Rural round-up

June 8, 2018

Beef + Lamb New Zealand calls for tailored approach towards emissions:

Beef + Lamb New Zealand (B+LNZ) welcomes the government’s commitment to setting a new carbon target and considering accounting for the differing contributions of specific livestock emissions as consultation on proposed Zero Carbon legislation gets underway.

“With severe weather events like droughts and floods becoming more frequent, sheep and beef farmers feel the impacts of climate change first hand and are aware of the challenges climate change brings”, says B+LNZ CEO Sam McIvor. “We know that everyone has to do their bit to meet this challenge, and as a sector we’ve already reduced greenhouse gas emissions from livestock by 30 per cent since 1990.

“We’ve also set the target for our sector to be carbon neutral by 2050 as part of our new Environment Strategy and we’re progressing a range of actions to help build on the good work that farmers are already doing. . . 

Gas differences recognised in Zero Carbon consultation:

Federated Farmers is heartened that impacts on the economy, and the difference between short and long-lived greenhouse gases, are becoming more prominent topics in our discussions about global warming and climate change.

Some of the choices and challenges in front of New Zealand get an airing in the Ministry for the Environment’s consultation document on the Zero Carbon Bill, the Federation’s Climate Change spokesperson, Andrew Hoggard, says.

“It’s a positive that the ‘Our Climate, Your Say’ document, released today, recognises that methane from livestock is a recycling, not accumulating, greenhouse gas. Methane has a half-life of around 12 years, whereas carbon dioxide stays in the atmosphere for hundreds of years. . . 

Economists concerned by risks of ‘M. bovis’ – Sally Rae:

Economic risks associated with Mycoplasma bovis are rising, economists say, and a beef farm in Ranfurly is one of the latest properties confirmed with the disease.

Last week, it was announced eradication would be attempted, at a cost of $886million, and entailing slaughter of a further 126,000 cattle.

In BNZ’s latest Rural Wrap, senior economist Doug Steel said there was much more to it than the initial impact on production from culling cows. . . 

Devold role continues a passion for wool – Sally Rae:

Craig Smith’s passion for wool never dims.

After about 28 years in the wool industry, Mr Smith remains a staunch advocate for the natural fibre, which he described as “the most amazing product in the world”.

This month, Mr Smith — previously business development manager at PGG Wrightson Wool — began a new job as general manager of Devold Wool Direct NZ Ltd.

Devold is a Norwegian-based high performance wool clothing brand which dates back to 1853, when its founder came up with the idea of knitting wool sweaters for fishermen. It celebrated its 165th anniversary last weekend. . . 

Beef + Lamb New Zealand proposes levies increase to meet future challenges:

Beef + Lamb New Zealand (B+LNZ) today launched consultation on a proposal to increase sheepmeat and beef levies to accelerate investment in a range of key programmes.

B+LNZ is seeking farmers’ views on the plan to increase the sheepmeat levy by 10 cents to 70 cents per head and the beef levy by 80 cents to $5.20 per head.

If adopted, the rise would mean an average sheep and beef farm would pay an additional $260 per annum and an average dairy farm an extra $55 per annum. . . 

Arable Industry Honours Two of its Finest:

A leading advocate for biosecurity and a 30-year contributor to organisations that support growers were honoured at the Federated Farmers Arable Industry conference in Timaru yesterday.

Former Foundation for Arable Research (FAR) CEO Nick Pyke was presented with the Federated Farmers Arable Biosecurity Farmer of the Year Award and North Canterbury farmer Syd Worsfold was named Federated Farmers Arable Farmer of the Year in recognition of his contribution over the last three decades to the arable industry and stakeholder groups, Federated Farmers, FAR and United Wheatgrowers. . . 

Helping dairy farmers avoid FEI penalties with supplementary feed:

It’s three months away but New Zealand dairy farmers are already preparing for the impact of Fonterra’s new fat evaluation index (FEI) grading system, which comes into effect on September 1.

Fonterra established the FEI test to measure the fat composition in the cow’s milk it collects, to ensure it is suitable for manufacturing products that meet customer specifications.

