Fonterra’s boss might have been ultra-cautious but out on the country’s dairy farms there was a subdued cheer at the news that the wholemilk powder price had leapt 14% at the latest GDT auction..
The GDT index rose 8.3%, the biggest rise since November 2016, and the fourth successive gain. Fonterra’s CEO Miles Hurrell says it’s “really surprising—no-one saw a number of this magnitude”.
It dispels some of the gloom generated by the Covid-19 pandemic. And it generates the hope that Fonterra pitched its forecast for the season too low, in the broad range from $5.40kg/MS to $US6.90.
Hurrell suggested suppliers should not get “too excited” by the WMP result. Fonterra had put out excess product for immediate shipment, which resulted in “a bit of a flurry in that first event” ..
“[This] suggests to me that some of our customers out there had caught themselves short – had seen Covid having an impact on their business – but things had bounced back faster than what they’d realised I think”. Continue reading “Dairy prices lift the gloom for farmers but their future meanwhile is being plotted by Beehive planners with a vision”
NZ’s dairy industry has a clear role to play as one of the country’s saviours in the battle to recover from the global impact of the Covid-19 pandemic — even if there is little evidence that ministers in the coalition government recognise its importance.
The industry, as it has done so often before, will just have to do it on its own.
Luckily, the giant co-op, Fonterra, has stabilised, after racking up a massive $600m loss last year and there’s a refreshed sense of where the dairy industry stands in the economy’s hierarchy, as other pillars (tourism, international education, air transport, construction) tumble over the pandemic precipice. Morale at the grassroots level is rising again.
So what’s the message for dairy farmers as the 2019-20 season ends and they look ahead to the next? Batten down the hatches or seek to expand production?
It’s not an easy one for many Fonterra suppliers, as they move out of a debilitating drought. But they have the encouragement from the co-op – the payout for the season just ending, though at the lower end of the range earlier signalled, will still be between $7.10 and $7.30kg/MS. That’s above the break-even point, said to be around $5.90. Continue reading “Dairy farmers will be in the vanguard of NZ’s economic recovery – but it looks like they shouldn’t count on much govt help”
NZ’s dairy industry, under constant fire from critics for its methane emissions, pollution of waterways and intensive farming practices in recent years, almost overnight is shaping up to be one of the country’s saviours as the economy dives into recession.
While other key export sectors — tourism, forestry, education — are jack-knifed by the coronavirus pandemic, the dairy industry’s earnings more than ever before are proving it to be what the critics have scorned: “ the backbone of the economy”.
The much maligned Fonterra Co-op this week reported total group sales revenue in the six months to January 31 increased by 7% or $678m to $10.4bn, mainly due to improved pricing and the product mix sold. That compared with $9,745bn in the January 2019 half.
And Fonterra is keeping its farmgate milkprice forecast in the $7-$7.60 /kg range. That means more than $11bn being paid to its suppliers. Continue reading “Dairy industry profits are a bright spot in an economy headed for recession”
Dairy farmers had some Xmas cheer this week, as dairy giant Fonterra told them the forecast payout would be the fourth-highest-ever, at the mid-point of its farmgate milk price range.
The $7.30kg/ms means the cash payout for the season will reach $11.2bn, a rise of about $400m from the earlier forecast.
There could even be a clap from the cowsheds for the new bosses of Fonterra who are turning around the co-op’s financial performance, as they apply a back-to-basics approach to recovering from last year’s horrendous $605m loss. The first quarter of the new financial year has gone well. Continue reading “Xmas cheer from Fonterra as the bosses at the dairy co-op get back to basics”
Fonterra’s board, under heavy fire for the losses racked up in the last two years, may at last be getting something right. Its recruitment of Mercury’s CEO Fraser Whineray to the newly created post of chief operating officer puts him in pole position to drive innovation, efficiency, and sustainability in the co-op.
When he joins Fonterra next year he will bring with him the credentials of having transformed Mercury, simplifying the business through the divestment of overseas interests and developing a compelling strategy for sustainable growth.
Harbour Asset Management’s Shane Solly said Whineray adds “a bit of grunt to the front row at Fonterra”.
