Rural round-up

05/02/2021

Dairy prices and Fonterra’s re-establishment as a global leader should be celebrated far beyond the cowsheds – Point of Order:

The New Zealand economy, although battered  by the  Covid-19 pandemic, has  moved   into 2021  in  better  shape  than  anyone  might have predicted  just six months ago.

To  a degree  this has been due  to  the  continuing vibrant performance  in the export  sector  particularly  by the  primary industries. This  week  there  was a  fresh surge  of  confidence   within that sector  because of the signal from the big dairy co-op, Fonterra, in lifting its  milk payout  forecast.

Fonterra  now expects to pay farmers between $6.90-$7.50kg/MS. That is up 20c a kg from its previous forecast range of $6.70 -$7.30. . . 

Dairy markets have hit a sweet spot but big challenges remain – Keith Woodford:

Global dairy markets continue to grow despite negative sentiment in some quarters. The Climate Change Commission expects less cows to be balanced by more milk per cow. Man-made ‘udder factories’ are yet to emerge.

The combined effect of the three latest global dairy auctions has been that US-dollar prices for dairy have risen eleven percent since Christmas. A farmgate payment above $NZ7 for each kg of milksolids (MS) of fat plus protein for the dairy year ending in May 2021 now looks close to ‘baked in’.

This means that for a second year, farmgate prices will exceed $7. This will be the first time that prices have stayed above $7 per kgMS for two consecutive years.

It will also mean that five years have passed since the two bad years of 2015 and 2016. The bad years were largely driven by EU internal quota removals and a consequent surge in EU production. . . 

Feds survey shows farmer confidence has bounced back:

Farmer confidence has bounced back to where it was pre-Covid19 but attracting and retaining staff remains a headache, the latest Federated Farmers Farm Confidence Survey shows.

Of the nearly 1,100 farmers who completed the Research First survey in the second week of January, a net 5.5% considered current economic conditions to be good. That’s a 34-point jump from the July 2020 survey when a net 28.6% considered them bad, marking the lowest level of farmer confidence in the 12 years the six-monthly survey had been conducted.

“Looking ahead, a net 43.8% expect general economic conditions to worsen over the next 12 months. That sound a bit grim, but just six months ago 58.7% of survey respondents expected a deteriorating economy,” Federated Farmers President and commerce spokesperson Andrew Hoggard said.

“I think farmers, like other New Zealanders, are feeling buoyed by the way we’ve handled the pandemic despite the torpedo to international tourism. The agricultural sector is willing and able to maintain production so long as regulatory and other stumbling blocks don’t trip us up.” . . 

Positive attitude asset during lockdown:

A new study* has found a strong ‘can do’ attitude and cooperative spirit in the agricultural industries were significant factors in minimising losses and uncertainties during the COVID restrictions last year in New Zealand and Australia.

Co-authored by Lincoln University’s Dr Lei Cong, with contributors from a number of institutions including AgResearch, The University of Queensland, NZ Institute of Economic Research, and Plant and Food Research, it measures the immediate impacts of COVID-19 control measures to June 2020 on the agri-food systems of Australia and New Zealand and how resilient those systems were.

It found the effects on both countries were broadly similar, and there were relatively minor economic impacts across the surveyed industries.

It stated the high level of ingenuity in the rural communities, both in Australia and New Zealand, was likely a key element of their resilience and capacity to overcome movement restrictions and the disruption of value chains. . . 

Kiwi conservationists count wins in war on wallabies – Nita Blake-Persen:

Pest control experts say they are finally starting to make a dent in New Zealand’s exploding wallaby population, as a battle to stop them destroying native forests rages on.

Checkpoint cameraman Nick Monro and reporter Nita Blake-Persen headed out on a hunt to see how it’s all going.

The government last year allocated $27 million towards culling wallabies as part of its Job for Nature programme.

Among those to receive funding is Dr Tim Day, a pest control expert working in the Bay of Plenty.

Wallaby numbers have been growing in the area in recent times, and Day described them as a “little known villain”. . . 

Scientists have taught spinach to send emails and it could warn us about climate change – Marthe de Ferrer:

It may sound like something out of a futuristic science fiction film, but scientists have managed to engineer spinach plants which are capable of sending emails.

Through nanotechnology, engineers at MIT in the US have transformed spinach into sensors capable of detecting explosive materials. These plants are then able to wirelessly relay this information back to the scientists.

When the spinach roots detect the presence of nitroaromatics in groundwater, a compound often found in explosives like landmines, the carbon nanotubes within the plant leaves emit a signal. This signal is then read by an infrared camera, sending an email alert to the scientists. . . 

 


How to keeping growing

15/01/2014

Business confidence is at a 20 year high lifting jobs, profits and investment:

New Zealand business confidence climbed to a 20-year high in the fourth quarter, lifting expectations for profits, hiring and investments, and raising the prospects for inflation to start to accelerate.

A net 52 percent of businesses were optimistic in the December quarter, seasonally adjusted, the highest since June 1994 and up from 33 percent three months earlier, which was itself the highest in more than three years, according to the New Zealand Institute of Economic Research’s Quarterly Survey of Business Opinion.

Domestic trading activity, which is closely aligned with economic growth, climbed to the strongest since March 2005, with a seasonally adjusted net 15 percent of firms experiencing a pickup in their own activity. Expectations for the coming quarter rose to 32 percent from 24 percent.

“This quarter every region in our survey was doing better,” said Shamubeel Eaqub, principal economist at NZIER. “Until recently much of the recovery was concentrated in Canterbury. This has now broadened to most regions across New Zealand, which points towards a more sustainable and stable recovery.” . . .

Sustainable and stable are very reassuring words, much better than boom and bust which have been used, and experienced, too many times before.

