Rural round-up

November 29, 2018

Hopping to the beat: drummer turned grower Trevor Courtney :

Trevor Courtney has always liked beer, and now the drummer for ’60s band Chants R& B is growing his own hops.

After a 40-year music career, Trevor and his wife Lyndsay now have a lifestyle block in North Canterbury where they grow hops plants, heritage apples and saffron.

Trevor and Lyndsay’s eight-hectare property is home to two flocks of Wiltshire sheep, but they’re pretty low-maintenance, Trevor says.

“In the spring they start to shed their fleece, so there’s no shearing,…you can leave their tails on. We only meet up with them a couple of times a year.” . . 

Alliance Group more than halves profit –  Rebecca Howard:

 (BusinessDesk) – Red meat cooperative Alliance Group more than halved its net profit as it paid more for livestock and in tax, interest and administration costs.

Net profit for the year ended September fell to $6.6 million from $14.4 million a year earlier, the Invercargill-based co-operative said in its annual report. Revenue, however, lifted to $1.8 billion from $1.5 billion in the prior year and it paid more than $1.2 billion to its farmer-shareholders.

The group also paid $14.6 million in loyalty payments and another $31.6 million in advance payments to support farmers during periods of low cash flow. . . 

What it takes to win the Ballance farm environment award :

Trying different things, learning from mistakes, and working with Mother Nature are part of the ethos of this year’s national Ballance farm environment award winners.

As winners of the Gordon Stephenson Trophy, Bay of Plenty kiwifruit growers Mark and Catriona White are officially ‘national ambassadors for sustainable farming and growing’.

During a round of meetings with agriculture agency representatives and MP Todd Muller in Wellington this month, the Whites dropped into Federated Farmers’ HQ to swap war stories on topics as diverse as workforce shortages, genetic engineering and whether farmers/ growers who repeatedly fail to heed sustainability messages should be left behind. . . 

 

Apple industry already growing jobs for new horticultural degree graduates:

New Zealand’s booming apple and pear industry is already promising great career opportunities for the first graduates of a new stand-alone Bachelor’s Degree in Horticulture.

Recruitment is underway for the new three-year degree that starts in February 2019 with a fully industry-sponsored 4ha apple innovation orchard at Massey University’s Palmerston North campus.

New Zealand Apples & Pears capability manager Erin Simpson, who has been a driving force behind the new degree, said never before has there been a more exciting time for young people to enter the industry which is offering them a bright and rewarding future. . . 

Fonterra confirms second director election timing:

The Fonterra Shareholders’ Council has confirmed that a second election for the remaining vacancy on Fonterra’s Board of Directors will be held in December. Voting will open on 3 December and close at 1.00pm on 20 December, and the results will be announced later the same day.

Only two candidates from the first election, Leonie Guiney and Peter McBride, obtained more than 50% support from voting shareholders. The Rules of the first election state that if not enough candidates obtain more than 50% support, there must be a second election. . . 

Manawatū agricultural contractor lands deal supplying Auckland Zoo with feed:

Manawatū agricultural contractor Mike Hancock is helping to feed some of the world’s most stunning and endangered animals.

The 23-year-old is a joint operations manager for Bruce Gordon Contracting, north of Marton.

Earlier this year the company received a phone call from Auckland Zoo, almost 500 kilometres away. . . 

Knickers the steer, one of the world’s biggest steers, avoids the abattoir thanks to his size – Jacqueline Lynch and Tyne Logan:

At 194 centimetres high, WA-born steer Knickers is believed to be the tallest in Australia — and one of the tallest in the world.

To put it into perspective, the seven-year-old is almost as tall as NBA star Michael Jordan and weighs more than a Mini Cooper car at about 1,400 kilograms.

That’s double the weight of the average Holstein Friesian and half a metre taller — and could make more than 4,000 hamburger lovers happy.

But owner Geoff Pearson of Lake Preston in the state’s south-west said Knickers was not destined for the barbecue anytime soon. . . 

How we fell out of love with milk – Tim Lewis:

Soya, almond, oat… Whether for health issues, animal welfare or the future of the planet, ‘alt-milks’ have never been more popular. Are we approaching dairy’s final days? 

A couple of weeks ago, some eye-catching billboards began appearing around central and east London. Entire tunnels of the underground were plastered with the adverts; the sides of large buildings were covered. On one panel there was a carton (or, in some instances, three) of Oatly, an oat drink made by a cult Swedish company that favours stark graphics, a bluey-grey colour scheme, and which is a market leader – in a not uncompetitive field – in the tongue-in-cheek promotional messages known as “wackaging”. The adjacent panel, in large, wobbly type, read: “It’s like milk, but made for humans.” . . 

 Sprinklers help nourish refuge elk – Mike Koshmrl:

Each summer a massive $5.25 million irrigation system is cranked on at the National Elk Refuge, showering beads of water over nearly a fifth of the preserve’s 25,000 grassy acres.

