Subsidies blind producers to market signals

November 24, 2015

Dairy producers overseas aren’t getting low price signals which have prompted New Zealand farmers to reduce production:

New Zealand dairy farmers’ pay packets continue to be thin because overseas farmers haven’t yet received the price signal to cut milk production on the back of a market glut and low demand, says Rabobank’s top dairy analyst.

“Current global commodity prices in dairy are easily low enough to shut off taps globally. The problem is those low prices have not been passed onto farmers in many regions of the world,” said Tim Hunt, the global agribank’s head dairy strategist on a visit from his New York base.

“(With) these current (GDT) auction results of low US$2000 a tonne, there is no farmer in Europe or the US or Latin America who can make money on that. The problem is that New Zealand farmers are the only ones who are at the moment getting the farmgate signal that reflects that. . . 

New Zealand producers have had the very strong market signal that supply is outstripping demand. The price we’re getting is low, in response to that we’ve cut costs and production.

Subsidies in other parts of the world are protecting farmers from the low prices and blinding them to market signals.


Fonterra holds 4th place in global dairy rank

July 16, 2014

Fonterra has held fourth place in Rabobank’s global dairy rankings:

  The latest annual Rabobank survey of the world’s largest dairy companies highlights the giants of one of the world’s most valuable food sectors.

The last 18 months have seen most of these players battle challenging conditions, with weak economies and supply constraints undermining sales growth in key markets. Againt this backdrop, mergers and acquistions have become an attractive route to growth and profitability. But with billion dollar deals increasingly hard to come by, dairy giants will need to acquire or tie up with more companies to sustain the same rates of growth in future. Those adept at acquiring and embracing new businesses will remain well positioned to survive and thrive. 

“Once again, giants Nestlé, Danone and Lactalis top the list, showing that the world’s largest dairy companies are reasonably entrenched,” commented Rabobank analyst Tim Hunt. “We continue to see some companies outperform their peers in sheer growth terms. In particular, the Chinese giants Yili and Mengniu, which saw their sales expand by 14% and 20% respectively, with Yili entering the top 10 for the first time ever”. 

Saputo continued its march up the list to push to eighth place, in part due to several recent acquisitions. Meiji and Morinaga slipped down the list largely due to the sharp decline in the value of the Yen (in which most of their products are sold).  

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2013 was a challenging year for most of the world’s major dairy companies, with stagnant sales volumes in most OECD dairy markets. Acquisitions have become a more attractive route to grow sales and in 2013, there were 124 dairy transactions, up from 111 in 2012 and the highest since 2007.

Positioning for maximum effectiveness in the expanding Chinese market remains prominent. In 2013, joint ventures were announced between Mengniu and Whitewave and COFCO and Danone while Yili announced a partnership agreement with Dairy Farmers of America.

Mengniu took a stake in China Modern Dairy to secure raw milk supply. A further joint venture is pending between FrieslandCampina and Huishan. Despite the increase in transactions, the dairy sector saw no billion dollar deals in the 12 months to 30 June 2014.

While underlying growth will pick up in coming years, many markets will not return to the rapid growth rates seen before 2008. In this context, mergers, acquisitions and joint ventures will remain a key avenue to growth and profitability.

“The catch is that the number of attractive targets is shrinking and multiples have risen,”  explained Hunt. “With billion dollar value deals harder to come by, dairy giants will need to acquire or tie up with more companies than in the past to sustain the same rates of growth”.

Fonterra made a record pay out to its suppliers last season but that was overshadowed in the media by its poor handling of the whey protein concentrate debacle.

However, it maintained its 4th place in the rankings.


Rural round-up

September 25, 2013

Increases for selected fish stocks show success of QMS:

Primary Industries Minister Nathan Guy has today announced increases to catch limits for a range of New Zealand fisheries, thanks to healthy stock levels.

“These decisions today reflect the success of the Quota Management System (QMS), which is recognised as world leading. It is driven by science and responsive to change, which means that as stocks improve we can increase our sustainable take”, says Mr Guy.

Healthy stocks have led to increased Total Allowable Catch (TAC) limits for Hoki 1, Ling 5, Ling 7, Orange Roughy 3B, Scampi 2, Kingfish 7, Leatherjacket 3, Oyster 4 and Sea Perch 1.

“For several stocks, such as Ling 6, Bluenose 1, 2, 3, 7 and 8 and Snapper 7, I have decided to maintain the current TAC. . .

Regulatory Californication – Willy Leferink:

Isn’t it amazing how some people love catastrophy  Last month’s dairy recalls saw some truly leap off the deep end and when we were just getting through that, others latched onto a report by a New York-based dairy strategist.  It warned the New Zealand dairy industry could be squashed by a resurgent U.S. one.

