Rural round-up

February 1, 2020

Dairy debt and declining values create an equity pincer – Keith Woodford:

Some weeks back I wrote how the market value of dairy land is declining substantially. The biggest factor is a change in bank-lending policies such that local buyers cannot get funding. The second key factor is that foreign buyers can no longer buy land for dairy farming. A third factor is pessimism about the long-term future relating to environmental issues and labour availability.

The consequence of these factors is that although many dairy farmers would like to sell, there are very few buyers. This is despite three years of good dairy prices and now a fourth good year heading into the home straight with nearly all farmers making operating profits.

In this article, I build on that situation to explore the proportion of farmers who, with declining asset values, have either exhausted or are close to exhausting their previous equity. . . 

New levy to hit farmers – Peter Burke:

The New Zealand Agricultural Aviation Association (NZAAA) is up in arms about a proposed new safety levy.

They say it unfairly targets the ag sector and will lead to increased costs of spreading fertiliser and spraying crops. NZAAA chairman Tony Michelle says his organisation is happy to pay levies set by the Civil Aviation Authority (CAA). However, he believes the new proposals are almost double the present ones and says there is a huge inconsistency in the way these would be applied.

Some operators believe the ag sector is seen as a soft target by the CAA, because it assumes the new charges will just be passed on to farmers.

Fonterra’s Te Awamutu site moves to pellet power:

Fonterra is taking another step forward in its commitment to renewable energy as it announces that its Te Awamutu site will be coal free next season. 

Until now the site has used a combination of fuels to process milk – including coal.  This latest move, follows a trial last year and means it will switch from using coal at the end of this season, starting the 2020/21 season powering the boiler with wood pellets. 

Fonterra’s Sustainable Energy and Utility Manager Linda Thompson says it’s an exciting step for the Co-operative and, in particular, the Te Awamutu team. . .

China overtakes the US as top beef market:

China overtook the United States as the biggest market for New Zealand beef exports in 2019, Stats NZ said today. 

In the year ended December 2019, beef exports to China rose $880 million (112 percent) from 2018 to reach $1.7 billion. In contrast, beef exports to the US fell $245 million (20 percent) to $956 million.

“China became the number one destination for beef exports from New Zealand in 2019,” international statistics manager Darren Allan said. . . 

LIC half-year revenue up as farmers invest in ‘precision farming‘:

Performance Highlights H1 2019-20:

$163 million total revenue, up 1.4% from $161 million in the same period last year.

$30.3 million net profit after tax (NPAT), down 7.6% from $32.8 million in the same period last year.
$58.4 million earnings before interest, tax, depreciation and amortisation (EBITDA), down 1.5%.
$43.1 million earnings before interest and tax (EBIT), down 6.5%.
Underlying earnings (NPAT excl bull valuation change)* range remains forecast to be $21-25 million for year-end, up from $19.5 million in 2018-19. . . 

Farm Debt Mediation Scheme – next steps:

The Ministry for Primary Industries (MPI) is taking steps to establish the new Farm Debt Mediation Scheme, which will begin operating on 1 July 2020.

From next week MPI will be able to consider applications from mediation organisations wanting to take part in this scheme.

“We’ve already heard from leading mediation organisations that are interested in participating. If an organisation is approved, they will then make sure their mediators are trained for the new scheme,” says Karen Adair, MPI’s deputy director-general of Agriculture and Investment Services.

The Farm Debt Mediation Act became law on 13 December 2019 and brings a new approach to farm debt mediation. . . 


Rural round-up

September 3, 2019

FMA looking into Fonterra’s asset write downs and financial performance following complaint – John Anthony:

The Financial Markets Authority is seeking information from Fonterra after receiving a complaint expressing concerns about the dairy cooperative’s expected record annual loss and asset write downs.

In early August Fonterra said it expected to make a loss for the 2019 financial year of between $590 million and $675m due to asset write downs of up to $860m.

A Financial Markets Authority (FMA) spokesman said it recently received a complaint about Fonterra’s financial reporting, and its audited financial statements over the last few years.

The complaint came from shareholder Colin Armer, who said he and his wife owned 10 million shares. . . 

Passion for sheep runs deep – Sally Rae:

She is known simply as “Sheepish Sophie”.

In the world of social media, Sophie Barnes – who has a strong following – is more well-known by that moniker.

Most recently, the young English shepherd and lamb-rearing specialist has been documenting her travels around the South Island with partner Dorrien Neeson and six dogs, working on various stations and farms.

At present stationed in the Waitaki Valley, Ms Barnes (27) admitted she had tried to find other hobbies apart from sheep farming and genetics but for her they did not exist . . 

The battle for trust – Peter Burke:

With distrust growing in consumers, even for science, gaining their trust is now more valuable to win than ever.

Tim Hunt, the head of RaboResearch Food and Agribusiness in Australasia, says trust is becoming more complex to succeed in and more valuable to win because of what is happening in New Zealand’s markets.

He says in emerging markets, such as China and Southeast Asia, consumers are placing enormous value on the safety of products, whereas in western markets they increasingly value sustainability, animal welfare, fairness and provenance.

Five years of Water Accord show dairy farmers doing their bit to improve water quality:

One of New Zealand’s biggest hands-on environmental efforts has created a wave of change on dairy farms across the country and is contributing to progress in improving water quality.

Today, the Sustainable Dairy: Water Accord farmers and partners announced their achievements to date, including:

  • fencing off dairy cattle from 24,249km (98.3%) of significant dairy accord waterways (waterways which are more than one metre wide and more than 30cm deep). That’s the equivalent of nearly 12 road trips from Cape Reinga to Bluff. Excluding stock from waterways is one of the most beneficial ways to improve water quality
  • installing bridges and culverts on 100% of stock crossing points dairy cows use
  • preparing 10,396 nutrient budgets – up from 6,400 budgets in the first year of the Accord. Nutrient budgets allow farmers to carefully plan nutrient applications and manage nutrient losses
  • assessing 100% of Accord farms for effluent management practices – this process checks that farms have appropriate infrastructure and systems in place to manage effluent
  • developing riparian management plans to protect water quality on 52% of Accord farms with waterways. . . 

Taking the bad with the good in dairy industry report:

Federated Farmers congratulates the dairy industry on another robust environmental report, which shows there are some good things to celebrate and some things that need further work.  

Today’s release of the now five year’s running Sustainable Dairy: Water Accord report shows there are still areas that need work, but overall dairy farmers should be proud of what they’ve achieved in a very short timeframe.

Amongst those matters that need further work are the 6.15% of significant non-compliance with effluent management requirements.

But overall Federated Farmers wants to give a big positive shout-out to what hard working farmers have achieved for the environment in the last 12 months. . .

Lamb export prices spring to a new high :

Export prices for lamb reached their highest point in the June 2019 quarter, Stats NZ said today.

This level is the highest since the series began in 1982, and follows steady increases from the second half of 2016.

“Both lamb and beef prices rose this quarter, up 4.7 percent and 5.3 percent, respectively, on the back of strong overseas demand,” overseas trade statistics manager Darren Allan said. . . 

Burgers and climate: the real beef

I have two burgers. One is a beef burger from McDonald’s on the left and the other on the right is a Beyond Meat, plant-protein burger from A&W.

You’ve been told by companies, groups and the media to choose; to eat less meat because one is better for the environment, and we’ve been led to believe that by picking one over the other, we’re doing our part in climate change and being more environmentally-friendly.

What if I told you that both burgers are doing their part and all agriculture is part of the solution, not the problem? What if I told you it’s not one versus the other when it comes to climate change? What if I told you there is more to the story than these companies are sharing? . . 


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