With no crops growing and no livestock in sight, tourists and newcomers to Jackson Hole who catch a glimpse must occasionally be bewildered.

But there are actually many reasons for the refuge’s irrigation system, new as of 2010. . . 


Not all milk created equal

October 3, 2017

Militants vegans and animal rights groups are waging a war against farmers and farm produce.

Their rhetoric tends to be high on emotion and low on science.

It tends to paint the alternatives as being better for the health of people and the environment regardless of the facts.

And it tends to pay less than lip service tow hat’s required for a balanced diet.

A good example is milk, not all of which is created equal. Calling something milk doesn’t give it the same nutritional value as real milk from cows, goats and sheep.


GDT up 10.9%

September 2, 2015

The GlobalDairyTrade trade weighted index increased by 10.9% in this morning’s auction.

This is a welcome second successive increase after a run of big falls.

IMG_6918 (640x480)

IMG_6919 (640x480)

IMG_6920 (640x480)


Milk mountain must move before price will rise.

July 3, 2015

Yesterday’s GlobalDairyTrade auction resulted in a 5.9% drop in the price index.

gdt2715

 

 

 

 

 

 

 

 

 

The end of EU milk quotas, embargoes on trade with Russia and lower feed prices in the USA are all contributing to an increase in the supply of milk.

Another cause for the price drop is less demand from China which has stockpiled a mountain of milk powder.

Until that mountain moves we’re not going to see much improvement in prices.

 

 


GDT price index down 3.%5

May 6, 2015

Price’s at Fonterra’s GlobalDairyTrade auction dropped again this morning with the price index down 3.5%.

gDt6.5.15

gdt6515

gdt6.5.15

What goes down can fall further but sooner or later prices will go up again.


Rural round-up

May 2, 2015

Trelinnoe treads lightly on the environment – Kate Taylor:

From crutching sheep at home on the farm to meeting the world’s top farming politicians, the passion Bruce Wills has for all facets of farming is evident from the moment you meet him.

His brother Scott is the other side of the coin, a man of few words, until you ask him about the farm’s stock policies, then the same passion is evident.

They both love Trelinnoe – an 1134ha hill country farm carved out of the scrub by their parents and an uncle through the 1950s and 60s. . .

Ruataniwha irrigation scheme gets 15 years to sort water quality – Pattrick Smellie:

 (BusinessDesk) – A revised decision from the board of inquiry considering the Ruataniwha Water Storage Scheme relaxes water quality conditions that were previously regarded as unworkable. It gives irrigators 15 years to find ways to manage nitrogen levels in the Tukituki River to very low levels.

The board’s original decision, released last June, set a maximum level for dissolved inorganic nitrogen (DIN) downstream from the scheme of 0.8 milligrams per litre, a level consistent with the highest quality freshwater bodies under the government’s recently updated National Policy Statement on freshwater management, and at odds with DIN levels in the river today.

To get around that, the decision created an exemption for some 615 farms to discharge higher levels of nitrogen, leading to successful appeals from a range of environmental groups who argued the board had created a “factual fiction” by setting a high standard that would not then be expected to be met. . .

 

IrrigationNZ says Board of Inquiry decision on Tukituki ‘reasonable’ but far from practical for farmers:

“The Board of Inquiry for the Tukituki Catchment has reached a reasonable decision in what has been a long process,” says Andrew Curtis, CEO of IrrigationNZ. “But it is a far from practical outcome for farmers and the regional economy. We believe nutrient limits set for the Tukituki system remain unrealistic for what is a productive working agricultural landscape.”*

IrrigationNZ does however recognise the positive step taken in the decision to exclude some hill country farms, forestry, orchards and lifestyle blocks from having to gain consents, but points out that the reality is the majority of commercial enterprises will still require one. . .

 

Alliance Group Targets 3,300 Tonne Carbon Reduction:

One of the world’s largest processors of sheepmeat, Alliance Group Limited, aims to reduce carbon emissions by 3,300 tonnes over the next three years, as part of a new energy management agreement with the Energy Efficiency and Conservation Authority (EECA).

The agreement, announced in Southland today by Alliance Group Chief Executive David Surveyor and EECA Chief Executive Mike Underhill, includes a thermal and electricity energy use reduction of approximately 10 Gigawatt hours per annum by 2017. This is the equivalent annual energy use of about 960 households.

David Surveyor says reducing the company’s energy use makes good business and environmental sense and that the new partnership with EECA is the next phase of Alliance Group’s energy management journey. . .

Synlait Milk ingredient will help to significantly enhance sleep:

Synlait Milk has commercialised a dairy-based milk powder ingredient that is clinically proven to enhance sleep.