I am only going off media reports but “Arise the Hunter: The Re-orientation of the US Dairy Industry and Implications for New Zealand,” by Tim Hunt certainly impressed the media.  The U.S. dairy industry produces five times the volume of milk as we do and its star used to be California.  I say ‘used to,’ because our new found love of red tape has me worried our dairy industry may be undergoing ‘Californication.’  There is a raunchy TV series going by that name where a fictional novelist solves his ‘writer’s block’ by having affairs.  Is our affair with regulation going to tie our industry up in knots, just like it did to California’s?

I learned how much California has become horridly regulated from Nicola Waugh.  As a Nuffield New Zealand Farming scholarship recipient, she travelled overseas in 2011 from March until October.  As a farm consultant for AgFirst Waikato, she also understands what regulation is. . .

Stay safe these holidays:

With school holidays starting this week, Federated Farmers is putting out a timely reminder to be vigilant with farm safety.

“Our home is our work place and when the children are home from school, we need to be more alert to hazards around the farm,” says Jeanette Maxwell, Federated Farmers Health & Safety Spokesperson.

“Last year we had 14 fatalities and 408 serious injuries on farm, don’t become a part of the statistic these holidays. Be mindful of visitors on farm wanting to experience the rural lifestyle, educate them on hazards and keep them safe. . .

More options for growers under Wools of New Zealand / New Zealand Wool Services International agreement:

Growers will be the ultimate winners of a direct farm-to-scour service agreement between Wools of New Zealand and New Zealand Wool Services International (NZWSI).

Wools of New Zealand will be the face to their grower shareholders and supporters with NZWSI providing all of the back office logistics to move wool efficiently from farm directly to the scour and ultimately, to market.

Ross Townshend, Chief Executive of Wools of New Zealand, says the agreement is a ‘win-win’ for shareholders and suppliers providing them with access to a range of sales options including a weekly schedule, monthly plans and more Wools of New Zealand brand contracts, such as the forthcoming Camira lambswool contract. . .

Big dairy results fortnight kicks off with Synlait:

In a big results fortnight for most dairy farmers and the New Zealand economy, listed milk processor Synlait has started the ball rolling with a net after tax profit for 2012/2013, which was ahead of its prospective financial information forecast. Fonterra Cooperative Group releases its 2012/13 results tomorrow with the other two cooperatives due to follow next week.

“For supplier-shareholders of Fonterra, Synlait, Tatua and Westland, this is going to be a huge fortnight, given Open Country Dairy has already paid its suppliers for the 2012/13 season,” says Andrew Hoggard, Federated Farmers Dairy Vice-Chairperson.

“I would add for New Zealand, too, since this relates directly to over a quarter of our country’s merchandise exports. . .

Wrightson chair John Anderson to retire at October meeting:

(BusinessDesk) – PGG Wrightson chairman John Anderson will retire from the rural services company at the annual meeting next month.

Anderson, who joined the board during a tumultuous shake-up in 2010, will step down from the board at the Oct. 22 meeting, the company said in a statement. A new chairman will be appointed after the meeting. Anderson’s appointment coincided with a changing of the guard in 2010 when Craig Norgate and Baird McConnnon left the board and China’s Agria Corp came on as a cornerstone investor, going on to mount a partial takeover of the company. . .

Lindauer Leads Lion’s Charge at New World Wine Awards 2013

New Zealand’s most popular sparkling wine wins gold medals at wine awards

23 September 2013 – Lindauer Classic Brut Cuveé, Lindauer Classic Rosé and Saints Sauvignon Blanc 2012 have scooped gold medals at the New World Wine Awards 2013, leading the way for Lindauer Special Reserve Blanc de Blancs which won silver. In addition, following on from its gold medal win, Lindauer Classic Rosé was then named Champion Bubbles.

A record number of entries were received for this year’s New World Wine Awards, which were judged by an independent panel of 13 wine experts at Wellington’s Westpac Stadium in July. . . .

Spy Valley Chardonnay Named Champion White Wine:

Marlborough’s Spy Valley Wines is delighted to announce that their 2012 Chardonnay has been named Champion White Wine at the 2013 New World Wine Awards.

Now in its 11th year, the New World Wine Awards utilise the internationally recognised ‘20 point scoring system’, with wines blind tasted and evaluated by an independent panel of 13 judges, many from overseas. Winners of each category are then re-judged to find the Champion Red, Champion White and Champion Bubbles, with the sole criteria being that all wines must retail for under $25. . .

Mission Reserve Chardonnay 2012 wins Gold at the 2013 New Word Wine Awards:

One of only two Chardonnays to be awarded Gold.

The Mission Reserve Chardonnay 2012 is one of only two Chardonnays to win Gold at the 2013 New World Wine Awards. These Awards are exclusively for the very best wines retailing at under $25.

In total, a record 1,099 wines were entered from 157 wineries, with the Mission Reserve Chardonnay taking out Gold and a coveted place in the Top 50.

This recognition follows on from a Gold at the 2010 Awards, and marks 15 years of local and international acclaim for the classically crafted Hawke’s Bay Chardonnay. . . .


Rural round-up

August 17, 2013

Chinese Kiwis defend NZ brand:

An analysis of social media in New Zealand and China has found an emerging group of Chinese residents in New Zealand and others with close ties to China, vigorously defending New Zealand’s brand in the wake of Fonterra’s whey protein contamination crisis.

The analysis was carried out by Dr Hongzhi Gao, a senior lecturer at Victoria Business School and senior research fellow of the New Zealand Contemporary China Research Centre; Vallen Han, Asia marketing director of New Zealand Post; and Simon Young, chief executive of syENGAGE, a social media consulting firm. . .

Two Fonterra managers sent on leave in botulism probe:

Fonterra has placed two of its senior managers on leave as it continues its internal investigation into the whey protein botulism scare.

Fonterra chief executive officer Theo Spierings says the company is moving quickly and establishing key facts and as they emerge they are taking appropriate action.

He says placing two people on leave does not pre-empt the findings of the review and they will continue to be involved in the ongoing investigation.

The review will be finished by the end of the month. . .

Beware sleeping US dairy giant – expert – Hugh Stringleman:

The giant United States dairy industry is re-gearing for exporting and may rival soon the influence of New Zealand in world dairy trade.

Rabobank International global strategist dairy Tim Hunt gave that message to dairy audiences throughout NZ last week.

An Australian economist, Hunt is based in New York and has a special interest in the contrasts between Oceania and North American dairying.

His prepared notes were called “Arise the Hunter, the reorientation of the US dairy industry and implications for NZ”. . .

Economy-wide lessons as white gold loses its shine – Eye 2 the Long Run:

It is critical to understand that the issues for the NZ economy arising from the current Fonterra debacle  (as opposed to dairy farmers and Fonterra directors and managers) is assuredly not a “public relations” issue or one of “reputational management”. The best PR firm in the world cannot resolve such issues through spin – nor should it try.

Calling for better “PR” is simply a form of denial.

Key problems from an economy wide perspective are:

1. Nowhere else to turn

The choice for producers has been narrowed by statute to Fonterra for some 90% of the market. There is virtually no diversity, depth or spread of processing in the industry. The statute prevents it. Dissatisfied producers have nowhere else to turn. All eggs in one basket – then we drop the basket. . . .

Lustrous lambs wanted:

The hunt is on for lambs with unusually lustrous fleece. Crown Research Institute Agresearch says if you have any such lambs this spring, it wants to hear from you.

“We particularly want to understand what proteins or cellular structure may be special to their wool, and then whether these are the same as those in the lustre breeds,” says David Scobie, who is leading the lamb quest.

“Studying a naturally occurring mutation with such a dramatic effect on fibre characteristics provides a unique opportunity to understand the genetic and physiological mechanisms affecting fibre quality.” . . .

AgResearch overhaul tipped to boost research – Annette Scott:

A proposal to overhaul AgResearch’s campus and farm infrastructure will create a vital agricultural research institute for the next 50 years, AgResearch chief executive Tom Richardson says.

The restructuring proposal involves axing 180 jobs at Ruakura, near Hamilton, and 85 jobs from the Invermay site near Dunedin.

The $100 million proposal would result in large campuses at Grasslands in Palmerston North and at Lincoln in Canterbury.

A final decision is expected next month following a four-week consultation period. . .

Federations’ ‘www.ruraljobs.co.nz’ a success:

Federated Farmers is thrilled its ‘Rural Jobs’ service has hit 115 job advertisements since the beginning of the year, promising a bright future for agricultural careers.

“www.ruraljobs.co.nz is a fantastic service and it is picking up traction as one of the leading rural job advertisers,” says Conor English, Federated Farmers Chief Executive.

“Great staff are critical to any farming operation. Federated Farmers wants to ensure that our youth realise these opportunities are available to them and that employers have all the right documentation to know what the legal requirements are.

“Our www.ruraljobs.co.nz is not only the place to go to match people with jobs, but also where you can get up to date employment contracts reflecting the latest law changes, information on nationwide wages and salary packages, immigration ACC and OSH requirements and free legal advice for our members. It is a great one stop shop, tailored for the farming sector” . . .


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