Rural round-up

27/03/2012

Fertiliser Use Increases As Farmers Reinvest In The Land:

Total fertiliser use on New Zealand farms increased for the first time in three years in the 2010/11 fertiliser year, reaching just over 3 million tonnes.

This is a significant increase in fertiliser use compared to the previous year, which was 2.3 million tonnes, but is below the peak use of 3.3 million tonnes recorded in 2004/05 and close to total fertiliser use in 2007/08 of 3.1 million tonnes.

The fertiliser use data are reported in the March edition of Fertiliser Matters, published by Fert Research. . .

New Zealand…A Place Where Talent Wants To Live & Proudly Farm –  Pasture to Profit:

“New Zealand…A Place Where Talent Wants To Live” this was the NZ strategic vision that Sir Paul Callaghan(New Zealander of the year 2011 & ex Massey University Scientist) spoke so passionately about before his death last week. http://www.youtube.com/watch?v=OhCAyIllnXY&feature=related  Sir Paul Callaghan was a world class scientist, leader & a passionate advocate for a better more prosperous New Zealand. . .

Are You Using Farm Business Management “Apps” on Your Farm? – Pasture to Profit:

The Centre of Excellence in Farm Business Management is a joint virtual centre of the Farm Management Departments at both Massey & Lincoln Universities in New Zealand. The Centre is conducting a number of research projects in Farm Business Management. One of those projects is investigating what Apps (Applications) are available for IPhones/IPads & Android mobile phones.  . .

If You Don’t Measure You Can’t Control…Basic Pasture Management! – Pasture to Profit:

What’s going on? Have New Zealand dairy farmers taken their eye off the ball…..or even worse “lost the plot”? What has happened to their famous pasture grazing skills?

 Throughout the low cost pasture dairying world NZ farmers have a reputation of being expert grazing managers & very efficient users of low cost pasture. Is this still true? From my observations I’d say it’s no longer the case that NZ farmers are the best in the world.  . .

We All Cast Our Shadow on The Environment..NZ Landcare Trust Conference – Pature to Profit:

  “We are born into the shadow of our parents & eventually we create our own shadow”. Powerful story telling from George Matthews (a NZ Landcare Trustee) opened the NZ Landcare Trust Conference in Hamilton NZ.

Although his Maori proverb has to do with life itself….we all do cast our shadow on the environment in which we live & farm. Our Earth’s environment is in trouble. It was Albert Einstein who said that …” Insanity: was doing the same thing over and over again and expecting different results.”      . . .

The changing face of the global dairy industry – Dr Jon Hauser:

Australia – A switch from cooperatives to private processors

The Australian dairy industry has undergone vast changes over the last ten years. The biggest shift is in the composition of ownership of the industry; Bonlac, Bega, Tatura, Warnambool Cheese, Dairy Farmers, Challenge Dairy … almost all the major milk processors except Murray Goulburn have gone from being cooperatives to private processors.

In just over a decade 65 per cent of Australian milk, from all states, has been lost to the farmer co-operative sector. This is a monumental change in the culture and direction of the industry. . .

Meat and dairy prices off their peak for now  but outlook positive – Allan Barber:

The recent fall in Fonterra’s GlobalDairyTrade on line auction for the fifth time in six months means global dairy prices have fallen by 9% since last May and by 24% over the season when adjusted for the value of theNew Zealanddollar. The dollar has only just come off historical highs against both the UKpound and the euro, so the combined effect on our dairy, beef and lamb exports has been disappointing to say the least.

But the outlook in the medium term is still good, provided our exports are not derailed by one or more of the dire forecasts of Greek debt default, general lack of buoyancy inUKand Europe, and the lower growth forecast in China. . .

AFFCO able to operate despite lock-out – Allan Barber:

Interested observers of the argument between AFFCO and its unionised meat workers may be confused by a state of affairs which results in a portion of the workforce being locked out, another percentage going on strike in support of their colleagues, and the rest of the workforce being able to keep production going. Read the rest of this entry »


Fert prices drop

04/12/2009

Ballance and Ravensdown have both dropped the price of fertiliser to $310 and $311 a tonne repsectively.

