Rural round-up

September 23, 2016

Farmers must ‘lock in the gains’ as milk price lifts:

DairyNZ is encouraging farmers to lock in the gains achieved in the past two seasons, as a pasture-first farm system will continue to provide payback as the milk price rises.

Chief executive Tim Mackle says the increase to $5.25 per kg MS for the forecast 2016/17 Fonterra Farmgate milk price is terrific news for dairy farmers.

“This brings many farm businesses to around the 2016/17 break-even milk price of $5.05 per kg MS, once retrospective payments and dividends are taken into account. This means fewer farmers will need to borrow extra funds this season,” says Tim.

“Retrospective payments for next year have also been boosted by 20-25 cents in this announcement, to over $1 per kg MS. . . 

New funding for Mayfield Hinds irrigation scheme:

Primary Industries Minister Nathan Guy has welcomed $345,000 in new funding to investigate expansion of the Mayfield Hinds irrigation scheme in mid-Canterbury.

The funding comes from the Ministry for Primary Industries’ Irrigation Acceleration Fund (IAF)and will look at the feasibility of increasing the irrigated area of the current scheme by 4,500 hectare through piped extensions.

“Storing alpine water to use in dry times is crucial for rural communities to thrive, especially as the climate becomes more variable,” says Mr Guy.

“Well planned and managed irrigation schemes are good for rural economies and the environment. . . 

Fonterra says China well-poised for growth, regulatory changes will see 1800 brands disappear – Fiona Rotherham

(BusinessDesk) – Fonterra Cooperative Group chief executive Theo Spierings says legislation will mean drastic changes in the Chinese infant formula market with the removal of between 1800 and 2000 brands in the next 15 to 18 months.

Regulatory changes require each entity to have only three brands and three different recipes of infant formula in a bid to crack down on the grey market and allay consumers’ food safety concerns by reducing fake formula.

Spierings said Fonterra was well-positioned in every segment in China where it is already the global market leader for ingredients such as whole milk powder but a lot of things have changed in the past few years including a shift to sales from mother and baby shops to e-commerce. . . 

NZX milk futures fall from record after GDT, still above Fonterra payout forecast – Tina Morrison

(BusinessDesk) – New Zealand milk price futures have fallen in the wake of the latest GlobalDairyTrade auction, having reached a record in the run-up to this week’s sale, but remain above the payout level forecast by most of the country’s milk processors.

The NZX milk futures contract for the 2016/17 season hit a record $5.65 per kilogram of milk solids ahead of the GDT overnight on Tuesday, and recently traded at $5.50/kgMS. That’s still above the base milk price forecast by the country’s major milk processors, with Fonterra Cooperative Group this week updating its forecast to $5.25/kgMS, while Synlait Milk’s is at $5/kgMS, Westland Milk Products at $4.75-to-$5.15/kgMS, Miraka at $4.55-to-$4.80/kgMS, and Open Country Dairy at $4.60-to-$4.90/kgMS. Tatua sits above the futures with a current forecast of $5.50-to-$6/kgMS while Oceania Dairy didn’t immediately respond to a request for its forecast. . . 

NZ Merino and Silver Fern Farms set out new path for Silere:

The New Zealand Merino Company (NZM) and Silver Fern Farms have reached agreement for NZM to take 100 per cent ownership of Alpine Origin Merino Limited, previously owned jointly.

Alpine Origin Merino Limited was established 5 years ago as a joint venture between NZM and Silver Fern Farms to own the SILERE alpine origin merino brand and to fund the development and marketing of the SILERE merino meat range. Under the agreement NZM becomes the sole shareholder in Alpine Origin Merino Limited.

NZM Chief Executive John Brakenridge stated that “when we set out we needed to prove merino meat could be differentiated as a luxury eating experience and value created in market could be delivered to grower suppliers. . . 

Kiwi moves to Pitt island, with no electricity or phones, for love – Ryan Bridge:

There’s no love without sacrifice, right? How far would you be willing to go to make it work?

Story met Amy Podjursky during our flight to the Chatham Islands, and discovered she was moving hundreds of kilometres to a remote island in the name of love.

There’s no electricity or cellphones on Pitt Island – and there’s only around 50 people who actually live there. It’s quite uninhabited and it’s the eastern-most point of New Zealand. . . 

 

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Not all superheroes wear capes. Some wear boots and know how to use a crock pot – PinkTractor.com


Value-add shows value of co-operative

September 22, 2016

Fonterra has announced a 65% increase in net profit after tax to $834 million which the company says reflects a stronger business despite ongoing challenges in global dairy markets.

Highlights:

Sales volume increased 4% to 23.7 billion Liquid Milk Equivalents (LME)

· Revenue $17.2 billion, down 9%

· Normalised EBIT $1.4 billion, up 39%

· Net profit after tax $834 million, up 65%

· Return on capital 12.4%, up from 8.9%

· Ingredients inventories down 25%

· Gearing ratio reduced to 44.3% from 49.7%

· Debt reduced by $1.6 billion to $5.5 billion

· Earnings per share 51 cents

· Cash Payout $4.30

– Farmgate Milk Price $3.90 per kgMS

– Dividend of 40 cents per share

 . . . Chairman John Wilson said that the 2015/16 season had been incredibly difficult for farmers, their families and rural communities, with global dairy prices at unsustainable levels.

“Our Co-operative has responded. We continued with the significant and necessary changes we began in the business over three years ago to support our strategy and its priorities, and worked hard to return every possible cent of value back to our farmers.

“Our business strategy is serving us well. We are moving more milk into higher-returning consumer and foodservice products while securing sustainable ingredients margins over the GlobalDairyTrade benchmarks, especially through speciality ingredients and service offerings.

“Through increased earnings and continuing financial discipline we have increased the return on capital and strengthened our balance sheet by significantly reducing debt.

“We have done what we can to support our farmers with the Co-operative Support Loan, and early payment of dividends.

“After a period of deliberate and disciplined attention to the business, we have become a stronger Co-operative operationally, financially and in our mindset with a clear sense of direction and a structure which will support real momentum in our strategy going forward,” said Mr Wilson.

Mr Wilson said farmers’ decisions to reduce stocking rates and supplementary feeding to help lower costs resulted in milk collection across New Zealand for the 2015/16 season declining to 1,566 million kgMS, down three per cent on the previous season.

Strong volume and value growth

Chief Executive Theo Spierings said more volumes of milk sold at higher value is at the heart of Fonterra’s strategy.

“For our farmers, the promise is that we will make the most of their milk. We’re keeping that promise.

“We’ve seen the real strength of our ingredients business this year. The money our farmers have invested in stainless steel is giving us more choice, and we have matched production to the highest value customer demand. In a difficult market, we increased ingredients normalised EBIT this year by 24 per cent to $1,204 million.

“In consumer and foodservice, we converted an additional 380 million litres of liquid milk equivalents (LME) into higher returning products, bringing our total volumes in this business up from 4.5 billion LME to 4.9 billion. Increasing our consumer and foodservice volumes, and especially our foodservice growth, meant we increased our normalised EBIT in this business by 42 per cent to $580 million.

“Our results show that we continue to do what we said we would do right across the Co-op. We are single-minded about transforming our business to get the best results. We have cut our operating expenses, increased our free cash flow, reduced our working capital days, driven debt down, and reduced our capex and our gearing.

“All of this effort, combined with higher earnings and margins meant our measure of return on capital has increased from 8.9 per cent to 12.4 per cent.

“Our results show how our strategy is creating value for our shareholders. We are driving more volume into higher value products, and we are achieving results with increasing efficiency. We will continue to build on this strong platform to keep improving and delivering results to our farmers.

Investing in our communities and future

“At the same time, we have kept our promise to share great dairy nutrition with our communities through Fonterra Milk for Schools, and through our Grass Roots Fund and Living Water partnership, we are looking after local communities and the environment.

“We can only do all of this with the support and commitment of our farmers, investors and employees. Throughout the year we have challenged our people to adapt how we work to better manage the shifts in the global market. It has been a real team effort and I want to thank all of our people in New Zealand and around the world,” said Mr Spierings.

Future outlook

With a forecast Farmgate Milk Price of $5.25 per kilogram of milksolids (kgMS), the forecast total payout available to farmers in the 2016/17 season is $5.75 to $5.85 before retentions. This includes a forecast earnings per share range of 50 to 60 cents.

Mr Wilson said over the past three years the Co-operative had worked hard to align its structure to its strategy with a focus on achieving more value for the volumes of milk produced by its farmers.

“The higher forecast earnings per share range reflects the performance improvements the business will continue making.

“It is still early in the season, and we expect continuing volatility as reflected in price improvements in recent GDT auctions.

“Current global milk prices remain at unrealistically low levels, but as the signs in the market improve, we are very strongly positioned to build on a good result in the year to come,” said Mr Wilson.

The last season was a very tough one for dairying with the milk price well below the $5.05 almost all farms need to break even.

However, lower milk price makes it easier for the company to make money on its value-added products.

This shows the value of  the co-operative model. It enables producers to share the dividends which off-set the low milk price, and it is why Fonterra suppliers are determined to retain ownership of the company.

In businesses which aren’t co-operatives, higher dividends can come at the expense of producers.

You can see the annual results here.


366 days of gratitude

September 21, 2016

Today’s increase in Fonterra’s forecast payout was unexpected and has raised a couple of questions:

  • Given last year when an increase in the forecast price was proved to be premature and later reversed, wouldn’t it have been more prudent to wait to make sure the upward trend in demand for milk is going to continue?
  • Why make the announcement today, instead of waiting until tomorrow when the company will present its annual results?

The cynic in me thinks these are valid concerns but the optimist is hopeful that Fonterra learned from last year and its forecast will prove to be at worst accurate and might even be conservative.

Dairying has had a couple of tough seasons, the impacts of which have spread off-farm.

Today’s 50 cent lift in the forecast payment has provided more than a glimmer of light at the end of the tunnel and I’m grateful for that.


GDT and Fonterra’s forecast payout up

September 21, 2016

The GlobalDairyTrade price index increased by 1.7% in this morning’s auction.

That was less than analysts and expected and whole milk was down .2%.

However, Fonterra is obviously confident that the upward trend in prices will continue and has increased its farm gate forecast milk price:

Fonterra Co-operative Group Limited today increased its 2016/17 forecast Farmgate Milk Price by 50 cents to $5.25 per kgMS.

When combined with the forecast earnings per share range for the 2017 financial year of 50 to 60 cents, the total payout available to farmers in the current season is forecast to be $5.75 to $5.85 before retentions.

Chairman John Wilson said that since the Co-operative last reviewed its forecast Milk Price in August, global milk supply has continued to reduce and demand has remained stable.

“Milk production in key dairying regions globally is reducing in response to low milk prices. Milk production in the EU for 2016 is beginning to flatten out and our New Zealand milk collection is currently more than 3 per cent lower than last season.

“While we have seen some improvement in GDT auction prices recently, the high NZD/USD exchange rate is offsetting some of these gains.

“There is still volatility in global dairy markets and we will continue to keep our forecast updated for our farmers over the coming months,” said Mr Wilson.

It’s only a forecast.

Farmers and sharemilkers will still be very cautious but it’s very welcome news for the industry, those who service and supply it and the wider economy.


Rural round-up

September 19, 2016

Officials crack down on dairy farmers for breaching employment obligations – Gerard Hutching:

Officials have discovered that half of the 28 dairy farms they visited in the last two months in Waikato were in breach of their employment obligations and have fined some farmers $2000 each.

The Labour Inspectorate has promised a nationwide crackdown on employers who fail to keep written employment agreements or time records. Maximum fines can reach $20,000 for serious breaches.

Federated Farmers dairy spokesman Andrew Hoggard said he could not defend the farmers.

“There are no excuses. Employment agreements have been around since 1991 so they can’t say they don’t know,” Hoggard  said. . .

Tenacity and vision mark tenure – Guy Williams:

One of Queenstown’s most respected community servants has hung up his chainsaw. Peter Willsman, the driving force behind the region’s ground-breaking wilding tree control group, has stepped down as co-chairman. Queenstown reporter Guy Williams asks him why, and looks at his legacy.

Wilding trees throughout the Wakatipu — and probably in the rest of the country as well — may well be standing a little taller this week.

That is because one of their biggest scourges, Peter Willsman, has called time on his leadership role in the Wakatipu Wilding Conifer Control Group (WCG).

Co-chairman since the group’s formation in 2009, he announced his resignation at its annual “reporting night” last week. . . 

100 farmers dump milk following silo collapse – Vaughan Elder:

About 100 farmers in Otago and Southland were forced to dump milk over the weekend in  the aftermath of the milk silo collapse at Fonterra’s Edendale site.

Fonterra has called in engineers from around New Zealand and the world to try to get the plant fully operational again after the silo collapsed  on Friday, bringing down an overhead gantry carrying large steam pipes.

Neighbours reported hearing a  loud boom about 1.50pm, followed by the  sound of steam escaping from the ruptured pipes, a noise which continued for about 30 minutes.

One said it sounded like a Boeing 747 flying low overhead. . . 

Farm trends shut yards – Neal Wallace:

The South Island’s largest sale yards at Temuka in South Canterbury are benefiting from competitors closing but could not take anything for granted, Temuka Saleyards Company chairman Ian Bowan says.  

The company has spent more than $100,000 on electronic ear tag readers and was planning a new effluent disposal system.  “We’ve kept up with everything. We haven’t got behind,” he said.  

News the Tinwald yards in Ashburton would close later this year confirmed a trend of consolidation of sale yards around the country, some closing and others holding fewer sales.  

Closures in recent years included Cromwell, Matamau near Dannevirke and Studholme and Holme Station in South Canterbury. . . 

Synlait’s Profit Triples in Fy16, Launches Next Growth Phase:

Synlait’s reported net profit after tax (NPAT) has more than tripled to $34.4 million for the financial year ending 31 July 2016.

Driven by an almost fourfold increase in canned infant formula volumes and growth in powder and cream product volumes, the positive result has also set the foundation for Synlait’s next phase of growth.

“Synlait is a growth company. Our FY16 performance highlights the progress we’ve made since our IPO in 2013 towards our aspiration of making more from milk,” said Chairman Graeme Milne.

“We are continuing this momentum with an accelerated pro-rata entitlement offer to eligible shareholders[1] to raise approximately $98 million in support of our next growth phase. Investing in further capital projects to expand our capability and capacity will put us in a strong position to pursue customer, product and market development opportunities in the coming years,” said Mr Milne. . . 

Quality can sell grain – Annette Scott:

New Zealand grains are in a league of their own and should be marketed as such, industry leaders say.  

Heavy reliance on the dairy industry had affected arable growers’ returns so they suggested other principle markets should be explored.  Market trends, challenges and opportunities were the focus of a grains forum held in Canterbury on Thursday.  

Facilitated by the Grain and Seed Trade Association (GSTA) in conjunction with the Foundation for Arable Research and Federated Farmers, the forum stimulated thinking around plans for future action in the grains sector. . . 

Prices keep heads shaking – Hugh Stringleman:

Keen demand for young cattle for restocking will centre on sale yard prices for 100kg weaners from the end of the month, AgriHQ livestock market analyst Rachel Agnew says.  

The weaner market was expected to open with prices well over $4/kg liveweight, probably $4.50 to $4.80.  

“Inquiry levels are starting to build up and the first weaner calves are an eagerly anticipated part of the annual cattle cycle,” she said.  

Buying weaners was a way of stocking up with the lowest financial outlay. . . 

Computing giant includes rural secondary schools in “vision’ competition:

HP New Zealand (HP NZ) is asking rural students to share their vision of how they think they will learn in the future to be in the running to win a share of $26,000 worth of HP products and support.

The HP Rural Schools Competition, in its third year, gives rural New Zealand primary schools – and for the first time this year – secondary schools, the chance to win HP technology and support best suited to the school’s needs. Entries are open now. . . 

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Rural round-up

September 16, 2016

Plant & Food $8.5 million research grant includes GM techniques used ‘in lab’ only – Fiona Rotherham:

(BusinessDesk) – An $8.5 million research grant awarded to crown research institute Plant & Food this week for new breeding technologies for high value plant industries includes gene editing which is considered in New Zealand to be part of genetic modification.

The grant was part of the total investment announced this week of more than $209 million over the next five years in new scientific research projects through the Ministry of Business, Innovation and Employment (MBIE) 2016 Endeavour Fund.

Plant & Food chief executive Peter Landon-Lane told the NZBio conference today that one of the new breeding technologies is CRISPR gene editing, which gives biologists the ability to target and study particular DNA sequences in the expanse of a genome and then edit them. . . 

First milk flows through Fonterra’s newest milk powder plant at Lichfield:

The first litres of Waikato-farmed milk are flowing through Fonterra’s newest high-efficiency milk powder plant, as the world’s joint-largest dryer comes online in the South Waikato.

The new 30 metric tonne an hour dryer at the Co-operative’s Lichfield site will be capable of processing an additional 4.4 million litres of milk each day – equivalent to almost two Olympic swimming pools – into high quality milk powder for global markets.
 
Large scale dryers such as this play a key role in driving value for the business, says Fonterra’s Chief Operating Officer Robert Spurway. . . 

Ballance Farm Environment Awards Confirm Viticulture Business On Right Track:

Pictured: Allan Johnson, Pip Goodwin and Blair Savage

Entering the Greater Wellington Ballance Farm Environment Awards was a valuable exercise for South Wairarapa viticulture business, Palliser Estate Wines of Martinborough Ltd.

Chief executive officer Pip Goodwin says the operation aims to be a leader in the production of high quality wine using the most sustainable methods possible.

“The Ballance Farm Environment Awards gave us a chance to be judged by our peers and find out what we could do to improve in future.”

Solving sticky problem earns big bio kudos:

Scientists at Scion have solved a growing environmental problem for wood panel manufacturers.

Warren Grigsby and his team have developed the world’s first wood panel resins (glue) using biobased ingredients.

That solution has earned the team the “Biotechnology of the Year” award at NZBIO’s annual conference in Auckland.

When Scion, the Crown Research Institute that specialises in science around forestry, wood products and bio materials, learned the level of formaldehyde emissions from wood panels were being regulated lower in countries like Japan, the United States and in the European Union, with New Zealand following suit, it looked to biotechnology to find ways of reducing the emissions. . . 

What farmers wish you knew about farmers – PinkTractor.com

From ‘farming is easy’ to ‘farmers are rich,’ there are a million things consumers think they know about farmers. We asked our amazing farm community what the one thing they wish people knew about farmers. These are the responses.

Farmers are smart! They have to be everything – plumbers, carpenters, mechanics, scientists, vets and more. Every day!

Farming is a lifestyle, not a job. It’s 24 hours a day, 7 days a week. Every day of the year. It’s almost impossible to take a vacation, especially if you have animals.

Some farmers have to have jobs off the farm to make ends meet, but they still wouldn’t trade it for anything. . . 

McFall Fuel and VicForests show safety leadership as Conference Partners:

Industry safety champions in both New Zealand and Australia have come forward to show their safety leadership by becoming Principal Partners to the 3rd FIEA Forest Industry Safety Summit conference series – scheduled for March 2017 in Rotorua and Melbourne.

“The leaders of both McFall Fuel in New Zealand and VicForests in Australia see their teams as early adopters of positive safety practices. So they’re keen to show leadership for others in the forest industries by being proactive in safety,” says event director John Stulen from FIEA.

McFall Fuel CEO, Sheryl Dawson actively promotes safety in every aspect of their company’s operations. McFall Fuel’s strong family values of zero harm, respect, trust, integrity, teamwork and a strong work ethic are reflected in every facet of the work carried out. . . 

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Whoever said ‘everything happens for a reason’ has never had a cow step on her foot. – Pink Tractor


Rural round-up

September 14, 2016

Success outside of big cities:

We asked some of New Zealand’s leading business people about their bravest moment in business. In the sixth story of our series for Spark, Whitestone Cheese CEO Simon Berry.

“Bravest moment? I reckon moving from Vancouver to Oamaru!”

Simon Berry, CEO of Oamaru’s Whitestone Cheese, comes from a long line of Otago farmers.

When the 1980s arrived so did the rural downturn. Noticing the tide was about to turn, Simon’s father Bob made the bold decision to forego beef and sheep for cheese.

“Dad was always good at reading markets,” says Simon. “‘In those days, the only cheese you could find in Kiwi supermarkets was the 1kg block. So my parents would visit their neighbours in Karitane who ran a small business called Evansdale Cheese.”

“Everyone raved about their green, mouldy farmhouse cheese!” . . 

Lessons from Australian dairy – Keith Woodford:

Our Australian dairy cousins are currently going through difficult times, particularly for those who supply Murray Goulburn, and to a lesser extent Fonterra.  There are lessons to be learned, although there may be alternative perspectives as to the specifics thereof.

Right now, production in Australia has plummeted. It will take a month or two to see how it all settles out, but early season production is down 10 percent.  Fonterra’s production is down 22 percent, and Murray Goulburn is in all likelihood down even more. Indeed, there have to be doubts as to whether Murray Goulburn can survive long-term in its current form.

Once the spring-calving cows come on-stream, the figures may look less dramatic, but both Murray Goulburn and Fonterra have clearly lost substantial market share. . . 

Vehicle review ‘great’ – Sally Rae:

It’s out with the old and in with the new with vehicles on Landcorp-owned farms.

Keeping people safe was the driver behind a review of vehicle safety by New Zealand’s largest corporate farming operation.

The review established a set few vehicles to be used on the basis of what worked for particular farms and terrain.

It was decided to remove all quad bikes on Landcorp’s dairy farms and reduce the number of quad bikes on livestock farms. . . 

Beef producers cautioned to look beyond the price peak:

New Zealand cattle producers are being cautioned to look beyond the current high-priced environment, with near-record prices unlikely to be sustained in the medium to long term according to a new industry report.

In its latest beef research report, Australian and New Zealand beef industry – looking beyond the price peak, agribusiness banking specialist Rabobank says while New Zealand farmgate prices are expected to remain around current levels in the short-term, they will then come under pressure as global beef production, and indeed total animal protein production, increases.

This will likely see prices ease, albeit to trade in a higher-than average range out to 2020, the report says. . . 

Officials Urged to Challenge Canada’s Latest Dairy Trade Protectionism:

The Dairy Companies Association of New Zealand (DCANZ) has joined with US, Australian, European, and Mexican dairy organisations in requesting a WTO dispute settlement proceeding be initiated against Canada if it continues with a planned extension to its dairy trade protections.

A joint letter, sent to Trade Ministers, sets out concerns that a recently concluded agreement between Canadian dairy producers and processors would provide an incentive to substitute Canadian dairy ingredients for imported dairy ingredients and would unfairly subsidise exports of Canadian dairy products. The agreement would provide a guaranteed price for milk used to manufacture ingredient dairy products, including skim milk powder and milk protein concentrate, which is below Canada’s cost of milk production, and which matches the lowest globally traded reference price for these products. . Image may contain: text

Life is better on the farm.

New Zealand’s Escorial Wool launches exclusive collection:

This season the luxurious and rare Escorial wool will showcase the first complete collection in both worsted and woollen fabrics, woven in Yorkshire, England by exclusive partners Joshua Ellis and Luxury Fabrics.

Escorial wool, originating from the Spanish Royal flocks of El Escorial, has made a name around the world for producing luxury performance garments for a discerning customer, grown from an exceptional small sheep, grazing in limited numbers in Australia and New Zealand. The Escorial distinction is in the heart of the fibre, performing as a naturally coiled spring. It is this coiled attribute that delivers fluidity in the Escorial fabric making a lightweight garment of crease resistance and comfort.

Founded by New Zealander Peter Radford in 1998, Escorial wool in February this year partnered with renowned Yorkshire textile companies Joshua Ellis and Luxury Fabrics, both who have the heritage and experience to translate the characteristics of Escorial into a luxurious fabric. . . 


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