Fonterra milk price forecasts give a fillip to farmers and the regions – the co-op has become an NZX favourite, too

Fonterra has  confirmed  what  most analysts  had  been predicting and lifted its 2020/21 forecast farmgate milk price range to  $7.30 – $7.90 kg/MS, up from  $6.90 – $7.50. This should  send a  further surge of  confidence  across  NZ’s  rural regions, hopefully in  a  wave  strong enough to encourage  farmers  to plan to  increase production  next  season.

As  a  result  of  the  higher  payout, the co-op  will be  pumping $11.5bn  into the  rural economy, well ahead of the $10bn predicted  last year. Although  farmer-suppliers  to Fonterra  are paid off   the mid-point  $7.60  of the new range, most analysts  believe the final payout will reach $7.90.

That  should  ensure a  handsome  return  for most  suppliers,  whose  cost  of  production averages  around $5.80-$6 kg/MS—and for the  highly  efficient, at below $4, an even   better one. Continue reading “Fonterra milk price forecasts give a fillip to farmers and the regions – the co-op has become an NZX favourite, too”

Covid-19 is doing the govt a favour by focusing attention away from its failures and follies

The  reverential   aura enveloping  the  Ardern government   is beginning to fade and ministerial  fallibilities are  emerging. Just as  suddenly, the  media  are  offering  some  space  to  critics  of  the  government.

Richard  Prebble  is  calling for a  Royal Commission into   the  government’s  handling of the pandemic response.  ACT’s  David Seymour  sees  the  government’s rollout of the vaccination programme  as  an “insulting lottery”.

The Prime Minister’s   famed  kindness  and compassion  did not extend to “Case L”  in Papatoetoe who, she said,  ignored instruction in going to work at  a  local KFC.  But  the PM’s  anger  was  misplaced: “Case L”  had  been told  she was free to go to work.   “Case L” is  said  to have been distressed  by  the  vilification she suffered  in social  media.

And  now it  is  becoming apparent how  the pandemic and the government’s response to it are wreaking  havoc among  businesses.  News media have reported  this week how   businesses  which have held on for months of  Covid-19  disruption  are  starting to fold as  pressure  mounts  with  no clear  end  in sight. Continue reading “Covid-19 is doing the govt a favour by focusing attention away from its failures and follies”

Dairy price lift will give fillip to regional economies and fortify Fonterra’s confidence in pressing on with capital restructuring

Our  dairy provinces  are  reverberating to  the  news that prices  soared  at the  latest Fonterra GDT auction. The prosperity  this  brings  to the regions  will  provide a  significant counterbalance  to the loss  of earning power  in the tourism sector because of the pandemic.

The average price at the auction climbed 15% to $US4,231 a tonne but,  more  importantly, the price for wholemilk  powder, which is  the  key to the payout  to farmers,rose an astonishing 21% to $US4,364 a tonne. Butter  was  up  sharply to $US5,826 a tonne, or 13.7%.

Overall, the increase compares with a 3% rise at the previous auction two weeks ago.

The main dairy companies have recently narrowed their forecast payouts to farmers for the current season to above $7 per kilo of milk solids. Continue reading “Dairy price lift will give fillip to regional economies and fortify Fonterra’s confidence in pressing on with capital restructuring”

The PM was angry – but her halo is slipping and Aucklanders are riled, too, by roadblocks and closed businesses

Prime   Minister  Jacinda  Ardern has admitted  to   the  NZ Herald’s  Claire Trevett  that ”Covid  is  constantly in my mind”.

In an interview  at the weekend, extending  over two pages of  the newspaper, Trevett observed:

“Ardern is  now  very confident in her Prime Ministerial  skin. There is  nothing  tentative  about her  leadership.

“She has admitted suffering from a  touch of self  doubt in the past— but if she, or others, ever thought  she  was  not up  to the  job, the  past year has  dispelled  it  completely. There  is  also optimism in her.”

Trevett  went  on to  assert –

“The  most recent  community cases have been dealt  with, with limited  disruption  to people’s  lives” .