Both companies say it reflects a fall in the price of raw materials internationally and the prices are about half what they were at this time last year.


Coal to fertiliser plant for Southland?

25/09/2009

Eastern Southland’s lignite coal could be turned in to fertiliser if joint investigations by farmer-owned co-operative Ravensdown and Solid Energy are successful.

Solid Energy, and agricultural fertiliser supplier, Ravensdown, are jointly investigating the viability of building a US$1 billion plus coal-to-fertiliser plant in Eastern Southland, harnessing the region’s world-scale lignite resource and making New Zealand self sufficient in, and potentially an exporter of, urea fertiliser.

The study will consider the economics and possible location of a plant producing up to 1.2 million tonnes a year of urea – a nitrogen fertiliser used to enhance grass growth – from up to 2 million tonnes a year of lignite mined from Solid Energy’s extensive lignite resources. At last year’s urea prices – up to US$800/tonne – this plant would have generated the equivalent of about NZ$1.5 billion per annum in export equivalent revenue – through a combination of import replacement and direct exports.

The venture could created up to 500 new jobs. The study should be completed early next year when the companies will decide if they proceed to the next stage. If they decide to go ahead construction could start by 2012 and the plant might be operating by late 2014.

Solid Energy’s Chief Executive Officer, Dr Don Elder, says: “. . . Agriculture is our most important economic sector . . .. Urea is a key input to increased farm productivity, but is mostly imported at present, which exposes our farmers to world supply volatility, and prices that can fluctuate widely. Producing urea from our vast lignite resources is a prime example of how New Zealand can capitalise on our position as one of the richest countries in the world in natural resources per capita.”

The lignite to uerea study is running in parallel with work to investigate producing diesel.

“Developing a urea plant in advance of constructing a lignite-to-diesel plant would allow New Zealand to have advanced gasification industry competency and capabilities in place at an earlier stage, to substantially facilitate further and larger developments. Alternatively the two developments could take place in parallel and form the basis of a “syngas park”, supplying clean syngas to multiple downstream applications including diesel and urea.”

Federated Farmers  president Don Nicolson said the responsible exploitation of our mineral wealth would play an important part in increasing productivity.

“The numbers involved in this feasibility study are mind-boggling.  Even if annually it converts two-million tonnes of lignite into fertiliser, there are enough proven lignite reserves to keep the plant ticking over for some 650 years.

“The study opens up the prospect of 500 new jobs and the construction of a state of the art facility in an investment worth some $1.4 billion.

“Given New Zealand imports some half million tonnes of gas or coal based urea each year, the new plant will likely be built to the latest environmental standards.  This has obvious benefits from a global climate change perspective.

“The really exciting thing is the potential of turning New Zealand from an importer into an exporter, generating the equivalent of $1.5 billion in export equivalent income each year. 

“That amount represents one and a half times the size of the wine industry or three times the current value of the wool clip.

“It’s also an example where companies can leverage off agriculture, New Zealand’s most important industry, into completely new areas.  In this case taking a low value mineral which occurs in vast quantities and turning that mineral into a high value export.

Turning a low value resource into fertiliser, replacing imports, creating jobs in rural Southland, doing it all to meet the highest environmental requirements . . .  If investigations show the project is feasable it will be very good news indeed.


Blessed are those who give

09/05/2009

Three acts of generosity in the last couple of days:

Julian and Josie Robertson from the USA have donated 15 major art works to the Auckland Art Gallery.

The appreciation shown by people when the Robertsons allowed 12 works from their art collection to be shown in an exhibition in Auckland and Wellington, motivated them to make this donation.

From the arts to sport – Eion Edgar donated $1 million to the New Zealand Committee when he retired as president this week.

Mr Edgar and his wife, Jan, have made several substantial philanthropic donations, notably to the New Zealand Olympic Committee, the Edgar Centre in Dunedin, the Edgar National Centre for Diabetes Research and Dunedin’s new stadium, which will be known as Forsyth Barr Stadium at University Plaza.

And from sport to farming –  Ravensdown is offering  shareholders in drought affected areas interest free, deferred payment terms on fertiliser purchases plust free technical advice.

