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Sheep milk gelato goes global

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New Zealand sheep milk gelato makes it to finals of global dairy awards

Spring Sheep Milk's gelato is a finalist in the World Dairy Innovation Awards. It will soon be available in New Zealand ...

Spring Sheep Milk’s gelato is a finalist in the World Dairy Innovation Awards. It will soon be available in New Zealand stores.

Two New Zealand companies have made the finals of the World Dairy Innovation Awards, although neither managed to come away with a first prize.

Spring Sheep Milk, based near Lake Taupo, was a finalist in two categories: the best ice cream or frozen yoghurt, and best dairy packaging design.

Fonterra was a finalist for the best dairy ingredient.

Landcorp and marketer SLC have about 3000 milking ewes on a farm near Taupo.

Landcorp and marketer SLC have about 3000 milking ewes on a farm near Taupo.

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Spring Sheep Milk chief executive Scottie Chapman said it was a great achievement for the company to make the finals after just one year in operation.

“It shows the industry is looking at alternative dairy. There were so many categories, but if you asked me which one I’d like to win, it would certainly be the ice cream innovation. There is a lot of kudos within the industry with these awards,” Chapman said.

Most of the company’s first year’s production was turned into probiotic and prebiotic powders. About 98 per cent of products are for export, with Taiwan earmarked as the first market followed by South Korea and Malaysia.

Spring Sheep Milk would soon sell gelato, sheep milk latte and butter on the local market.

Chapman said consumers were looking for alternatives to traditional dairy.

“Sheep milk is richer and creamier than traditional cow’s milk. It has been used in Europe for centuries as a gastronomic indulgence, renowned for quality cheeses and is now a rapidly growing category worldwide.”

The creator of the gelato was Murray Taylor, formerly technical manager for Tip Top and at present a director of OOB Ice Cream. The nzicream website describes him as “Mister Ice Cream”.

“When you think of your favourite ice cream there’s a good chance Murray Taylor has been involved with creating it so we approached him to help us. He’s got over 40 years’ experience but this was the first time he’d worked with sheep milk,” Chapman said.

Taylor created a dark chocolate and a vanilla bean gelato and says he’s been impressed with sheep milk.

Spring Sheep Milk was established in June 2015 and is a partnership between Landcorp, and boutique sales and marketing company SLC.

The World Dairy Innovation Awards are in their tenth year and are designed to celebrate excellence and innovation across every category of the global dairy industry.

 

 

 

 

Farmers face ‘brutal’ time as Fonterra cuts price forecast

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Source: Stuff

Federated Farmers have predicted the next six months will be “brutal” for dairy farmers as they cope with tight cash flows following Fonterra’s announcement of a cut in this season’s milk payout price to $4.40 per kilograms of milk solids.

Fonterra has announced an opening forecast farmgate milk price of $5.25 per kilogram of milk solids for the 2015-16 season, slightly higher than commentators were predicting.

This does not include the forecast earnings for the 2015-16 financial year.

However the co-operative at the same time reduced its forecast farmgate milk price for the 2014-15 season to $4.40 per kg/ms, down from its previously announced forecast dividend range of 20-30 cents per share.

The change amounts to a forecast cash payout of $4.60-$4.70 for the 2014-15 season that would be paid to a fully shared-up farmer.

Chairman John Wilson said the revised forecast reflected the reality that global commodity prices had not increased as expected.

Federated Farmers dairy chairman Andrew Hoggard said it was disappointing to see the drop in the 2014-15 return. Cash flows would be tight for the next six months at least, with the advance rate beginning at 70 per cent of the forecast farmgate milk price – an opening rate of $3.66 per kg/ms.

“It confirms what we already know, and that is that the next six months are going to be brutal,” Hoggard said.

The advance rates Fonterra pays are just $3.66 for June, July and August. It is not until January that the advance rate hits $4, but farmers will not receive that payment until February.

Hoggard said the message was the same to farmers as it had been for months.

“We all know there is volatility, now we’ve been rudely awoken to it. Farmers need to focus on the long term, and make sure they’ve got support,” he said

Rabobank economist Hayley Moynihan said the prices were “largely as expected”, reflecting the fact any recovery would not occur until later in the season. She said Rabobank was standing behind farmers.