On  that, there  may be  a  question mark.  The  interview  appeared   the  very day  another  community Covid case had  led to  a fourth lockdown of  Auckland.  The  decision had been taken by  Cabinet  on Saturday  afternoon  and announced  by Ardern at 9pm. Continue reading “The PM was angry – but her halo is slipping and Aucklanders are riled, too, by roadblocks and closed businesses”

Govt funding for Air NZ is among the big issues around future of our tourism industry

As  reports pile  up on the success of  vaccines against  Covid 19, is  it  time  for  New Zealand  to think of how  it  will  return  to   normal?

The  vaccines  will  not  simply eradicate  the virus, so governments will need to  start thinking about  how  to live with it.

The London “ Economist”  last week pointed  up the problem for NZ, a country which it  said had  sought to be  Covid-free by bolting its  doors  against the  world.

“ In this  way it has kept registered deaths to just 25, but such a draconian policy makes no sense as a permanent defence.   NZ is  not  North Korea. As vulnerable Kiwis  are vaccinated , their  country will come  under growing pressure to open its  borders—and  hence to  start to tolerate endemic Covid-19 infections and deaths.”

The task  for  governments is  to  work out  when  and how  to switch from emergency  measures to policies that are  economically  and socially  sustainable indefinitely.  The  Economist reckons the  transition  will  be  politically  hard   in  places  that have invested  a  lot  in being covid-free. Continue reading “Govt funding for Air NZ is among the big issues around future of our tourism industry”

Child poverty measures show improvements – but the PM is pressed to pump more money into income support

All  nine child poverty measures showed downward trends, compared  with  two years  ago, Statistics  NZ reports.

Hurrah!  Another  victory  for  Prime Minister Jacinda  Ardern, it seems.

After  all, she made it  clear   as  she took office that the defeat  of  child  poverty  was her  special priority.

So  what’s  this grumbling from the Child  Poverty Action Group?

The poverty  statistics,  although not  surprising, are “deeply disappointing” and for  families  with disabilities  they are “absolutely shocking”, according to Professor Innes  Asher, chair  of the CPAG.

Most of the nine measures showed no statistical change over the 21 months to March 2020.

“We’ve long said that poverty for children is a huge problem and doing just a little bit will not be enough. We urgently need the government to raise income support significantly for our children in families receiving benefits, and the government needs to use a multi-pronged approach to tackling the housing crisis.

“Incrementalism isn’t working. Persistently delaying implementing the bulk of the recommendations of the Welfare Expert Advisory Group isn’t working.”

The Children’s Commissioner, Andrew Becroft,  chimed in  that the  government needs  to apply  “big, bold initiatives”.

The  first  priority must  be to lift benefits, he says.

The worry (both critics say) is that they know child poverty will have increased due to COVID-19. The data released this week was collected before the onset of the COVID-19 pandemic.

Nearly one out of every five families living with disabilities live in material hardship, more than double the rate of families with no disabled members, the CPAG says.

“Discrimination is the reason why children who are disabled, or who have a disabled caregiver or sibling, are more likely to go without,” says Professor Asher.

“It doesn’t have to be this way, and it absolutely should not be this way. Other countries such as the UK acknowledge families with disabilities have greater expenses, and they support those families so they are no more likely to live in material hardship than others.”

Among the nine measures, the one bright note is that material hardship has definitely reduced overall (in a statistically significant way) from 13.2% to 11%.  That’s a reduction of around 24,000 children, and is likely (although not definitely) to have reduced somewhat for young Māori, from around 22.6% to 19% – around 11,000 young Māori may no longer live in material hardship.

“We expect that we’re probably seeing the effects of the Winter Energy Payment, the extension of free doctors visits to all those aged 13 and under, but also the mushrooming of private charity – food bank numbers have increased massively over the last few years,” says Professor Asher. 

However, material hardship rates for Māori and especially Pacific children are still far above national rates overall: nearly one in five Māori children (19%) live in material hardship (around 54,000 children), and more than one in four Pacific children (25.4% or around 37,000 children) compared with just over one in ten children overall (11% or 125,000 children).

Overall, 168,000 children are still in the severest income poverty, below the 40% income poverty line.

