Rural round-up


Drones to aid farm work :

Rab Heath grew up on a farm so he knows that grass equals money.

However, keeping an eye on your pasture takes time, and a huge amount of physical effort when checking soil conditions in every paddock.

Rab’s worked out a way to do this remotely, using drones. . . 

Canterbury farmers face bleak irrigation season – Thomas Mead:

Canterbury farmers face a tough spring with several key irrigation rivers already on restriction after a third straight year of low groundwater levels, with some wells, streams and springs to dry up.

Poor rainfall has left alpine rivers well below their long-term averages, with the Ahuriri River in South Canterbury already on a full restriction preventing all kinds of irrigation. Other rivers, including the Rakaia, Waimakariri, Hurunui, and Rangitata, are partially restricted.

Environment Canterbury (ECAN) surface water science manager Tim Davie says the restrictions are designed to protect ecosystems and stream-life. . . 

Technology set to play big part in NZ agriculture:

Ultimately, for New Zealand to diversify its export base, technology will play a critical role in improving value-add in agricultural exports, a leading New Zealand agri-tech expert says.

Craige Mackenzie, chair of Precision Agriculture Association of New Zealand (PAANZ), says precision agriculture has a lot to offer the bright future of the second biggest New Zealand industry sector.

“There is growing interest in the benefits of precision agriculture for environmental and financial viability of our New Zealand farms but we have a challenge ahead to get greater engagement with more farmers and companies in this sector. . . 

NZ Farming Systems Uruguay to cut ties with NZ, posts biggest loss since Olam took control – Jonathan Underhill:

(BusinessDesk) – NZ Farming Systems Uruguay, set up by New Zealand investors in 2006, is to cut ties with the country after delivering its biggest-ever loss to owner Olam International of Singapore.

Olam has retained a New Zealand registration for the South American subsidiary since buying out minority shareholders and delisting it from the NZX in late 2012, with its registered office care of law firm Buddle Findlay in Auckland. But the latest annual report of Farming Systems says the group “has the intention to deregister the parent company from the NZ Companies Office and migrate to Uruguay.”

Farming Systems appears to have been hard hit by the downturn in global prices of dairy products, with its net loss widening to US$74.5 million in the year ended June 30, from US$69.5 million a year earlier. Sales fell 34 percent to US$48.9 million. . . 

NZ dairy farm prices show sharp rise, REINZ figures show – Edwin Mitson:

(BusinessDesk) – The median price per hectare for a New Zealand dairy farm sales has increased by more than 50 percent on a year ago, Real Estate Institute of New Zealand figures show.

In the three months to the end of August 2016, the median sales price per hectare was $40,469, with 14 properties sold. In the same period a year earlier, the median price was $26,906, with 21 properties sold, a rise of 50.4 percent.

The figures cover the winter period, with REINZ noting that the low level of sales can distort statistics. The median size of a dairy farm sold was 100 hectares. . . 

Venison sales set to soar this spring as Kiwis become more adventurous and health conscious in the kitchen:

Duncan Venison has reported a surge in demand from consumers and professional chefs in the run up to spring and summer, indicating that Kiwis are recognising the health and taste benefits, are starting to see it as a year-round option, and are also becoming more adventurous with how they cook it.

The company is selling considerable quantities of venison to restaurants and home cooks per week, with no sign of sales slowing down as the warmer weather approaches. This includes the “Bistro Fillet from Pāmu Farms,” a tender, pan ready cut that was developed earlier this year, and is now on the menu at restaurants such as The Sugar Club, Sails Restaurant, The French Café, Paris Butter, and Clooney.

Since the 1st July launch, sales of Bistro Fillet have exceeded budgeted volumes by over 50%, with a number of restaurants still to change over to their spring menu. . . 

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Because of their connection to the land, farmers do more to protect and preserve our environment than almost anyone else. They are some of the best environmentalists around  – Ike Skelton.

Rural round-up


Rates gouge farm incomes – Tim Fulton:

Thank goodness export prices are strong because a Beef + Lamb New Zealand report says local authority rates have risen cumulatively by just over 30% over the past five years.