In that context, Point of Order notes, Whineray would be following the example of his renowned uncle, the late Sir Wilson Whinerary, who not only captained the All Blacks from the front row, but subsequently had a successful career as a businessman and company director. Continue reading “Fraser Whineray: a results-oriented business leader with a track record on decarbonisation”
This is the second chapter in the woes of Fonterra, and behind it the dairy industry, on which the New Zealand economy is so dependent.
Point of Order listed some of those woes last week. Now, in the wake of the latest revelation, Fonterra will have to absorb a loss of between $590m and $675m for the current financial year.
Critics of the industry have sprung to the attack: Minister of Regional Economic Development Shane Jones is calling Fonterra’s management “corporate eunuchs” and labels Fonterra’s board as “grossly inept”.
Greenpeace has a simple solution: halve the dairy herd, a move that would cost the country $8.3bn in lost exports, and lower the standard of living of every New Zealander.
Jones’ ideas to resolve Fonterra’s financial difficulties are hardly more realistic.
Sacking the board won’t solve anything: nor trying to recruit a new executive team (though it might be worth asking Chris Luxon if he’d take a look). Continue reading “Farmers are getting more milk from each cow – they deserve a much better performance from Fonterra”
Encouraging signs emerged this week that key elements in the structure of NZ’s largest export industry are whipping themselves back into the shape they should be.
The giant co-op Fonterra has gone back into the black with a net profit of $80 million in the first half, after previously recording a net loss of $186m.
Meanwhile Westland Milk Products, NZ’s second biggest dairy co-op, is in line to be sold to China’s biggest dairy company, Yili, in a $588m transaction that would inject nearly half a million dollars into the operations of each of its suppliers.
Alongside these co-ops, the Canterbury-based Synlait has underlined its strength in the industry with a solid result in its half-year after achieving higher sales volumes. It reported a half-year net profit of $37.3m, 9.6% lower than the $41.3m in the previous first half, but with the focus on investing for growth, with a second processing plant due to come on stream for the 2019-20 season. Continue reading “Comforting news for dairy farmers as companies report results and the world price rises again”
Fonterra’s suppliers will be choking on their Xmas rations, as they digest the price blows the co-op has delivered. First, the dairy giant has revised down its forecast milk payout range for the season to $6-$6.30 from the earlier $6.25-$6.50, and, second, it is clawing back some of the $4.15/kg advance payment rate.
Farmers in January will be paid $4/kg for the milk they supplied in December plus the co-op is clawing back 15c/kg for all the milk supplied between June and November.
It is not surprising that farmers with costs of production running at or above $6/kg are reported to be “shocked” and “angry”. Even those efficient operators who have lower operating costs won’t be happy with Fonterra saying it “appreciates” the budgeting impact the updated $4 advance rate will have on farmers in January. Continue reading “Something festive for Fonterra farmers? A hint of solace would be a start…”
Fonterra chairman John Monaghan sought to cheer up the co-op’s farmer-shareholders by telling them at what was reported to be a “packed” annual meeting that “For a time this year, NZ farmers were paid this highest milk prices in the world.”
He insisted there has been a structural change in the co-op’s milk prices since Fonterra was formed.
“We’ve gone from being paid about half as much as our global peers to the point now where we are consistently paid the same or thereabouts.It sounds arrogant to say it, but the fact is that simply never would have happened without a strong Fonterra”. Continue reading “Fonterra must learn to be driven by profitability, not volume “
It must have felt like salt being rubbed into their financial wounds for Fonterra’s farmer-shareholders, when Synlait Milk this week reported its net profit soared 89% to $74.6m. Fonterra’s mob saw their co-op notch up a loss of $196m, and with prices at GDT auctions trending down, they may also have to accept a trim to the forecast milk price.
Where Fonterra talks of slimming its portfolio, Synlait is still investing in expansion.
In the latest year Synlait has been working on new and expanded plants in Dunsandel, Auckland and Pokeno as well as a research and development centre in Palmerston North. Continue reading “The grass on the far side of the fence will look much greener for Fonterra farmers”