Wilson said world markets were over-supplied with dairy commodities following good growing conditions in most dairy producing regions.

“This is a tough season and we will continue to keep our farmers informed as the season draws to a close given the current volatility,” said Mr Wilson.

The forecast farmgate milk price change for the current season will mean a further revision to the advance rate schedule of monthly payments to farmers.

Wilson said the forecast farmgate milk price for 2015-16 was based on Fonterra’s best view of long-term global dairy supply and demand.

“We can expect prices to recover going forward, and to see a rebalancing of supply and demand over the season. However it is more difficult this early in the season to determine exactly when this recovery will lead to a sustained price improvement,” said Wilson.

ASB economist Nathan Penny agreed with Hoggard that the Reserve Bank would cut the official cash rate in September and October. Penny is predicting it will be cut by a total of 50 basis points.

Fonterra chief executive Theo Spierings said the long-term fundamentals of global dairy demand were strong.

“Our forecast for the new season takes into account a range of factors including global milk production forecasts, the economic outlook of major dairy importers, current inventory levels and geopolitical events,” Spierings said.

“Given the season we are coming out of, we are absolutely focused on improving farmer returns and driving the co-operative’s performance,” he said.

Meanwhile the Greens have called on Landcorp to stop converting forests to dairy farms or risk doing serious damage to the rural economy.

“Landcorp needs to stop the dairy conversions until they can show how undertaking more conversions stacks up economically in the face of the lower forecast milk price. All the information that we’ve seen so far suggests that, in fact, dairy conversions may be hurting other farmers financially,” Green Party MP Catherine Delahunty said.

Landcorp is in the process of converting 25,700 hectares of forest to dairy farming in the upper Waikato River catchment area alone, at a cost of $87 million.

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Sustainability ‘comes from the heart’

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Source: Stuff

Farming sustainably “comes from the heart”.

It is done because it is the natural thing to do and encompasses all parts of Southern Bell Orchards, owner Frans de Jong said after his family-run business recently won the 2015 Waikato Farm Environment Awards Supreme Award.

“You do it because you have a passion. That’s why you do it.

“That means you work on a healthy environment to begin with, you work on a better soil, healthier animals and products with a longer shelf life. In the end you get healthier people, and I think that’s really important.”

The de Jong family also won awards for soil management, harvesting, innovation and water management.

Frans said he felt “overwhelmed” upon accepting the Supreme Award.

“To get one is amazing and to get so many is even more amazing.”

When the de Jong family took over the orchard near Matamata 11 years ago, the previous owners had used a lot of sprays, he said.

“We found out very quickly that it was not the way we wanted to do things. We wanted to have a really healthy environment around the plants and create a natural environment that looks after itself – and it can be done.

“If you use the correct nutrition, and you stimulate that with micro organisms in the system, you can get a better soil and you can get healthier plants and animals.”

De Jong said the other aspect of sustainability to his business was succession. His son, Talbert, and partner, Emily Meese, have worked full time in the business since 2013 when Frans and wife, Tineke, started a 10 year succession plan and will own 50 per cent of Southern Belle’s shares within a decade. Frans and Tineke’s other child, daughter Simone works in tourism and marketing.

The 5.05ha property was bought in 2003 just before emigrating from the Netherlands. The de Jongs had never heard of feijoas prior to purchasing the property. These were being grown in the orchard, along with nashi, persimmon and blueberries. The de Jongs decided to concentrate of quality and volume and grow only feijoas in the orchard and capsicums in greenhouses.

The orchard is 3.5ha with the trees grown espalier-style for ease of management and harvest. All feijoa trees that were in the orchard when they purchased have gradually been replaced with new cultivars with a range of harvest times from mid-March through until June.

This year they anticipate producing about 20 tonnes, but in four years, when all the new trees mature, they estimate a crop of 60 tonnes. About half of their feijoas are exported.

The capsicum operation encompasses 3000 square metres of greenhouse space and includes a range of capsicum varieties. These are planted in August, harvested from early November through until early July and mostly sold on the local market. A small amount of cucumbers and chillies are also grown in the greenhouses.

