Mainland betters NZX-50

30/07/2008

We call it the Mainland with our tongues in our cheeks but now we have the numbers to prove we’re weathering economic tough times better than the north.

The Deloitte South Island Index measures the market capitalisation of 33 companies with head offices or the majority of their business in the South Island and puts them into an index relative to their size.

For the first six months of this year, the index was down by 8.5 per cent, beating New Zealand’s benchmark NZX-50 index which fell 21 per cent. Over the last quarter (April to June) it has risen into positive territory, growing 3 per cent versus the NZX-50’s drop of 8 per cent.

However, doing better isn’t the same as doing well as Deloitte partner Paul Munro points out:

At a headline level it shows South Island companies are doing better than the rest of the country, but we need to balance that out with the fact that of the 33 companies measured 61 per cent saw a drop in their market capitalisation.”

Munro said the strong performance over the last quarter had been boosted by larger companies like PGG Wrightson and NZ Farming Systems Uruguay.

PGG Wrightson, the second largest company on the index, grew its market cap by $127 million, boosted by a higher share price and $5 million in bonus shares being issued, while NZ Farming Systems Uruguay saw its market cap increase by $83 million on the back of a rising share price driven by predicted increased earnings. Munro said their strength followed the boom in the dairy sector with record milk solid payouts.

He said this sector was having a positive impact on other businesses and because a greater proportion of business in the South Island was linked to dairying it was helping to hold up the economy.

It’s not all down to dairying, but the record payout from Fonterra and the continuation of conversions from sheep to dairy farms are pouring money into rural communities. That in turn is insulating the provinces from the worst effects of the recession.


More dairying fewer dogs

16/07/2008

Fewer dogs will be on the market at the 51st annual Gore dog sale  today, another sign that Southland farms are converting from sheep to dairying.

However, demand was still expected to be strong for the 33 heading dogs and 21 huntaways on offer at the Charlton saleyards.

PGG Wrightson agent Nicol Gray believed the good dogs would fetch upwards of $3000.

“The quality is pretty high — just as good as last year — and we will be expecting good prices,” he said.

Each dog would give a make-or-break two-minute demonstration working a mob of sheep under the watchful eye of potential buyers.

Last year heading dog Sox, bred by Matt O’Connell, of Middlemarch, made the top price of $4000, while John Tweed, of Lawrence, sold the top huntaway, Mel, for $3700.

The top dog at last week’s Ashburton sale, a five year old heading bitch, Queen,  sold for $5600. The top huntaway made $2000.


Heading Feds Requires Change from Sheep

30/06/2008

Taking on the presidency of Federated Farmers is pushing Don Nicolson to change from running sheep on his farm to leasing it for dairying.

His 212 ha farm is too small to justify the cost of employing a manager but too big for him to run by himself while also serving as president.

“My intention is to give it [Federated Farmers presidency] 24/7 attention, but I can’t do both. There is no way given the economics of sheep farming that I can employ a manager.”

His experience illustrated one of the major challenges facing farmers and a reason he was looking at joining the flood of sheep and beef farmers changing to dairying.

Last year, he made a net profit of just $1 a stock unit over his 2500 stock units. Leasing to a dairy farmer would earn him a net profit of $200,000.

“It makes no sense to stay in the sheep industry.”

Even without taking on the presidency the difference in income from dairying or sheep and beef is a pretty compelling argument for change.  But even so, this is a reminder of the sacrifices made by people who take office in voluntary organisations.

The Oamaru Mail reported last week that North Otago Council of Social Services was disbanding because it had too few members. It’s the lament of just about every voluntary organisation be it sport or leisure club, religious, service or lobby group, or political party.

Yet the voluntary sector is still a vital part of our communities and society. We’re fortunate that there still are people willing to play an active role in them in spite of the cost in financial, and personal terms and the many competing demands for their time, talent and energies.


ETS for agriculture is economic stupidity

30/06/2008

David Bellamy’s biological arguments for excluding agriculture from the Emissions Trading Scheme (see post below) are complemented by economic arguments from Muriel Newman:

The primary sector remains the backbone of New Zealand’s prosperity. Last year it earned 47 percent of the country’s export returns of $35 billion. Dairying was the single biggest export earner with receipts of $7.5 billion, or 21.6 percent of the total. Meat exports ranked second with $4.3 billion or 12.4 percent. In third place, wood exports were worth $2.1 billion, or 6 percent.

The primary sector exports around 90 percent of all of the food produced in New Zealand. This is in sharp contrast to Australia, which only exports a quarter of its food production. An estimated 40 percent of New Zealanders are employed in the food industry.

New Zealand’s prosperity has, of course, always been dependent on farming…

That’s why it is incomprehensible that a New Zealand parliamentary party is undermining the farming sector. The Green Party should be ashamed of itself for blaming farmers for increasing food prices, when farmers, like everyone other New Zealander, are facing rising costs caused by increasing fuel and power prices, higher mortgages, and an escalation in rates and other government charges.