Results from an independent clinical trial of iNdream3 have proved its efficacy as a sleep promoting ingredient.

iNdream3 is made from melatonin-rich milk collected in the hours of darkness, when cows naturally produce increased concentrations of melatonin in their milk

“We’ve been developing this product for several years and this clinical trial is a major milestone in proving the ability of iNdream3 to improve sleep,” said Dr Simon Causer, Synlait’s Research and Development Manager.. . .

Maori farm vitally important for community:

A Northland sheep and beef farm in the running for the top Maori farming award has impressed the judges with its strong ties to a small local community.

Paua Station is one of three finalists for the Ahuwhenua Trophy and as part of the awards is hosting an open day today.

The almost 3,000 hectare station lies just south of Cape Reinga, about 80 kilometres north of Kaitaia, and surrounds the small community of Te Kao.

It is owned by Parengarenga Incorporation, whose general manager, John Ellis, said the running of the farm was very much centred around the community. . .

Dairy Awards Finalists in Auckland for Annual Awards:

The 33 finalists in the 2015 New Zealand Dairy Industry Awards are in Auckland, where the winners of the New Zealand Sharemilker/Equity Farmer of the Year, New Zealand Farm Manager of the Year and New Zealand Dairy Trainee of the Year will be announced on Saturday night.

“The national awards is a big deal for these finalists – they’ll meet some key industry people, develop lifelong friendships and important networks, and be exposed to opportunities that’ll propel their career forward,” National Convenor Chris Keeping says.

Judging has been taking place during the past two weeks, as judges have visited the sharemilker/equity farmer and farm manager finalists on their farms. However, the final judging component will take place tomorrow when all finalists will participate in an interview. . .

Country’s Top Steaks Make The Cut:

Following today’s semi-final taste test, the 20 most succulent steaks in New Zealand have been named as finalists in the 2015 Beef and Lamb New Zealand Steak of Origin Competition.

A panel of 12 well-known foodwriters and chefs, including Kerry Tyack and Julie Biuso, tasted a total of 69 sirloin steaks, judging each one on taste, tenderness and aroma, to find the top four for each class.

Semi-final judge, Kerry Tyack says as a returning judge, he was reminded of the outstanding quality of New Zealand beef.

“Although the steaks vary in taste, texture and appearance, they’re all of a consistently high standard,” says Tyack. . .

Hawke’s Bay Harvest Bodes Well for a Stellar 2015 Vintage:

The Hawke’s Bay wine region looks set to enjoy its third consecutive year of great vintages.

With picking nearly complete, Hawke’s Bay grape growers and wine makers are optimistic that this will be another good year, following exemplary vintages in 2013 and 2014. Hawke’s Bay is the first region to forecast the quality of this year’s vintage following harvest.

“Most would be considering this to be a very good, solid vintage,” Michael Henley, Chair of the Hawke’s Bay Winegrowers Association (HBWG) and CEO of Trinity Hill Wines, says. . .


GDT up 2.4%

December 17, 2014

At last a lift in the GlobalDairyTrade index – up 2.4% in this morning’s auction.

 

gdt17914

gdt17.12.14

The next auction will be held on January 6th.


Farmers subsidisng NZ consumers

November 29, 2013

The question of why milk isn’t less expensive here when we produce so much is often asked.

What most people don’t know is  the retail price is well below the real cost.

. . . Chief executive Theo Spierings said the downside of strong demand for dairy commodities was increasing pressure on Fonterra’s NZ Milk Products division where profit margin remained under pressure.

To illustrate his point, Spierings said if the division were to pass on to consumers of a two litre bottle of milk in New Zealand the full price paid to farmers for their milk, the retail price would need to increase from $4 to $6 and the co-operative would be facing a media storm.

“And that would not be the worst of it…we would see the volume of dairy consumption in NZ going down very fast.”. . .

Fonterra and ultimately the farmers which supply it are subsidising consumers.

One reason for the higher cost is that we’re no longer low-cost producers.

The traditionally low-cost pasture-based dairying regions, such as New Zealand, have lost their cost advantage as input prices have risen, and now compete on the global market with a similar cost of production to producers with more intensive farming systems, according to a recently-released industry report.

In the report, No longer low-cost milk ‘down under’, agricultural banking specialist Rabobank says global milk production costs have converged between dairy-exporting countries, as the traditionally low-cost milk producers have seen their production costs rise, off the back of volatile global feed prices and the increasing use of feed in traditional pasture-based regions.

Report author, Rabobank director of dairy research, New Zealand and Asia Hayley Moynihan says New Zealand milk producers will need to structure their businesses and production systems to withstand ongoing high price volatility – for both dairy commodity prices and inputs.

Higher costs can be absorbed when the payout is higher but costs rarely drop quickly when the payout falls.

Ms Moynihan says lower-cost regions, like New Zealand, have already “largely capitalised their efficiency gains in a high milk-price environment into the price of land and other assets”.

Therefore there is a need to adapt to this loss of absolute competitive advantage in milk production as efficiency gains become more difficult to obtain.

