NZ’s dairy industry, under constant fire from critics for its methane emissions, pollution of waterways and intensive farming practices in recent years, almost overnight is shaping up to be one of the country’s saviours as the economy dives into recession.
While other key export sectors — tourism, forestry, education — are jack-knifed by the coronavirus pandemic, the dairy industry’s earnings more than ever before are proving it to be what the critics have scorned: “ the backbone of the economy”.
The much maligned Fonterra Co-op this week reported total group sales revenue in the six months to January 31 increased by 7% or $678m to $10.4bn, mainly due to improved pricing and the product mix sold. That compared with $9,745bn in the January 2019 half.
And Fonterra is keeping its farmgate milkprice forecast in the $7-$7.60 /kg range. That means more than $11bn being paid to its suppliers.
The co-op’s net profit of $293m was a big turnaround from the $72M in the previous year.
And though global dairy trade auction prices have weakened, the fall in the NZ dollar against its US counterpart suggests returns can be sustained.
Fonterra last year reported a full-year record loss of $605m, then launched a massive reorganisation of its operations as well as reducing debt in a back-to-basics approach.
CEO Miles Hurrell is talking up a more dynamic approach to its investment portfolio.
“We need to get to a mindset that if we buy an asset or develop something new, to keep continually reviewing it and asking if this is the right time to harvest it and move out”
Commenting on the impact that coronavirus had on Fonterra’s ability to get product into China, Hurrell reports there have been delays, but nothing of concern in terms of landing product there.
That matches what A2 Milk earlier reported on the impact of the coronavirus outbreak that
“ … product is flowing and products such as ours are getting priority for clearance at ports”.
A2’s half-year revenue rose 31.6% to $806m, and it is looking at manufacturing in its own right, due to the increased scale of its infant nutrition business.
A2 Milk has a stake in Synlait Milk which this week reported revenue in the January half rose 19% to $559m, with sales of consumer-packaged infant formula rising 22%.
Point of Order has not sighted reports of how other dairy producers like Open Country, Tatua, Westland and Oceana are faring but we reckon it is as fair bet they too have solid results from their exports.
The overall performance of the dairy industry, and their suppliers, begs the question: how would the country’s balance of payments be looking without them?