Rural round-up

October 21, 2016

The causes of the great cheese glut –  Mitch McCann:

There’s a big problem in United States right now. No, not that – America’s got too much cheese.

According to Vox, 453 million kilograms sits in cold storage warehouses across the country.

There’s a few reasons for what’s being labelled “America’s cheese glut”.

Around 2014, China’s economy was growing fast.

They were buying up heaps of US dairy products, like milk powder and cheese.

American farmers stepped up to meet demand, then China’s economy slowed, and with it – cheese sales. . . 

Forestry Industry Helps Grow Kiwi Population:

A new set of guidelines to help forest owners protect kiwi will help increase kiwi population numbers across New Zealand.

The guidelines, created by Kiwis for kiwi’s National Mentor for Advocacy, Wendy Sporle, have also been developed into a short training module to educate forestry crews about on-the-ground kiwi management.

Wendy Sporle has been a Northland farm forester for 40 years and has decades of forestry and kiwi management experience. . . 

Tirau’s iconic sheep, ram, and dog buildings for sale:

After 23 years, the creators and owners of the iconic Sheep, Ram and Dog buildings in Tirau are putting them up for sale.

Sitting on a prime corner on State Highway 1, the buildings have been much-loved  and photographed by locals, tourists and people passing through the town since their creation. 

John and Nancy Drake, the creators and current owners of the buildings, built the sheep back in 1994. . . 

Fonterra Showcases Clean Water Commitments at Global Summit:

All Fonterra manufacturing sites are aiming for globally-leading industry standards for wastewater treatment within 10 years according to COO Global Consumer & Foodservice Jacqueline Chow.

The Co-operative, which uses some 45 million cubic metres of water in processing in New Zealand, currently recycles close to six per cent or an average 2.5 million cubic metres annually.

“As new capacity is built, Fonterra is investing in resource-efficient plants such as our upgraded Pahiatua site which recovers and recycles 90 per cent of condensate from powder processing for irrigation to nearby farmland.” . . .

Extra 3825km2 of cell coverage delivered to rural areas:

An area the size of 450,000 rugby fields has been added to the country’s cell network in just two years, says Communications Minister Amy Adams

Thirty-four new cell towers have expanded coverage by an extra 3825 square kilometres to rural areas previously without coverage.

The new towers are a result of requirements set in the auction of the 700 MHz band of radio spectrum, won by Spark and Vodafone in 2014. Under the auction agreement Spark and Vodafone were required to build new towers in new rural areas in the first five years after the purchase.

“Thirty four towers were completed by the end of the second year, which is four sites more than required by the auction agreement. Seventeen have come online in the last year,” says Ms Adams. . .  

CropLogic Recognised At Annual TIN100 Awards:

Precision agriculture firm, CropLogic, has been named one of the most promising early stage companies at the annual TIN100 Awards announced in Auckland last night.

The TIN100 Awards recognise the leading technology exporters in New Zealand following the release of the annual TIN100 Report. The Report analyses the performance of the country’s largest exporters in the areas of ICT, High-tech Manufacturing and Biotechnology.

CropLogic was amongst ten shortlisted companies including 8i, BioLumic, Engender Technologies, Footfalls & Heartbeats, Hydroxsys, Invert Robotics, Mars Bio-imaging Ltd, Parrot Analytics and Timely. . . 

Entries open for the 2017 New Zealand Dairy Awards:

The window of opportunity to make a difference to your farming career has arrived! Entries will be accepted for the New Zealand Dairy Industry Awards from today, Thursday 20th October, until midnight 30th November. Competitions categories include the New Zealand Share Farmer of the Year, New Zealand Dairy Manager of the Year and New Zealand Dairy Trainee of the Year.

All entries are received online at The New Zealand Dairy Industry Awards are supported by national sponsors The New Zealand Dairy Industry Awards are supported by national sponsors Westpac, DairyNZ, DeLaval, Ecolab, Federated Farmers, Fonterra Farm Source, Honda Motorcycles, LIC, Meridian Energy and Ravensdown, along with industry partner Primary ITO. . . 

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Those who say you shouldn’t take your work home with you don’t know lambing season.

Rural round-up

October 20, 2016

43 jobs axed at Mossburn works – Simon Hartley:

Silver Fern Farms has axed more 43 Mossburn meatworkers’ jobs as it rationalises killing shed numbers across the country.

While the closure is vaunted as an ”opportunity” for Silver Fern Farms, the Northern Southland job losses will gut the micro-economy of Mossburn, with its population of barely 200.

The new killing season at Mossburn was just about to start; now, plant decommissioning will start next month. . .

Devastating news for small town – Tracey Roxburgh:

The Deer Capital of New Zealand received a body blow yesterday when news broke of Silver Fern Farms’ plans to close its venison plant.

The mood in Mossburn yesterday afternoon was sombre and while no-one spoken to by the Otago Daily Times seemed surprised by the proposed closure of the plant, which employs 43 staff, all agreed it was devastating for the small town.

Silver Fern Farms announced in a statement it was consulting staff at its South Island Mossburn venison plant and at its North Island Wairoa mutton processing plant, on ”options for closing the two small sites”. . .

Silver lining in overseas efforts to ditch meat diet:

Meat exporters are unfazed by a campaign to shift the world away from meat to plant protein.

A group of 40 investment companies, managing about $1.8 trillion in assets, have launched a campaign to encourage 16 major companies including WalMart, Unilever, Nestle, Kraft Heinz, and Tesco, to change the way they source protein for their products, in an effort to reduce environmental and health risks.

The investment companies, brought together by the Farm Animal Investment Risk & Return (FAIRR) Initiative, have warned about the impact of meat production on the planet.

“The world’s over reliance on factory farmed livestock to feed the growing global demand for protein is a recipe for a financial, social and environmental crisis,” said Jeremy Coller, founder of the FAIRR Initiative and chief information officer of Coller Capital, one of the investment firms involved in the campaign. . . 

New Zealand King Salmon Lists on NZX & ASX

Aquaculture – a “healthy” portfolio ingredient

Salmon is on the menu at both the NZX Main Board (NZX) and the ASX with the listing today (19 October) of the world’s largest aquaculture producer of King salmon.

The initial public offer (“IPO”) for Nelson / Marlborough-based New Zealand King Salmon was for 69.2 million ordinary shares, quoted under the ticker NZK.

With the government supporting well-planned and sustainable aquaculture growth, New Zealand King Salmon sought $30.0 million in new capital to repay debt, and to fund future investment and working capital.

As a result of the fully subscribed IPO, and based on the $1.12 price per share, the company’s market capitalisation is $154.5 million, excluding certain shares offered under an employee share ownership plan. . . 

The reds have it in South Island Farmer of the Year finals

Three red meat producers and a Central Otago wine business will be up against each other for the finals of the Lincoln University Foundation 2016 South Island Farmer of the Year at Lincoln University on November 16.

The four finalists are:

James Dicey, a viticulturist and owner of Grape Vision Limited based in Bannockburn, Central Otago.

Lauren and Geoff Shaw, sheep and beef farmers in Central Otago, near Ranfurly.

Lyn and Neil Campbell, Campbell Farms, Middle Valley, near Fairlie in South Canterbury farming sheep, beef, bulls and deer, and arable crops.

Simon Lee, Manager Mendip Hills Station, Parnassus, North Canterbury, farming sheep, beef and deer.

Foundation Chair Ben Todhunter says he’s looking forward to a great finals night on November 16. . . 

When it comes time to hang up the gumboots:

With the average age of New Zealand farmers pushing 60, and land values on a steady increase, it’s no surprise succession planning is currently top-of-mind for the agricultural industry.

In fact, leading commentators see private farm succession as the single biggest challenge for the industry to overcome during the next decade.

Dairy Women’s Network and its partners ASB and Crowe Horwath are coming together to offer support to farmers around this daunting and extremely personal, but important issue, over the next few months.

The partners will be delivering free succession planning workshops across the country, over the next six months. . . 

Timber industry upbeat despite challenges:

“Challenges facing the NZ timber industry are real and significant but the industry is generally in a good demand cycle and sentiment is positive” says New Zealand Timber Industry Federation (NZTIF) president, John McVicar.

“Domestic demand for timber is very strong at the moment” he said.

“However the upside was tempered with a number of very real challenges facing the industry.” . . 

Commission releases draft report on Fonterra’s 2016/17 Milk Price Manual:

The Commerce Commission today released its draft report on its annual statutory review of Fonterra’s Milk Price Manual for the 2016/17 dairy season. The Commission’s draft finding is that the 2016/17 Manual is largely consistent with the purpose of the milk price monitoring regime under the Dairy Industry Restructuring Act 2001 (the Act).

Deputy Chair Sue Begg noted that most of the Manual remains unchanged.

“The most significant amendment introduced this year is the inclusion of Fonterra’s sales outside the GlobalDairyTrade auction platform for whole milk powder, skim milk powder and butter milk powder. This shift could result in an increase in the milk price for the 2016/17 season of five cents per kilogram of milk solids,” Ms Begg said. . . 

Fonterra Receives Awards for Tanker Safety:

Fonterra’s GM Transport and Logistics Barry McColl has been named Road Risk Manager of the Year at the Australasian Fleet Safety Awards.

The award recognises his role in maintaining the safety of more than 1,600 drivers in 500 tankers travelling more than 90 million kilometres a year.

Fonterra Director New Zealand Manufacturing Mark Leslie said the award is a great tribute to the outstanding work of Mr McColl and his team. . . 

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Rural round-up

October 18, 2016

Calf milk powder shortage dire – Neal Walllace:

Calf rearers battling a shortage of milk powder are unlikely to get a reprieve this season with a major retailer warning product delays could continue for another four weeks.  

As if that wasn’t enough, farmers report the price of calf milk replacer, or what some are calling white gold, has increased in recent weeks from $53 for a 20kg bag to $75.  

Farmlands chief executive Peter Reidie said his company was not taking any new orders for calf milk replacer (CMR) because suppliers had advised they could not supply any product. . . 

World food trends favour dairy – Hugh Stringleman:

Fonterra has identified 11 modern consumer food trends it says are very positive for high quality milk production in New Zealand.  

Global consumer and food service chief operating officer Jacqueline Chow said Fonterra had invested $1 billion over the past decade in dairy innovation – in science, sustainability, nutrition and packaging – to position the co-operative to meet the trends.  

Its dairy farmers had also spent $1b over the past five years on environmental initiatives. . . 

More calls to rural support line reported -:

The Waikato Rural Support Trust is receiving unusually high numbers of calls from farmers as adverse weather conditions and the low dairy payout take a toll, it says.

Trust chairman Neil Bateup said a particularly wet spring had caused issues with feed quality and quantity and that had made farming very difficult.

Mr Bateup said the farmers calling were mainly in the dairy industry, with those people also struggling with the low payout of the past couple of years. . . 

Feral Activists Are Worse Than The Pests 1080 Fights:

Activism in New Zealand has sunk to a new low as conservation workers don’t even feel safe going about their daily jobs.

Federated Farmers is deeply concerned for the safety of the country’s conservation department staff and contractors, as so-called activists continue to ignore the fact that 1080 is working well for New Zealand.

“It is simply unacceptable for New Zealanders who go to work every day to protect our environment, to be made to feel unsafe doing their jobs,” says Federated Farmers president Dr William Rolleston.

“This is madness and it’s activism out of control. . . 

Ngāi Tahu adds horse treks to its tourism stable – Aaron Smale:

Ngāi Tahu has bought a horse trekking business in Glenorchy to add to its tourism portfolio.

The South Island iwi has bought Dart Stables in Glenorchy, which runs horse treks through a region that features heavily in Peter Jackson’s Lord of the Rings film trilogy.

Ngāi Tahu Tourism chief executive Quinton Hall said the business fit well with its broader tourism strategy.

“The team at Dart Stables has an excellent reputation with customers and within the local community and has access to some of the most beautiful parts of the country,” he said. . . 

Enterprising Rural Women Awards (ERWA) entrants for 2016:

Six fantastic businesses are competing in three categories this year and the ultimate winner will receive the supreme prize for the Enterprising Rural Women Awards.

Rural Women New Zealand’s annual awards showcase rural women who run their own successful businesses. For the entrants, it is an opportunity to promote their innovative rural enterprise and gain recognition for their contribution to their community.

Each category winner receives $1,000 in prize money and a trophy, with a further $1,000 being awarded to the supreme winner who is judged as an exceptional rural business women. Prizes also include clothing from Swazi Apparel and from the Agri-Women’s Development Trust $400 worth of executive coaching for each category winner and an additional $3,400 professional development package for the supreme winner.

2016 ERWA categories: . . 

International Beef Alliance meets in Taupo:

New Zealand is hosting beef producers from the International Beef Alliance in Taupo this week.

The International Beef Alliance includes the national organisations representing beef cattle producers in Australia, Brazil, Canada, Mexico, New Zealand, Paraguay and the United States and it meets annually to progress issues of common interest.

This week the Presidents and CEOs from the Cattle Council of Australia, Associação dos Criadores de Mato Grosso, Associação Nacional dos Confinadores de Brasil, Canadian Cattlemen’s Association, Confederación Nacional de Organizaciones Ganaderas, Asociación Rural de Paraguay, Beef + Lamb New Zealand and the US National Cattlemen’s Beef Association will meet in Taupo. This group accounts for 46% of the world’s beef cattle production and 63% of global beef exports. . . 

Helping farmers save time and take control:

With volatility in the dairy payout, there has never been a more important time to have a clear picture of your farming business’ performance.

And according to Figured’s marketing manager Monica Shepherd, nearly 40 per cent of farmers surveyed at the New Zealand National Fieldays, said they wanted more advice from their accountants on how to achieve just that.

In response, Dairy Women’s Network is running a free dairy module called ‘Farming in the Cloud’ with its partners Figured, Xero, ASB Bank and Crowe Horwath. . . 

New Zealand’s Extra Virgin Olive Oil Awards – Top Honours Announced:

Winners in New Zealand’s most prestigious competition for olive oil were announced last night at a formal dinner held at Parliament in Wellington and hosted by MP Paul Foster-Bell.

Robinsons Bay Olives from Akaroa took out the 2016 Best in Show as well as Best in Class in the Commercial Medium Blends Class at the New Zealand Extra Virgin Olive Awards, run by Olives New Zealand, the national organisation for olive oil growers.

The Old N’Olive Grove Partnership from Wairarapa won the Best in Boutique Category for growers who produce less than 250 litres of certified extra virgin olive oil, as well as Best in Class in the Boutique Intense Single Varietal Class with their Rockbottom Grove Picual. . . 

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Thank ewe for supporting wool week.

Rural round-up

October 4, 2016

Lamb to tell ‘red meat story’ – Sally Rae:

Beef and Lamb New Zealand is to close some overseas offices as it concentrates on a new marketing strategy to differentiate this country’s products with those of international competitors.

After about 12 months of consultation, Beef and Lamb chairman James Parsons released the strategy which he said marked a change in direction for the organisation.

The story of New Zealand farming and its farmers would be at the heart of Beef and Lamb New Zealand’s new market development strategy targeting new and emerging markets.

Mr Parsons said development of a red meat sector story, which captured the culture, values and integrity long associated with New Zealand sheep and beef farmers, would be a way to differentiate this country from its competitors in the international marketplace. . . 

Appointed acting president of WFO: –

Federated Farmers president William Rolleston has been appointed acting president of the World Farmers’ Organisation (WFO).

Dr Rolleston has been the WFO’s vice-president and will guide the organisation through until the next general assembly in Helsinki in 2017 during which a new president will be appointed.

“It’s a privilege to be appointed to this role in an acting capacity. The WFO actively promotes the critical importance of a sustainable global farming sector for the future of our planet. . . 

Feds say it’s simple: comply with the law:

Farmers are urged to commit to getting employee records and contracts right after large fines were issued during a Labour Inspectorate investigation into a Taranaki dairy farm.

Federated Farmers Taranaki provincial president Bronwyn Muir says it is essential farmers keep up-to-date contracts and wage and time records for all employees.

“Agriculture needs to attract a good quality, motivated workforce to drive productivity gains and to improve performance. So farmers need to provide workplaces which will attract those people.

“Getting the basics of employment law right is the foundation to build that attractive work environment,” Bronwyn says. . . 

Shearing sports season kicks off in Central Otago :

A big shearing sports season has begun with the national Merino Championships on today  and tomorrow.

The championships are being held in Alexandra, Central Otago.

Five national titles will be decided in the only national fine wool event. New Zealand shearers will be competing to stop West Australian shearer Damien Boyle from snapping up the open shearing championship for the seventh year in a row. . . 

Guy welcomes Sri Lankan FarmIQ pilot:

Primary Industries Minister Nathan Guy has welcomed the announcement of a FarmIQ technology pilot in Sri Lanka.

The pilot was part of a joint announcement by Prime Minister John Key and Sri Lankan Prime Minister Ranil Wickremesinghe today.

“The FarmIQ management system has been developed through the Primary Growth Partnership (PGP), and is cutting edge technology that can be applied to a range of farming activities,” says Mr Guy. 

“It works by capturing and analysing data throughout the value chain so farmers can better link on-farm practices to farm outputs and revenue.  . . 

What is Fonterra anyway – Susan Edmunds:

What does Fonterra do?

Fonterra is a co-operative that buys milk from its farmer shareholders and processes it, mainly for export.

Fonterra and its shareholders produce more than two million tonnes of dairy ingredients, specialty ingredients and consumer products every year. Only about 5 per cent is kept in New Zealand. It produces about a third of the world’s dairy exports. . . 

New president marks quarter-century milestone for United Fresh:

Leadership and collaboration are vital to keep New Zealand’s horticulture industry blooming, says the new president of the country’s only pan-produce organisation.

New president Jerry Prendergast says the produce industry is entering a new era of business, just as United Fresh celebrates its 25th year.

“New varieties, sustainability, new technologies and competitive advantage are just some of the factors guiding our strategic plan into the future,” he says.

The people who work in the industry are essential to delivering on these targets, he says. . . 

WineWorks turns 21 and opens multi-million dollar plant in Auckland:

WineWorks, New Zealand’s largest, independent wine bottling and warehousing provider, officially opens its new multi-million dollar facility in Onehunga on Friday (7 October, 2016) and at the same time toasts 21 years of being in business.

The new state-of-the art plant was more than eight years in the planning. It took almost 12 months to construct and covers two hectares. One of the tallest buildings in Onehunga, it is located in what Managing Director Tim Nowell-Usticke calls the ‘sweet spot’ of the wine industry’s supply chain.

“Here we have easy access to rail, the port, the airport, industry suppliers and supermarket distribution centres. In addition, the country’s only glassworks is just down the road, and New Zealand’s largest wine market is right on our doorstep.” . . 

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 –

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.


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.

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