When drought hits, fertiliser often comes out of budgets which means when it rains again pastures don’t get grow as well as they should.

This offer will enable farmers to keep up their fertiliser programmes without increasing their overdraughts.


Otago phosphate could save $1b

12/09/2008

Rising world phosphate prices could make a South Otago supply  economically viable and save farmers $1 billion a year in imported phosphate rock.

Ravensdown Fertiliser Co-operative chief executive Rodney Green said yesterday, that the Clarendon deposit had become viable as the world price of phosphate rock soared from $75 a tonne in 2007 to $740 a tonne now, as countries shored up supplies of the mineral to increase their food production.

Phosphate is a crucial component in many fertilisers, and New Zealand uses about one million tonnes a year.

Mr Green said the resource could yield 34 million tonnes, enough to make Ravensdown self-sufficient in superphosphate for 22 years.

“This opportunity could be a boon to farmers and could result in the New Zealand economy becoming self-sufficient in phosphate rock, saving $960 million on current prices in foreign exchange a year,” he said.

A three-month investigation will be undertaken to confirm the viability of the deposit which was discovered in 1902 and mined until 1924, then again during World War II when Japan occupied Nauru.

The resource covered 450ha on eight Clarendon farms, and initial work was focused on determining its quality and quantity.

“There is a pretty strong imperative to get this going as soon as we can,” he said.

Mr Green said the world had plenty of phosphate, but China and Togo had imposed export taxes to ensure there was sufficient for their food production needs, while the other main sources in Morocco and Russia were isolated and transport costly.

In contrast, the Clarendon deposit was 3km from State Highway 1 and the main trunk rail line and 40km from the company’s Ravensbourne fertiliser works, slashing shipping costs to a fraction of the current $180 ($US120) a tonne.

Because of the age of the titles, the various mineral rights were privately owned by the landowners and Blackhead Quarries.

All were supportive of the investigation, Mr Green said.

One of the landowners, Tony McDonnell, who lives in Phosphate Rd, said agriculture and the country needed a local fertiliser resource to ensure the sector continued to underpin the economy.

He used 300 tonnes to 400 tonnes of superphosphate a year on his farms, but soaring international prices had made it a costly input.

“If it proves to be big, this would be a large operation and would bring a lot of money into the Otago economy,” he said.

Phosphate fertiliser has increased $300 a tonne since March and it’s one of the biggest items in most farm budgets. If the South Otago deposits are viable it will create jobs in the area. It will also have a wider benefit by and reducing our reliance on imported phosphate which will become even more expensive as our dollar falls in value.


Power pushes up producers’ prices

19/08/2008

The price of power was the main contributer to the increase in the Producers’ Price Index  in the three months to June, Statistics New Zealand said today.

Ouptput prices went up 3.5% and input prices rose by 5.6%.

The rise in the outputs index is the largest quarterly rise since the June 1985 quarter, while the rise in the inputs index is the largest since the March 1980 quarter. Both indexes were mainly driven by higher prices for electricity generation and supply.

One business’s output becomes another’s input, so for example milk and grain are outputs for farmers but inputs for cheese makers and bakers.The electricity generation and supply outputs index rose 30.9 percent in the latest quarter, the largest rise since the series began. Higher output prices for electricity generation were recorded, with lower lake levels pushing up spot prices. In the year to the June 2008 quarter, the electricity generation and supply index rose 41.7 percent, which is also the largest annual rise since the series began.

 

Electricity producers cover those inolved in generation, transmission, distribution and retail and their inputs include fuel, business services, rent and power itself. I’m not sure how much the healthy dividends the Government gets from the power companies it owns contributes to the price rises.

Within the inputs index, electricity generation and supply rose 50.8 percent in the latest quarter and 85.4 percent in the year to the June 2008 quarter. Both movements are the largest since the series began in the June 1994 quarter. Lower lake levels were the cause of higher costs for electricity generation this quarter.

Ouch. We pump water for irrigation which makes power one of our bigger costs.

Another contributer to the PPI indexes is the wholesale trade which covers fuel and fertiliser and they are also big budget items for farmers.