In fact, it is Green Party policies like biofuels, emissions trading schemes, and an over-reliance on solar and windpower that are the cause of much of the cost pressure increases that are occurring in New Zealand and around the world. That is why their call for an inquiry into supermarket pricing smacks of hypocrisy and political game-playing – especially in light of their opposition to the government’s proposal to delay the entry of farming into the emissions trading scheme.

Absolutely right. They don’t appear to understand that if it costs more to produce food it will cost more to buy it.

The government has estimated that at a conservative price for carbon of $50 a tonne, under their proposed emissions trading scheme agricultural payouts will fall by 12 percent for dairying, 21 percent for beef, 34 percent for sheep and 43 percent for venison. 

Anyone who has even the most rudimentary understanding of our economy will realise that these charges will not only ruin the viability of the farming sector and cause food prices to escalate to unprecedented levels, but will further undermine the wealth of all New Zealanders.

Why would any government commit to something which will be hugely expensive, damage the economy and do nothing for the environment. It is economic and political madness to impose such high costs for no benefit.


It’s Not What You Say …

25/06/2008

Comments by Federated Farmers Dairy Chair Frank Brenmuhl on the right of  farmers to continue to produce food as an election issue might win support from other farmers but the way he says won’t win friends anywhere else.

Dairy farmers were being held responsible for greenhouse gas emissions that the could do little about without reducing food production, he said.

“This election is about … the right of farmers to continue to produce food for the world and revenue for this nation”.

It may be for the minority who are farmers, but I suspect it’s not for most other people.

He said dairy farmers were being attacked because they are:

* paid the world price for much-needed food;

* seen as privileged for owning dairy farms;

* using water and resources they own to produce food;

* not subsidising the cost of dairy products in NZ supermarkets.

But he questioned how New Zealanders expected to be able to afford to import nearly 60 percent of their food, electronic appliances, vehicles and other consumer goods, if there was no farm produce to sell.

“As a trading nation we have to sell stuff in order to buy stuff,” he said. “What part of this do they not understand?”

Townies should not expect dairy farmers to donate $15 million so that the price of dairy foods sold in NZ can be reduced.

“They want … and they want … but they do not want to pay.” he said.

“Why should farmers have to be better than, more considerate than, more accountable than the rest of New Zealanders?” Mr Brenmuhl said.

“Am I ashamed of success? Not one bit. It is what is desperately needed for New Zealanders to be better off”.

The physical resources that farmers used to produce food did not belong to the Crown, non-government organisations, or to the politicians.

“The land we own is ours for as long as we choose to own it, unless it is stolen by the state,” he said.

 This has already got a negative reaction in a comment on No Minister:

Psycho Milt said…

So for Federated Farmers, this election is about the absolute right of farmers to wreck the environment if there’s increased profit in it for them? And the rest of us don’t get a say in whether our countryside gets turned to shit or not? OK, got that. I’ll be voting Green after all, then.

Of course that isn’t what Feds or Brenmuhl is saying – but the way that he said it provides fuel for those who don’t understand farmers and farmers; and those who believe the green-wash about dirty dairying.

A recent Lincoln University survey  found farming is percieved as contributing more to water pollution than sewage or storm water run-off.

Nearly half the respondents cited farming as one of the main causes of water degradation, followed by sewage and stormwater runoff – the first time those factors had been relegated to second place.

In the previous survey, done in 2004, only about one-quarter of respondents had blamed farming for poor water quality.

Federated Farmers environment spokesman Bruce McNab said many farmers used their streams for household water supplies, so they would not knowingly pollute them.

He said cows were viewed as the enemy of the environment, but noted the increased pressure for food production. The notion that farmers did not care for the environment was not true, he said.

But unfortunately Brenmuhl’s comments only add to the perception that most farmers don’t care for the environment. That perception not only makes it difficult for farmers in New Zealand, it could seriously undermine our reputation in international markets.


17,500km Fencing Job

19/06/2008

Taranaki farmers  are about halfway through a 17,500km fencing job along streams on their properties – the equivalent of NZ’s coast line.

The mass fencing and planting is part of a regional riparian management project to protect waterways on dairy farms.

A typical farm might have nearly 5km of stream, and the fencing and planting would cost about $10,000 a kilometre. The council helped by providing riparian management plans, and plants at cost price of $2.50 each.

It might be expensive but environmental protection and enhancement are a necessary part of modern farming.


Good Pay Out Takes 13 Seasons

12/06/2008

Mabel Howard is credited with the observation that there’s only one good job on a dairy farm and the bull’s got it. It was delivered during a parliamentary debate on the sorry lot of farm workers, but many sheep farmers have quoted her words to prove the superiority of their calling.

