Saturday soapbox

November 28, 2015

Saturday’s soapbox is yours to use as you will – within the bounds of decency and absence of defamation. You’re welcome to look back or forward, discuss issues of the moment, to pontificate, ponder or point us to something of interest, to educate, elucidate or entertain, amuse, bemuse or simply muse, but not abuse.
The Master Shift's photo.

Be a reverse terrorist. Plat. Plan. Scheme and launch random acts of life. Incite it. Invite it. Ignite it. Shake this world to its foundaiton . And enjoy yourself in the process. – Robert Mann.

Quote of the day

November 11, 2015

There must be something beyond slaughter and barbarism to support the existence of mankind and we must all help search for it. – Carlos Fuentes who was born on this day in 1928.


Rural round-up

November 9, 2015

Alliance in good shape, Donald says – Sally Rae:

He’s been sitting around the board table at Alliance Group for 24 years but Murray Donald has finally called time.

Come December 17 and the Southland farmer will be gone, as he is standing down as a supplier representative at the company’s annual meeting in Oamaru.

Mr Donald (54), who farms near Winton, and fellow long serving director Doug Brown, of Maheno, who was elected in 2001, have decided not to seek re election. . . 

Exit from EU could cripple UK agriculture – Allan Barber:

A new report by agricultural consultancy Agra Europe entitled Preparing for Brexit suggests leaving the EU, to be determined by a referendum in 2017, could destroy the British farming sector. The authors have based their forecast on the Coalition government’s 2013 Fresh Start Policy document which theorised that British agriculture could imitate New Zealand and Australia’s success in surviving, even flourishing, in a post-subsidy world.

Not surprisingly there is plenty of scepticism about the realistic prospect of either of these scenarios eventuating. If British voters chose the Brexit option, it is most unlikely any government would eliminate all subsidies, while a cursory glance at the proportion of farm income from EU Common Agricultural Policy payments shows how laughable it would be to expect them to become suddenly profitable. . . 

Contest continues to hold appeal – Sally Rae:

Chris Pemberton was just a lad when he competed in the Young Farmers Contest.

It was 2005 and, at 17, Mr Pemberton was one of the youngest regional finalists in the contest’s then 36-year history.

He was still at boarding school at St Kevin’s College when he competed in the Aorangi regional final.

While unplaced, he performed creditably and was a favourite with the crowd. . . 

Spaans new DairyNZ head – Stephen Bell:

Waikato dairy farmer Michael Spaans has been elected the new chairman of DairyNZ.

The industry-good body held a special meeting of the board this weekend.

Spaans will serve an annual term as chairman, leading an eight-member board made up of five farmer-elected and three independent directors.
He replaced long-serving chairman and former Cabinet minister John Luxton who retired from the DairyNZ board last month after 12 years of service on dairy industry bodies. . . 

Yashili New Zealand’s Pokeno factory opens – Gerald Piddock:

Yashili New Zealand Dairy Co has opened its new state-of-the-art infant formula manufacturing plant in Pokeno, south of Auckland.

The 30,000m2 plant will employ 85 staff and have an annual production capacity of about 52,000 tonnes of formula product. It will produce formula under the brand ‘Super Alpha-Golden Stage Infant Formula’ with shipments to China expected to begin in early 2016.

Yashili New Zealand is a leading producer of infant milk formula for the domestic market in China. It was founded in July 2012 and is a subsidiary of Yashili International Holdings and Mengniu Dairy Co.  The new factory took three years to build and cost $220 million. The company’s goals were to produce the highest quality infant formula and raise the healthiest babies in China. . . 

Yashili, Arla and Danone sign agreement – Gerald Piddock:

Yashili International along with European dairy producers Arla and Danone have entered into global strategic cooperation agreement.

Signed at the opening of Yashili’s new infant formula plant at Pokeno on November 6, the agreement will see the three companies work closer together in supplying products into Arla and Danone’s markets.

“It is a significant agreement between these two great dairy producers who are each committed to the highest standard of food quality and safety,” Yashili International Holdings president Lu Mingfang said. . . 


Competition not sufficient to warrant deregulation

November 6, 2015

The Commerce Commission has found there’s not yet enough competition to deregulate the dairy processing industry.

The Commission began its review in June this year at the request of the Minister for Primary Industries as required under the Dairy Industry Restructuring Act 2001 (DIRA).

Deputy Chair Sue Begg said the Commission’s draft finding is that, on balance, there is not sufficient competition at the farm gate and factory gate to consider full deregulation at this time.

“Our primary concern is that competition in the factory gate is very limited. Without the existing regulations, Fonterra would be able to increase the price of raw milk it sells to other domestic processors. This could in turn result in higher retail prices for dairy products in New Zealand,” Ms Begg said.

“While there are signs of competition and growth in the farm gate market, particularly in Canterbury, Southland and Waikato, Fonterra faces little competition as the dominant buyer of raw milk in most regional markets. However, it does not have the ability or incentive to reduce prices to farmers in this market due its co-operative nature and constraints from competitors.”

The Commission also concluded that Fonterra has limited ability and incentive overall to shut competitors out of dairy markets if the regulations were removed.

The Commission’s draft report has outlined options for transitioning to deregulation in the future and resetting the current market share thresholds that prompt a competition review. The recommendations include:
Taking a staged approach to amending the DIRA regulatory regime, beginning with a review of the Raw Milk Regulations with an eye to allowing a factory gate market to develop
Resetting the market share thresholds in both the North and South islands to 30 percent (up from the current 20 percent) as the trigger for a competition review of the dairy industry.
“Our analysis suggests that gradual relaxation of the Raw Milk Regulations may encourage the factory gate market to develop. Full deregulation currently poses a potential risk to domestic competition in goods such as fresh milk and cheese, where independent processors are dependent on regulated access to raw milk from Fonterra. Taking a staged approach to deregulation would mitigate this risk,” Ms Begg said.

“We recognise that any changes to the regime would need to be carefully managed and welcome submissions from interested parties. In particular we want to test the evidence on the likely costs and benefits of deregulation and whether our recommended approach of developing a more competitive factory gate market is appropriate at this time.”

Submissions on it are open until December 4th.

Primary Industries Minister Nathan Guy and Commerce and Consumer Affairs Minister Paul Goldsmith have welcomed the Commerce Commission’s release of a draft report on the state of competition in New Zealand’s dairy industry today.

The report was commissioned by the two Ministers on 2 June 2015 as required under the Dairy Industry Restructuring Act 2001. That Act allowed the formation of Fonterra, and includes provisions to promote contestability in New Zealand’s farm gate and factory gate dairy markets to ensure their efficient operation.

“The Commerce Commission has formed an independent view based on its expertise as New Zealand’s primary competition regulatory agency. On balance, the draft report has found that competition is not sufficient to warrant deregulation at this point,” says Mr Guy.

Submissions on this draft report are open until 4 December 2015. Following a period for cross-submissions, the final report will be released by 1 March 2016.

“I intend to consult on a package of policy proposals in mid-2016, following receipt of the Commerce Commission’s final report.

“The dairy industry is a major part of our economy and this process will be helpful in assessing whether the Act is effectively promoting contestability, and in turn, the efficient operation of our domestic raw milk markets.”

“I would like to thank the Commerce Commission for their work to date, and I encourage all those with an interest in this area to consider the Commissions draft report carefully, and to make a submission if necessary,” Mr Goldsmith says.

The final report will help inform the Government’s policy decisions, in particular, whether or not to allow the default expiry of the pro-competition provisions of the Act in the South Island (the current expiry threshold was met in the South Island in the 2014/15 season).

The draft report is here.

Now that the expiry threshold has been met in the South island I hope that the Minister will allow the default expiry of the pro-competition provisions.

GDT drops 7.4%

November 4, 2015

The GlobalDairyTrade price index dropped 7.4% in this morning’s auction.

This is the second drop after four successive increases.




(Apologies for photo quality, I still haven’t found a simple way to crop and compress photos since I got a new computer with updated software).


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

Word of the day

September 6, 2015

Quaggy – of the nature of or resembling a quagmire; marshy; boggy, soft and watery; flabby; pillowy; yielding easily to pressure or weight; not firm.


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