Fonterra opening forecast $6.25 – $7.25 per kgMS

May 23, 2019

Fonterra has announced an opening forecast price of $6.25 – $7.25 per kgMS:

Key third-quarter financial performance numbers:

    • Sales volumes: 16.6 billion LME, up 4%
    • Revenue: $15 billion, up 1%
    • Gross margin: $2.2 billion, down 3%
    • Normalised operating expenses: $1.8 billion, down $73 million
    • Normalised EBIT: $522 million, down 9%
    • Capital expenditure: $419 million, down 28%
  • Revised forecast earnings per share range: 10-15 cents from 15-25 cents per share
  • 2018/19 forecast Farmgate Milk Price range: $6.30 – $6.40 per kgMS
  • Opening 2019/20 forecast Farmgate Milk Price range: $6.25 – $7.25 per kgMS
  • 2019/20 Advance Rate Schedule has been set off $6.75 per kgMS

A dollar range in the forecast is a wide one but its an uncertain world and it’s better to be clear about that.

Fonterra Chief Executive Miles Hurrell said that good progress is being made on the strategy review and reiterated that the benefits from those changes will take time to flow through into the Co-op’s financial performance. . .

Farmers and unit holders can expect to see some fluctuation in our earnings over the next couple of years and there will be one-off transactions and adjustments (some positive, some negative) as we reset the business and deliver on our new strategy.

“We are committed to keeping people updated as we make progress. Today’s update is:

    • We are commencing a strategic review of our two wholly-owned farm-hubs in China
    • We have agreed with our partner Nestle to review options for the future ownership of our Dairy Partners Americas (DPA) Brazil joint venture, including a potential sale of respective stakes
    • We are closing our Dennington site in Australia.

“These decisions relate to our new strategic direction – in particular, prioritising our New Zealand milk supply and simplifying our global portfolio, which, as we have said previously, requires us to review every part of business to ensure it meets the needs of the Co-op today.”

Changes had to be made and the new board and management are making them.


Rural round-up

May 15, 2019

Tip Top sale half of debt target – Hugh Stringleman:

The sale of Tip Top to a joint-venture northern hemisphere company, Froneri, for $380 million has achieved almost half of Fonterra’s debt reduction target.

When its Beingmate shareholding is divested and a half share of DFE Pharma is sold, Fonterra should reach its $800m reduction target by July 31.

The Beingmate stake has a market value of about $280m and the DFE share about $200m, based on annual sales figures.

Chief executive Miles Hurrell has therefore made a good start on promised financial reforms of substantial debt reduction, cuts in capital and operational expenditure and 7%-plus return on capital invested by farmer-shareholders and unit holders. . . 

Gisborne woman takes out SI Sheep Dog trials event:

Gisborne’s Jo Waugh has won the zig zag hunt at the South Island sheep dog trial championships, the first time a woman has won the event in more than 100 years.

And not only did the 30-year-old and her huntaway dog, Guy, get on the podium, but two other women also joined her in the top seven, clocking up another achievement in the usually male-dominated event.

The South Island Sheep Dog trials were held in Hanmer Springs this week but farmers and shepherds have been competing since the sport first landed in New Zealand in the 1800s. . . 

MIE man changed priorities fast – Neal Wallace:

Richard Young was elected to the Silver Fern Farms board on a platform of industry restructuring and agitating for a merger with Alliance. Six years later the Otago farmer is the co-operative’s boss. He talks to Neal Wallace.

Richard Young vividly remembers the induction for new directors the evening before his first meeting as an elected member of the Silver Fern Farms board.

It was 2013 and the newly elected directors were taken through the co-operative’s accounts ahead of the annual meeting the next day.

It was not pretty. . . 

Tiny farm run on ethical principles– Sally Brooker:

An Alma family is proud to have set up the district’s smallest dairy farm.

Bethan and Bryan Moore have a herd of just 13 Ayrshire cows with calves on 6ha alongside State Highway 1. They will soon be selling milk in glass bottles.

The Moores bought the land about 18 months ago, after four years of sharemilking in Tasmania. Mrs Moore grew up near Cardiff, Wales and met Mr Moore, a farmer from the North Island, on her travels to New Zealand. . . 

Seeka cuts earnings forecast on smaller crop – Gavin Evans:

(BusinessDesk) – Kiwifruit grower and marketer Seeka has cut its full-year earnings guidance by $4 million due to reduced harvests in both New Zealand and Australia.

