Behind all the Covid headlines lurked a positive story this week.
Prices at the Fonterra Global Dairy Auction leapt 4.6% to hit an eight-year-high, as tight milk supply stokes demand for NZ’s biggest export commodity.
Almost certainly Fonterra’s farmer-shareholders will receive a record payout this season, and, with a bit of luck, this could be high enough to end up ahead of rising costs.
And even though local consumers may find themselves paying more for their milk, butter and cheese, the country benefits from dairy products boosting export returns. Some economists are predicting Fonterra’s total payout to its producers will top $14bn this season.
At the auction,the average price for whole milk powder, which has the most impact on what farmers are paid, posted the biggest gain, up 5.6% cent to US$4082 (NZ$6041) a tonne, and is now 21% higher than at the same time last year.
Among other products:
- SMP up +5% to US$3,963 or NZ$5778
- Butter up +5% to US$6,158 or NZ$8,978
- Cheddar up +1.1% to US$5,546 or NZ$8,086 (all per metric tonne)
Continue reading “Record payout for dairy farmers is in the offing – but climate change policy pressure sours the outlook”
New Zealand’s primary producers deserve a Christmas bouquet – or a big hamper stuffed with goodies – as food and fibre export revenue is projected to top $50 billion for the first time next year. They are achieving this despite the challenges of regulatory compliance, increasing costs for inputs such as feed and fertiliser, Covid impacts on freight movements and constraints around labour availability.
Total export value is expected to rise 6% to $50.8bn in the year to June 30 2022, according to the Ministry for Primary Industries’ Situation and Outlook for Primary Industries report released today.
Ministers were quick to hop on the bandwagon, despite framing many of the new regulatory constraints.
Agriculture Minister Damien O’Connor said the healthy growth forecast across the majority of the primary industries showed the future of the food and fibre sector is bright.
“This is the first time NZ’s annual food and fibre export revenue will crack $50bn – a result we should all be very proud of, particularly as we navigate the challenges of Covid-19”. Continue reading “Primary producers overcome big challenges (including govt regulations) to lift export revenue in latest forecasts”
Farmers have voted overwhelmingly in favour of a capital restructure for Fonterra—- and Agriculture Minister Damien O’Connor, who previously raised concerns about the plan, now says he is confident the government can work with the board to get the change across the line.
Fonterra chair Peter McBride last week told Fonterra’s meeting:
“Either we’re a corporate or we’re a co-operative. The current model, where we’re trying to have a foot in each camp, is not sustainable”.
Farmer-shareholders made it plain they wanted the “pure” co-op rather than the corporate model
Now it is over to the board to negotiate the “tweaks” which O’Connor says he believes are necessary in amending the Dairy Industry Restructuring Act.
O’Connor accepts the vote last week is “a very clear result”.
“I’m pleased for Fonterra. It was really important that they get a clear mandate for change and there’s an indication that the farmers are behind the board.There’s been a shift in focus for both the board and management over the last couple of years. This is an endorsement of the direction of travel.” Continue reading “O’Connor is confident the DIRA can be tweaked to give effect to farmer vote in favour of Fonterra’s capital restructuring”
City dwellers, preoccupied by Covid, may not have observed that the country’s export economy is being sustained by its primary industries. Last week came the news that Fonterra had signalled a record payout to its suppliers, pumping $13.2bn into the regions.
Some analysts think that may be on the conservative side and the final payout will surpass $9kg/MS.
In any case, the ANZ commodity price index lifted 2.8% in November, pushing it into new territory. The bank’s economists, noting that dairy prices led the charge, reported they were supported by strong gains in meat.
Again, because of the preoccupation with the pandemic, it may have gone unnoticed that meat exporters achieved record returns in the season ended in September. Total export receipts for beef and sheepmeat equalled the record returns of 2019–20 and were 17% up on the five-year average.
Beef export volumes reached a record high in 2020–21, up 8% on 2019-20 and 16% up on the five-year average. The high volumes reflected the numbers of steers and heifers processed.
The higher volumes were easily absorbed by strong consumer demand and tighter global beef supply.
Lamb export volumes in the 2020–21 season were about the same as in the previous season and the five-year average. The average export value was 4% down on the record high of 2019–20, but 8% above the five-year average. Continue reading “Wool growers, too, have something to cheer about as dairy leads the charge in brightening farmers’ prospects”
As dairy farmers prepare for the critical decision they have to make on the capital shape of the big co-operative Fonterra, they will be buoyed by the strong markets across the globe for dairy products — so strong that economists are revising their forecasts for this season’s payout.
Fonterra itself has already revised upwards its original forecast range from $7.90 – $8.90kgMS, from $7.25 – $8.75 kgMS.
The Advance Rate which Fonterra pays its farmer owners will be set off the mid-point of the range. This has increased from $8kgMS to $8.40kgMS.
ANZ Bank economists have raised their forecast to $8.80 while others, citing the futures market, see it breaking $9. Continue reading “Milk price forecasts are being lifted ahead of critical vote on Fonterra’s capital structure”
New Zealand’s agricultural industries on which the country depends for the bulk of its export income are facing a renewed onslaught from environmental lobby groups which are challenging the country’s failure to place what they see as an effective charge on agricultural emissions. But this time Jacinda Ardern and James Shaw are being bayoneted alongside the farmers.
Greenpeace spokesperson Christine Rose says:
“Jacinda Ardern and James Shaw need to show some mettle, stand up to the dairy industry and include 100% of agricultural emissions immediately”.
Forest and Bird is on a slightly more elevated plane: it says it is calling on He Waka Eke Noa to put their plan to price agricultural greenhouse gas emissions in the bin because even He Waka Eke Noa says it wont actually cut emissions”.
He Waka Eke Noa is the name adopted by a Primary Sector Climate Action Partnership which aims to support farmers and growers to protect, restore and sustain the environment and to enhance the country’s well-being and that of future generations.
According to the discussion document He Waka Eke Noa –
“Initial modelling suggests these prices would lead to reductions in total agricultural emissions of less than 1% reduction in both CH4 and N2O below 2017 levels, additional to reductions as a result of other environmental policies.” Continue reading “Greenie groups are grouching about the govt as well as the agriculture sector over greenhouse gases”
Just as the dairy season hits its peak, Fonterra farmer-shareholders are confronted with a key decision on the capital structure of the big co-op. The board is asking them to vote on the proposal at the annual meeting next month.
Consultation on the proposal with farmer-owners has been ongoing throughout the year, with some tweaks announced in September before a second round of discussions. But Fonterra leaders have been clear they wouldn’t put the reform forward for voting if they believed the support wasn’t there
Farmers have had little time to enjoy the news that the co-op has raised its forecast payout for the current season to a record level. Nor is the capital structure the only issue triggering worry in the cowshed.
The government’s focus on climate change, particularly methane emissions, is another matter weighing on the industry, exacerbated by outfits like Greenpeace shouting the odds about “industrial farming’’ and “dirty dairying”. Continue reading “Capital restructuring is one big issue for Fonterra farmers – but they must respond to environmental challenges, too”
A surge in prices at the latest Fonterra global dairy auction once again underlines how New Zealand’s dairy industry is the backbone of the country’s export economy. At the level they have reached, dairy farmers can look to a record payout this season from Fonterra.
Overall, prices rose 4.3% in US dollars, and, better still, 5.1% in NZ$. Star of the show was the cheddar cheese price, which shot up 14%, with other foodservice products also strong.
The average price for whole milk powder, which has the most impact on what farmers are paid, lifted 2.7% to US$3921 (NZ$5408) a tonne, prompting speculation it will push through US$4000/t.
A record payout is already mooted by some some economists in the agricultural sector. Above $8.80kg/MS, it might dispel the gloom being cast across the industry by Cop26, where the focus has shifted to the need to cut methane emissions.
NZ is reported to be joining more than 100 countries in pledging to reduce methane over the next decade.
Collectively, signatories to the pledge – officially launched on Tuesday (Wednesday NZ time) – are aiming to reduce the greenhouse gas 30% by the end of the decade. Continue reading “Farmers are making good money from milk – but they should brace to meet commitments to trim the methane”
In a timely boost to the rural regions, Fonterra has raised its forecast milk payment to farmers for this season to match its previous record high of 8.45kg/MS, as demand for dairy holds up while supply tightens.
The giant co-operative lifted and narrowed its forecast farmgate milk price range for the 2021/22 season to between $7.90 and $8.90kg/MS from the initial $7.25 to $8.75 kgMS.
The midpoint of the range on which farmers are paid increased to $8.40 kg/MS, from $8 last season. That would match the previous record, paid in the 2013/14 season, and would result in almost $13bn flowing into regional New Zealand.
The country is heading into its peak milk production period in late spring and output so far is below last season, constrained by poor weather and limits on expansion. Milk production is also soft elsewhere, because of poor weather and high feed costs. Continue reading “A fillip for farmers from Fonterra’s milk-payment forecast”
At first blush, there might have been some cheering in the cowsheds at results from the latest Fonterra Global Dairy Trade auction, with prices up by an average 2.2%. But the ebullience would have become more subdued as the reality sank in that the rise in the NZ dollar against the greenback meant the price slipped by 0.5% in local currency terms. Moreover, with costs rising on the farm, maybe there wasn’t anything to cheer about.
Perhaps the only ray of light has been Fonterra’s decision to offer smaller amounts of WMP on the auction platform because of strong contract demand in conjunction with the expectation this season of flat milk supply.
And the auction showed demand is highest for food-service commodities, with butter up 4.7%, cheese up 2.9%, and SMP up 2.5%.
Still, the average price for WMP in lifting 1.5% to an average US$3803 (NZ$5305) a tonne is now 25% higher than at the same time last year. Continue reading “Global dairy prices rise, hurrah – but so did the Kiwi dollar, and farm costs are climbing, too”