“At an average increase of 6.1% each year it defines the expression ‘inflation busting’,” Federated Farmers local government spokesperson David Rose said when The New Zealand Farmers Weekly showed him B+LNZ’s figures.

The rates insight is part of the Economic Service’s regular survey of on-farm costs, combining data from Statistics New Zealand with its own assessments. . . 

Looking beyond the dollars at Winter Dairy Days:

Helping dairy farmers look ‘beyond the dollars’ at their whole farm system management is the goal of a series of winter dairy workshops being held by the Dairy Women’s Network around New Zealand in June and July.

The five workshops are being held in Winton, Rotorua, Cambridge, Hokitika and Nelson at the end of June and beginning of July and are a great follow on from the Essential Farm Finance days run by the Network earlier in the year.

Ngatea dairy farmer and farm consultant, Julie Pirie, will lead four of the workshops, with Te Anau dairy farmer Anna Kempthorne speaking at the Winton event. . . .

NZ Farming Systems cuts FY guidance as dry weather reduces milk production – Hannah Lynch,

NZ Farming Systems Uruguay, the South American dairy farmer controlled by Singapore’s Olam International, will miss its target to break even on a pretax basis this year after dry weather stunted pasture growth and milk output.

Farming Systems is now forecasting a loss of US$3 million to US$5 million on an earnings before interest and tax basis. The company will break even once it accounts for a fair value adjustment in the value of livestock, it said in a statement.

“Milk production continues to increase significantly year on year, although the very dry summer and autumn weather in Uruguay along with the later-than-expected completion of the new dairies, has resulted in milk production to date being below forecast,” it said. . .

Arable farmers cut back grain in favour of seed crops:

Arable farmers are cutting back on wheat and barley for next season and planting more seed crops in response to falling grain prices.

Growers cut back on seed production last year in response to higher grain prices but increased wheat and barley production and record yields created high stock levels and reduced prices.

Federated Farmers grain and seed chair Ian Mackenzie says the one contract price offered for milling wheat so far has dropped from about $460 to $420 a tonne.

Feed grain contract prices have dropped from about $410 to $360 a tonne.

Water storage scheme ‘vital’ for Hawke’s Bay farmers:

A central Hawke’s Bay farm consultant says farmers regard a proposed $220 million water storage scheme as being a vital step in the economic growth of the region.

Hawke’s Bay Regional Council has this week been hearing submissions on the Ruataniwha scheme, which could provide irrigation to 22,500 hectares of farm land.

Consultant Roy Fraser has visited northern Tasmania where he says farmers have been using water storage for more than 70 years. . . 

Dairy breeding a family tradition – Hugh Stringleman:

Stuart Bay retired on May 31 as chairman of the dairy co-operative LIC, the fourth generation of his family to serve on livestock improvement co-operative boards.

After 37 years of dairy herd improvement governance, perhaps Bay has seen and done it all?

No way. Bay would like his 22 years on the LIC board over again, for a ring-side seat for what he believes are the most exciting years to come in dairy genetics.

LIC is beginning to deliver genomics science, which promises dairy farmers routine gene fingerprinting of their calves, to quickly identify the most productive milkers and their predisposition to faults and diseases.

Trees on farms workshop : maximizing marginal land use:

A Trees on Farms workshop particularly designed for Maori landowners and farmers taking an inter-generational view of their land management options is being held in Ohope on Wednesday 20 June.

This workshop will focus on in the opportunities and benefits trees can provide in developing management for the marginal or less productive parts of the farm, and those attending will be able to discuss tree planting options with Maori land owners, experienced farm foresters and regional council staff.

The workshop and field trip will feature the Ohope property of Ngāti Awa Group Holdings, looking at trees as an intergenerational land management tool providing sustainable agribusiness solutions and enhancing long term land use. . . 

Rural round up


US dairy lobby drops oppostion to NZ export access:

An American dairy producers’ group has dropped its longstanding opposition to New Zealand dairy exports being included in the nine-country trade talks known as the TransPacific Partnership, or TPP.

The backdown by the United States Dairy Export Council comes as New Zealand negotiators prepare to take on the US over dairy access in the talks. . .