Group earnings before interest, tax, depreciation and amortisation are likely to range from $32.5 million to $33.5 million in the 2019 calendar year, down from the $36.5-$37.5 million range the Te Puke-based company signalled a month ago.

Seeka, the biggest kiwifruit producer in New Zealand and Australia, said unseasonably hot, dry weather in both countries has reduced fruit size and crop volumes. . .

Meeting of Otago Drought Group – Sally Rae:

The work of the Otago Drought Group is a great example of farmers and their organisations collaborating to manage climate challenges locally, Agriculture and Rural Communities Minister Damien O’Connor says.

The group met again this week to update its discussions on the dry conditions in the Clutha district, how farmers were faring and what actions might be needed.

The group, which included Otago Regional Council chairman Stephen Woodhead, representatives from Beef + Lamb New Zealand, DairyNZ, Federated Farmers, the Otago Rural Support Trust and the Ministry for Primary Industries, convened early in any adverse weather event. . . 

Flying Pig cafe going to market:

One of the Waitaki district’s most recognisable restaurants is on the market.

The Flying Pig Cafe, with its distinctive porcine pink exterior, has long been a landmark in Duntroon.

It has been closed since illness befell its owners in early 2017, and is now for sale.

An Auckland couple bought the cafe in 2007 after discovering it during a holiday driving around the South Island. Business began to soar after the Alps 2 Ocean cycle trail opened in 2014. . . 

Hi-tech boosts growers’ bottom lines:

“Incredibly clever” technology that elevates cool rooms into a state-of-the-art controlled atmosphere chambers is helping Hawke’s Bay’s growers make the very best of their crops.

It is not just about chilling fruit, it is about controlling the air conditions inside the cooler to hold it in the best possible state until market conditions are optimal; which could be any time over the 12 months after the crop has been picked.

Next week, growers have the opportunity to learn more about that technology from the Europeans who make it. . . 


Rural round-up

March 8, 2019

Test will come when new cattle rustling laws applied

Livestock rustlers could spend up to seven years in prison when new penalties are imposed but a Northland farming official says police need more resources to investigate and take rural crimes more seriously.

The Crimes Amendment Bill, which was passed unanimously by Parliament on Tuesday, makes theft of livestock or any other animal, including beehives and farm dogs, an offence liable for up to seven years in prison.

Also passed was the offence of unlawful entry on agricultural land with the intent to steal livestock or to act unlawfully against specified things such as buildings or machinery on that land — a crime which could see the offender put behind bars for up to a decade.

It makes it the same penalty as for burglary. . . 

Water levels drop and fire dangers rise as drought continues in Nelson – Tim Newman:

Water restrictions in Nelson continue to tighten as the region continues its long dry period into the beginning of Autumn. 

Nelson’s Maitai Dam, which supplies the city with drinking water, has seen its water levels drop significantly during that time. 

Nelson City Council infrastructure group manager Alec Louverdis said the dam was currently 71 per cent full.  . . 

The future of food production from a female perspective:

Nine influential Kiwi women from across the primary industries sector are gathering in Manawatu next week to discuss where-to-next for our food producing nation. They’re coming together as part of the ASB Perspective 2025 round-table discussion, which is a headline event at this year’s New Zealand AgriFood Week in Palmerston North.

It’s the fourth year ASB has been the main sponsor of New Zealand AgriFood Week, which is delivered by the Central Economic Development Agency, and its unique perspective panel is considered a must attend event at the Globe Theatre in Palmerston North. . . 

Majority of beekeepers vote against commodity levy on honey:

Commercial beekeepers have voted not to support the introduction of a honey levy with only 23.56% voting for the introduction of a commodity levy.

Commenting on the result Bruce Wills, Chair of Apiculture NZ, the industry organisation which led the commodity levy proposal says: “It’s no secret that this is not the outcome I, or the Board, wanted to see. I believe it will set back the development of the honey industry, but I understand that at present commercial beekeepers are hurting with the erosion in honey prices as a result of over-supply, for all floral types other than mānuka honey.” . . 

Bids for Fonterra’s Tip Top due in by Monday – Jenny Ruth:

(BusinessDesk) – Indicative bids to buy Tip Top ice-cream from Fonterra Cooperative Group are due in by Monday, according to the Australian Financial Review which says it has seen a copy of the confidential information memorandum.

Its Street Talk column says the business is being pitched by First NZ Capital as a “unique opportunity to invest in an iconic New Zealand company with 80 years of heritage.”

While the memorandum talks about Tip Top’s “unrivalled market position,” it also notes that Unilever, which has the rights to Magnum ice-cream and a host of dairy free products, dominates the premium end of the market where the fat margins are. . . 