Wholesale trade also made a contribution to both the PPI output and input indexes. The wholesale trade outputs index rose 6.0 percent in the June 2008 quarter, while the inputs index rose 6.4 percent. In both cases the increase was driven by higher prices in the mineral, metal and chemical wholesaling sector.In the year to the June 2008 quarter, the PPI outputs index rose 8.5 percent and the inputs index rose 11.8 percent.

 

If these input costs, most of which have a large imported component, went up when our dollar was relatively high they will almost certainly be higher in the next quarter because the dollar has been lower.

The increase in inputs has been greater than that for outputs which means we’re absorbing some of the costs. But even so each trip to the supermarket is a reminder that some of the increases get passed on to consumers.

I couldn’t find any 1kg blocks of cheese at the supermarket today, and the 700g block of edam I did find cost $11.99. I wonder if this is because there would be consumer resistance if they tried to sell bigger blocks at that per kilo price?


Lower dollar good news and bad news

12/08/2008

The good news about the falling dollar, down to an 11 month low of US69.84c this morning, is that we get more for our exports.

However, the lower value of our currency also increases the price of imports which is particularly bad news for farmers when two of our biggest budget items – fertiliser and fuel – are already highly priced.

One reason for the dollar’s fall is the Reserve Bank’s decision to relax its guard against inflation by lowering the official cash rate.

Several commentators said this would be good for exporters, but I’m not sure how much better off we are if the gains on the swings of increased returns for our produce is countered on the roundabout of increased prices for inputs.

Nor do I think that a weak currency is a good recipe for a strong economy.

And I am definitely not relaxed about a little bit more inflation. The memory of the economic disaster which resulted when all the little bits more became a lot and led to inflation rates of more than 20% in the 1980s, and the painful process of bringing it down again, are still too fresh.

I’m with Don Brash who, when he was governor of the Reserve Bank, told a public meeting that a little bit of inflation was like being a little bit pregnant, it doesn’t stop at a little bit.

The B- I got for stage one Economics, as it was then known, doesn’t qualify me to debate this issue. But The Visible Hand in Economics and Show Me The Money  and Brian Fallow  are qualified and they all warn about the dangers of going soft on inflation too.

The falling dollar is a good news-bad news story for exporters and if it contributes to higher inflation the bad will more than outweigh the good.


Solid growth ahead for primary sector

07/08/2008

The Ministry of Agriculture & Forestry  is forecasting sunny times for the primary sector over the next five years in spite of a stormy outlook for domestic and international ecnonomies.

The 2008 Situation and Outlook for New Zealand Agriculture and Forestry (SONZAF) 2008 report , expects international demand for food products to keep key commodity prices buoyant for the next five years.

MAF says while traditional Western markets are slowing, this is expected to be offset by continued growth in fast-developing Asian economies such as China, India and other developing and oil exporting markets.

“Individual sectors all face their own challenges, but overall the combination of strong commodity prices, growing global food demand and new market developments – such as the China FTA signing – presents positive opportunities for the primary sector over the next five years,” MAF Director-General Murray Sherwin says.

Challenges at home include the 2008 drought, which continues to have a significant affect across the sectors. In the meat sector, this has resulted in wide-spread de-stocking that will lead to falling beef and lamb export volumes next year.

Export returns, most noticeably in the meat, kiwifruit and forestry sectors have also been eroded by the high New Zealand dollar. And high fuel and fertiliser costs have undermined improved commodity returns. The economic outlook in some of the key markets, such as the United States, is also constrained.

Lamb and beef prices are improving and the outlook is brighter in both sectors than it has been for sometime, Mr Sherwin says.

Beef export earnings, for example, are projected to increase by more than 40% over the forecast period.

Based on Treasury assumptions of easing exchange and interest rates, MAF also expects farm gate returns to be boosted.

This is encouraging – but the low dollar which increases returns also increases the price of major inputs including fertiliser, fuel and machinery.


Ausssie farmers want ag out of ETS

16/07/2008

Australian farmers  want their Government to keep agriculture out of its Emissions Trading Scheme.