The de Jongs enjoy the regular contact with customers that taking their produce to several farmers’ markets allows them. In addition to Frans, Tineke, Talbert and Emily, Southern Belle has four staff who work almost all year in the greenhouses, and up to 20 staff for the feijoa picking and pruning from March until July.

Frans worked in The Netherlands in analytical chemistry, eventually establishing, with a partner, a successful agricultural/ horticultural laboratory. He has also studied process technology.

This background and approach drove Southern Belle and is an integral part of the farm business, the Awards judges said.

Frans said it was logical to do testing.

“Measuring is knowing and I think spending a bit of money analysing something is money well spent because you’ll get it paid back 10-100 times.”

Frans had devised a greenhouse heating system which reduces their energy usage by 40 per cent and a unique closed circuit irrigation method which ensures no nutrients are being lost.

Careful and vigilant management and some biological controls introduced have significantly reduced the amount of spraying necessary.

They follow Albrecht soil fertility principles. Frans went to a Kinsey course and said he “really connected” with the concept, finding his chemistry understanding gave him a ready grasp on the topic.

“You are looking at the interactions between the nutrients in the soil. It’s about having an open mind and always trying to become better.”

Also winning big were Te Awamutu dairy farmers John Hayward and Susan O’Regan, who took out the Dairy Farm and Water Protection Awards.

“It’s something we’re really passionate about and we have worked a lot in the last three years on on riparians and wetlands,” Hayward said.

The couple milk 420 cows on a 140ha milking platform on their 245ha farm business Judge Valley Dairies. The couple had the ability to balance the drive for production and profit with environmental care, the judges said.

The property consists of 45 per cent flat, 40 per cent rolling and 15 per cent steep contour. A land use capability assessment was undertaken with the Waikato Regional Council last year. This had “been a really helpful assessment to have undertaken” providing insights that have formulated their way forward, O’Regan said.

The assessment revealed they had 123ha of cultivatable country, 34ha that should be protected from cattle and 10ha that is very prone to erosion and is best suited to planting out. As a result, John and Susan entered into a partnership with Comvita that in the next four years will see the company plant 20ha in high potency manuka, with the couple receiving a share in the resulting honey production.

The land will be retired from farming but the establishment of the manuka will mitigate erosion and reduce the overall nitrogen leaching factor on the property.

“It’s a win-win situation on land that was marginal in any event. The manuka deal turns it into land that is productive on two fronts and this use sits very comfortably with our views environmentally,” O’Regan said.

The couple have also worked closely with the council on riparian care and planting plans. In the past four years John estimates they have established about 5000 natives. A wetland covers about three hectares and a four hectare native area including a waterfall and significantly regenerating bush is stockproofed and protection by QEII National Trust covenant is being pursued.

Judge Valley Dairies is Hayward and O’Regan’s first farming venture together.Prior to setting up the operation Hayward was sharemilking in his own right and O’Regan was a barrister, practising in Te Awamutu.

Between them the couple have five children, Emily, George, Ben, Lilly, and baby Jack. The couple have a clear view on their responsibility as land users. They believe the requirement that farmers are specifically accountable for their outputs is inevitable.

“If we can set our business up sustainably, we will be on the right foot going forward and able to meet any such demands,” Hayward said.

The farm is targeting production of 215,000kg milk solids this season. The cows are managed in two herds. The friesian herd are calved in autumn and the rest the jersey herd are calved in spring. John and Susan purchased the first property of what became their business in an equity partnership in 2008.

They have since upgraded its infrastructure to include the construction of a 30-aside herringbone cowshed. In 2012 the partnership purchased the neighbouring drystock farm and integrated it into the first property. This season, John and Susan will move from equity share to full ownership.

North Waikato dairy farm owners Peter and Judi Buckley and their sharemilkers Stuart and Lichelle Morgan won the Land and Life Award, which recognises the people side of the farm business and the catchment improvement Award.

The Buckleys own Loch Carron near Te Kauwhata. This 103ha farm has a 67ha dairy platform and is situated adjacent to Whangamarino, a 7000ha area included on the Ramsar Convention’s list of ‘Wetlands of International Importance’.