“It is likely that optimal supply chain efficiency could at least partially mitigate this loss,” she says.

“Efficiencies achieved downstream in milk processing and marketing via a strong route to market and established supply chain relationships will likely play a greater role in differentiating competitive export companies and industries into the future.”

Ms Moynihan says to ensure that competitiveness is based on more than just the cost of producing milk, the New Zealand dairy industry will need to work hard to ensure that it stays ahead of the pack in supply chain efficiency, market access, marketing and sensible regulation. . .

We also have to safeguard our reputation for high quality, safe food.

The New Zealand dairy industry, most well-known for its low-cost production, has moved, perhaps irrevocably, to a higher cost farming system, the Rabobank report says.

Ms Moynihan says the structural increase in milk prices globally and locally has driven the quest for increased production, almost at any cost.

“The first signs were there in 2002 when , on the back of milk prices increasing 42 per cent over two seasons, farm working expenses surged 33 per cent per kilogramme of milk solids produced,” she says.

“The reality check of a 32 per cent lower milk price in 2003, which remained at a similar level over subsequent years soon saw expenses fall back into line.”

However, Ms Moynihan says the 72 per cent lift in milk prices in 2007/08, and higher prices on average in the years following, brought a steep increase in production costs Media Release November 27, 2013

that show little sign of abating without a significant change in farming systems or an economic crisis.

Farm working expenses increased 72 per cent in 2007/08 on the prior season and interest cost rose 29 per cent with both expenditure categories oscillating around these higher levels ever since, she says.

Additionally, higher interest costs per kgMS have been driven by New Zealand dairy farmers’ increased debt, not higher interest rates, Ms Moynihan says.

“The significant increase in dairy land values over the past decade combined with an increased focus on land acquisition resulted in aggregate farm debt across the dairy industry more than doubling since 2002 to almost NZD 20 per kgMS produced,” she says.

New Zealand producers are likely to experience upward pressure on milk production costs over the coming years as they are confronted by a rising interest rate market and the likely impact of future environmental regulations on farming systems and milk production levels.

“Tackling environmental issues is likely to result in a variety of measures that may include increased infrastructure on-farm, altering pasture management or decreased intensity of farming systems which all impact production cost dynamics”.

Ms Moynihan says milk producers in New Zealand should consider where the competitive advantage lies for their own operations.

“Increased exposure to the global dairy market for some milk producers and greater intensification on-farm for others has added complexity to many dairy farm businesses,” she says.

“A flexible production system at a higher average cost may still be competitive if it provides resilience during a downturn.”

With high volatility expected to continue for both milk prices and production costs, the ability to lower inputs and/or costs during periods of abundant global supply would be a distinct advantage, Ms Moynihan says.

“Southern Hemisphere producers previously survived global market downturns for prolonged periods due to the size of their absolute comparative cost advantage,” she says.

“With this cost advantage now minimal to non-existent, other strategies to survive the inevitable downturns – albeit likely short-term – will be required.”

Any dairy farmer not doing well with this season’s forecast record payout shouldn’t be in the business.

But next season’s payout will almost certainly be lower and even the best farmers have to keep a rein on costs to ensure they can cope with less money.

Businesses which service and supply farms also have to be aware that while they might be making hay under this year’s sun, next season could be cloudier.


Reputation relies on trust

January 25, 2013

The announcement that traces of DCD have been found in milk is concerning but the way it has been handled is exemplary.

There is no food safety risk but the two fertiliser companies which use products with DCD have immediately suspended sales.

This media release from Ravensdown explains the issue:

Ravensdown announces today that, with immediate effect, it is suspending the sales and application of its eco-n product which contains DCD.

“The reputation of New Zealand as a quality food producer is as important to us as it is to our farmer owners. So it is reassuring that both the MPI’s and our own peer-reviewed research shows there are no food safety issues with DCD or eco-n,” comments Greg Campbell Ravensdown Chief Executive. “What’s changed is that last year, organisations like the US Food and Drug Administration added DCD to a list of substances to test for. This, combined with increasingly sophisticated scanning technology now presents a possible trade risk. Given the risk to NZ’s dairy export reputation, Ravensdown has taken the initiative and is suspending the single product which uses DCD for this calendar year.”

“As DCD has been used safely around the world for 30 years, there has never been a set of international standards around maximum residue level in food products. Because no standard exists for DCD, no detectable presence is acceptable. And because zero detection of DCD cannot be guaranteed, Ravensdown has taken the responsible, voluntary step to suspend its use while the trade issues are resolved,” added Greg.

In December last year, the Ministry for Primary Industries initiated a working party to assess the use of dicyandiamide (DCD) on farm land. The working group comprises representatives from MPI, Fonterra, the Dairy Companies Association of New Zealand and fertiliser companies Ravensdown and Ballance.

The working group was set up after testing on whole milk powder detected the occasional presence of low levels of DCD coinciding with the times of the year that the product is applied.