NZ Farming Systems ekes out $US 367000 1h profit:

NZ Farming Systems Uruguay, the South American dairy farmer that was bailed out by Singaporean owner Olam International, eked out a small profit in the first half on higher milk sales and a one-time accounting gain on he value of livestock.

Profit was US$367,000 in the six months ended Dec. 31, from a loss of $6.77 million a year earlier, the company said in a statement. Sales jumped 81 percent to $34 million.

Farming Systems first-half result would have been a loss of $5.1 million, if not for a fair-value adjustment on livestock of US$5.5 million. In the year-earlier period there was no adjustment.. .

North Island beef processing competition heats up – Allan Barber:

In spite of the slow start to theNorthIslandseason, currently 18% behind last year, forecasts suggest it will catch up, even exceed last season. But it is certain to come late with dairy farmers likely to keep milking as long as they can, unless we get an unseasonably cold early winter. What’s also certain is there will be plenty of processing capacity to handle it, especially when the Te Aroha rebuild is finished. . .

Battle of employment philosophies spreading – Allan Barber:

The weekend’s announcement by AFFCO of a lockout at five of itsNorth Islandmeat plants comes hard on the heels of the three week strike by the Ports of Auckland stevedores, following several months of increasingly acrimonious negotiations.

 Unless it gets agreement to its proposal, AFFCO intends to lock out 758 of its meat workers covered under the Core Collective Agreement which expired last September and which the company has been trying to renegotiate unsuccessfully with the Meat Workers Union for some months now. . .

Cooper’s resignation signals broader meat industry frsutration – Allan Barber:

Keith Cooper’s resignation from the board of Beef & Lamb New Zealand, sudden as it appeared to be, had been brewing for a time. Cooper had previously expressed frustration with farmer directors’ lack of commercial awareness, terming it naivety, and obviously believed B&LNZ was getting involved in areas it should leave to the meat companies, such as market development. . .

Australian Dairy conference – the use of social media by dairy farmers– Pasture to Profit:

“Consumers don’t care how much you know until they know how much you care!” This was one of the powerful messages from Charlie Arnot CEO of the Centre of Food Integrity (@foodintegrity, @charlie_Arnot) presented at the Australian Dairy conference (#ausdairy) in Warragul, Victoria, Australia.

Charlie spoke of the need for all farmers to acquire a “Social License to operate” by building trust with not only the local community but in fact all consumers & customers of the food farmers produce.   Trying to defend farmers & farming practices by arguing with science or attacking the attackers is clearly failing. . .

Smart on-farm management is good risk maangement – Pasture to Profit:

Simple low cost On farm management changes can substantially contribute to a better environmental outcome. This is a really powerful & positive message to come out of the Massey University’s Fertilizer & Lime Research Centre’s conference held last week at Massey’s campus at Palmerston North, NZ.

Over 3 days there were papers from researchers, consultants, farmers, Regional Councils, the fertilizer industry & environmental groups…..

Synlait purchase indictment on NZ capital markets


 Bright Dairy & Food, China’s third biggest dairy company by volume, has signed up to buy  51% of Synlait’s milk processing subsidiary, Synlait Milk, for $82 million.

The deal is subject to approval in China and here.

Federated Farmers says it’s an indictment on our capital markets.

“After last year’s abandonment of an Initial Public Offering, it’s a damming indictment on our capital markets that Synlait couldn’t rely on New Zealand to provide the investment capital necessary to fund its expansion,” says Lachlan McKenzie, Federated Farmers dairy chairperson.

Another New Zealand company may get a welcome injection of foreign cash too. Singapore’s OlamInternational has agreed to buy PGG Wrightson’s 11.5 per cent stake in New Zealand Farming Systems Uruguay, subject to regulatory approval, and is making a full takeover offer on the same terms.

I will be surprised if this gets the same criticism that a Chinese company’s bid for the 16 Crafar farms has.

Synlait owns farms, but it is the processing arm not the producing one, in which Bright Dairy will be investing and NZFSU  owns land, but in South America, not here.

Many people are not keen on the idea of foreigners taking too big a stake in our land but they’re less likely to be so emotionally attached to these companies.

No surprise in FSU forecast


Farming Systems Uruguay is still expecting a full year loss.

That’s not a surprise.

