Latest lift in auction prices is an encouraging sign for the fortunes of dairy farmers

The good  news   was  running  in  favour  of  New Zealand’s  meat  producers early this week.  Today it is running in  favour  of our  dairy  farmers.

The  first  Fonterra  global  dairy  trade  auction in  three weeks  had  the  most  bidders  in  a  year and  charted  prices  on   a  rising  trend,  confirming  the  firm  tone  at the  previous  event   was  not  a  one-off.

The global dairy trade price index posted its biggest increase since early March, when it jumped 15%.

The key WMP product rose 3.3%, SMP was up 7.3% and both butter and cheese each rose almost 4%. Prices rose 4% overall in USD terms, although they were only up 1.2% in NZD terms, held back by a firming currency.

The average price for WMP was  US$3691 (NZ$5200) a tonne, with gains across all contract periods. The average price is sitting 24%  higher than at the same time last year. Continue reading “Latest lift in auction prices is an encouraging sign for the fortunes of dairy farmers”

South American curbs on beef exports bode well for NZ’s prospects

New Zealand’s beef exports may suddenly be  in high demand from  overseas  markets, in   the  wake  of  the world’s largest beef exporter, Brazil, suspending its beef exports to its No. 1 customer, China, after confirming two cases of “atypical” mad cow disease in two separate domestic meat plants.

China and Hong Kong buy more than half of Brazil’s beef exports.   NZ’s  sales are relatively  modest, by comparison, but  reached  36%   of  our total  beef  exports   last  season. 

The  other  big exporter  to  China,  Argentina,  in  June  decided  to   restrict  exports, with the  aim of  boosting domestic  supply.  Argentinian beef exports are to be  limited to 50% of the average monthly volume exported from July to December 2020.

Because  Argentina was the fifth largest beef exporter in 2020 and the second largest supplier to China, its cut in export volumes has the potential to have a significant impact on global beef trade.

NZ   producers  who  were  reported  to be  heading  into spring  with some confidence could  find  prices — which were  already  strong — climbing  even  higher. 

Rabobank,   in  a  recent  report,  says  pricing remained elevated over the past three months. This high pricing comes off the back of strong demand from China and suppressed beef export volumes from Australia,.

The report says Argentina’s restrictions will be reviewed at the end of this month.

Meanwhile   China  is   facing  its  own  problems  through its  poor  job  of  curbing  swine  fever. With  one  of the  world’s   highest rates  of  pork  consumption,  China’s  failure has   wrought  havoc in  its  domestic  supplies,  costing  between $50bn  and $120bn, according  to the Asian  Development  Bank.

If  China   faces  years-long  disruption in  pork  supplies, as  some reports  suggest,  ,  the  outlook for    beef producers, here   and  with other  exporters,   should  shine  even  more  brightly.  

A NZ-UK trade agreement will be another – albeit small – step in the re-ordering of global trade

There is increasing chatter in London that the NZ-UK trade deal will be announced in days, with invitations to briefings being diaried for Tuesday.

But it’s worth noting that the UK commentators seem to be excising the prefix ‘free’ from the ‘trade agreement’, perhaps reflecting better understanding that these days there is no free trade without a substantial regulatory component.

While NZ’s producers will no doubt be grateful if they get an Australian-style phased reduction of tariffs and quotas as has been briefed, the non-tariff/quota regulatory barriers will be just as important in the long run.

That at least would seem to be the view of the eminent organ, the Irish Farmers Journal, in its assessment of the currently-fraught implementation of free trade arrangements between the EU, Ireland, Northern Ireland and Great Britain (ie, the UK minus Northern Ireland).

Continue reading “A NZ-UK trade agreement will be another – albeit small – step in the re-ordering of global trade”

Dairy auction prices deliver a pick-me-up for farmers – and a tonic for the economy, too

New Zealand is back in lockdown and hopes of an early border   reopening  have been dashed, but  the   cows  still  have to  be  milked.  And  injecting  a  cheerful  note  into  an otherwise  downcast  country  this  week,  prices  at   the  latest  Fonterra global  auction  broke  a  losing run of  eight  consecutive  falls,  banishing  fears  that  the  opening  price  for  the  season  might  have to be trimmed.

The co-operative has set the opener  for the 2021/22 season at between $7.25kg/MS to $8.75  with a mid-point of $8. Its previous highest-ever opening price was $7kg/MS.

