Monthly Archives: March 2016

Stephen Winter of Nind Dairy Services in Invercargill

Dairy downturn hurts other businesses

By | News | No Comments

Source: The Southland Times

The flow-on effects of the dairy downturn is beginning to bite in Southland towns, with numerous companies reporting a downward trend in business.

Dairy support companies are feeling the pinch from the low milk price payouts and unrelated businesses have also noticed farmers putting the brakes on spending.

Southland regional manager for Farmlands, Harry Soper, said all Southland towns were rural service towns so the downturn was affecting everyone.

The most important thing was the health and wellbeing of those affected, he said.

Farmlands, which sells goods to farmers, was finding business “challenging”, but having a diverse range of other business interests was proving beneficial.

Invercargill’s Nind Dairy Services director Stephen Winter said the diary downturn had resulted in work and revenue for the company dropping significantly.
“It’s pretty obvious when the payout goes from $8 to under $4 it will have a huge impact, not only on dairy farmers but also on companies like us servicing them.”

Winter believed revenue for businesses servicing the dairy industry was down 25-30 per cent on last year.

However, he said it was not all doom and gloom.

Farming went in cycles and his business had been through such cycles during its 25 years of servicing the dairy industry.

Two years ago the company built 12 new dairy sheds but they only had four confirmed this year,with two pulling out since Christmas.

Winter said they had not replaced any of the tradesmen who had left in the last two years, meaning they had dropped from about 40 to 30 staff.

The longer the downturn continued the harder it would be, but Winter said his company would ride it out.

“It will bounce back at some stage, but we don’t know when that will be.”

Ewan Allan Honda owner Andrew Allan, based in Gore, said new motorbike sales had dropped off in the first three months of this year.

However, their workshops had been busier than normal, with many farmers getting motorbikes fixed instead of buying new ones.

Honda was also sourcing older model motorbikes to sell to farmers, which were cheaper than the new models.

“It’s time to give a bit back to farmers and that’s part of it,” Allan said.

Udy’s Grain and Feed Ltd owner Ross Norman said his Wyndham business, which sells calf feed to dairy farmers, was experiencing a downturn in sales.

“Two years ago we had a great year, last year it was down a good 20 per cent and I am worried about it going down again this year.”

Invercargill Licensing Trust general manager Greg Mulvey said dining numbers in its restaurants were down slightly on last year and forward accommodation bookings had softened, indicating rural sales reps were travelling less.

“Other than that we haven’t noticed anything that would be significant.”

H&J Smith chief executive John Green said one third of its clients in Southland were rural based and there was “definitely an air of caution” in their spending.

Sales had been partly affected in high ticket items such as furniture and hunting apparel, but overall Green was pleasantly surprised how business had stood up.

H&J was carefully monitoring the situation.

Invercargill Hunting and Fishing owner Gerald MacRae said its sales had not declined during the dairy downturn, with farmers still keen to get out hunting and fishing.

The rural community were positive and resilient people, he said.

“Even if things are a bit tough it’s good they get off the farm and do other activities.”

2f90c391b6794ba8a2c498ce801a4d211

Fonterra Cuts Milk Price Forecast to 9-Year Low on Global Glut

By | News | No Comments

Source: AGWeb

Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, cut its milk price forecast to a fresh nine-year low as oversupply continues to depress the global market.

The Auckland-based company dropped its estimate for the 2015-16 season to NZ$3.90 ($2.64) a kilogram of milksolids from NZ$4.15, according to a statement Tuesday. It now expects to pay its 10,500 New Zealand farmers between NZ$4.25 to NZ$4.30 a kilogram of milksolids inclusive of dividends.

“This further reduction in the forecast farmgate milk price is the last thing farmers want to hear in what is proving to be a very challenging season,” Chairman John Wilson said.

Four out of five dairy farmers in New Zealand will operate at a loss this season as the global slump in milk prices enters its third year, hurting economic growth, according to the central bank. Fonterra’s announcement comes two days before Reserve Bank Governor Graeme Wheeler is due to decide whether to cut interest rates to a fresh record low.