AUSTRALIA’S proposed emissions trading scheme (ETS) could affect international food and fibre prices at a time of food crisis, the nation’s farm sector has warned.

National Farmers’ Federation vice-president Charles Burke said rarely did governments pursue policies like the ETS that could have such broad-reaching ramifications.

”If we don’t get this right, this could become a new and additional factor putting pressure on global markets, affecting both supply and prices in Australia,” he said on the eve of the release of the Federal Government’s green paper on emissions trading.

Mr Burke said Australian farmers’ input costs – fuel, electricity, fertiliser and chemicals – may increase regardless of agriculture’s role in an ETS.

All of this sounds very similar to what farmers are saying on this side of the Tasman.

Westpac’s senior agribusiness economist, Justin Smirk, said global markets responded immediately to any event, be it floods in Iowa, food export tariffs in Argentina or aggressive US and European biofuels policies.

”Actions, events and seasonal conditions in Australia and their impact on our farm sector are no different, reverberating through global markets,” he said.

”Markets are closely watching the complex problem of climate change, its potential impact on global farm output, and the policies proposed to mitigate global warming emissions.”

Competitors will also be working out if they could use the ETS to impose non-tariff barriers to imports.

NFF president David Crombie warned against including agriculture in the ETS, citing the difficulty in measuring, monitoring or verifying the sector’s emissions. No country had included agriculture in an ETS, he said, with the exception of New Zealand, ”where farmers are now looking at margins reducing by up to 160% as a result”.

And how silly is that when it won’t do anything to reduce the global carbon footprint?


CPI up 1.6% dairy farm costs up 10% a hectare

15/07/2008

Consumers and producers are counting the costs associated with rising inflation.

The Consumer Price Index  went up 1.6% in the June quarter and pushed inflation up to 4% while dairy farm working costs  rose 10% a hectare in the past year.

Specialist dairy farm and business management company, Farmright, surveyed 50 farms which the company manages and found that between 2006-07 and 2007-08, feed rose 25%, fertiliser 24% and freight and cartage 37% per hectare.

Farmright manager Jim Lee said fertiliser costs had gone up further since the survey was done, and wage costs were also creeping up on dairy farmers.

Wage costs only rose 3% last year, but newly negotiated contracts indicated that figure would increase sharply this year because of greater demand and a shortage of workers.

The shortage of staff is critical and it’s not helped by immigration policy which requries herd managers to have a bachelor’s degree or five years relevant work experience if they are applying for residency.

“We know from contracts being negotiated for new and existing staff being rolled over that there have been some increases.”

The cost of production, which included feed, run-off costs and cost of management, but excluded depreciation on the Farmright-managed farms, rose from $2.91 per kg of milk solids (kg m/s) in 2006-07 to $3.61 per kg m/s in 2007-08.

Mr Lee said drought and cost increases had an impact. But he said some businesses were now operating at higher cost structures than they would be aware of.

He believed some farmers would be faced with costs of $6 per kg, made up of $4 per kg farm input costs and interest costs of $2 per kg.

“Cost control and financial discipline are more important now than ever before,” he said.

It is easy to let costs get away when the payout is high but not so easy to rein them in when the price falls.

However, one of the speaker’s at last year’s South Island Dairy event (SIDE) conference told how he’d gone into dairying when the milk payout was $5.30 and the next year it went down to $3.60 – but they made more that season than the previous one because they were much more disciplined about containing costs.


On-farm inflation 9.7%

15/07/2008

A 9.7% increase in costs for sheep and beef farmers in the year to March 2008 is the highest rate of on-farm inflation since 1986-87 when input prices rose 13.2%.

The previous year the price of inputs increased 2.7%.

Major increases were:

Fertiliser, lime & seeds:         30%

Fuel:                                      23.5%

Feed & grazing:                     13.7%

Interest:                                 9.0%

Electricity                               7.2%

Local Govt. rates                    6.6%

Although the high dollar reduced the price of imported goods, fertilsier, lime and seed prices still increased by 30%. The price of fertiliser increased from $260 to $480, another 60%, between March and June, June but that is not included in these figures.  

Local Government rates increased 6.6 per cent. This was the second largest increase in 17 years and in the last five years the overall increase was 33 per cent, an average of 6.6 per cent per year. The overall cumulative increase over 5 years to March 2008 was 22.7 per cent, while over 10 years the increase was 37.0 per cent.

In comparison the CPI rate of increase over 5 years was 14.0 per cent, well below the 22.7 per cent for sheep and beef farm input prices

If interest is excluded, the underlying rate of on-farm inflation in 2007-08 was up 8.3 per cent.

Meat & Wool Economic Service figures for the annual on farm inflation percentage change in the past 10 years:

including interest        (underlying % change) excluding interest

1998 -99         -2.0%                                          0.9%

1999-00                 2.8                                                             1.4

2000-01                 5.2                                                             6.0

2001-02                 1.7                                                             2.8

2002-03                 3.6                                                             3.4

2003-04                -0.2                                                             0.0

2004-05                 4.1                                                             3.7

2005-06                 4.8                                                             5.2

2006-07                 2.7                                                             2.7

2007-08                 9.7                                                             9.8

 


Meat Industry Disunity Scuttles Taskforce

29/06/2008

Disappointment but little surprise has greeted the news that the Meat Industry Taskforce  has disbanded.

Taskforce chairman Sir John Anderson said yesterday that consultant PricewaterhouseCoopers (PWC), which was commissioned to complete an industry analysis, could not get informed consent from all industry participants.

In addition, Sir John said that in the last week one company had announced it was withdrawing its support for an industry strategy, saying it was pursuing its own plans, making it impossible to compile a report.

Meat and Wool New Zealand (MWNZ) established the taskforce earlier this year to create a red meat industry strategy to address international marketing, supplier dynamics and processing.

Owen Poole who chairs Alliance Group said his company supported the taskforce and was disappointed it had failed. 

Mr Poole said the strategy could have been the catalyst for industry aggregation, and the fact PWC was going to seek contributions from farmers, meat companies and unions, would have produced meaningful results.

“I see it as a lost opportunity,” he said.

Silver Fern Farms chief executive Keith Cooper said he supported any initiative to create an industry strategy, but the taskforce never released its terms of reference, so companies did not know what it was trying to achieve.

Mr Cooper said Silver Fern Farms (formerly PPCS) was not the reason the taskforce failed.

“In regard to the Meat Industry taskforce announcement, from a Silver Fern Farms perspective, we were never asked for informed consent by PWC on the issue.”

The company supported any initiatives to improve supplier returns.

“Silver Fern Farms supported any initiative about reviewing the industry strategy or structures.”

Anzco chairman Graeme Harrison was also supportive but not surprised it had failed, given the reluctance of the four major meat companies to co-operate on industry issues.

“Unless the four companies were prepared to talk in meaningful ways, then it was never going to happen.”

While he had reservations about the size of regulatory and commercial hurdles the taskforce faced, he said it would have provided an important circuit-breaker for farmer confidence.

Mr Harrison said commercial reality would now play its hand and there would be change.

“Sooner or later, something will happen and it will be a commercial decision.”

The 07-08 season was a very tough one for sheep farmers with falling returns and steeply increasing prices for fuel, fertiliser and other inputs. The outlook for next season’s lamb prices is more optimistic, but even so they’ll be hoping that whatever happens in the industry happens sooner not later.


Fert Price Rising Fast

21/06/2008

Competition and swiftly rising prices is forcing fertiliser companies to move from six monthly to quarterly pricing.

Volatile fertiliser pricing has seen Ballance and Ravensdown both adopt quarterly price reviews, but Ravensdown chief executive Rodney Green said the timing of the price reviews could mean farmers missed out or were advantaged depending on when they ordered their product.

…Ballance recently announced it was moving to quarterly pricing and Mr Green said Ravensdown had to follow suit, but he wanted to hear shareholders’ views on the change.

This was a shift from the traditional co-operative principle where all shareholders were treated as equally as possible.

Co-operative or not, you have to set the price at some stage and in a free market there will always be an element of luck about the price you get on any given day. And given how steeply prices are rising it is very unlikely that farmers will find they’d pay less if they waited to buy.

Such was the volatility of fertiliser pricing, Australian companies were pricing and selling by the shipload. It was likely New Zealand prices would rise in the future as companies exhausted stock and bought new product at higher prices.

“Everything we sell would be substantially lower than anywhere else.”

For example, Israel was exporting superphosphate for more the $US500 – $NZ659.8 – a tonne, while it was being sold in New Zealand for below $US500 a tonne.

Rising prices often provides the opportunity for new players. People from both Balance and Ravensdown at the fieldays said that demand was so much higher than supply they were not anticipating new companies setting up in competition with conventional fertilisers, but they wouldn’t be surprised if the market for snake oil increased.


Wheat Rising Bread Will Too

20/06/2008

The floods which have destroyed corn crops in the United States will bring improved prices  for cropping farmers here.

Federated Farmers Grain & Seed chairman Andrew Gillanders said grain growers were being advised to closely follow world markets before committing to sales, otherwise they could miss out on improved prices.

“The New Zealand grain growers should not be tempted into signing contracts because their input costs are rocketing up and the New Zealand dollar is dipping everything is about to rise again.”

The price of corn reached nearly $8 a bushel in the United States this week because of a wet spring and floods in the Midwest which are forcing farmers to replant their crops or replace them with soya beans.

This will have a flow on effect on the price of beef because so much US stock is grain fed.

New Zealand farmers are facing cost increases of around 50% for chemicals, fuel, fertiliser and transport so the prospect of improved returns is welcome. But of course higher prices for grain will flow on to the domestic market making bread and cereals more expensive. 


Glass half full of fertiliser

07/06/2008

Halfdone blogs  on the rising price of fertiliser apropos of which the weekly Ag Letter from farm consultants Baker & Associates arrived in our inbox today and opened with this tale about someone who sees a silver lining in the cloud of price rises:

 

One local farmer who has a boat with 2 x 200 HP motors on the back is philosophical about the doubling of fertiliser prices

 “Fishing has just got cheaper…. It only costs one tonne of DAP to fill the boat with gas now”

 


Fonterra payout good for country

31/05/2008

The ODT see more pluses than minuses in the increased Fonterra payout:

The good:

Fonterra announces record payout to farmers of $7.90 kg of milk solids for this season; up from $4.46 last season.

The higher payout increases by $4 billion the cash injection into the economy.

It will be worth an extra $30 million to the Otago economy and an extra $70,000 in gross income to an average Otago farmer.

2008-09 opening forecast payout $7 kg of milk solids.

The bad news: Consumer dairy-product costs will rise, putting pressure on already stretched grocery budgets.

Another plus for the country, which might not be appreciated by farmers, is the increased tax that will be paid. Last season’s payout meant that most farmers made small, if any, profits. Even with the increased costs of fertiliser, feed, fuel, power and wages most farmers will have very healthy taxable profits this season.

 

The opening forecast of $7 for next season is also very good news – even with the cautionary advice that actual payouts can be higher or lower than initial forecasts and the uncertain international finanancail situation might mean the final payout could drop. Of course it could, but the growing demand for protein makes that unlikely.

 

Largely overlooked in the excitement over the increased payout was the news  that Fonterra’s fair value share price has dropped from $6.79 to $5.22.

 That’s disappointing for those wanting to get out of the industry or change suppliers – friends who are selling found themselves around $500,000 poorer after the announcement. But it will make it a little easier for people planning to sign up to Fonterra because it reduces the cost of entry. And one reason for the drop in the share price could be competition from other companies which don’t require new suppliers to buy shares, making it much cheaper for them to get in to the industry.

 

The increased payout and good forecast will make dairying more attractive, but excitement will be tempered by the knowledge that costs will also rise, and most won’t go down if/when the payout does. Fertiliser prices have already risen: superphosphate was $270 a tonne and is now $511; urea has gone from $690 to $948 and the price of DAP has more than doubled from $706 to $1526.

 

 

The price rise is being driven by increased international demand. It won’t be welcomed by those in dairying and will be even less welcome for sheep farmers.


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