DCD, which is applied to pasture in autumn, winter and spring, has been used to reduce nitrate leaching and greenhouse gas emissions in New Zealand for nearly a decade.

“Though this news is disappointing for the 500 customers who use eco-n, the potential risk demanded decisive and pre-emptive action ahead of the autumn application season,” said Ravensdown’s Greg Campbell.

Even without eco-n, Ravensdown continues to help farmers lift their production and lower their environmental footprint. The farmer-owned co-operative does this through whole-farm testing, nutrient management planning and advice plus precise fertiliser application.

“We continue to help farmers produce top quality food and do all we can to support New Zealand’s export story in a complex world of international trading partners and regulations. We’ll be foregoing sales of eco-n, which makes up about 1% of Ravensdown’s annual revenues, but we are a 100% farmer-owned co-operative concerned with the long-term future of the rural sector,” added Greg Campbell.

“In the long-term, mitigating nitrate leaching is vital for sustainable New Zealand farming. The effectiveness of nitrification inhibitors like DCD is well proven and helps farmers in the face of stricter requirements being imposed on them. So we’ll be looking to the Ministry for Primary Industries through the working party to initiate the potentially-lengthy process of seeking a new international standard to recognise DCD. This would then specify a level or maximum residue which New Zealand dairy exporters and producers could work below,” concluded Greg.

Ballance’s media release says more research is the key:

More research is the key to developing nitrification inhibitors which help farmers reduce environmental impacts while meeting potential international trade requirements, Ballance Agri-Nutrients Research and Development Manager Warwick Catto said today.

His comments follow the voluntary suspension of sales and application of the nitrification inhibitor dicyandiamide (DCD) on farmland in response to the detection of the occasional presence of low levels of DCD in dairy products. Both major fertiliser co-operatives have announced the suspension until further notice.

“We still have every confidence in the potential for nitrification inhibitors to play an important role in helping New Zealand farmers to operate within nutrient loss limits.

“While our nitrification inhibitor product DCn has been a small part of our portfolio we remain confident that continued research will result in the development of a nitrification inhibitor solution which delivers environmental benefits, meets international requirements and is supported by robust science.”

Mr Catto said Ballance had not sold DCn since July 2012 and had not promoted its use on pastures since late 2010. This means that only a handful of Ballance customers have recently used the product. As a precautionary measure Ballance will not reintroduce any DCD-based products to the market until the potential international trade issue of milk residues is mitigated.

Ballance ceased sales of DCn in early spring 2012 to review the product and its applications, and incorporated it into its $32 million research and development programme aimed at reducing nutrient and greenhouse gas losses through more efficient fertilisers and next generation nitrification inhibitors.

“This is in line with our science-based approach and emphasis on continual evolution of our product and service offerings to meet the needs of New Zealand farmers.

“Our research is partially funded by the Ministry for Primary Industries through their Primary Growth Partnership and our work on nitrification inhibitor developments will take into account potential international trade concerns regarding residues in milk products,” says Mr Catto.

Mr Catto says that Ballance strongly supports all moves to protect New Zealand’s reputation for quality food and believes that all products used in food production must be backed by sound science and ongoing research.

Fonterra backs the suspension:

“We have been assured by New Zealand’s regulatory authority – the Ministry for Primary Industries – that there is no food safety risk.  However, DCD residues in agricultural products may present a future trade issue,” said Managing Director Co-operative Affairs Todd Muller.

“Although DCD was a promising option for reducing nitrate leaching, it is critical that New Zealand’s trade reputation is preserved.  The voluntary suspension is the responsible approach in the absence of any internationally agreed standards for DCD residues in food,” said Mr Muller.

Fonterra will participate in a working group set up by the Ministry for Primary Industries to examine what the suspension means in terms of the future use of DCD in farming, including the impact on water quality requirements.

Not all countries have the strict regulatory and testing standards for food safety that New Zealand does.

Some countries that do test food might hide results that didn’t suit them.

The companies have acted correctly in promptly suspending sales of products with DCD.

It’s about trust.

New Zealand relies on our reputation for high standards of food safety and that reputation relies on trusting that everything possible is done to keep food safe and taking a precautionary approach, even as in this case, there is no risk to consumers.

Products with DCD, a nitrification inhibitor, have been applied with fetiliser to pasture and forage crops to target urine, dung and fertiliser emissions. They can improve water quality, reduce production of the greenhouse gas nitrous oxide and increase pasture growth.


Water footprint next environmental measure

September 27, 2012

The importance of water as a scarce resource is being reflected in the next environmental measure – water footprints:

Water footprints seem to be taking over from carbon footprints at the Water New Zealand Conference in Rotorua today.