At  this  auction,  the price  index  lifted  0.3% from the previous auction a fortnight ago,  with the average  price   at US$3,827.  Prices for skim milk powder, butter and anhydrous milk fat rose, while whole milk powder declined. The average price is sitting 21% higher than at the same time last year.

“The cream group and skim milk powder did the heavy lifting, while whole milk powder lost further ground,” said NZX dairy analyst Stuart Davison. “Cheddar prices gained also, while lactose prices finished the auction unchanged.”

The average price for WMP, which has the most impact on what farmers are paid, fell 1.5% to an average US$3552 (NZ$5040) a tonne, after a 3.8%  decline at the previous auction.

“WMP prices continue to let the team down, but it seems that the momentum of the WMP price slide has slowed, and prices might start to find some support in the near future,” Davison said.

North Asia was the largest buyer of WMP, although the region bought less than at the previous auction and significantly lower than at the equivalent event last year, he said. Buyers from the European Union, the Middle East, Africa and South and Central America all purchased more whole milk powder at the latest auction.

“This trend in buying highlights the current level of global demand for dairy products,” he said.

The  very  firm  prices   at  the   auction  confirm that  the  country’s primary   industries  are  still underpinning the export  economy, which  suffered  the loss  of  earnings  from  international tourism  and education when Covid-19  hit.

The ANZ World Commodity Price Index came off its record level  last  month when it eased 1.4%. In local currency terms,  though,  the index barely changed, lifting just 0.1% m/m, as lower commodity prices were offset by a softening in the NZD trade weighted index.

Dairy industry emissions depend on who does the measuring but Greenpeace presses for a culling of the herd regardless

Greenhouse  gas  emissions  from dairy farming  have  reached  an all-time  high – but emissions from the dairy cows themselves have dropped year-on-year.

Confused?

Well  you  might be.  And  to  many  it  might not matter  much, but  for  NZ’s  most important  export  industry, it looms  as  a  vital issue.

The  calculation depends – apparently – on who collects the  statistics. The first  is from Statistics NZ, the  second  from the Ministry  for the Environment.

Inevitably, the industry says the  second is the better measure because statistics which show dairy farming emissions have increased capture too many irrelevant categories.

Radio  NZ  reports  Stats NZ figures show dairy cattle farming emissions rose 3.18% (up 546.2 kt CO2-e to 17,719.4 kt CO2-e) between 2018 and 2019, the most recently reported year. This is the highest figure on record, dating back to at least 2007.

The Stats NZ figures count all emissions produced on dairy farms, regardless of what the emissions stem from. Continue reading “Dairy industry emissions depend on who does the measuring but Greenpeace presses for a culling of the herd regardless”

NZ dairy industry’s biggest challenge is meeting methane gas emission targets

New Zealand dairy farmers are some of the most efficient producers of dairy milk in the world, and while the past year has been tough for many industries, the overall picture for dairy has been overwhelmingly positive.  Returns to farmers have been at record levels,. along with the economic contribution to NZ.

Dairy  export receipts are  nudging $20bn  a  year, up  from $4.58m  in 2000.

But  now  the  industry  is  facing  its biggest  challenge.

Dairy  cattle are  responsible  for  22% of  NZ’s emissions. Can  NZ  meets  its methane  emission  targets  without  slashing  the   size of the  national  dairy  herd?

The  threat of  global warming  has  become all too plain  to  New Zealanders  in recent weeks and the pressure  on   the  government to  act  is  mounting.

It  can’t   dodge  making  decisions  on  the  Climate  Change Commission  report  it  received   earlier this  year. But  its  proposals  could  have  a  severe  impact  on   the  dairy industry. Continue reading “NZ dairy industry’s biggest challenge is meeting methane gas emission targets”

McBride puts his stamp on Fonterra’s capital restructuring proposals

The big  dairy  co-op  Fonterra  has  moved to make  its  capital  restructuring  proposals  more  palatable  to  its  10,000  farmer-shareholders as  it  seeks to  slash  the  drastic entry  cost  to  become a  new  supplier.

Faced  with  a  future where  total milk production  is  flattening, Fonterra  needs    more  flexibility in    its  capital rules, the  most  burdensome of which has been the compulsory requirement to invest huge sums of capital just to supply.

The  revisions now   being  put  forward bear   the  stamp   of  chairman Peter  McBride, who  in an earlier role  successfully carried  the  kiwifruit  growers in   Zespri through   a  similar  capital  restructure.

