22 percent, and Murray Goulburn is in all likelihood down even more. Indeed, there have to be doubts as to whether Murray Goulburn can survive long-term in its current form.

Once the spring-calving cows come on-stream, the figures may look less dramatic, but both Murray Goulburn and Fonterra have clearly lost substantial market share. . . 

Vehicle review ‘great’ – Sally Rae:

It’s out with the old and in with the new with vehicles on Landcorp-owned farms.

Keeping people safe was the driver behind a review of vehicle safety by New Zealand’s largest corporate farming operation.

The review established a set few vehicles to be used on the basis of what worked for particular farms and terrain.

It was decided to remove all quad bikes on Landcorp’s dairy farms and reduce the number of quad bikes on livestock farms. . . 

Beef producers cautioned to look beyond the price peak:

New Zealand cattle producers are being cautioned to look beyond the current high-priced environment, with near-record prices unlikely to be sustained in the medium to long term according to a new industry report.

In its latest beef research report, Australian and New Zealand beef industry – looking beyond the price peak, agribusiness banking specialist Rabobank says while New Zealand farmgate prices are expected to remain around current levels in the short-term, they will then come under pressure as global beef production, and indeed total animal protein production, increases.

This will likely see prices ease, albeit to trade in a higher-than average range out to 2020, the report says. . . 

Officials Urged to Challenge Canada’s Latest Dairy Trade Protectionism:

The Dairy Companies Association of New Zealand (DCANZ) has joined with US, Australian, European, and Mexican dairy organisations in requesting a WTO dispute settlement proceeding be initiated against Canada if it continues with a planned extension to its dairy trade protections.

A joint letter, sent to Trade Ministers, sets out concerns that a recently concluded agreement between Canadian dairy producers and processors would provide an incentive to substitute Canadian dairy ingredients for imported dairy ingredients and would unfairly subsidise exports of Canadian dairy products. The agreement would provide a guaranteed price for milk used to manufacture ingredient dairy products, including skim milk powder and milk protein concentrate, which is below Canada’s cost of milk production, and which matches the lowest globally traded reference price for these products. . Image may contain: text

Life is better on the farm.

New Zealand’s Escorial Wool launches exclusive collection:

This season the luxurious and rare Escorial wool will showcase the first complete collection in both worsted and woollen fabrics, woven in Yorkshire, England by exclusive partners Joshua Ellis and Luxury Fabrics.

Escorial wool, originating from the Spanish Royal flocks of El Escorial, has made a name around the world for producing luxury performance garments for a discerning customer, grown from an exceptional small sheep, grazing in limited numbers in Australia and New Zealand. The Escorial distinction is in the heart of the fibre, performing as a naturally coiled spring. It is this coiled attribute that delivers fluidity in the Escorial fabric making a lightweight garment of crease resistance and comfort.

Founded by New Zealander Peter Radford in 1998, Escorial wool in February this year partnered with renowned Yorkshire textile companies Joshua Ellis and Luxury Fabrics, both who have the heritage and experience to translate the characteristics of Escorial into a luxurious fabric. . . 


GDT continues trending up

September 7, 2016

The GlobalDairyTrade price index continued its upwards trend in this morning’s auction with an increase of 7.7%.

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Before we get too excited, last year the price index went up 14.8% on August 19 , up  10.9% on September 2nd and 16.5% on September 16th and 9.9% on October 9th but the trend was all down after that.


Rural round-up

September 2, 2016

Fonterra on the eve of disruption – Fran O’Sullivan:

Fonterra chief executive Theo Spierings’ challenge ‘build windmills not walls’ is galvanising the dairy co-operative, writes Fran O’Sullivan.

Theo Spierings’ leadership has been tested as he re-engineers New Zealand’s biggest business during the tough times of a lengthy global commodity slump.

The story of how NZ dairy farmer incomes have plummeted, the company’s staff numbers have been slashed and hard calls made with its suppliers is well-traversed.

But behind the scenes there has been a fundamental refocusing of the company’s strategic operations which Spierings expects will result in a “strong picture” when he unveils Fonterra’s financial results late next month. . . 