While the production of a cup of coffee consumes a startling 140 litres of water, a pair of leather shoes consumes 8,000, the production of a single litre of bio-ethanol can consume between 1,200 and 3,000 litres of water, Professor Torkil Jonch Clausen, Chair Programme Committee, World Water Week in Stockholm and Adviser to Sweden’s Ministry of Natural Resources and Environment told the Water New Zealand conference in Rotorua this morning.

Water footprints

Product Water consumed (litres)
1 cup of coffee 140
1 glass of milk 200
1 litre bio-ethanol 1200 – 3000
1 cotton tee shirt 2000
1 hamburger 2400
1 pair leather shoes 8000

His message to the conference was that water is an increasingly scarce world resource and those countries who are blessed with abundant supplies of water, like New Zealand, are very fortunate.

This might be good for New Zealand but no doubt the measure will be clouded by emotion rather than based on science, as carbon footprints are.

Conserving any resource is sensible but a water footprint is a blunt instrument. Using 140 litres for a cup of coffee in a desert could be more wasteful than using 8000 litres for leather shoes in a region where water is plentiful.


Milk price up 6% in GDT auction

September 5, 2012

The trade weighted index had a welcome 6% increase at the latest GlobalDairyTrade auction.

It might be too early to call it a trend but it is the third successive rise in the TWI.

The TWI is now back over the 10 year average.

The price of anhydrous milk fat increased by 11.8%; butter milk fat climbed 15.8%; cheddar was up 5.3%; lactose increased 5.2%; milk protein concentrate was up 15.5%; rennet casein rose 10.1%; skim milk powder was up 7.5% and whole milk powder increased by 4.3%.


Dairy price up 7.8%

August 16, 2012

This morning’s GlobalDairyTrade auction showed a welcome reversal of this year’s trend  for dairy prices with a 7.8% increase in the trade-weighted index.

The price paid for anhydrous milk fat increased 14%; buttermilk powder was up 10.2%; cheddar was up 8.8%; milk protein concentrate increased by 15.4%; rennet casein was up 4.7% skim milk powder increased 7.3% and whole milk powder increased by 7%.

This increase takes the price back to around the long term average.

One reason for the increase could be the drought in the USA. That usually depresses the price of beef because the market is flooded by farmers culling stock, and increases dairy prices because of a decrease in supply.


It’s the market that matters

July 15, 2012

Quote of the day:

. . . It’s not the market’s job to consume milk as and when the farmer produces it. It’s the farmer’s job to produce milk when the market needs it. . . Dr Jon Hauser

In New Zealand, as in Australia about which Dr Hauser writes, milk supply is mostly seasonal.

That is less of a problem here when most of our milk is turned into milk powder, butter or cheese and exported. In most other countries most milk is consumed domestically in fresh liquid form and demand is relatively constant regardless of any peaks or troughs in production.

But regardless of what happens to the milk, the underlying principle is the same – it is up to producers to meet the market in terms of quantity, quality and price.

This is a concept which European and British farmers who have been protected from the market by subsidies are struggling to grasp:

Up to 2,000 dairy farmers are expected in Westminster today to protest at cuts to the price they’re paid for their milk. Last year, dairy farmers received a little under 29p for every litre they sold: this is set to fall to less than 25p. Since it costs about 30p to produce a litre of milk, the cuts constitute yet another catastrophe for a benighted domestic industry, and may put many thousands of dairy farmers out of business. “There has been an unprecedented outcry of anger and frustration among farmers,” says the National Farmers’ Union. “We are united in our demand for an immediate reversal” of the cuts.

Prices for farmers have stalled over the last 15 years: in 1997 they were receiving 25p for a litre of milk, while feed costs alone have doubled since 2010. Half of Britain’s dairy farmers went out of business between 2000 and 2010. Like the pig farmers who only save themselves from going out of business by growing their own feed, dairy farmers will likely attempt to make up the shortfall by reducing staff, which will of course have corollary impact. . .

Welcome to the real world, where, as Tim Worstall observes supply and demand rule:

. . . We’re in a rigged market because of the EU. That’s one cause.

But far more importantly, we’ve the standard interaction of supply and demand. Dairy farming is becoming more efficient: as farming has been doing since the Neolithic. That rising food production is what has enabled civilisation to develop. More milk is being produced from less land with fewer cows. It really is not a surprise that prices paid to producers are falling in real terms.

The effect of this is to bankrupt some producers and force them out of production. Which is, harsh though it may sound, exactly what needs to happen. Production is becoming more efficient thus we need fewer producers. . .

A Yorkshire farmer we visited last month said that message was the one good thing to come out of the foot and mouth epidemic.

All his cows were killed and before he replaced his herd he went through the figures. He realised that dairying didn’t stack up for him and rather than buying more cows he increased the amount of crop he grows.

The market matters. Rather than wasting their energy on protesting to politicians, farmers should be working out how to meet it.


Good farmers prefer market to politicians

July 12, 2012

European dairy farmers installed a milk lake in front of the European parliament in protest at falling milk prices.