Perhaps  then it is  not  quite  the policy  triumph government  flaks  would  have us believe.

Still, the  Prime  Minister  says:

“We are still working  on it”.

And  the  Finance  Minister Grant  Robertson  is chuffed    that    NZ’s  sovereign currency ratings  have been raised by international agency S&P  on the basis  of  a  stronger-than-expected  recovery.

“The  real thing for  me  is that this is the first upgrade  that  Standard and Poors have done since pandemic, so I think that is  a real sign of  confidence in  our  recovery.  The  other  thing that is  important  is the general confidence   that will flow through, not  only  for NZ  businesses, but  also  for international  businesses, people  looking to invest”.

That’s  for certain:  NZ will need huge investments coming in if eventually it  is  to formulate  the policies  that  will  rid it of child poverty.

As  the  experts  say, the government will have to change its policy so that all low-income families with children are allowed to access all family assistance – currently  children in severest poverty are denied full access to key family assistance because their caregivers receive a benefit.

Rising world market prices for our dairy products give all of NZ cause to cheer

Covid-19 has  delivered a body blow to NZ’s international  tourism  industry and bruised university incomes from foreign students — but NZ’s  primary industries  are rising to the  challenge  and yielding impressive returns week  by week.  As  a  consequence, NZ’s  economy  is  not  sustaining  the  kind of Covid damage   which – for example –   lowered  the  United Kingdom’s  GDP  by 9% last year.

Defying predictions, the dairy sector has started  the  year   strongly.  Moreover,  lamb markets did not move down as  expected but have  marginally improved  while  demand  for beef  from China has been  strong.  Log   returns are  trending up.

On the  other  hand, in horticulture, the  results  so far  have been variable:  for  example  cherry orchardists’  crops  were devastated by  the weather.

For  primary  exporters  the  problems have come  from different quarters,  first  in logistical challenges and second   from the  currency  which  has  moved up  to 72USc.  Nevertheless,  the  basic  message  is  that  the  rural  economy   has helped to fill  the  gaps  left  by the  destruction  caused by  the  Covid-19 pandemic. Continue reading “Rising world market prices for our dairy products give all of NZ cause to cheer”

Climate Change Commission has plenty of new energy developments to consider before completing its final report

Thirteen   wind farms, each the size of the country’s  largest, will need  to be  built in the  next  15 years  to power  the  country’s fleets of  electric vehicles, and boilers. That’s  what the Climate Change Commission has urged in its  recent    report to the  government.

Whether   the  country’s power  companies  will see it  the  same way  as the commission is  far   less certain. Already  Contact, one of the biggest, has stepped  up  to the plate and says  it  will  invest $580m  to build a  new  geothermal  station at Tauhara.

Contact’s  chairman, Rob McDonald,  says:

“We believe the Tauhara geothermal project is NZ’s  best  low-carbon ren ewable electricity opportunity.  It will operate 24/7, is not reliant on the weather  and is ideal for displacing  baseload  fossil fuel generation  from the  national grid which  will significantly reduce  NZ’s carbon emissions”.

Construction is  expected to be  completed  by  mid-2023. Japan’s Sumitomo Corporation  is  leading the build, in partnership   with Naylor Love  and Fuiji Electric.

Meanwhile   Genesis Energy  is  reviewing whether it  should keep its investment in the offshore Kupe  oil and gas field,  or look at “better investment  opportunities”.

It  says the field  has “attractive” cash flow and a  strong  growth outlook, and its operators are looking at further development, including  further  exploration and drilling  another well.

Kupe  provides  around 15% of  the  country’s  natural gas  and half  of  LPG demand.

Last  August  its gas  reserves  were revised  upwards  by  more  than 20%.  Its  importance to  the  country  has  risen  after  Beach  Energy  and NZ  Oil  and  Gas (Genesis’  other  partners  in Kupe)  relinquished  PEP  52717 (Clipper)  which contained  the promising Barque  prospect off  the  Canterbury coast  this  week.

NZ  Oil  and  Gas  said  it  was with “much regret”  they  gave  up the permit  after years of  work to mature  it  and  bring in appropriate partners. CEO Andrew  Jefferies  says  he  expects it  will not be  the  last offshore  acreage  to suffer  the same fate.

