Subsidies blind producers to market signals

November 24, 2015

Dairy producers overseas aren’t getting low price signals which have prompted New Zealand farmers to reduce production:

New Zealand dairy farmers’ pay packets continue to be thin because overseas farmers haven’t yet received the price signal to cut milk production on the back of a market glut and low demand, says Rabobank’s top dairy analyst.

“Current global commodity prices in dairy are easily low enough to shut off taps globally. The problem is those low prices have not been passed onto farmers in many regions of the world,” said Tim Hunt, the global agribank’s head dairy strategist on a visit from his New York base.

“(With) these current (GDT) auction results of low US$2000 a tonne, there is no farmer in Europe or the US or Latin America who can make money on that. The problem is that New Zealand farmers are the only ones who are at the moment getting the farmgate signal that reflects that. . . 

New Zealand producers have had the very strong market signal that supply is outstripping demand. The price we’re getting is low, in response to that we’ve cut costs and production.

Subsidies in other parts of the world are protecting farmers from the low prices and blinding them to market signals.

TPP text released

November 6, 2015

The full text of the Trans Pacific Partnership Agreement (TPPA) has been released just as the government always said it would be.

The usual suspects, at least some of whom are opposed to any trade, will continue their opposition. Some might even trawl through all of its 6,000 pages to base their opposition on something which is actually in the agreement.

But one of the measures of the importance of being in this particular tent was what happened soon after the 12 countries to it reached their agreement.

Indonesia said it wants to join and the EU approached New Zealand to start negotiations on a Free Trade Agreement.

The TPPA is not perfect but we have too much to lose by not being part of it and enough to gain by signing up to make it worthwhile.


Rural round-up

October 12, 2015

SFF challengers challenged – Neal Wallace:

Those backing an alternative capital underwrite for Silver Fern Farms have been accused by the company’s board of playing a dangerous and irresponsible game.

Chairman Rob Hewett said the board had not been provided with any details on the proposal in which a group of agribusiness leaders have allegedly agreed to underwrite a rights issue of up to $100 million of new capital for SFF.

“The board has not received a proposal. We do not know any details, we do not know who the mystery underwriters are, nor who the supposed bank is. . . .

Dangerous game to stare down bankers, warns SFF chairman – Jonathan Underhill:

(BusinessDesk) – Silver Fern Farms chairman Rob Hewett says the company’s banking syndicate has become tired of its relationship and it would be “a dangerous game” to test lender support in the event farmer-shareholders don’t support selling a half stake to Shanghai Maling Aquarius this week.

Hewitt was responding to calls from shareholders opposed to the deal to look at alternative funding, which could keep New Zealand’s biggest meat company in local hands. The cooperative that now owns SFF would be showered in cash if the Chinese deal goes ahead. As well as $261 million that would be injected into the business, leaving it debt free with funds to upgrade plant and pursue global growth ambitions, the farmers will get a dividend of 30 cents a share, or $35 million, and the cooperative’s board would get $7 million for its costs – enough to keep it going for seven years at current rates. . . 


New action plan to attract the workforce dairy farmers need:

Attracting the skilled dairy workforce that farmers need to run their businesses is the goal of a new joint workplace action plan launched with the Minister for Primary Industries in Canterbury today by Federated Farmers and DairyNZ.

DairyNZ chairman John Luxton says one of the aims of the industry’s 10-year strategy is to see 90 percent of dairy farm businesses having quality work environments by 2020.

“We have put actions and commitments in this new plan to ensure we achieve that part of the strategy. We are competing with all the other career opportunities on offer across the globe. We’re not always the most attractive choice for many young people these days and we need to be if we want to develop and retain the workforce we need,” he says. . . 

Free lease for pub with no proprietor – Rhys Chamberlain:

Are you looking for an opportunity, a change, a slower way of life?

Then the Macraes community needs you.

Stanley’s Hotel, a registered historic place, is without a proprietor and the Macraes Community Trust is on the hunt for the community’s next publican.

Trust member Mat O’Connell is keen to get someone signed up to keep the pub open after failing to attract a lessee over the past year. . . 

A2’s successful capital-raising raises $40m for growth – Dene Mackenzie:

The management of A2 Corporation could now focus on delivering growth following the successful capital-raising announced yesterday, Craigs Investment Partners broker Peter McIntyre said.