The European Milk Board (EMB), which represents 100,000 dairy farmers across the EU, is calling for a programme of voluntary reductions in production which would allow producers to cut milk output by up to 25% of their quota.

Under their proposals, there would also be financial compensation for the value of the production lost. . .

Hundreds of EMB members travelled to Brussels from countries including Belgium, France, Germany and The Netherlands to join in the protest against the mismanagement of the milk market.

The group said overproduction on the European milk market is leading to a drastic fall in milk prices and leading directly to the next milk crisis.

EMB said the surplus of milk in the market was pushing prices to the floor and the survival of farms could not be guaranteed this way.

Under CAP reform, European dairy farmers are calling for the introduction of a voluntary supply constraint and the setting up of a European Monitoring Agency, to restore the balance between supply and demand.

EMB president Romuald Schaber said: “The only way to alleviate the situation is to reduce production, preferably by a voluntary supply constraint in the short term.”

The root of the problem is quotas and subsidies not the balance between supply and demand.

When we were in Europe last month we met dairy farmers who wanted to increase production but would have to buy quota which would make it very expensive.

We got the impression good farmers were looking forward to the end of the quotas and subsidies? Then they would be farming to produce what the market wanted rather than being dictated to by bureaucrats and politicians.

The transition to a free market will be painful for some, as it was in New Zealand. But it will be better in the long run for both producers and consumers when the market sorts out supply and demand.


Dairy plant in receivership

May 18, 2012

The grapevine has been telling us that New Zealand Dairies was in trouble and the NBR confirms it:

Independent dairy processor New Zealand Dairies has been placed in receivership after its Russian owners failed to find a buyer for the business, NBR ONLINE has learned.

Receivers from BDO  Christchurch were appointed this afternoon but were not immediately available for comment, a BDO staff member said.

Waimate-based New Zealand Dairies operates a $100 million dairy factory at Studholme in South Canterbury as an independent dairy processor. . .

Payment for the previous month’s milk is usually made on the 20th of the month.

A monthly milk cheque could be $80,000 to $100,000.

NZ Dairies’ suppliers will be waiting anxiously to find out how much, if any,  they will be paid.

 


Another price fall signals lower payout

May 16, 2012

Fonterra’s forecast payout for this season is $6.75 – $6.85 a kilo of milk solids. There have been several signs that next season’s price will be well below that and this morning’s 6.4% drop of the trade-weighted price in the GlobalDairyTrade auction makes that even more likely.

The price of anhydrous milk fat dropped 11.9%; cheddar was down .2%; milk protein concentrate was down 1.2%; rennet casein fell .7%; skim milk powder dropped 5.4% and whole milk powder fell 8.9%.

The price is now below the long-term average.

Fonterra chair Sir Henry van der Heyden said the price reflected the increased amount of milk on sale because of higher production here.

The grapevine has been suggesting next season’s forecast could be around $5.50. That’s a big fall from this season and any wise farmers will be redoing budgets with a very sharp pencil.


One fall does not a winter make

April 19, 2012

People wagering on iPredict are putting their money on a fall in Fonterra payouts for this season and the next one.

Forecasts for Fonterra’s 2011/12 and 2012/13 payouts have fallen following last night’s 10% plunge in prices on the company’s global dairy auction system.

According to the 6000 registered traders on New Zealand’s online predictions market, iPredict, the 2011/12 payout per kilogram of milk solids (before retentions) is now likely to be $674, down $0.07 from the $6.81 forecast when iPredict last reported on Monday.

The 2012/13 payout forecast has been harder hit, and is now just $6.14, down $0.35 or 5.4% from the $6.49 forecast on Monday.

Federated Farmers is also warning of a possible drop in the forecast price for next season:

World wide demand for milk products remains steady despite a 9.9 percent price index fall on the GlobalDairyTrade online market. Federated Farmers agrees with Fonterra this reflects the current abundance of milk being produced around the world.

“Almost ideal growing conditions around most of New Zealand this season has seen a record amount of milk production and a corresponding increase in products on the market platform,” Federated Farmers dairy chairperson Willy Leferink says.

“There is also more milk coming from the United States and Europe at the moment, meaning there is an abundance of milk products going through GlobalDairyTrade.

“This month alone there has been a 10 percent increase in volumes on the platform, so a price drop was not unexpected.

We will have to watch what happens over the next few months, but with Fonterra already having revised down it’s payout by 45 cents to $6.30 per kg of milk solids, New Zealand dairy farmers should begin preparing for a potentially lower milk price forecast for the 2012-13 season.

“However, the price of whole milk powder indicated by GlobalDairyTrade represents just one day on the market.

“This is a volatile market with many factors influencing it. One thing which could have a big effect on global dairy production over coming months is the very strong beef prices at the moment, which could sway production towards the meat rather than the dairy side of the equation.