It hasn’t been an easy year for dairying anywhere and establishing dairy farmers in another country is a lot harder than doing it at home.

Is Agria the answer?


The market approved of the Chinese company Agria taking a stake in PGG Wrightson with an initial lift in PGW”s share price.

However, the subscriber-only section of the NBR raised questions which the ODT mentions too.

Silver Fern Farms took advantage of the price rise to cash in the shares they’d got in part settlement after PGW’s offer to take a 50% share in the meat company fell through.

I think that’s a wise move because as a newsletter from our sharebroker said: . . . any targeted upside from the strategic partnership is mostly aspirational and long term at this point . . .

Agria might be part of the answer to PGW’s problems but a need for investors isn’t the company’s only worry.

Its attempt to buy in to SFF was seen by many as a ticket-clipping exercise, not unlike its involvement with Farming Systems Uruguay.

Farmers unhappy about these moves have taken their business elsewhere and the company has lost some of its good stock agents too.

It’s got a lot of ground to recover in the field and its new partner won’t be able to help with that.

FSU fails foreign investment 101


When I posted on Farming Systems Uruguay in August I was restrained in my criticism.

I didn’t say that we were so unimpressed by what we learned when we visited one of their farms that we sold our shares in the company as soon as we got home.

I didn’t say that the manager of the farm we visited, who is one of New Zealand’s top dairy farmers, wasn’t being left to manage. He had to answer to the company’s representative who visited once a week not just on strategy but on day to day farming practices.

I didn’t say that the manager had only had a two-week Spanish course when he arrived, been getting just one lesson a week since then and his wife and children weren’t getting any help with the language at all.

I didn’t say that the manager told us of visiting another FSU farm where he’d been concerned that the cows were hungry and asked why they weren’t in a paddock with more grass. He was told that was being saved for the directors’ visit.

I didn’t say that everything we saw contradicted the glowing picture being painted in New Zealand of the company, its farms and the opportunities in Uruguay.

I didn’t say that we could see there was money in the business for PGG Wrightson and anyone else who could clip the ticket but we couldn’t see what was in it for investors in FSU.

I didn’t say any of that on the earlier post because it’s more than two years since we were there and I thought things might have improved. Brian Gaynor’s column shows they haven’t.

Everything he writes supports what we saw and heard in Uruguay.

What works in business in one country doesn’t necessarily work in another. The sobering lessons from the experiences of several companies which ventured across the Tasman show that and at least they speak the same language there.

Uruguay is not just another country, it has a different climate, different language and different culture.

It’s on a similar latitude to northern New Zealand but on a continent which gets much hotter than we do. Pastures which last 10 years or more here will have to be replaced every two or three years there. That’s good for PGG Wrightson which has the rights to all the business on the farms and will sell the seed. But it’s not good for farm profits and FSU shareholders.

Spanish is probably one of the easier languages for English speakers to learn. With total immersion you should have a good grasp of the basics after three months and be reasonably fluent in a year. But Gaynor says the last New Zealand manager who had been in Uruguay for two and a half years never learned the language.

 It is the height of ignorance to live and work in another country without being able to converse with the locals. It’s also not good for business because you never get the full story if you have to rely on interpreters. But that the manager didn’t learn isn’t necessarily his fault. If his staff spoke English they would when talking to him and the demands of the farm would take precedence over Spanish classes.

But one of the first lessons of foreign investment 101 is that the people working on the ground must speak the local language. Ensuring its managers and their families learn Spanish should be one of FSU’s priorities.

Then there’s the culture. They do things differently in Latin America you can’t just pick up what works here, transplant it there and expect it to work as it does at home.

Adolf at No Minister is even less impressed than I am. He blames the directors. They are responsible for the decisions they made but I think they only see what the people in Uruguay want them to see and have no idea of what’s really going on.

PGW will make money by clipping the ticket on everything the farms buy but it’s going to be a long time before the farms make a profit and shareholders get a return on their investment.

There are wider concerns too. Crafar Farms has shown what happens when a business grows too quickly without good processes, systems and staff. If that happens here, the potential for problems half a world away are even greater.

New Zealand deserves its reputation for high standards of animal welfare and environmental practice. Our reputation is at risk  from companies which try to emulate what we do here in other countries and fail to do it properly.

