Dairy giant Fonterra has taken a hammering in the media in the wake of its disclosure it expects to report a full-year loss of as much as $675m and won’t pay a dividend as it slashes the value of global assets. It will be the second annual loss in a row.
Investment guru Brian Gaynor in the NZ Herald argued Fonterra’s farmers have drained the co-op almost dry in terms of milk prices and dividends and have left it in an extremely vulnerable position. Earlier another Herald columnist, Matthew Hooton, contended NZ has put all its milk in one pail – in a company with inadequate governance and capital to match its aspirations.
Continue reading “Testing times for NZ’s dairy industry: Can its leaders find the right formula?”
So what, on reflection, are we to make of the Reserve Bank governor Adrian Orr last week slashing the official cash rate by half a percentage point to a record low of 1%?
After all, just the day before Orr made his historic move, Finance Minister Grant Robertson was delivering assurances to anyone who might be listening of the NZ economy’s “solid fundamentals” as he celebrated the unemployment rate falling to 3.9%.
Why then would investment guru Brian Gaynor label the OCR cut as a “bizarre decision”?
In his widely read column in the Saturday edition of the NZ Herald, Gaynor wrote:
“Populist politicians and central bank governors are obsessed with taking measures to avoid any form of economic slowdown. This approach, which has been strongly influenced by Trump’s pressure on the US Federal Reserve Board, is unorthodox, because expansions and slowdowns are an integral part of the business cycle. The weird 0.5% rate cut…means our Reserve Bank has more limited options if NZ is confronted by a serious recession”. Continue reading “Lopping the OCR might be a stroke of genius – or an Orr-ful monetary policy blunder”
Regional Economic Development Minister Shane Jones has one of the great jobs in modern NZ politics. He’s in charge of spending the $3bn Provincial Growth Fund, which NZ First extracted from Labour as part of its coalition negotiation.
Already $2bn has been committed, and the fund is expected to allocate the remaining $1bn before next year’s general election.
And the provinces, the theory goes, will be so grateful they will ensure NZ First gets back to Parliament to deliver a repeat dose post- 2020
Or will they?
Shane Jones has certainly generated a constant flow of headlines, but will the benefits to the provinces yield sustained economic development, and produce a renaissance in the provincial cities? Will the economic benefits be solid enough to filter down to the average resident in the supposedly deprived regions? Continue reading “Questions are raised about the PGF and its promise of provincial rejuvenation”
On the face of it, it’s a no-brainer. Weighed down with debt, Westland Milk, based in Hokitika is financially on its knees. Riding to its rescue, Chinese dairy giant Yili has come in with a $588m buyout deal which will yield $3.41 a share to the co-op’s farmer shareholders, and, as well, absorb Westland’s debt and liabilities.
According to Westland, the nominal value of its shares has ranged from 70c to $1.50 per share. For the average-sized Westland farm, the share offer translates to about half a million dollars cash.
The offer looks even more attractive since Westland had to cut its milk payout forecast, while other companies’ forecasts are rising. Westland, which has grown out of the West Coast’s 150-year dairy heritage, hasn’t paid a competitive milk price for several years.
The conditional deal comes with extra sweeteners. Yili has committed to collect all milk supply. It will also pay a competitive price of at least as much as the Fonterra farmgate milk price for 10 years.
But why would Yili go that distance? Continue reading “Yili bid for Westland Milk raises questions about dairy co-operatives – and Fonterra’s ownership”