He  points to a  confluence of  events including adverse regulatory settings, the  dry  hole in OMV’s Tawhilki permit,the recent announcement

Terminating the  Wherry-1 drilling, and the effects of Covid drill costs having  formed  a perfect storm, making  the task of finding suitable drill partners in the required timeline impossible.

Both  Beach  and  NZOG  reaffirm their commitment  to NZ  with  Kupe   which they say “remains a  key supplier to the  country’s energy needs”.

At Kupe they are halfway through a major compression project  to maintain production, and say  the offshore  permit has both development and near-field  exploration potential.

Their enthusiasm  for  Kupe  suggests   both   could be interested   in  channelling  more of  their capital,  now  they  will be  no longer funnelling   any  towards the  Barque prospect, into Kupe. They might  also  be interested  in snapping  up   Genesis’ stake  if it comes on the market.

However  that  works  out, there  are  other interesting  moves   in the  energy  field  which makes  some of  the  Climate Change Commission’s scenarios  look  out of  date  even  before  they reach the government.

Energy  consultants    report   keen interest by  overseas  interests  in investing   in large-scale  solar  projects  in NZ,  now  that  the price  of  solar  equipment   is falling.   Where big solar  farms   can  be  located  adjacent to large sources  of demand,   the  lower  transmission costs  are  said  to make  the economics  look very attractive.

With  the  government  moving  last week to  stiffen up the Emissions  Trading Scheme, incentives  in the  energy  sector   are  changing  rapidly. Climate Change Minister James Shaw  claims  the government  had to lift the price  to emit  because  the  scheme had  failed to deliver on its primary purpose  of bring down carbon emissions.

The  Climate  Change Commission will have to bring these developments into consideration before its final report  reaches the government  for  action next  December.

There’s a good case for meeting emission targets with free-market remedies rather than central planning

Richard  Prebble,  in his  column  in the NZ Herald, is  dismissive   of the Climate Change Commission’s draft plan to reduce carbon emissions to fulfil  NZ’s  obligations  in meeting the global warming threat.

He contends the commission is proposing to  centrally plan  the economy for the next 35  years — but it’s impossible to plan 35 years out .  “It  would be like today’s economy having been planned in pre-internet 1986”.

Prebble  writes:

“So when faced with an existential  threat  like global warming why would a  government respond by using an economic tool, central planning, that has never worked?”.

The  commission intends

  • The closure of aluminium and methanol production,
  • a switch from coal, diesel and gas to electricity,
  •  dairy, sheep and beef animal numbers reduced by around 15%,
  • phase out imports of light internal combustion  engine vehicles,
  • no further natural gas connections to the grid or bottled LPG, and
  • more walking, cycling  and public   transport.

Continue reading “There’s a good case for meeting emission targets with free-market remedies rather than central planning”

Why our dairy farmers should take their own climate-change initiatives rather than wait for govt regulations

Is the  Climate Change Commission’s draft proposals to meet  NZ’s emissions targets  as  radical  as right-wing commentator  Matthew Hooton contends, or entirely “doable”  as  leftie Simon Wilson  suggests?

The  draft budgets call on  the government to ensure  the  country emits on average 5.6% less than it did  in 2018 every year  between 2022 and 2025, 14.7% less for every year between 2026 and 2030  and 20.9% less  for every year between 2031 and 2035.  This is designed to get NZ to  zero net carbon emissions  by 2050 to avoid catastrophic climate change.

Prime Minister  Jacinda  Ardern, who has said dealing with climate change  is her government’s “nuclear  free moment”,  says she will introduce new policies  and a  new international climate target to meet the shrinking carbon budgets set out by the CCC.

For  the  dairy industry the challenge looks daunting:  herd numbers  will have to be  cut by 15% by 2030, assuming selective breeding reduces biogenic methane emissions  by 1.5%  by the same year.  From  2025, 2000 hectares of  dairy land  would be converted to horticulture annually. Continue reading “Why our dairy farmers should take their own climate-change initiatives rather than wait for govt regulations”