The location overarches all farm management and planning. The property has a nearby 12ha runoff and is low-lying with deep peat covering about 1/5 of the farm. Utilising and maintaining four large flood pumps goes with the territory on Loch Carron. Daily vigilance and a keen eye on the weather forecast, especially for heavy rain events, are key factors in the smooth and economic operation of the farm. Most of the farm is below the water table, which is deliberately raised during each summer. This allows safe summer grazing and ensures the peat stays intact.

The Buckleys also established a 4.5ha wetland eight years ago in conjunction with a neighbouring quarry.

Buckley said they would not have been able to achieve the environmental gains on their farm without the partnerships they created with the Waikato River Authority and the quarry.

“Partnerships and achieving the environmental results we have got is huge to me and I look out there at the wetlands sitting right beside us – about 50 metres from the back door, we get a lot of enjoyment from it.”

South Waikato dairy farmers Hans and Anita Nelis were winners of the Farm Stewardship Award for their 380ha, 970 cow operation encompassing two properties at Tirau and Waotu. Three of their six children are currently sharemilking the family farms.

“There are no handouts, we give them the opportunity but we won’t give them any money.”

“Part of our commitment to sustainability is in succession planning, that is important, and we are proof it can be done, even with high debt levels,” Hans said, who also feels a strong duty to the dairy industry to support the 50:50 sharemilking concept.

The de Jongs will hold a field day at Southern Belle Orchard on May 21.

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Dairy farmers go to rural trust for support in high numbers

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Source: Stuff

Stressed-out Manawatu dairy farmers have been seeking the help of rural support services in high numbers as they try to cope with low milk payouts.

The Rural Support Trust, which helps farmers in times of hardship,is the busiest it has been since the devastating 2004 floods.

Trust member Chris Wall said during the floods the trust helped hundreds of people with feed for stock and stock movement, as well as helping people cope with the stress caused by the high water levels.

“Now we are perhaps helping 20 to 30 people and mostly dairy farmers – they’re under pressure, with things such as financial analysis, legal advice or they might go to a counsellor or go away for a weekend,” Wall said.

“We work undercover, it is confidential. If people have to leave the farming industry – we try to help them exit with dignity.”

Federated Farmers Manawatu/Rangitikei sharemilker chairman Richard McIntyre said many dairy farmers and sharemilkers were feeling the pinch.

He said new sharemilkers had bought cows during last season’s high prices, and were facing tough times as the milk payout was less than many had budgeted on.

A sharemilker often owns cows and pays for milking costs, while sharing the milk income with the land owner.

“For some sharemilkers it has been very tough. It comes down to their circumstances. The volatility of cow prices has been huge and it has eroded their equity. A lot of sharemilkers are having to increase their overdraft on lower equity.”

McIntyre said one example involved the wife of a Raetihi sharemilkerwho had been forced to go with their children to live and work in Palmerston North at her parents’ home, while he was at the farm.

It was the only way they could make ends meet at the property, McIntyre said.

“There’s the financial stress, and then the personal stress of having to live apart.”

Wall said the trust encouraged people to get in touch.

He said some support people went door to door, but he thought many rural people would not admit they couldn’t cope.

“The trust waits until people contact us. Keep an eye on how you are, your family or your neighbours. we need to hear from people.”

Federated Farmers Manawatu/Rangitikei president James Stewart said there was a bit of a “gloomy” feel around dairying at the moment.

“We know there will be ups and downs in the industry, so don’t let it get you you down. Keep communications open with your bank, farm adviser and professionals that can help. Let them know what’s happening in your case.

“Remember real wealth comes from the provinces via exports and we are an export dependant economy.”

Wall said sheep and beef farmers were used to dealing with wildly fluctuating incomes and were able to cope more than some dairy farmers.

“But at the moment, beef prices are high, wool prices have lifted and lamb prices are about the same. So we are mainly seeing dairy farmers who have to cope with lower payouts. If payout are low next season, then there will be more dairy farmers needing help.”

In the meantime he said he doubted there would be many conversions from other farming to dairying with the milk price at rock bottom.

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Farmers Tread Lightly With Twitter

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Source: Taranaki Daily News

A South Taranaki dairy farming couple remain fervent advocates of Twitter as a farmers’ forum, although hindsight has made them temper their use of social media.

Mokoia variable order sharemilker Paul Johnston was caught up in last month’s Twitter debate about a Taranaki Daily News opinion piece on dairy farming by columnist Rachel Stewart.

Stewart complained to police after the column generated what she said were sexist, standover tactics and personal slurs on Twitter by farming leaders who should know better. She also received a threatening hand-written message in her letterbox.

While she welcomed robust debate, she had been “thrown” by the hate demonstrated in the tweets and said overtly sexual or derogatory responses were offensive and unnecessary.

Johnston said while Stewart made some fair points in her column, he didn’t like her tone, so he posted to Twitter what he intended to be tongue-in-cheek comments about her.

Stewart thinks many farmers don’t appreciate the significance of their Twitter postings and perhaps don’t realise their comments can go viral and far beyond their intended audience.

Comments they might make around the dinner table or in the pub should be kept private rather than exposed on social media. “Because they’ll come back and bite you,” she said.

Johnston said he had moved on since the discussions about Stewart’s column.

“But now I’d think twice before making such a tweet.”

The debate about the column was preceded before Christmas by a photo he posted on Twitter of his children sliding in cow excrement. It gained 100-odd favourites and retweets around the world and also created a furore after Venture Taranaki put it on Facebook.

He said about 5 per cent of comments questioned the couple’s parenting skills.

“Twitter’s a forum where people vent and it can get nasty. Stuff can be taken out of context and blown out of proportion. So we’ve learned not to jump in.”

Noting Twitter was a public platform, wife Sue said the reaction showed them they had to be aware of other people’s perceptions. “We’re now more careful of Twitter.”

The couple are in their first season as variable order sharemilkers on a 200ha milking platform south of Hawera, where they milk 520 cows year-round.

Paul Johnston said negativity on Twitter could put some people off. He’d like more farmers and rural professionals to participate to realise the untapped potential it had in Taranaki.

“We need to showcase to the world how we produce food,” he said.

“We get a bad rap from some sections of the media and we are judged on the ones that let us down. Twitter is a fantastic forum to show consumers where their product comes from and how it’s produced.”

The rugby fan signed up to Twitter in 2010, after noticing interaction among All Blacks, provincial players and rugby commentators via Twitter on a rugby website.

“I found it great to have players like Piri Weepu reply and discuss points or ideas.”

Joining Twitter could be daunting. “Using 140 characters can seem puzzling, but once you get the initial gist of it, follow a few farmers and take their lead, it has massive potential.”

He follows about 1100 people on Twitter and a similar number follow him.

“Looking at profile pages of people I follow usually highlights like-minded, interesting, or informative accounts. The Twitter app also recommends accounts that maybe of interest.”

He said Twitter brought information to his farming business quickly.

“I can put a question out there with a photo, say, about pasture, and – boom – you have instant information.

“It’s provided by reliable individuals or companies. I can ask a question relating to grazing, post a picture of a weed, for example, and within minutes there will be replies, advice and information.”

Vets, farm advisers, DairyNZ consulting officers, agronomists, farmers could all be found on Twitter. “The potential for networking and discussion is endless.

“It is a different avenue than a discussion group, but has the same effect – a bit like a conference call. Tapping into the wealth of knowledge and expert advice has massive benefits for any business.”

He checks Twitter in the morning while he’s getting the cows in for milking.

“Sitting on the bike in the dark, I can watch what farmers in the UK are doing because they’re at the end of their day. I just flick through it and wait for something to grab my attention.

“Having breakfast and at lunchtime, I’ll often have look at Stuff (.co.nz) and at Twitter.”

A Taranaki meet would allow tweeters to get to know each other. “There are some amazing people I interact with that I would like to meet in person and I owe a few beers to a number of followers for advice.”

Sue Johnston joined Twitter a year ago and enjoys its immediacy.

“Social media isn’t going to go away, so you may as well be involved. But how you manage it is important.”

One night a light-hearted tweet from her husband to “sort those kids out” generated a response from one of their followers: “New-age parenting”.

On Twitter she has caught up with an old school friend now farming in the South Island.

She sees Twitter as a tool that will help the couple grow their business and career.

“Twitter puts you out there, for connections and jobs. As a mum of three (aged between 4 and 7), I find it nice to interact with other farming mums and professionals.

“Absolutely more Taranaki people could get on to Twitter. It would be awesome to see more farmers and wives/partners get on board, so your knowledge grows.”

New Zealand Sharemilker/Equity Farmer of the Year Charlie McCaig, of Te Kiri, joined Twitter just over a year ago, has almost 600 followers and follows a similar number.

He said Twitter allowed users to engage in discussion and debate and to post local events.

“It’s like an enormous, never-ending discussion group that doesn’t only include farmers.

“There is on-tap information and experience that comes from people with a huge array of backgrounds.

“I’ve lost count of the number of questions I’ve asked and the interesting responses I’ve received – from very basic, like ‘What sowing rate do you use for turnips?’ to more complicated ones like, ‘What are farmers doing to reduce farm working expenses?”‘

McCaig follows overseas farmers because he’s interested in their challenges and their perspective on New Zealand issues.

@GethEvans was on a working holiday in Te Kiri a few years ago. “Both being from the UK, we talked about common friends and experiences in New Zealand.”

Before Evans’ brother, Gwyn, visited New Zealand on a working holiday last year, he contacted McCaig about working for him and wife Jody.

“It’s a great example of the power of networking and it worked out perfectly.”

McCaig said Twitter discussions were generally mature. “It’s got a meeting-of-the-minds feel to it.

“The way Twitter is structured, that anyone can see your tweets and you can see anyone else’s, removes a safety net that other social networks have and makes people behave. It’s as if you are all in one big room so you can’t talk behind someone’s back.

“It also means that someone you haven’t spoken to before can read your discussion and throw in their contribution. The lack of privacy opens up the discussions across the globe, which is great if you’re looking for new insight into a problem.”

He said Twitter complemented other forums and offered new contacts and opportunities. It had put the couple in touch with numerous overseas visitors, partly because of their New Zealand Dairy Industry Awards success.

He believes Twitter provides a real opportunity for farming to tell its story to city people. “One of the biggest challenges farming faces is its image. I’d like to see more farmers using Twitter to show the world their daily lives.

“I think it would really help change some preconceptions about what it’s like to work on the land.”

Farming advocate Shona Glentworth joined Twitter 3 1/2 years ago, initially for her own off-farm business that assists businesses to develop. She soon saw the benefits of engaging with agricultural people and companies. She follows nearly 1800 people and more than 1300 follow her.

She said Twitter’s potential in Taranaki was untapped. Organisations like DairyNZ, Fonterra and LIC could add knowledge to discussions, ask questions, canvas opinions and build a sense of community.

“I really like Twitter. I think it is fun. There is a lot of learning and development of networks and community – it suits someone like me who has opinions, loves to talk, debate, engage and network.”

But it needed to be kept in perspective. “It doesn’t always allow depth, is not always an accurate reflection of what is happening off Twitter and it can be hard for some people to cope with the intensity (at times) and negativity (at times).”

Glentworth was one of a group of four who established Agchat on Twitter a year or so ago to mirror discussions in Australia, UK and US. The live weekly conversations are moderated by a person who tweets questions pertinent to agriculture. She said it was now in a hiatus and a more sustainable way of managing it was needed.

Dairy NZ consulting officer Michelle Taylor is a new Twitter user who joined late last year. Her followers and those she follows are a mixture of personal friends and agricultural tweeters.

“Twitter is instant and not long-winded – really good for capturing ‘now’ thoughts, ideas and feedback.”

It was a forum that allowed her to reach a wide range of farmers both nationally and internationally.

“Contributors to a conversation give some very extensive and sometimes humorous viewpoints.”

She believes the potential of Twitter is untapped in Taranaki. “Social media as a whole is an excellent way to get information out to people who don’t have endless time to read written text or search endlessly for information.”

However, she acknowledged it had its downfalls. “Not everything you read online is true, correct or factual, but is a good starting point for making an informed decision.”