Can FSU performance match the rhetoric?


Farming Systems Uruguay’s aim was to take New Zealand farming systems to Uruguay.

It sounded good and cheap land had an appeal when farm prices here were soaring. But there are usually good reasons why land is cheap and what works well in one country can’t be transferred directly to another with a different climate, culture and language.

The weather can go against you anywhere and drought in Uruguay is one of the factors which contributed to the company’s $15.6 million loss  in the year to June 30.

FSU had signalled this with a profit downgrade warning earlier this year, followed by the news the company will have to sell $60m worth of land in the next couple of years.

Neither of those announcements surprised us because we visited one of FSU’s farms a couple of years ago and weren’t impressed. Nor was the manager.

He’d arrived from New Zealand in February to find there was no electricity in the house, no hot water, no TV reception, no internet, a problem with the swimming pool’s filtration system so it couldn’t be used and he had to share the only telephone with several other workers.

By the time his wife and children joined him in April electricity and hot water had been restored but the problems with the TV, internet, phone and pool still hadn’t been addressed.

The manager had been given a short course in Spanish when he arrived. That didn’t get him beyond the basics so he had to rely on bi-lingual staff to translate for him most of the time. But it wasn’t just language difficulties there was a huge cultural divide.

Farm owners and managers in Uruguay don’t usually live on the farm and this one was on a dirt road, more than 30 kilometres from the nearest town which had only one small store selling food.

Owners don’t usually do farm work either, they employ others to do it for them and because labour is cheap they often do it with more people and less labour-saving equipment and methods than we’re used to here. Applying fertiliser was a three-man job – one drove the tractor, the other two stood at either end of the paddock with flags to direct the driver.

Most of the staff were married men who went back to their families for long weekends once a month so even if they could have spoken the language the manager’s wife and children had few other women or children to talk to.

The manager resigned soon after we were there. It’s possible huge improvements have been made in the couple of years since then and the company may be putting much more effort in to inducting their managers and families.

However, financial and farming performance have yet to match the rhetoric.

The company blamed drought, falling prices and a delay in raising capital for this year’s loss. I think the problems go deeper than that. Grass isn’t always greener on the other side of the ocean.

Land was cheaper in Uruguay than in New Zealand but there’s much more to successful dairying than cheap land. Developing dairy farms and getting them to show a profit isn’t easy here, it is even more difficult when there’s a language and cultural barrier.

Taking New Zealand farming systems to Uruguay might pay off in the long term, but I don’t think financial performance will match the promise in the short term.

Mainland betters NZX-50


We call it the Mainland with our tongues in our cheeks but now we have the numbers to prove we’re weathering economic tough times better than the north.

The Deloitte South Island Index measures the market capitalisation of 33 companies with head offices or the majority of their business in the South Island and puts them into an index relative to their size.

For the first six months of this year, the index was down by 8.5 per cent, beating New Zealand’s benchmark NZX-50 index which fell 21 per cent. Over the last quarter (April to June) it has risen into positive territory, growing 3 per cent versus the NZX-50’s drop of 8 per cent.

However, doing better isn’t the same as doing well as Deloitte partner Paul Munro points out:

At a headline level it shows South Island companies are doing better than the rest of the country, but we need to balance that out with the fact that of the 33 companies measured 61 per cent saw a drop in their market capitalisation.”

Munro said the strong performance over the last quarter had been boosted by larger companies like PGG Wrightson and NZ Farming Systems Uruguay.

PGG Wrightson, the second largest company on the index, grew its market cap by $127 million, boosted by a higher share price and $5 million in bonus shares being issued, while NZ Farming Systems Uruguay saw its market cap increase by $83 million on the back of a rising share price driven by predicted increased earnings. Munro said their strength followed the boom in the dairy sector with record milk solid payouts.

He said this sector was having a positive impact on other businesses and because a greater proportion of business in the South Island was linked to dairying it was helping to hold up the economy.

It’s not all down to dairying, but the record payout from Fonterra and the continuation of conversions from sheep to dairy farms are pouring money into rural communities. That in turn is insulating the provinces from the worst effects of the recession.

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