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”

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”

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”

Stronger business investment – by farmers, too – is essential for NZ’s post-Covid recovery

In  its Thursday editorial  the NZ  Herald  speaks an important truth:  “Investment important to  stay  on  track”.  This  won’t  have  startled  its  more literate  readers but  in  its text  it notes  the  strong result  in the latest  Global Dairy Trade auction, which  prompted Westpac  to raise  its  forecast  for  dairy giant Fonterra’s payout  to its farmers to $7.50kg/MS  this season.

“If  this turns  out to be correct,  it will represent the highest  payout in  seven years for  a  sector of  the economy that is arguably still  NZ’s  most  important, even before international  tourism was effectively suspended by Covid-19”.

The  Herald editorial  goes on to make the case that despite the buoyant mood,  the  only  realistic  way for  NZ to remain   in such  solid shape in the  post-Covid era  is  through stronger  business  investment.

This  is  the theme  which  Point  of  Order  set  out  earlier  this  week when it  contended  Fonterra  should go hard  with this  seasons’s payout  to  encourage  investment  by its farmer-shareholders  in expanding  production. Continue reading “Stronger business investment – by farmers, too – is essential for NZ’s post-Covid recovery”

Here’s the chance for Fonterra to play a leadership role and spur the others with its milk price

Dairy prices increased by 3.9% across the board at the latest Fonterra global auction. The lift followed rises of 1.3% and 4.3% in the December auctions which took dairy prices to their highest level in 11 months, defying those analysts who believed Covid-19 had disrupted dairy markets.

In the latest auction WMP rose 3.1% to $US3,300 a tonne, its highest level in 12 months. Other significant movements included a 7.2% lift in the price for butter to $US4,452 a tonne.

ANZ agricultural economist Susan Kilsby said the auction results came as a great surprise and as a very positive start to the new year. She contends it strengthens the likelihood Fonterra’s milk price payout this season will be closer to the higher end of the range Fonterra is currently forecasting.

The big co-op in December narrowed the range to $6.70/7.30kg/MS.

So what are the chances, if the trend evident in recent GDT auctions continues, of the payout going even higher? Continue reading “Here’s the chance for Fonterra to play a leadership role and spur the others with its milk price”

Dairy farmer confidence is improving but there are challenges in export markets

The dairy industry  has  recovered some  of  its  confidence, as  its  role  as the  backbone  of  NZ’s  export structure has  moved  into sharper  relief  in the  Covid-19  pandemic.

Rabobank’s  latest quarterly survey of  farmer confidence says  it  has improved from  minus 32%  to minus 23%, with  demand  for  NZ dairy products  holding up well  since the  previous survey  in September.

The  dairy  industry  over  past  seasons   has  been the  target  of  urban critics  for  so-called   “dirty dairying”, climate  change  warriors  who want a reduction in methane emissions,  and the  government, which is implementing  new  freshwater regulations. Internally the industry was  stricken  with  the  financial  woes   of   Fonterra.

Even  now  as the  industry absorbs the evidence  for greater  confidence,  it   is  not  without  strategic  concerns.    Most  of  these  are focused  on  its  Chinese markets  following  the  problems being encountered  by Australian exporters in the  wake  of retaliatory action by  the Chinese  government. Continue reading “Dairy farmer confidence is improving but there are challenges in export markets”

Innovation works very well indeed

Matt Ridley – former science editor of The Economist and prolific popular science writer – has tackled a slippery subject in his book How Innovation Works’. He succeeds in painting a vibrant and at times counter intuitive picture of this process. One that policy makers and public alike can usefully ponder.

A major contribution is demystification.  He trashes the model of a tortured genius locked in the lab. Innovation comes from lots of people, competing or in concert, working by trial and error, sharing or stealing knowledge. It occurs when the conditions are right, because it bubbles out of the accumulation and testing of knowledge (hence the prevalence of simultaneous invention from calculus to light bulbs). ‘Ideas having sex’ is his metaphor of choice. And this tends to happen where innovators can gather and experiment free of restrictions.   

Continue reading “Innovation works very well indeed”

A2 Milk has lost  some of its sharemarket  gloss but has  become a formidable  dairy player with a bright outlook

Two  encouraging signals from the  dairy industry this week underlined  its strength  as  the backbone   of the  NZ  export  economy, all the  more vital since  the  Covid-driven collapse  of the international tourist  industry.

First  came  news that prices  strengthened  at the  latest  Fonterra  global dairy  trade  auction, with  the  average price reaching  $US3157  a  tonne. Prices for other products sold were mixed, with gains for butter and skim milk powder, but falls for cheese and other products.

Analysts  said  it  was  positive  to see  good, strong  demand  from   China. The  price  of  wholemilk powder  which  strongly  influences the  level of  payout to Fonterra’s  suppliers  moved  up  1.8% to $US3037  a tonne.

 ANZ agri-economist Susan Kilsby said there had been some concerns that stocks may be building in China, so it was really positive to see good, strong demand from that market for the dairy industry. Continue reading “A2 Milk has lost  some of its sharemarket  gloss but has  become a formidable  dairy player with a bright outlook”

It isn’t hard cheese if the EU gets its way with GIs, chef insists – but dairy exporters are likely to disagree

Kiwi cheese-makers will be wondering which advice they should take from chef Simon Gault.

This week he was saying they should stop trying to imitate brie and gouda and focus on producing uniquely New Zealand styles.

His advice was given to people watching a webinar arranged by the European Union Delegation to New Zealand, an outfit committed to promoting the EU’s increasing use of geographical indications to protect European products.

In June last year, however, Gault  was singing the praises of NZ French-style cheeses. 

In particular, he was enthusing about a French-style camembert made in the Nelson region.

So you don’t have to go to France to buy a cheese, he advised.

“ Bastille day is coming up – let’s buy NZ French cheese” Continue reading “It isn’t hard cheese if the EU gets its way with GIs, chef insists – but dairy exporters are likely to disagree”