How to build on this and ensure the good times grow is the challenge, as Economic Development Minister Steven Joyce points out:

The top independent world economic brains in the OECD and IMF expect us to continue to outstrip most developed countries in the next couple of years.

At last, we have the potential to make a serious move up that fabled OECD ladder. Net migration to Australia has also dropped sharply. At around 1000 a month, it’s about a quarter of what it was, and close to its lowest point over the past decade.

There are risks – the world remains in economically uncharted waters. However, if we remain cautious and conservative in our approach, we should do better than most.

And, of course, one or two good years do not change the fortunes of a country. We need many years of higher growth to provide better opportunities for Kiwis and their families. . .

The dairy trade, particularly with China, and the Christchurch rebuild are contributing to the growing economy but they are only aprt of the story.

What’s most encouraging is that a range of our companies across a number of industries are successfully selling their goods and services around the world, despite tough economic times.

In industries like ICT, high-tech and medium high-tech manufacturing, engineering services, tourism, international education, wine and other food and beverages, New Zealand firms have got leaner and more savvy in the past few years and all that work is starting to pay off.

The big thing driving the success of our entrepreneurs is their commitment to innovation; to developing products that allow them to demand a premium price in world markets. It’s that which determines their long-term success. . . .

The government has helped by removing road blocks that discourage investment.

A lot of work has been done and laws have been changed to ensure New Zealand is more welcoming of new investment while protecting against the risks. You need constant new investment to replace some of the old industries that become obsolete as a result of revolutionary technologies such as the internet.

So how do we keep growth happening? How do we lift New Zealand’s longer term growth rate so that we add more jobs, reach our potential, and become a true “Pacific Tiger” rather than just a short-term success story? I think there are several key things:

1. Keep opening our markets and building strong people to people relationships. The lesson of the China FTA is obvious. If we can get a good TPP deal, then we should grab it – along with other FTA and trade opportunities.

2. Innovate, innovate and innovate. The National-led Government is putting a lot of taxpayers’ money into assisting firms and their ideas. As a country we are starting to see the power of innovation in our industries but we need to keep lifting private sector investment in research and development to international norms.

3. Keep building the skills of a successful and innovative trading nation. Encourage more of our young people into the careers that breed innovation, like engineering, ICT, and science.

4. Encourage more capital to invest in New Zealand. The mixed ownership programme has helped set up a stellar year for our stock exchange. We need to build on that. Capital investment in competitive industries creates sustainable jobs.

5. We need to keep removing red tape and provide certainty to investors, especially in resource industries. That means making decisions quickly and effectively, while also working to improve environmental outcomes.

6. We need to keep building infrastructure to support a growth-oriented country. Great progress has been made in electricity transmission and ultra-fast broadband. Those projects need to be finished. And we need to keep investing in our transport systems for safety and efficiency. That means high-quality four-lane roads in and out of our main centres, resilient highways elsewhere, and quality public transport that people want to use.

Finally – and above all – we need to make responsible fiscal and economic decisions that keep the tax burden low and pay off debt. We need to keep rewarding New Zealanders with efficient public services and lower income taxes than elsewhere. It’s talented, hard-working Kiwis who get out of bed every day that make all this happen. Kiwis strive and succeed because they see the benefits of their hard work. If politicians keep remembering that then New Zealand will truly become a Pacific Tiger.

That of course requires a National-led government.

Any alternatives are focussed on taxing and spending, on redistributing rather than growing, and appealing to envy rather than aspiration.


Land price lifts 209% in 6 years

12/09/2008

The price of farmland has risen 209% in the past six years accroding to Westpac economist Doug Steel.

Prices were expected to peak in 2007-08, as they did in previous cycles, in 1989-90 and 1995-96, followed by a trough in 2001-02.

It was not surprising that land suitable for dairying had led the increase given the rise in dairy prices, but Mr Steel said product prices, as they related to land prices, ignored the influence of productive capacity, future returns and the cost of production.

But the two did correlate, evident by Fonterra forecasting the milk price well ahead of the season and the impact that had underpinning land values.

“Fonterra’s early forecast of $7 a kg milk solids has given confidence to the market that high dairy payouts are going to be around for the next 12 months.”

Elevated land prices also reflected confidence in the dairy sector.

Mr Steel said dairy production had increased considerably in the past decade, and milk solids per hectare had increased by a compound rate of 2.6% a year, reflecting more more cows per hectare and also more milk solids per cow.

But Mr Steel said research showed that the top 10% of dairy farmers in the 2006-07 season were producing 25% more milksolids per hectare than an average operator.

Similarly, sheep production had improved markedly.

Lambing percentages had risen from 105% in the mid 1990s to over 120% now.

Looking ahead, Mr Steel forecast a milk payout for the coming year of $7.10 a kg m/s but revised down to $6 from $6.30 his predicted payout for 2009-10.

. .  . The return of US beef to Asia had also put pressure on prices, but growing demand from Russia was supporting prices.

Mr Steel was optimistic about prospects for the medium term.

He was equally optimistic with lamb prospects, saying prices this season should be “considerably better than the dismal returns of the past few seasons”.

He picked prices to be 50c a kg higher than they were in 2007-08 and $1 a kg better than 2006-07.

Sheep numbers were falling all around the world and meat prices in Europe were 30% higher than they were a year ago, while prices for co-products were also improving.

“While growth in demand in the EU and US may ease with economic growth, reducing supply is likely to keep prices firm.”

Chris Nixon an economist with the New Zealand Institute of Economic Research analysed the price of farmland and its reflection of economic activity for Agmardt. He presented his findings at the AGmardt breakfast during the National Bank Young Farmer contest and you can read it here.


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