 

At least they used to, but as we’ve watched returns for meat and wool fall while milk prices stayed stable then rose, more than few of us reconsidered our opinion of dairying. Thirty years ago the Lower Waitaki Valley supported 10,000 sheep, today more than 40,000 dairy cows graze the same paddocks. My farmer was among those long established North Otago sheep and beef men who watched the invasion and began to wonder if there was more to life than meat and wool.

 

The calculator came out, experts were consulted, discussions took place, options were investigated, heads were scratched, conclusions were drawn and the decision was made: we’d stick to sheep. Time passed, more calculations were made, other options were investigated, experts were consulted again, further discussions took place, different conclusions were drawn and the decision was revised: we’d convert part of our farm to dairying.

 

That was the start of a very steep learning curve and one of the first things I learnt was that the bull’s job is no longer as important on a modern dairy farm, at least not in person (or should that be in animal?). Instead of putting the bull out and letting nature take its course, farmers now choose their sires from a catalogue and order straws of semen. This means the relationship between the cow and her mate is at arm’s length – the arm in this case being that of the artificial insemination technician.

 

The next thing I learnt was that building a diary shed is similar to building a house in that it always takes longer and inevitably costs more than expected. The site was supposed to be cleared in January but work didn’t start until April. Soon there were men everywhere – digging holes, delivering concrete, building and upgrading farm tracks to the standard the diary company demands for its tankers, and all needing to be paid.

 

In the middle of all these men was my farmer, writing cheques and wondering what he’d let himself in for while I kept strictly to my role of uninformed observer because the most important thing I learnt about dairy farming was just how demanding a life it was. Wool doesn’t go off if it’s not shorn today and, crisis situations like droughts excepted, there’s usually some leeway when sending lambs away; but cows have to be milked twice a day, every day from August to late May.

 

It didn’t help that the shed wasn’t finished when the first calves were born and while monthly milk payments made a pleasant change from the once or twice yearly cheques from meat and wool, the money coming in didn’t stretch to cover the bills that followed. Conversion is an expensive business and the costs didn’t stop there. Our advisors suggested the dairy unit would be more economic if we increased our herd from the initial 400 cows to 600. That in turn meant we needed more irrigation which necessitated building a dam.

 

Then we got tuberculosis and had to slaughter any cow which reacted to tests in case she was infected. The Animal Health Board pays for the cows but there is no compensation for the lost production. The tests aren’t 100 percent reliable and the cow carrying the disease which was infecting our herd was only discovered by accident a couple of years later when she dried herself off and was sent to the freezing works where they found her lungs riddled with the disease.

 

We regained our TB-free status but then struck a drought and ran out of water for irrigation so had to dry the cows off early. This spurred us to increase the irrigation which cost more and the increased herd numbers necessitated a second dairy shed and more staff which in turn led to the need for more accommodation. A further boost in cow numbers last year required more labour and another new house.

 

But at least this season the increase is production was rewarded by an increase in the payout. Not surprisingly that was followed by an increase in costs as the price of fertiliser, fuel, power, calf feed, silage, and wages went up too. However, in spite of all that it looks like, after 13 seasons, this will at last be the year when the really good job on the dairy farm is banking the money.

 


Gypsy Month Changes Neighbourhood

06/06/2008

It used to be Gypsy Day, it became Gypsy weekend, then it took a week and now dairy farm numbers have expanded so much the pressure on home removal and stock transport firms is such it’s more like Gypsy month for dairy farm staff and their cows.

 

Dairy employment contracts go from June 1 to May 31 and hundreds of sharemilkers, dairy workers and managers change jobs and homes at the end of a season. That has an impact not just on the people who move but the communities they move to and from as well. A school with 100 pupils might have a 20% change or more in pupils as some come and some go.

 

That affects the whole school and a principal tells me that a child can lose up to a term of optimal learning each time s/he changes school. However, he said he’s noticed that more parents are trying to change jobs within a school catchment or shift less often so it’s less disruptive for the children.

 

The transitory nature of dairy farm work makes it harder to retain community cohesion too, although that was happening anyway. When our daughter started school in 1990 it had about 80 pupils and we knew all their families. When she left seven years later the roll was down to about 30, thanks to the ad-sag, and we knew only about half the families.

 

The district population has increased again as irrigation has brought more dairying – two years ago there were eight houses on our road, now there are 13. But it’s not as easy as it used to be to get to know new neighbours.

 

A couple who moved in to a house on the farm next door six years ago have moved out again and I never met them. The house is about four kilometres away from ours on an unsealed road we rarely use, so it would have taken a special trip to see them; and I did phone to invite them for a meal a few times but it didn’t suit. However, that doesn’t excuse the fact I didn’t make more effort and I’ve resolved to do better with the new occupiers to ensure that another Gypsy month doesn’t come around without us meeting.


%d bloggers like this: