Farmers start new dairy season on an encouraging note as Fonterra signals another record milk price

New  Zealand’s  dairy  industry, which is  proving  again it is  the  backbone of  the  country’s  export industries, has  been  given  fresh encouragement with the big  co-op Fonterra signalling  a  record  milk price for  the  season  that  has  just  opened.

It  comes  as the  payout  for  the  just-finished  season  stands  as  the  highest  since  the  co-op  was  formed in 2001.

So although farmers have  made  decisions for  this  season on  the  number  of  cows  they  are  milking,  they  have the  incentive  to go  hard on production  levels,  despite the  pressure  from  higher  costs  and worries  over climate changes measures, including  projected charges on emissions.

Fonterra’s buoyant  forecast contrasts with  a recent  report  by agribusiness banking specialist Rabobank  which  said that despite global milk production looking set to decrease for the fourth consecutive quarter in Q2 2022, weakening global demand is expected to create a scenario that will see moderate price declines in dairy commodities during the second half of the year. Continue reading “Farmers start new dairy season on an encouraging note as Fonterra signals another record milk price”

Climate change, farming and (a timely reminder for decision-makers) the Paris Convention’s nod to the need for food

An earlier post  on Point  of  Order about farming and climate change attracted  some interesting  comments.  The  post  itself  contended  that in view of the world  facing  a  global food  shortage the government  should be  doing everything in its power  to lift  food production — and  not  imposing  taxes  on methane  emissions (in  other words  taxing the   burps on animals}.

In the  wake  of  posting our thoughts, Point of  Order  was reminded  that the  Paris  Convention on Climate  Change  in  2015 finished  with an agreement   where Article 2  read with these  key  lines:

Article 2
1. This Agreement, in enhancing the implementation of the Convention,
including its objective, aims to strengthen the global response to the threat of
climate change, in the context of sustainable development and efforts to eradicate poverty, including by :

(b) Increasing the ability to adapt to the adverse impacts of climate
change and foster climate resilience and low greenhouse gas emissions
development, in a manner that does not threaten food production.

Point  of  Order underlines  that last phrase and questions whether that element has  been  fully  considered  in  the  action   which is  now  being  canvassed  in NZ.

He Waka Eke Noa  has delivered its recommendations for pricing agricultural emissions, which in effect will  add  significantly  to the  costs of  food  production.The Government is expected to formally adopt these recommendations in December.

Because He Waka Eke Noa  has  11 partners from the rural industries,  it likely will  be  a  formality   for  the government  to  proceed  with those  recommendations, although the Climate  Change Commission  will have its  own  input   into  what  happens.

Keith Woodford,  a  former  Lincoln College professor, in an article  on the  issue posted by interest.co.nz, noted  the  debate  within HWEN  “went right down to the wire” before Federated Farmers agreed to add their logo.

 “Some of the other partners to the document were also less than happy, but the alternative of failing to come up with an agreement at all was even less palatable.Now it will be up to the Government, taking account of forthcoming advice from the Climate Change Commission (CCC), to make some calls as to the path forward”. 

As  Professor Woodford  put it:

“The Government does not have to accept the HWEN recommendations. Nor does it have to accept the advice of the CCC. But if it does not accept CCC advice, it is required by legislation to give reasons.

“My bet is that there will be robust discussions within Government. There are some within Government, including senior members, who understand very clearly that they must not destroy agriculture. But there are also elements within the Government who are fundamentally antagonistic to New Zealand agriculture as currently structured”.

He says one of the key reasons for antagonism towards New Zealand’s agricultural sector is a serious misunderstanding about the importance of primary industries in general, and pastoral agriculture in particular.

“This lack of understanding is fed by the crazy way that we measure the importance of the agricultural sector in New Zealand. This starts with the measure of GDP, whereby agriculture supposedly makes up in the order of five percent of the economy. 

This GDP measure is limited not only to what happens on-farm, ignoring everything before and past the farm gate, but it also includes only part of what happens on-farm…..The only way to understand the importance to New Zealand of the land-based primary industries is to look at exports. More than 80% of New Zealand’s merchandise exports come from the primary industries”.

Professor  Woodford says the ‘bottom line arising from this situation is that New Zealand has responsibilities to itself, and also to others – through the Paris Agreement – to protect food production.

‘‘However, that does not let New Zealand ‘off the hook’ from having to minimise greenhouse gas emissions whenever it can do so consistent with its food obligations’’.

As Cabinet Ministers  get  to  grips   with the  issue of methane   emissions, Point of Order wonders whether they  will  grasp  all  the  implications  of  what the outcomes  of  their  decisions  will be.   And  will  they understand and  recognise  the  meaning  of the Paris Agreement’s Article 2.1(b)?

Impeding food production with taxes on emissions is a bad idea when the world is tipping towards mass hunger

As the war in  the Ukraine drags  on, the  international   food  crisis  is  deepening. The  Economist put it  simply but grimly:

“The war is tipping a  fragile  world towards  mass  hunger. Fixing that is  everyone’s  business”.  

So  shouldn’t  the  New Zealand Government   be  exhorting  farmers to  go  all out to produce  as  much  as  they  can   for  this  country  to be  lifting  its  food  exports?  Is   this  the  time   for  the  government  to be erecting  new  hurdles to impede the  production  of  food?  Shouldn’t  it  delay  the  plan  to tax methane emissions for  at  least  12  months? 

Let’s look  at what  The  Economist further said:

“The  war is  battering a  global food  system weakened   by  Covid-19, climate  change,  and  an energy  shock.  Ukraine’s exports of grain and oilseeds have mostly stopped and Russia’s are threatened.

“Together, the two countries supply 12% of traded calories. Wheat prices, up 53% since the start of the year, jumped a further 6% on May 16th, after India said it would suspend exports because of an alarming heatwave.   

“The widely accepted idea of a cost-of-living crisis does not begin to capture the gravity of what may lie ahead. António Guterres, the UN Secretary General, warned on May 18th that the coming months threaten ‘the spectre of a global food shortage’. The  high cost  staple foods has already raised the number of people who cannot be sure of getting enough to eat by 440m, to 1.6bn.

“Nearly 250m are on the brink of famine. If, as is likely, the war drags on and supplies from Russia and Ukraine are limited, hundreds of millions more people could fall into poverty. Political unrest will spread, children will be stunted and people will starve.”

 ANZ Bank  economist Susan Kilsby, in her recent edition of the  bank’s Agri-focus, said global food prices continue to strengthen as shortages loom for basic foods such as grains.

“This means there will also be a shortage of carbohydrates to feed livestock. This won’t directly impact New Zealand food production systems, but it will impact our competitors who rely on grain to produce beef and milk. At the same time, the price of growing pasture has also gone up, as global fertiliser costs have soared.”

The shortages of those basic feed stocks would underpin global production costs and keep production in check, but it would also erode the ability of poorer countries to import the higher-value foods that New Zealand exports, Kilbsy said.

The recent lockdowns in China had disrupted supply chains and impacted demand for some of the food products we export to China.

They also were having a significant impact on the economies of many other Asian nations.

“China plans to increase fiscal spending to offset some of the impacts of the lockdowns, but the direct impact of the disruptions to supply chains will be felt even harder in many other Asian nations.

“The quantity of New Zealand’s meat, dairy and horticultural goods available for export globally has been impacted by either detrimental weather or labour shortages.”

Kilsby noted that He Waka Eke Noa has delivered its recommendations for pricing agricultural emissions and the Government is expected to formally adopt these recommendations in December.

“Methane emissions pricing is expected to have a larger impact on deer, sheep and beef farms than dairy farms.”  

Point  of  Order  notes  that the  government  has  been  silent  on  these  issues  (admittedly Agricultural Minister Damien  O’Connor  has  been on  missions  abroad).

But  surely   this  is time for  it to  take  the  lead  in   striving to  expand  the country’s food  production  and  exports to feed a world which The Economist says is headed for mass hunger.

Dairy prices are rising again but the movement of Fonterra share prices (not so cheery for farmers) prompts buyback plans

New Zealand’s  dairy   farmers, who  will be  receiving  a  record  payout from  most of  the processing  companies  they have  supplied in the 2021-22 season,  will be  relieved that the  average price rose  again at the latest Fonterra auction, snapping five consecutive falls.

While  demand  from the  China  market  remained relatively weak, other regions stepped in to take up the slack. The GDT price index rose 1.5% to 1359 (the first increase since the March 1 auction when the index hit a record 1593}, a  level  well  above  recent  seasons.

Covid-19 lockdowns in China have disrupted supply chains and weighed on dairy markets, with North Asian buyers recording their fourth-smallest volume of whole milk powder at the latest auction.

NZX dairy insights manager Stuart Davison said South-east Asia took the largest volume of both milk powders, purchasing well over half the total whole milk powder sold, which was the biggest proportion of all, while also purchasing the largest volume of skim milk powder. Continue reading “Dairy prices are rising again but the movement of Fonterra share prices (not so cheery for farmers) prompts buyback plans”

Why this is not the time for govt to be heaping regulatory costs on farmers and requiring a culling of the dairy herd

On-farm inflation is at its highest level in almost 40 years, according to Beef + Lamb NZ’s Economic Service, and costs are expected to increase.  Meanwhile Federated  Farmers  says farmers’ satisfaction with their banks is relatively stable but more are feeling under pressure and the costs of finance are rising.

“Inflation is putting many New Zealanders and businesses under pressure, and our food producers are no different,” Feds President and economic spokesperson Andrew Hoggard says.

While Consumer Price Index (CPI) data has the annual inflation rate at 6.9%, the latest on-farm inflation rate has hit 10.2%  – the highest it’s been since 1985-86 (13.2%).

B+LNZ is concerned increasing regulatory requirements from the Government, such as freshwater and biodiversity rules, will stretch farmers even further. Continue reading “Why this is not the time for govt to be heaping regulatory costs on farmers and requiring a culling of the dairy herd”

Fonterra announces record opening milk price payment for its farmers next season as demand remains strong

New Zealand  has  suffered  several  jolts  in  the  past week, not  least a  higher interest rate regime as the Reserve  Bank counters  surging inflation.  But  at least  one  beacon of  light shines through the gloom:  the country’s leading primary  export  industry’s boom   is  moving  to a  second  season  of high prices.

Dairy  giant Fonterra,  which sets  the  pace  for  other dairy processors,  has announced a record opening milk price payment for farmers next season amid expectations of continued strong demand for dairy products and constrained global supply.

The co-op expects to pay farmers between $8.25 and $9.75kg/MS  for the season starting next month.  The mid-point, on which farmers are paid, is $9 kg/MS.

That breaks the previous record set at this time last year, when Fonterra’s opening price for the current season was $7.25 – $8.75kg/MS, with a mid-point of $8kg/MS. Continue reading “Fonterra announces record opening milk price payment for its farmers next season as demand remains strong”

Dairy prices fall sharply but farmers will do nicely, thank you, from this season’s payout and Synlait has strong half-year

Only  two  months  ago  Radio NZ  was  airing  a  report “Why  are global dairy  prices  so high?”  Now, the  story  is  rather  different  after  two sharp  falls  at  Fonterra’s  fortnightly  global dairy  auctions,  and  the  pundits   are  pondering  what  has  happened.

But  NZ’s  dairy farmers  can still rest  easy  that  this  season’s  payout  will be  the  highest in Fonterra’s  history.

The  latest fall this  week was  foreshadowed  in  a  report  by ANZ  agri-economist  Susan Kilsby  on commodities. She  noted  dairy prices fell 4% month-on-month in April, driven primarily by lower prices for whole milk powder which is highly influenced by demand from China.

Kilsby  went  on to  point  out market sentiment had deteriorated as the lockdowns in Shanghai and Beijing impact consumer buying opportunities.

“The global supply of milk increases at this time of the season due to the Northern Hemisphere reaching peak milk output, but global production still remains relatively tight, which will limit how far prices fall”.

 Kilsby said it was becoming increasingly difficult to get refrigerated goods into China. Continue reading “Dairy prices fall sharply but farmers will do nicely, thank you, from this season’s payout and Synlait has strong half-year”

“Milked” (the movie) presents a sour view of our biggest export industry – but dairy farmers can learn from it it anyway

A documentary titled Milked,  shown  at the  International Film  Festival in Dunedin, seeks  to  “expose”  the  New Zealand  dairy industry   and  calls  on  New  Zealanders  “to  heal the  land”.

Milked is available globally via the streaming platform Waterbear and on Youtube via Plant Based News. The documentary is made by indigenous activist Chris Huriwai and local director Amy Taylor.

Its crowd-funding campaign surpassed an ambitious $100,000 target in just 12 days, with much international support confirming its global relevance. Huriwai  told  one  news  outlet:

“My wish for this film is that it empowers people to look at the problems we’re facing more holistically. If you’re looking for a solution, it has to encompass everyone within the system and their diverse perspectives. This film is about sparking that conversation”.

But is  NZ  looking  for  a  “solution?”

The   dairy industry is  a world leader not  just  in its  products,  but  in  its systems.

In a  review for Newshub, Daniel  Rutledge says: Continue reading ““Milked” (the movie) presents a sour view of our biggest export industry – but dairy farmers can learn from it it anyway”

Fonterra is well placed to win Kiwi acclamation as a corporate champion

Can  Fonterra, with  its capital restructured,  become   the national champion,  it  was always  intended to be?.

The  stars   are  aligned  as  they  never have been before.

The  dairy  giant  has  the  products,  the  bosses,  the  markets, the  support of almost  all  its suppliers,  plus  the  government’s  backing.

It seems the  high  international prices  currently  prevailing  will  persist  for  another  season, and  maybe  two, which  would  be  the  longest stretch   in  Fonterra’s 20-years- or-so history.

With  Peter McBride as  chairman  and  Miles  Hurrell as  CEO, Fonterra   has  re-shaped the  leadership  and  narrowed  the   goals. Continue reading “Fonterra is well placed to win Kiwi acclamation as a corporate champion”

O’Connor now will support law changes needed for Fonterra’s capital restructuring

Agriculture  Minister  Damien  O’Connor has  overcome  his objections to  the  capital restructuring of  dairy giant Fonterra  and  says  the  government  will  now  amend the Dairy Industry Restructuring Act.

The dairy giant wants to make it easier to join the company, while maintaining farmer ownership amid falling milk supply.

O’Connor  recognises  Fonterra as a key part of New Zealand’s world-leading dairy industry and a major export earner for the economy, sending product to over 130 countries.

Around 95% of all dairy milk produced in New Zealand is exported, with export revenues of  $19.1bn a year. It accounts for 35% of NZ’s total merchandise exports and around 3.1%  of GDP. The industry employs around 49,000 people. Continue reading “O’Connor now will support law changes needed for Fonterra’s capital restructuring”