Kiwi Dollar Up Against Aussie After Dairy Price Jump

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Source: BusinessDesk

The New Zealand dollar rose after lower volumes helped push up prices at Fonterra’s GlobalDairyTrade auction overnight. The kiwi touched a fresh post-float high against the Australian dollar as investors favour the outlook for the local economy.

The kiwi increased to 77.92 US cents at 8am in Wellington, from 77.28 cents at 5pm yesterday. The local currency touched 96.22 Australian cents, its highest since the Aussie was floated in 1983, and was trading at 95.95 cents at 8am from 94.97 cents yesterday.

The New Zealand dollar outperformed its peers overnight after prices rose 3.6 per cent at the latest dairy auction as volumes fell, stoking optimism about a recovery ahead for New Zealand’s largest commodity export after a 48 per cent fall in prices last year. The kiwi was also bolstered by reports China is speeding up work on 7 trillion yuan of infrastructure projects to revive slowing growth, boosting optimism about the outlook for New Zealand’s largest trading partner.

Bank of New Zealand currency strategist Raiko Shareef said much of the New Zealand dollar’s record-breaking run could be put down a lack of liquidity in typically quiet Christmas-New Year trading and that the real test would be next week, when markets are back in full swing.

“But I would not fully discount this move into higher territory,” Shareef said. “Being at a fresh post-float high is probably justified given how negative sentiment is around Australia and given New Zealand is in a better economic situation than many of its peers,” he said.

Shareef said the price action overnight put the differences between the two economies into sharp relief. The Australian dollar, with its high exposure to the energy sector, suffered, while the New Zealand dollar, with its exposure to improving dairy prices, strengthened.

However, Shareef said he remained sceptical about the likelihood of the Kiwi reaching parity with the Aussie.

“China’s news was enough to ignite the lift in the New Zealand dollar followed by falling offshore yields and a positive GDT overnight,” ANZ Bank New Zealand Agri economist Con Williams said in a note.

Investors are favouring the New Zealand dollar over its Australian counterpart as the economic outlook appears more rosy on this side of the Tasman. New Zealand’s Reserve Bank has indicated it intends to hike interest rates further, compared with Australia where economists are starting to price in interest rate cuts. That makes the kiwi more attractive to investors looking for yield with interest rates in New Zealand already 1 percentage point higher at 3.5 per cent.

– with Jamie Gray

“The positive New Zealand dollar story has been enough to deliver post-float highs on this cross, which may temper further extensions higher as local sellers look to take advantage of the overnight move,” said ANZ’s Williams.

Still, he said the recovery in milk powder prices in the latest dairy auction isn’t strong enough to deliver Fonterra’s $4.70 per kilogram of milk solids forecast for the 2014/15 season. Skim milk powder rose 2.8 per cent while whole milk powder rose 1.6 per cent. AgriHQ estimates that would translate to $4.30/kgMS.

Today, traders will be eyeing ANZ’s latest Commodity Price Index, scheduled for release at 1pm, for a gauge of how other sectors are performing.

ANZ expects the kiwi to trade between 77.80 US cents and 78.30 cents today, while against the Aussie it will likely trade between 95.90 Australian cents and 96.40 cents.

The New Zealand dollar touched a 20-month high of 65.42 euro cents ahead of a report on Eurozone inflation tonight, which may signal the region is close to deflation, increasing pressure on the European Central Bank to step up stimulus measures. The kiwi was trading at 65.29 euro cents at 8am from 64.70 cents at 5pm yesterday.

The local currency touched a four-month high of 51.46 British pence, and was trading at 51.29 pence at 8am from 50.65 pence yesterday.

The kiwi edged up to 92.23 yen from 92.19 yen yesterday. The trade-weighted index advanced to 79.49 from 78.83 yesterday.

Falling Supply Boosts Dairy Prices

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Source: Stuff

Dairy prices have continued their turnaround, and analysts say a drop in production will help them rebound from a five-year low.

Prices rose 3.6 per cent at the GlobalDairyTrade auction overnight, boosted by a big jump in the price of butter.

The average winning price at the auction was US$2709 (NZ$3475) per tonne, up from US$2609 a tonne at the previous auction in mid-December.