The use of palm kernel expeller (PKE) as a supplementary feed has been identified as a key influencer on high FEI levels in dairy milk. A by-product of the palm oil extraction process from the fruit of the palm, PKE has become increasingly popular as a feed option in dairying, due to its relative low cost. However, high use of PKE can impact the fatty acid profile of milk, and has led to manufacturing challenges for Fonterra with certain products. . . 


Where will milk price go?

May 22, 2014

Fonterra will announce its forecast payout for the 2014/15 season next week.

This graph showing the relationship between GlobalDairyTrade auction prices and the payout give a good indication of where it’s likely to go:

milkgdt

 

 

 

 

 

 

 

The milk price has shadowed the GDT price index until the last few months when the index has fallen but the payout has remained higher.

Even the most optimistic forecasts for the coming season indicate a fall from the 2013/14 record payout.

This graph reinforces that and there’s speculation the new season’s inaugural forecast could be down by more than $1.50, to $7 per kilogram of milk solids (kg ms).  

. . . BNZ economist Doug Steel said a lower payout forecast was unlikely to surprise farmers, given highly visible declines in world prices to date.

Given current price and currency conditions, a milk price forecast somewhere around the $7 kg ms mark seemed plausible, Mr Steel said.

”This [latest decline] fits within our view that dairy prices would be lower this year,” he said in a statement.

Westpac chief economist Dominick Stephens also believed the new season payout forecast next week would be well down, at around $7.10kg ms, while also picking the present season forecast would be downgraded, from $8.65 to $8.50kg ms.

Because the dairy sector carried the majority, or about 65% of all agricultural debt, and half the dairy debt was held by about 10% of all farmers, the Reserve Bank was watching the sector closely, he said. . .

Wise farmers have used this season’s record payout to reduce debt and have been budgeting on a lower payout for the coming season.

 


The manufactured crisis

February 14, 2014

Remember the manufactured manufacturing crisis the opposition spent so much of their energy and our money on last year?

The news on it is bad for them but very good for the rest of us:

New Zealand’s manufacturing sector started 2014 on a healthy note, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for January was 56.2 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). The sector has now been in expansion for 16 consecutive months, with the last six months also averaging 56.2.

BusinessNZ’s Executive Director for Manufacturing Catherine Beard said that despite the usual seasonal effects of Christmas and the holiday season, the sector has begun the way it finished off 2013.

“Positive comments from manufacturers revolved around a growing confidence by consumers, further gains in building construction and continued high levels of new orders, both domestically and offshore. In particular, the metal product sector is currently benefitting from the strong residential construction boom, which will no doubt continue for some months to come.”

BNZ Economist Doug Steel said it would be easy to understand if the PMI had lost a bit of heat in January, given the hefty lift in the NZD/AUD exchange rate. But the PMI has barrelled on, as domestic demand strengthens. . . .

This provided the opportunity in Question Time yesterday:

Hon STEVEN JOYCE: Of the 16 different industries measured by the household labour force survey, employment rose in 11, including manufacturing, which does debunk another myth often heard around this building. There is no doubting that the high New Zealand dollar is a challenge for exporters, but the January Performance of Manufacturing Index, which was released today, shows manufacturing has now been in expansion for 16 consecutive months, which is, weirdly, precisely the exact same time since the Opposition announced the start of its inquiry into a manufacturing crisis. I quote from the Performance of Manufacturing Index today, which says that manufacturing punched above its weight regarding job growth in 2013. It accounted for 13.5 percent of jobs added in the New Zealand economy overall last year, which is more jobs than were added in Australia in the same period. . .

There is a cloud on the horizon though:

Hon STEVEN JOYCE: . . .  The Government has more than 350 initiatives under the Business Growth Agenda that are helping businesses grow, because that is how employment grows. I contrast this with policies that would put a chill on industries, that would cause their hiring intentions to freeze, and companies themselves might not even survive—for example, if you nationalise the electricity industry or double the cost of the emissions trading scheme on households and businesses, or if you impose new taxes on every single business in the country. . . .

The left demonise business without realising its the goose that lays the golden eggs of employment and economic growth.

The recovery is real but it’s not yet robust and a change of government with policies that would undermine business confidence could easily reverse the hard-won progress that’s being made.

 

 

 


Not a manufacturing crisis

February 14, 2013

New Zealand manufacturing expanded at the fastest pace in eight months in January, but employment in the sector is shrinking.