A2, which markets milk with a protein variant said to have health benefits, raised $40 million in a discounted share placement to help fund working capital in its burgeoning infant formula business.

The Auckland firm sold 58.8 million shares at 68c apiece in the placement, which was over-subscribed. . . 

Changed lives taking new turn – Stephen Bell:

Five years after their lives were irrevocably changed Jo and Bryan Guy are stepping back from farming, ending nearly a century of family involvement in daily milk supply.

“Someone in the family has been responsible for milking the cows every day,” Bryan says.

It started when Cecil and Mary Guy began dairying in Feilding after World War I.

They milked 20 cows year-round to supply milk at the farmgate for local residents.

In 1954 their son Grahame and his wife Winifred bought the farm and continued to milk every day, supplying town milk with fresh liquid for bottling. . . 

From a single vineyard grew a family dynasty – Russell Blackstock:

For 100 years, the Babich family have stayed true to the ideals of their patriarch.

David Babich has a view from his office window to die for. Twenty minutes after battling through traffic from his home in Auckland’s bustling suburb of Pt Chevalier, he is relaxing at his desk at his family firm in a lush city oasis.

The 47-year-old is general manager of Babich Wines, one of New Zealand’s oldest family-owned wineries.

Today he is raising a glass to the company being in business for 100 years. . . 

Bangladeshi scientists ready for trial of world’s first ‘Golden Rice’ – Reaz Ahmad:

Bangladeshi rice scientists are all set to conduct field tests of the world’s first vitamin A-enriched rice, popularly known as Golden Rice, before taking the variety to production phase.

The success in vitamin A-rich rice comes in quick succession of the world’s first three zinc-rich rice varieties that Bangladesh released over the last couple of years.

Upon completing a successful trial of the genetically engineered Golden Rice in its transgenic screen house, Bangladesh Rice Research Institute (BRRI) is now taking the variety — GR-2 E BRRI dhan29 — to confined field trials in the coming Boro season this November. . . .

Quote of the day

October 12, 2015

I guess, if you wanted to drive foreigners away and send a message to the world New Zealand’s not open for business, you could do it. – Tim Groser

Dairy prices trending back up

October 8, 2015

The price index increased 9.9% in yesterday’s  GlobalDairyTrade auction.

That’s the fourth good increase in a row, a positive and welcome trend after the run of sharp falls.


Whole milk powder, which has the biggest impact on the farmgate price, increased by 12.9%.




Although Fonterra has been offering smaller quantities at the auctions it says it isn’t stockpiling product and that it isn’t selling product elsewhere for less than the auciton price.

Dairy futures are also positive and an increase in the forecast payout is expected.

Any  improvement will be welcome but it will need to get above $6 before most farmers will make a surplus.


Quote of the day

October 8, 2015

FTAs aren’t solely about tariff elimination. They are also about the ability to trade with as few impediments as possible. In this respect, TPP looks comprehensive at first glance, with the promise to breakdown compliance and non-tariff barriers across the Pacific Rim. These benefits are significant, especially for smaller economies and companies. . . .

Closer connectivity with the major players on the trade and investment scene adds another string to our bow. The likes of the United States, Japan and Canada have some of the highest incomes and thus purchasing power of all countries. New Zealand isn’t the lowest cost producer in many sectors anymore and needs access better market access to wealthy consumers to capture margin, and to deliver on the “value-add” strategies that many sectors are pursuing. . . 

There is a raft of empirical evidence suggests trade liberalisation benefits overall welfare and lifts nationwide GDP, particularly for open trade dependent economies like New Zealand. Studies by the Peterson Institute suggested that the gains to New Zealand from TPP would cumulate to around 2% of GDP by 2025. Some of the numbers being bandied around by Government officials look a little on the high side, but considering the surge in two-way trade between New Zealand and China following the signing of the FTA less than a decade ago it leaves little doubt as to benefits on overall trade (and GDP) from increasing trade liberalisation. . . ANZ

Hat tip: Kiwiblog

Quote of the day

October 7, 2015

John Key's photo.

Trade is incredibly important to NZ. As a country, we won’t get rich selling things to ourselves. – John Key


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