Wheeler will keep the official cash rate unchanged at 2.5 percent on March 10, according to 15 of 17 economists surveyed by Bloomberg. Two expect a cut.

New Zealand’s dollar fell after the Fonterra statement. It bought 67.73 U.S. cents at 9:05 a.m. in Wellington, down from 68 cents.

Milk prices have been falling amid increased European production and weaker demand from Russia and China. Prices at GlobalDairyTrade auctions fell to a 12-year low in August and haven’t recovered significantly as the supply imbalance persists.

“The time frame for a rebalancing has moved out and largely depends on production reducing -– particularly in Europe — in response to these unsustainably low global dairy prices,” Chief Executive Officer Theo Spierings said in today’s statement. “Our forecast is based on no significant changes to either supply or demand globally before the end of the year. However, a reduction in the supply available for export before then could mean prices recover earlier than currently expected.”

eight_col_MILKING

Sharemilkers, farmers urged to work together

By | News | No Comments

Source: Dairy NZ

DairyNZ and Federated Farmers are holding a series of meetings for sharemilkers as dairy farmers come under further pressure from lower forecast payouts.

A sharemilker typically owns the herd and milks the cows on someone else’s property for a share of the farm gate milk price.

Federated Farmers dairy chairperson Andrew Hoggard said a meeting was held in Southland yesterday and more were planned for the Cantebrury, Manawatu, Taranaki, Waikato and Northland regions in the coming weeks.

The meetings were to provide advice and information on sharemilking and show the options available.

“Progression pathways, what do they look like?

“We’ve also got guys from our sharemilker employers and sharemilkers sub-sections that will be there talking about contracts and just offering hints and advice.”

Mr Hoggard said the meetings were trying to stimulate discussion between sharemilkers and farm owners on what they should be thinking about and working together on.

“In that situation you’ve got one farm and two businesses, and if both of those businesses aren’t rowing in the same direction it will spell bad news, especially in times like this.”

He said the industry still had a positive long-term outlook and that also needed to be a focus.

“The opportunities are there.

“Things will change…and keep on evolving, like they always have, but I don’t want everyone to get too wrapped up in the negativity and doom and gloom.

“It is a short-term thing, it has gone on a little bit longer than we expected it to, but things will come right.”

eight_col_Cows_up_close_16x10

Dairy industry needs to stay competitive

By | News | No Comments

Source: Dairy NZ

DairyNZ says it is time to look at how the dairy industry can stay competitive in the wake of a record low Farmgate Milk Price and mounting debt.

It is stepping up its support to farmers and is running workshops across the country this week focussing on sharemilkers and farm owners working with sharemilkers.

Chief executive Tim Mackle said Fonterra has done well since it formed in 2001, and the main challenge for farmers – compared to other tough years – was the mountain of debt that had grown.

“Ten percent of the highest indebted farms have 30 percent of the total dairy debt – that’s $11 to $12 billion or $10 million each. But that doesn’t mean all those farms are at risk,” says Dr Mackle.

“Twenty percent of the highest indebted farms have 45 to 50 percent of the total debt – $15 to $38 billion. But again these bald figures don’t necessarily spell doom and gloom for all. While many in this group will be facing extreme pressure, it is the combination of high debt and high farm costs that will require urgent action. As we feared, milk price has been low for too long. We’re keen to see interest rates come down after last week’s OCR cut. That will help all farmers. Many are also looking at other income they can bring in off-farm or through diversification.

He said Fonterra had done well, but the focus needed to shift.

“It’s been a fairly good period I’d say, but we need to re-set our competitiveness”

Mr Mackle said Dairy NZ was making more effort to see farmers in person.

He said one focus was on pasture to maintain competitiveness.

“We’ve always been shut out of many of the worlds markets, and really our ability to source pasture has always been our competitive advantage.

“We need to go back and look hard at challenging ourselves, are we doing everything we can to grow and harvest as much as we can of what is our cheapest feed – there really are a lot of reasons why right now we have to focus hard on utilising pasture and taking more expensive options out of our systems for now.”