The BNZ-Business New Zealand Performance of Manufacturing Index climbed 4.8 points to 55.2 last month, the highest since May last year and the highest for the month of January since 2007.

The survey showed the strongest sector within manufacturing was in non-metallic mineral products, which stood at 77.5 and probably reflected demand for concrete, especially for the Christchurch rebuild, said Bank of New Zealand economist Doug Steel.

“Over the coming years we anticipate the positive flow-on effects of a stronger construction sector, and not only in Canterbury, to broaden to other parts of the manufacturing sector,” Steel said.

Production was the strongest of the five seasonally adjusted diffusion indexes within the PMI, with a reading of 57.7 last month, the survey shows. On the PMI scale, a reading of 50 separates contraction from expansion.

Deliveries were at 57.6 and finished stocks on 56.1, the highest since October 2007. New orders rose to an eight-month high of 55.8.

By contrast employment slipped to 48.4, marking the eighth straight month of contraction.

Manufacturing is expanding but jobs in the sector are declining.

That shows that, contrary to claims by  Opposition parties which are wasting money on an inquiry into the manufacturing “crisis” that there is no crisis in manufacturing.

The problem is in employment.

If manufacturing is growing while jobs are declining it suggests growth in productivity which is good but it is often based on improved technology and more mechanisation.

The down-side of that is fewer people are required for the work.

The solution isn’t to subsidise manufacturing it’s to help train people for different jobs.

The rise in the New Zealand PMI contrasts with that in Australia, which sat at just 40.2 in January, for the widest gap between the two nations since the New Zealand index was started in 2002.

This might seem like good news for those focussed on Trans-Tasman rivalry.

But Australia is our biggest trading partner and any indication its economy is faltering is a concern for us.

 

 


Rural round-up

July 23, 2012

Heaps of grass has helped agriculture grow three times as fast as the overall economy. Doug Steel wonders if this may even understate how well the rural sector is doing, given how the numbers were analysed in 2007/08 – Doug Steel:

Like blood to the body, agriculture is critical to the NZ economy.

The sector makes economic contributions in direct and indirect ways, although measurement of such can be a tricky business.

The latest national accounts show agriculture GDP growing 7.5% through the year to March 2012. This supported the 2.4% expansion in the New Zealand economy over the same period. . .

Massive Chinese market for red meat market – Sally Rae:

The importance – and potential – of China as a market for the red meat industry was reiterated during the recent red meat sector conference in Queenstown.   

 Arron Hoyle, McDonald’s senior director and head of strategy in China and Hong Kong, said the dragon was redesigning  global trade and global prices.   

He spoke of the “unprecedented” urbanisation in China, the emergence of mega cities and the significant opportunities      the fast food chain saw. It was bullish and very excited      about those opportunities. . .

Sector strategy shows encouraging signs – Sally Rae:

Meat Industry Association chairman Bill Falconer believes the red meat sector strategy has been “settling down extremely well” since its launch 14 months ago.   

The strategy, initiated by the MIA and Beef and Lamb New  Zealand, was aimed at improving the sector’s viability and      increasing its earnings from $8 billion to $14 billion by  2025. . .

Aim for first place: chairman:

NZPork chairman Ian Carter has challenged those attending the  industry’s annual conference to recognise themselves as “the best little pig industry in the world”.   

    “Pork is the world leader in animal protein, but only number three in New Zealand.   

    “Our target must be first place,” Mr Carter, a North Otago farmer, said. . .

Clutha dairy earnings climb – Shawn McAvinue:

Sheep and beef farmers were the biggest agricultural earner in the Clutha district but dairy farmers were a close second.

The latest statistics from the Clutha Agricultural Development Board (CADB) says sheep and beef farming earned $313 million and dairy farming $276m for the year ending June 2011.

However, a steady five-year growth spurt in dairying had the Clutha herd increasing by 30 per cent to 98,543 cows. In the same period sheep numbers dropped 14 per cent to about 2.17m. . .

2013 Ballance Farm Environment Awards Opening Soon:

Entries for the 2013 Ballance Farm Environment Awards open on August 1, 2012.

Administered by the New Zealand Farm Environment Trust (NZFE) and operating in nine regions, the annual competition promotes sustainable land management by showcasing the work of people farming in a manner that is environmentally, economically and socially sustainable.

Entry forms for the 2013 competition are available from the NZFE website at http://www.nzfeatrust.org.nz

NZFE chairman Jim Cotman says this website has been upgraded to make it easier for farmers to find information on the Ballance Farm Environment Awards and the Trust’s other activities. . .


High food prices good for NZ

February 18, 2011

Quote of the week:

At times of rising food prices, the rest of the world must look at NZ  and see strong growth prospects, and the benefits from the world buying our products at higher prices are shared across the economy. The NZ dollar tends to follow broad movements in international commodity prices. Among the benefits of this are lower prices for imported goods, leaving more money to be spent elsewhere. In the upshot, the effect of high international foodprices is a net positive for the economy. “To think otherwise, would be like thinking higher oil prices are  a negative for Saudi Arabia. It would just not make sense.”  Economist Doug Steel in Trans Tasman.


White gold tarnished

January 8, 2009

At the start of last year sheep and beef farmers looked enviously at the returns dairy farmers were enjoying and aimed to get prices for meat, wool and other by-products which matched those from milk.

The gap between sheep and beef returns is closing on those from dairying but that owes more to the fall in the price of milk than improved prices from cattle and sheep.

Fonterra has already announced a drop from its opening forecast of $6.60 a kilo of milk solids for the season to $6 and is expected to announce a further fall at the end of the month.

The average price the company got at its internet auction  on Tuesday was $US2017 ($NZ3420) per tonne which was 9.3% less than the average in December.

The only glimmer of hope is a small rise in spot prices which might indicate prices are reaching the bottom of the cycle but that’s small comfort when the global price for milk, which peaked at the end of 2007, has fallen sharply  since September last year. 

dairy-11

dairy-10001

The state of global commodity markets isn’t the only problem facing Fonterra which just 12 months ago was being held up as the example the sheep industry should follow as the benefits from the white gold flowed through rural communities and into the wider economy.

The on-going fallout from its investment in Sanlu, one of the company’s hardest hit by China’s poisoned milk scandal continues. Sanlu was declared bankrupt  by a Chinese court on December 24th and the way the company has handled the issue doesn’t give me any confidence that it has learnt enough to ensure success in any future investment in China.

However, the financial losses from the Sanlu investment have already been taken into account and disappointing as Fonterra’s payout is expected to be it’s unlikely to fall as far as that of Westland Dairy Co-operative. It’s  reduced its forecast payout   for the season from the $5.20 to $5.60 a kilo of milk solids announced in November to $4.10 to $4.50.

Making matters worse is Westland’s decision to backdate the forecast meaning suppliers have to pay back money already received.

The reduced payout will mean suppliers will receive $180 million less than expected.

To bring that down to an individual farm: the owner of a 350-cow herd received $90,000 for his milk from Westland last month and had budgeted on getting $120,000 for January but is now expecting just $30,000.

Lincoln University professor Keith Woodford  said that given Westland’s position that Fonterra is unlikely to to achieve a payout of more than $5.

Westpac economist Doug Steel has a more positve view and thinks Fonterra could still achieve a $6 payout.

However, the company could do well to follow the advice given to politicians to under promise and over deliver because a lower forecast might help to stabilise or even reduce some of the production costs which rose further and faster than last season’s record payout.

The whitegold has tarnished but most commentators are still confident that the longterm outlook for dairying is positive for those who are able to farm there way through the current lower returns.

Established farmers with good equity will be disappointed by the drop in income and may have to tighten their belts but it shouldn’t threaten their businesses and they’ll be helped by the fall in interest rates and the cost of fertiliser and fuel.

Those most at risk are the ones who have just converted or are in the process of converting for next season who bought land and stock at peak prices; and sharemilkers who bought cows in the middle of last year when values were highest.

However, while the payout obviously has a big impact on financial performance it’s not the only factor to affect profitability.

A speaker at a SIDE (South Island Dairy Event) conference a couple of years ago said he’d had a better result for the year when the payout fell to $3.60 than he had the previous season when it was above $5 because he’d kept a tighter rein on costs when the payout was lower.

P.S. – Cactus Kate, Macdoctor  and Inquiring Mind have posts on Fonterra and Sanlu; and Fran O”Sullivan  is not impressed by the way the company has handled the issue.


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