“New Zealand’s dairy industry is very resilient and used dealing with small downturns while looking to the long term picture, which is very rosy indeed,” Mr Leferink concluded.

One price fall, even a 9.9% one, doesn’t mean we’re in for wintery market conditions, but it does show the need for caution with budgeting for the coming season.

It might also have a moderating influence on price rises for land, wages, supplies and services.

 

 


Supply up price down

April 18, 2012

Increased supply of milk from New Zealand, Europe and the USA has led to an inevitable fall in the price in this morning’s GlobalDairyTrade auction.

The 9.9% drop in the trade weighted index is the biggest since mid-2010.

The Real GDT-TWI, which is the GDT-TWI deflated by a measure of the US consumer price index, fell below its 10-year average for the first time since 2009.

The decline in prices comes as commodity prices hold near their lowest levels this year, based on the Thomson Reuters/Jefferies CRB Commodity Index of 19 globally traded commodities. The index most recently rose 0.4 percent to 302.09. Commodity prices have softened on signs demand may slow in China, the world’s fastest-growing major economy.

The average winning price for whole milk powder fell 11 percent to US$2,847 a metric tonne and skim milk powder fell 7.6 percent to US$2,871 a tonne.

Anhydrous milk fat dropped 6.9 percent to US$3,304 a tonne. Cheddar fell 12.1 percent to US$2,937 a tonne and milk protein concentrate declined 3.9 percent to US$4,520 a tonne. Rennet casein fell 11.9 percent to US$6,424 a tonne.

This isn’t welcome news but nor is it unexpected in the wake of reports of higher production heroverseeing other countries.  When the supply goes up, prices usually come down.


Second shot in milk war

February 8, 2012

Pack ‘n’ Save has fired the second shot in what could be a milk price war.

Federated Farmers says reports Pack ‘n’ Save in Auckland has joined Nosh in cutting the price of milk to $1 a litre shows  attention needs to focus on supermarket margins.

Dairy chair Willy Leferink said:

“Frankly, Nosh is doing more to open up competition at the retail end than any narrowly focused inquiry can ever achieve. 

“If Nosh’s milk was priced in Australian dollars and didn’t have the GST our milk attracts, it works out to be equivalent to A$0.68.

“Even Karori New World in Wellington is selling two litres of its budget milk for $2.99, as long as you spend $25 in-store.

“If you remove our GST and price that milk in Australian dollars, then it works out to be equivalent to A$1.01 per litre.  That’s only one Aussie cent more than what Coles is selling its milk for in Australia.  Milk Coles is spending a lot of money each week underwriting.

GST is a significant factor.

I’m not arguing for food to be excluded from the consumption tax but it does need to be taken into account when comparing food prices.

“But if you go to another New World in Wellington that same bottle will set you back $3.65.  That’s not only 22 percent more but tells me that margins at the retail end are pretty healthy

“That’s why we’d like to back Nosh Chief Executive Clinton Beuvink.  People need to support those local dairies and petrol stations that are selling cheap milk.  The big supermarkets rely on being convenient but convenient doesn’t make them the cheapest.

“Federated Farmers hopes this milk skirmish is the first step in a wider retail milk price war between Foodstuffs and Progressive.  It’s happened in the UK and Australia so why not here? 

“The focus really needs to be on the supermarkets because if dairies can sell milk cheaper and a small supermarket like Nosh can sell it as a loss leader, surely Foodstuffs and Progressive can do the same? 

“In two locations at least, Foodstuff franchisees already are,” Mr Leferink concluded.

Fonterra and farmers have been blamed for relatively high prices of milk and other dairy products but they are only part of a chain which adds costs at every link.


First shot in milk war?

February 7, 2012

Competition between retailers in Australia have driven down the retail price of milk.

That could be about to happen here:

Grocery retailer Nosh Food Market looks set to trigger a price war on milk by cutting the price of a brand of two litre mitre by more than half to $2.

Nosh says milk prices have risen 41% since 2007 and milk now costs relatively more in New Zealand than in Australia, South Africa, Britain and United States.

Co-founder Clinton Beuvink says he hopes the move will be a catalyst for permanently driving down the price of milk.

Nosh is cutting the price of the Cow & Gate brand milk to $2 per two litres – a 55% reduction from the normal retail price at Nosh stores.

Fonterra and farmers have been criticised for the relatively high price of milk on domestic markets but most of the costs which contribute to the retail price happens between the farm gate and consumers.

If Nosh is able to cut its price by more than 50% then either it has been charging far too much or it is prepared to use it as a loss leader.

Either way, milk will be cheaper in some outlets. Nosh has fired what could be the first shot in a milk war and other retailers will almost certainly retaliate to the benefit of consumers.

In Australia that has put a lot of pressure on farm-gate prices. But domestic supply takes such a small proportion of the New Zealand dairy production farmers here are much less likely to be caught in the crossfire between retailers.


%d bloggers like this: