Prices hold steady at latest GDT auction, but are there warning signs for farmers in Scope 3 pressures?

Prices held steady at the latest Fonterra  GDT auction. In USD terms, they were up 0.6% to an average $US3610, a smaller rise than the 2.4% at the previous auction.

WMP prices  held  steady at $US3400   but SMP and cheddar both rose.  Cheddar was  up 1.8% to $US4826, SMP  about +1.7% to $US3102. Butter meanwhile  was down 1.9% $US4725.

However things were undermined in NZ dollar terms. Overall prices dropped 2% in local currency as the NZD continues its puzzling rise. That means in local currency prices are down 15% over the past two months, compared with the equivalent 9% drop in the USD.

None of this shows NZ is getting on top of its of deteriorating current account deficit.

Down on the country’s dairy farms the question may be: can the big exporters  maximise their  sales in other markets such as  Australia  because  of lower local production  while  markets like  China  flat-line.

Elsewhere on the export front, some  market-watchers are encouraged by signs that the US – the world’s second-largest importer of beef after China – is likely to be looking for even more beef from global markets over the next three years, as its own domestic production declines.

On this, Rabobank says in a recent  report that while NZ is among the major global beef exporters that could help fill the gap – its own supply constraints mean it will be challenged to find additional export volumes.

Indeed, the report says, with production constraints in many of the world’s beef- producing nations, international markets will struggle to meet the gap left by the US contraction, potentially leading to an increase in global beef prices and the redistribution of trade volumes.

Meanwhile, on the global warming front, farmers, already feeling under the gun with the pace of regulatory change, are going to come under increased pressure to reduce their livestock emissions as the big milk and meat processing companies step up their climate change targets.

The country’s biggest processing companies are starting to tackle their Scope 3 emissions, which includes their indirect emissionsas they come under pressure themselves.

Lincoln University agribusiness and food marketing programme director Dr Nic Lees said people now wanted to know the carbon footprint of the whole supply chain, which was prompting greater scrutiny.

“That’s going to be where the pressure comes on farmers,” he said.

“Previously you could kind of hide things behind the farm gate, but you can’t do that any more.”

Fonterra, the country’s largest milk processor, told its farmer shareholders last month that it’s likely to set a target for Scope 3 emissions, which includes emissions from farms that supply it with milk.

And Silver Fern Farms, the country’s largest meat processor, plans to set its Scope 3 target next year, which would include livestock emissions from its farmers, something it believes will be a “game-changer”.

Fonterra has warned farmers that not meeting sustainability  expectations could see it lose customers, face trade barriers in overseas markets and restrict its ability to get bank funding.

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