More murky milk in China

October 25, 2016

Fonterra has launched an internal investigation after 19 people were arrested in Shanghai for selling nearly 300 tonnes of expired milk powder.

The suspects were reportedly managing a company which was packaging expired products of the New Zealand dairy giant into smaller packages for resale below market prices.

After a lengthy investigation, police discovered one of the suspects sold the expired products to another company, who in turn allegedly resold almost 200 tonnes to distributors in Shanghai and in the Jiangsu, Henan and Qinghai provinces, who sold them on e-commerce platforms or in wholesale.

Authorities have seized 100 tonnes of these products and have shut down the websites selling them.

A spokesman for Fonterra said the company supported the action taken by Chinese authorities and that it believed the case was a one-off.

“We support the enforcement steps taken by Chinese officials. While we believe this is an isolated criminal incident, we are reviewing the case internally,” spokesman Phil Johnstone told Reuters.

The milk powder scandal is the latest to hit China’s beleaguered food industry, where food safety incidents, including sale of adulterated or expired products have been on the rise. . . 

 The company is doing the right thing by investigating another murky milk mess in China.

The expired milk powder probably isn’t a health risk. Use-by dates are very conservative and a lot of food is still safe after the expiry date.

But that’s not the point.

Milk powder that has passed its expiry date has not been disposed of appropriately. The company needs to find out how that happened and ensure that it doesn’t happen again.

Rural round-up

October 12, 2016

Marks & Spencer Scotland pulls pin on NZ lamb –  Alexa Cook:

British retailer Marks & Spencer will no longer stock New Zealand lamb in its Scottish stores, after a decision to only sell locally-produced lamb.

 New Zealand exports about 29,000 lambs a year to Marks & Spencer in Scotland and the decision will hit about 10 or 12 lamb producers in this country.Beef and Lamb NZ chairman James Parsons is in Britain, France, Ireland and Belgium this week to assess what effect Brexit may have on New Zealand exports. . .

Farmer grows from on-lamb farm to million dollar empire in six years – Paul Mitchell:

In just six years, a farmer south of Whanganui has grown his business from a single block of land to a multi-million dollar company supplying restaurants and supermarkets globally.

This week Coastal Spring Lamb, at Turakina, received its first order from China, giving it a foot-hold in the biggest market in the world.

Founder Richard Redmayne said this was the eighth export market for the firm since it began selling overseas in January last year. . . 

At war with the pukeko – one gardener’s greatest foe – Charlie Mitchell:

The pukekos strike just before dawn, leaving hundreds of destroyed cabbages and a market gardener in despair.

Commercial gardener Brent Treleaven is at war with the native birds, which have caused thousands of dollars worth of damage on his farm north of Christchurch.

He had to relinquish part of his market garden to the pukeko after they took it over. . . 

Cows get inspirational talk before milking – Simon Wong:

An Australian farmer says the pep talks he gives his cows is an easy way to bring cheer to his colleagues, who are facing some trying times.

Two videos of southwestern Victoria farmer Adam Jenkins, posted on Facebook by his wife Catherine, have been shared thousands of times in the past few days.

They’re of Mr Jenkins giving his cows encouragement before heading into the milking shed and then afterward congratulating them on their efforts. . .

Industry’s competitiveness in spotlight at DairyNZ AGM:

Dairy farmers’ ability to remain internationally competitive is likely to be a hot topic when dairy industry and research body, DairyNZ, reviews the past year at its Annual General Meeting (AGM) in Canterbury this month.

DairyNZ is holding its AGM in Ashburton from 11am on Thursday, October 27, at Hotel Ashburton.

Industry body chairman Michael Spaans says the AGM will review the 2015/16 dairy season, including the low milk price challenges, and discuss DairyNZ’s highlights for the year and future direction. . . 

Latest industry results confirm LIC has the best bulls in the country – by far:

The genetic gain and value that LIC bulls are delivering on New Zealand dairy farms is confirmed in the latest Ranking of Active Sires (RAS) list.

A phenomenal 27 of the best 30 bulls on the All Breeds list are LIC’s, including the top 14 in a row of all breeds.

“These bulls are managed by LIC on our farmers’ behalf, with massive contributions from our top breeders and our Bull Acquisition team,” LIC General Manager Biological Systems Geoff Corbett said. . .