Value-add products need a point of difference – Keith Woodford:

[This article was commissioned by the NZ Herald. It was written on 8 August 2016 and published on 31 August 2016. Since being written, some 24 days ago, we have seen substantial increases in dairy commodity prices, and in the short term (i.e. the forthcoming GDT dairy auction on 6 September GMT, and possibly subsequent auctions) these increases are likely to continue. However, the fundamentals remain unaltered; i.e commodities are highly volatile and will remain so, but there are also many traps for the unwary along the value-add path.]

There is increasing recognition within New Zealand that the dairy industry is in some trouble. Heading into a third year of low prices, questions have to be asked whether the industry is on a false path. And if so, where is the path back to firm ground?

Some will argue that the answers are simple: that we should reduce the dairy footprint on our land, and that we should focus on value-add. In reality, it is not that simple.

For those who live in the cities, it is easy to miss the importance of agribusiness to the overall economy. Much of New Zealand’s economic growth of the last 15 years is a direct consequence of a bountiful economic environment for agriculture in general and dairy in particular. . . 

GMO ruling frustrates biotech industry, farmers:

A lobby group representing New Zealand’s biotech industry fears further changes around the way genetically modified organisms are regulated could potentially force companies and scientists to shift overseas.

The High Court has upheld the Environment Court’s decision that local councils can have control over use and release of genetically modified organisms in their district.

The ruling was based on an appeal by Federated Farmers, which argued the release of GMOs was already regulated by the Environmental Protection Authority and local councils were not qualified to make such decisions.

But lobby group NZBIO chief executive Will Barker said the decision would come as a blow to the industry. . . 

Boat to change face of commercial fishing in NZ launched in Nelson:

A ceremony steeped in tradition was held in Nelson today to celebrate the launch of a boat that will change the face of commercial fishing in New Zealand.

The state-of-the-art vessel has been built for Tauranga-based fisherman Roger Rawlinson, of Ngati Awa descent. It has been named Santy Maria after his mother, who started the business with his father Bill more than 25 years ago.

The Santy Maria is the first vessel in Moana New Zealand’s $25-30 million fleet renewal project. It has been designed by Australian company OceanTech, with the technical expertise and vast fishing experience of Westfleet CEO Craig Boote, and constructed to the highest specifications by Aimex Service Group in Nelson. . . 

Seafood industry continues steady growth path:

The seafood industry continues to show strong growth with export earnings reaching $1.78 billion in the year to June, Seafood New Zealand’s Executive Chairman George Clement said today.

Speaking at the seafood industry’s annual conference, George Clement said the June result was an increase of $201 million on the same time last year, ”further demonstrating that we continue to make a significant contribution to the economy as one of the country’s main export earners,” he said.

“Last year industry accepted the Government’s aspirational goal of doubling export revenues by 2025 and we are on the growth path to achieve this,”
he said. . . 

The thirsty truth about avocados – Mitch McCann:

From Instagram to Pinterest, this is the golden age of avocados.

They’re so popular, the New Zealand industry’s earnings have doubled in the past three years.

Earlier this year avocado prices skyrocketed to around $4.50.

But now you can grab one for less than $2.

That’s because we’re into a bumper season, which may end up being New Zealand’s biggest ever.

But growing avocados takes a lot of water – much more than for things like potatoes, tomatoes and lettuce. . . 

Seeka announces the purchase of the Kiwi Crush™ and Kiwi Crushies™ product ranges from Vital Food Processors Ltd.:

Seeka Kiwifruit Industries (NZX-SEK), New Zealand’s and Australia’s largest kiwifruit grower, today announced the purchase of the Kiwi Crush and Kiwi Crushies product ranges from Auckland based Vital Food Processors Ltd (Vital Foods) for an undisclosed sum.

Kiwi Crush is a range of 100% natural kiwifruit based drinks that have since the early 1990s helped New Zealanders support and balance the digestive system. . . 

Hawkes Bay wine celebration reveals master class talent:

Two big names in the wine industry will be the hosts of the first-ever F.A.W.C! Masterclasses, at the Hawke’s Bay Wine Celebration.

A must-do event for wine lovers, when the cellar doors of 38 of the region’s finest wineries come together – the Hawke’s Bay Wine Celebration is being held in Auckland and Wellington next month. This is a unique opportunity to meet the winemakers while sampling award-winning wines. The event will showcase 50 Chardonnays, 38 Syrah, more than 30 Merlot Cabernet blends, as well as aromatic Riesling and Gewurztraminer through to newcomers Albarino, Tempranillo and luscious dessert wines. . . 


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