McBride, after  taking  the chair at  Fonterra,  soon realised  the need for  change in the one-size-fits-all compulsory capital structure  requiring all shareholders to hold shares on a 1:1 basis. It  has become a  key factor in farmers deciding to leave.

Working  over   feedback  since  the first reform proposals were  outlined in  May,  Fonterra’s  board found several  themes emerging,  and   now sees  the need to  re-shape  several of  them. One of  the  main  worries revealed  in  the  initial  consultation related  to  the farmer-only market and its impact on the share price.

Changes being considered to the preferred option initially put forward  include adjusting the proposed minimum shareholding requirement for farmers and enabling share milkers and contract milkers to own shares.

A minimum shareholding requirement of 33% of milk supply, or one share per 3kg/MS, could be required. The preferred option had previously been 25%.

The entry timeframe for farmers to join the co-op could be extended from five to six years, while current shareholders would be given more time to exit – up to between 10 and 15 years from five years. Continue reading “McBride puts his stamp on Fonterra’s capital restructuring proposals”

Farmers contribute much to NZ’s balance of payments and our standard of living – but some ministers don’t grasp this reality

Global  prices for New Zealand products  from the  agricultural sector, as measured on the ANZ Commodity Price Index,  have risen for eight consecutive months to hit a  new  record in May.  Prices on the world index  are  up 18% this  year, or 17% in  local currency terms.

Some  economists are predicting more  rises  are  in  store  this  year.

The  gains  have  gone  some way in the  balance of  payments to offset big losses on  the  foreign  currency  front  from the overseas tourism and   international education sectors.

Westpac senior agri-economist Nathan Penny says being a food producer has been positive during Covid-19 as people still need to eat in times of crisis.

NZ   has  also  benefited because its key Asian markets handled Covid-19 well and got their economies back up and running quickly, ensuring resilient demand for our products that is pushing up prices. Continue reading “Farmers contribute much to NZ’s balance of payments and our standard of living – but some ministers don’t grasp this reality”

Look who’s singing the farm sector’s praises – none other than the Minister whose environmental rules constrain them

Labour ministers  are   beating  the farming  drum  (as never before).

On  stage  at  the Fieldays at   Mystery Creek, one of  the  first  out of the block (given the  absence  of Agriculture  Minister  Damien O’Connor  negotiating  free  trade  in London with the UK)  was  Oceans  and  Fisheries Minister David  Parker. 

He  was  singing  the  praises of  the  sector,  which  might have come  as a  surprise  to  many  within the  farming  industry,  who  have found  the strictures  he has delivered from his Environment  portfolio  rather  hard  to  digest.

Parker   used  the  Fieldays platform to  talk up  the sector which  he  declared had performed remarkably well in the face of Covid-19.

“NZ’s farmers, growers, fishers, processors, makers, and crafters have risen to the challenges that 2021 has presented”.

Farming exports are forecast to hit a record $49.1bn, up 3.4% over the next year, and The Situation and Outlook for Primary Industries report says by June 2025 the sector’s exports are forecast to reach $53.1bn. Continue reading “Look who’s singing the farm sector’s praises – none other than the Minister whose environmental rules constrain them”

How morale among our food producers is flagging in the face of Covid fatigue and Ardern’s regulatory agenda

KPMG’s global head of agribusiness, Ian Proudfoot​,  reports morale in  NZ’s farming  industries has slumped over the past year, with industry leaders struggling under the pressure.

“We could sense anger during our conversations, particularly in relation to the labour shortages the sector faces”.

Proudfoot is the  author of  the  KPMG “Agribusiness Agenda” , delivered at a   breakfast session at the opening  day  of  the  Fieldays,   billed  as the  largest agricultural event  in  the  southern  hemisphere.

He  believes  NZ’s role in a global “food renaissance” could be hampered by Covid-19 fatigue and sweeping regulatory changes.

That  presents   a  huge  challenge  for  any  government – particularly  one  that  has  been   perceived to be no  friend  to farmers. Yet Prime  Minister  Jacinda  Ardern put  on a  bold  front  when she  and  several  of  her  ministers appeared  at  Mystery  Creek.

Only  a cynic  would  suspect  she sees  an  opportunity  to  sustain  the strength  of  Labour’s  resurgent  vote  among  rural  communities  at  the  last election. Continue reading “How morale among our food producers is flagging in the face of Covid fatigue and Ardern’s regulatory agenda”