GDT down 3%

October 5, 2016

The GlobalDairyTrade price index dropped 3% in this morning’s auction after five successive increases.




Rural round-up

September 30, 2016

Pasture to plate approach for DCANZ regulatory manager Dianne Schumacher – Sue O’Dowd:

A Taranaki microbiologist skilled in the development of regulatory strategies for the New Zealand dairy industry brings a perceptive pasture-to-plate approach to her work.

Dianne Schumacher, who owns a 62-hectare dairy farm milking 110 cows near Stratford with husband Chris, joined the Dairy Companies Association of New Zealand (DCANZ) as regulatory manager in January this year. 

She brings to the role broad international and national food safety expertise gathered during her 30-year career in the dairy industry. . . 

The short-term or long-term game – Rick Powdrell:

With hotly contested demand for stock, farmers and meat processors need to think carefully about their existing strategy and what it means for our industry in the long-term.

Rural New Zealand has been through a challenging climate in recent years, with many farmers still enduring the ‘fallout’ and adjusting their farm policies going forward as they look to return to normal.

Whether you have been through severe drought or de-stocked as a result of last season’s perceived strong El Nino you will be looking to re-stock to more normal numbers. . . 

NZ wins from trade deals –  Mike Chapman:

The question many people are asking is, ‘which trade deal will it be: the Trans Pacific Partnership (TPPA) or the Regional Economic Partnership (RCEP)?’

So much focus has been on the TPPA it is very likely few people in New Zealand know anything about RCEP. The main difference is that the TPPA has the US as one of the partner nations, but not China; while, the RCEP has China as one of the partner nations, but not the US. Neither the US nor China is in both the TPPA and RCEP. For many nations, preferential access to both the US and China is a major goal.

The Peterson Institute assessment is the TPPA will increase annual real incomes in NZ by $US6 billion – 2.2% of our gross domestic product. It will increase our annual exports by $US9b –10.2% of our exports over baseline projections by 2030. This is because the TPPA will eliminate 75% of tariffs when it comes into force and 99% of tariffs when it is fully in force. For horticulture there are real trade benefits totalling around $26m per annum directly due to reduced tariffs. . . 

Time to review your calving date? – Wilma Foster:

With calving almost over and mating on the horizon it’s time to have a review of one of the most significant decisions you will make for next season, calving date.

There are four significant decisions you make on farm every year. They are calving date, stocking rate, BCS at calving and pasture cover at calving.

Historically calving dates were 10-14 days later than what we currently calve.

This has been due to a desire to increase days in milk, farmers mating rising 2-year heifers earlier than the main herd to improve their incalf rates, and the use of bulls with a shorter gestation. . . 

Beetle pest deterred by mussel shell mulch:

Research to find natural ways of reducing insect pest damage in vineyards was highlighted at the 2016 Romeo Bragato Conference – the largest conference for wine growers and makers in New Zealand.

Mauricio González-Chang, a Lincoln University PhD student in the Bio-Protection Research Centre, presented evidence that mineral feeding deterrents and mussel shell mulch can protect vines from grass grub beetle attack.  

Mauricio’s study of vines in the Awatere Valley in Marlborough, found that natural silica-containing feeding deterrents, such as kaolin particles (hydrophobic particle films) and diatomaceous earth, reduced the damage caused by beetles by about a third in chardonnay, and a half in pinot noir grape varieties.  

While the silica results were promising, the greatest reduction in damage was seen when crushed mussel shells were spread under the vine rows. The shells affected landing behaviour of the beetles and resulted in a two-thirds reduction in feeding damage. .  .

Bring your ag innovations to the table :

Innovative food and agribusiness start-ups and fledgling ventures will have the opportunity to showcase themselves to potential investors in Sydney in November.

FoodBytes! Sydney will be staged as part of the international Farm2Fork Summit, focusing on future innovation in food and agriculture, to be held on Thursday, November 3.

Originally launched in the United States in 2015, FoodBytes! is designed to find the most innovative concepts in food and agriculture and pair that creativity with the capital needed to bring them to market. . . 

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I am a farmer. I solve problems you don’t know you have in ways you can’t understand.

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.


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.

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