Fonterra appoints Judith Swales COO Global Foodservice:

Fonterra CEO Miles Hurrell has confirmed Judith Swales to the role of Chief Operating Officer, Global Consumer and Foodservice. This follows her appointment to the role in an acting capacity earlier this year.

Miles Hurrell says “Judith has been providing strong leadership into our Consumer and Foodservice business unit, and the momentum she has gathered deserves to be continued.” . . 

Scales Corporation enters into petfood joint Venture with Alliance Group:

Diversified agribusiness Scales Corporation Limited today announced an agreement to enter into a petfood Joint Venture (JV) with Alliance Group Limited (Alliance). Under the terms of the JV, Alliance will pay $15 million to acquire a 50% interest in Meateor’s New Zealand business and operations.

Managing Director Andy Borland says: “We are pleased to enter into a partnership with one of New Zealand’s leading farmer co-operatives. This venture is about developing New Zealand as the premier supplier of petfood proteins. We think the venture provides a number of benefits to the entire New Zealand petfood-supply industry including as an avenue for the industry to improve scale; improved relationships with customers including the ability to commit to longer-term relationships; an ability to move into higher value and added value ingredients; and ability to leverage extended customer and supplier networks.” . . 


Rural round-up

March 7, 2019

Miles Hurell says Fonterra top job was never a done-deal :

The Country’s Jamie Mackay always thought Miles Hurrell would be a shoo-in for Fonterra’s chief executive position but the man himself says it was never a done deal.

“Far from it. They gave me an opportunity to see what we could do in that six months [as interim CEO] and clearly it’s worked. The board have liked what they’ve seen,” said Hurrell.

Fonterra’s new chief executive told Mackay he is well aware that he has a big job ahead of him. . . 

Years of work ahead to eradicate M. bovis, programme director says  – Brianna McIlraith:

More than 80,000 cows have been culled around the country as part of the effort to stop the spread of the Mycoplasma bovis disease, but eradication is still a long way off, the man in charge of the programme says.

Geoff Gwyn said another two years of ‘heavy lifting’ lay ahead before the Ministry for Primary Industries was confidently on top of the bacterial disease, and experts had advised that eradication could take between five and 10 years. . .

Potentialseen in double-muscled Beltx sheep breed – Sally Rae:

A Southland farming family has invested significantly in the Beltex sheep breed, believing it will be of ”major benefit” to the New Zealand sheep industry.

Brent and Ann-Maree Robinson, and son Michael, who farm at Glenham, near Wyndham, last year paid $12,000 for a ram lamb at the inaugural Beltex sale in Canterbury.

Last week, they bought the second top-priced ram lamb for $21,000 at this year’s sale at Mt Somers, a 2-tooth ram for $11,500 and some Beltex ewes to help build their breeding programme. . . 

Woman claims inaugural female shearing crown – Ellen O’Dwyer:

Emily Welch still remembers the time a fellow male competitor refused to shake her hand for out-shearing him.

That was in 2007, when Welch came second in the senior finals at the Golden Shears.

Now the Waikato shearer is the first to have her name etched on the women-only trophy after taking first place in the inaugural event at this year’s Golden Shears competition in Masterton. . . 

Community rallies to support Cambridge wetlands project :

A Cambridge school’s planting project not only assisted local farmers’ environmental efforts, but also attracted plants and sustenance from local businesses.

As part of an environmental initiative between DairyNZ’s education programme and the Student Volunteer Army, 26 rural schools were matched recently with 26 farmers to carry out riparian planting projects around the country.

Two farmers taking part were sharemilkers Stu and Leah Gillanders, who teamed up with a class from Cambridge Middle School to plant a wetland on Merv and Marion Hunt’s Karapiro farm. . .

Dannevirke TeenAg award winner’s passion for Hereford  cattle :

Dannevirke teenager Niamh Barnett knows first-hand how nerve-racking bidding at a livestock auction can be.

The 17-year-old bought some Hereford cows at the Woodlynd Polled Herefords dispersal sale in Gisborne in February 2018.

“I went with a price I was prepared to pay for each animal. I just hoped I didn’t get outbid,” she laughed. . . 


Rural round-up

March 6, 2019

Miles Hurrell permanently appointed Fonterra chief executive officer:

Fonterra Co-operative Group (FCG) has announced the permanent appointment of Miles Hurrell as its Chief Executive Officer (CEO), with immediate effect.

Mr Hurrell had been the Co-operative’s interim CEO since August last year.

Fonterra Chairman, John Monaghan says the Co-operative’s Board has been impressed by Mr Hurrell’s leadership and commercial skills as it continued to breathe fresh air into the Co-operative. . . 

Fonterra caught in death valley :

The sale of Tip Top is crucial to Fonterra’s aim of reducing its debt by $800 million before the end of this financial year, dairy industry commentator Peter Fraser believes.

Fast-moving consumer goods companies can command some very high multiples of earnings when being traded.

Fraser is an economist who advised the Ministry of Agriculture during Fonterra’s restructuring attempt a decade ago and has commented on the dairy industry since.  . . 

M. Bovisfoundonthreefarms – Sally Rae:

Bulk milk testing from all dairy farms has confirmed Mycoplasma bovis infection on three farms, the Ministry for Primary Industries’ latest stakeholder update says. All three properties had previously known links to the bacterial cattle disease.

Another 51 farms would be further investigated as part of routine surveillance while testing was yet to be completed from about 50 farms that calved later in the season.

Testing would begin shortly after calving because the bacteria was more likely to be shed during times of stress, such as after calving and the start of lactation, the update said. . . 

Alex woolhandler to represent NZ at champs – Sally Rae:

It’s bonjour France for Alexandra-based woolhandler Pagan Karauria. Karauria (30) will represent New Zealand at the world championships in Le Dorat in July, after gaining selection at the Golden Shears in Masterton on Saturday night.

Her success was even more remarkable given she suffered life-threatening injuries in a vehicle crash in Central Otago 10 and a-half years ago and has battled with the lasting effects since. . . 

Indoor lambing unit is in enviro contest – Joanna Grigg:

Richard Dawkins of The Pyramid has entered his family sheep and cattle business in the 2019 Cawthron Marlborough Environmental Awards and is up against forestry, marine, wine industry, landscape/habitat, community innovation and business innovation entries for the supreme title.

The winners will be named on March 22.

The Pyramid is in contention for the Federated Farmers Award for sheep and beef entries.  . . 

Farm loan delinquencies highest in 9 years as prices slump – Roxana Hegeman:

The nation’s farmers are struggling to pay back loans after years of low crop prices and a backlash from foreign buyers over President Donald Trump’s tariffs, with a key government program showing the highest default rate in at least nine years.

Many agricultural loans come due around Jan. 1, in part to give producers enough time to sell crops and livestock and to give them more flexibility in timing interest payments for tax filing purposes.

“It is beginning to become a serious situation nationwide at least in the grain crops — those that produce corn, soybeans, wheat,” said Allen Featherstone, head of the Department of Agricultural Economics at Kansas State University. . . 

 


Rural round-up

October 19, 2018

Fonterra CEO Miles Hurrell responds to claims co-op is a failed experiment:

This week, the Herald published an article by industry observer Tony Baldwin, which argued in some depth that Fonterra has been a failed experiment. What follows is a response from Fonterra CEO Miles Hurrell to that article.

I took the job of CEO of Fonterra because I believe in the Co-op’s potential and the positive difference it makes to New Zealand and consumers around the world.

It’s clear the challenge is big and we don’t always get everything right. I’ve been open about that with our farmers, unit holders, employees and the New Zealand public.

Now our focus has shifted to rolling up our sleeves and getting on with the job. We are well underway with our business review, which will deliver a balanced portfolio of high-performing investments, aligned to strategy and delivering returns across the short, medium and longer term. . .

Hands-on hard yards training – Hamish MacLean:

Colderidge Downs, in the Rakaia Gorge, looks like paradise, but the Coleridge Down Training Farm is home to hands-on hard-yards-style training for youth with a passion for agriculture and the outdoors.

Covering extensive hill country to intensive irrigated pastoral land, the group of central Canterbury farms cover about 10,000ha, run 42,000 stock units, and take on three cadets a year to ultimately gain level 3 and 4 qualifications through primary ITO in a two-year course.

Lachie Mee (18) finished at Waitaki Boys’ High School as a year 12 pupil last year and started at Coleridge Downs in January along with two other first-year cadets.
And when he started, he quickly learned he had entered the workforce. . . 

 

Pāmu Deer Milk Wins Novel Food Award at NZ Food Awards:

Pāmu is excited to announce its success at the prestigious Massey University New Zealand Food Awards, taking home the Novel Food or Beverage Award for its groundbreaking deer milk product.

The announcement was made at the NZ Food Awards Gala Dinner last night, an event which highlights the best New Zealand has to offer in the food and beverage industry.

“The Food Awards are all about rewarding innovation, which makes this acknowledgement very meaningful to us,” said Pāmu Chief Executive, Steve Carden. “We spent over three years testing and trialing deer milk and have been incredibly pleased with the reception it has received amongst the restaurant industry. We knew it had broad appeal for desserts but have been really inspired by the range of savory applications we’ve seen chefs across the country develop. Some chefs have even created deer-milk cocktails.” . . 

Marks & Spencer weave NZ’s troubled wool into new line – Eric Frykberg:

New Zealand’s troubled coarse wool industry could benefit from a new line in sustainable clothing at British retail giant Marks & Spencer.

Six lines of men’s blazers have gone on sale at stores throughout Britain, made with New Zealand product.

Coarse wool has been struggling to earn its keep for years, with greater volumes having to be put onto the market in an often unsuccessful attempt to make up for falling prices.

Only fine fibre from breeds such as merino have helped the wool sector to prosper overall. . . 

‘Have your Say’ campaign launched for Rural NZ:

National Leader Simon Bridges has today launched the ‘Have Your Say’ listening campaign for Rural New Zealand as the next step in National’s 2020 election policy development process.

“We know farmers and growers contribute $42 billion a year in exports that sees 350,000 people employed in the sector, and New Zealand’s success depends on it. This success is underpinned by sustainable business practices that continue to enhance the environment for our children.

“We want to make sure rural communities can access top-quality public services and infrastructure like broadband, rural policing, education and health services. . .

Big cheese competition – Robyn Bristow:

Amateur cheesemakers will pit their skills against one another in the third annual Amateur Cheesemakers Competition at the Oxford Farmers Market on Sunday.

Those with a passion for cheesemaking must have their cheeses entered by 9am to be in with a chance of picking up a $50 prize. A $5 Farmers’ Market voucher will be given to everyone who enters.

Anyone wanting to be part of the taster/judging panel can register for $2, giving them the chance to taste all the entries and pick the three cheeses that tempt their tastebuds the most. . . 


Fonterra drops forecast payout

October 10, 2018

Fonterra has dropped its forecast farmgate milk payout for the current season:

Fonterra Co-operative Group Limited today revised its 2018/19 forecast Farmgate Milk Price from $6.75 per kgMS to a range of $6.25-$6.50 per kgMS and increased its forecast New Zealand milk collection volumes by 1.3 per cent to 1,550 million kgMS.

While no-one will be celebrating this, it’s not unexpected and it’s still not a bad price.

Although it’s very early in the season and it could well change again.

Fonterra Chief Executive, Miles Hurrell, says the change in the forecast Farmgate Milk Price was due to a stronger global milk supply relative to demand at this time.

“I know how hard it is for farmers when the forecast Farmgate Milk Price drops, but it’s important they have the most up to date picture so they can make the best decisions for their farming businesses.

“We are still seeing strong production coming from Europe, US and Argentina. While the hot weather in Europe has slowed down the region’s production growth, it is still tracking ahead of last year. US milk production is up slightly and Argentina’s is up 6.8%.

“Here in New Zealand, the season has got off to a positive start, mainly thanks to good weather and early calving in the South Island. As a result, we have increased our forecast milk collections for the year to 1,550 million kgMS – up from 1,525 million kgMS.”

Mr Hurrell says that global demand is simply not matching current increases in supply.

“At recent Global Dairy Trade (GDT) events, prices for all products that make up the milk price have fallen. Demand for WMP, in particular, continues to grow in China, and it remains strong across South East Asia, but it simply isn’t matching current levels of supply.”

Talking about the new move to provide a range for the forecast Farmgate Milk Price, Mr Hurrell says it was part of the Co-op’s intention to provide the best possible signals.

“We operate in a hugely volatile global market place, so it is very difficult to pinpoint an exact forecast Farmgate Milk Price this early in the season. For example, weather conditions can change suddenly and this can have a significant impact on the global milk supply.

“As a result, we have chosen to give a range of $6.25-$6.50 per kgMS and be clear that the Advance Rate is based on $6.25 per kgMS and the final price could be outside this range as we are still early in the season and up against considerable volatility. We therefore recommend farmers budget with ongoing caution.”

The timing of today’s update is driven by available market information and is not a DIRA requirement. Fonterra is required to give a forecast for DIRA purposes by 15 December 2018.

Supply and demand – the former is higher than the latter which depresses the price.

It’s as simple as that.

 


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