The trade-weighted GlobalDairyTrade price index hit a five-year low in December after plunging 50 per cent since February, but it has lifted at the last two auctions with prices up 2.4 per cent at the previous one.

It is at its highest level since September.

Following the auction, AgriHQ lifted its Seasonal Farmgate Milk Price forecast for the 2014-15 season by 10c a kilogram of milk solids to $4.30/kg.

Fonterra’s forecast for the season is $4.70/kg, although auction prices will need to continue to rise for that to be achieved.

AgriHQ analyst Ivan Luketina said Fonterra had offered lower volumes of dairy products on GlobalDairyTrade this season than it had previously, and the lower volumes had helped to reverse the recent price declines.

“There was a slight reduction in the volume of whole milk powder offered from the previous auction, which also delivered a lift in price,” he said.

“The volume of skim milk powder offered was less than the previous auction, and the lower volume attracted a 5.9 per cent lift in prices for Fonterra’s offered product.”

ANZ economists said supply was beginning to adjust to lower prices around the globe and “near-ideal” weather conditions looked to have come to an end in some key producing regions.

“Indeed in New Zealand supply growth has fallen behind last year since December and a soft finish to the season beckons,” they said in a note.

“The use of less supplement, and dry conditions in parts of the South Island, has seen milk flows fall behind last year.

“These dynamics, along with a change in product mix and strong sales via other channels seems to be restricting supply through the GlobalDairyTrade platform helping turn prices from cyclical lows.”

Butter had a strong outing at the auction overnight, up 13.2 per cent, while buttermilk powder prices rose 10.5 per cent.

All categories saw price increases, with anhydrous milk fat up 6.8 per cent, rennet casein up 4.2 per cent, cheddar up 3.2 per cent and skim milk powder up 2.8 per cent.

Whole milk powder, New Zealand’s largest dairy export, had the smallest gain, rising 1.6 per cent.

Volumes continued to fall with 33,669 tonnes sold, down from 35,390 at the previous auction.

ASB rural economist Nathan Penny noted that production by Fonterra farmers was still up about 4 per cent in the season to date.

ASB is predicting a milk price this season of $4.70 per kg, the same as Fonterra’s forecast.

“That said, we do expect production growth to slow through the summer and autumn,” Penny said.

“In that sense, markets will take more convincing that the milk supply growth is indeed slowing, before they start bidding up prices in earnest.”

 

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Fonterra MyMilk Subsidiary Plan Sparks Fears Among Farmers

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Source: NZME News

Shareholder says plan to let farmers supply milk without buying shares ‘shifts goalposts’.

Fonterra’s plan to allow non-members to supply it with milk has sparked fears that it could end up eroding the group’s co-operative base.

In mid-December, Fonterra moved to shore up its supply base by forming a subsidiary – mymilk – to take in more milk without suppliers having to buy shares in the co-operative.

The initiative is aimed at farmers in the high-growth provinces of Southland, Otago and Canterbury and may involve others in the North Island over the next 12 months. As it stands, mymilk will be limited to providing 5 per cent of supply.

Up until now all suppliers have had to buy shares in Fonterra in order to supply the co-operative, but with mymilk farmers will be invited to apply for one-year contracts, renewable for a maximum of five years, without the obligation to buy shares.

Fonterra said prices paid to mymilk suppliers would never exceed the farm gate milk price set by the co-op, and prices could be up to 15 cents lower.

The Fonterra Shareholders Council, noting that Fonterra’s share of milk collected nationally had fallen from 96 per cent since its inception in 2001 to 87 per cent today, said it was “broadly supportive” of the plan.

But one Fonterra shareholder said the co-op had “shifted the goal posts” with mymilk and had not adequately consulted its farmers, in sharp contrast to the exhaustive consultation and voting process that was required to bring in the Trade Among Farmers share trading scheme late in 2012.

Part of the reasoning behind mymilk was that it would enable Fonterra to maximise usage of its southern plant, which it is already in the process of expanding. But the shareholder said the reason there was extra capacity in the South Island was that farmers had opted to sell their Fonterra shares to supply other entities who don’t require their shares to be bought.

“Fonterra is effectively losing the race because suppliers are going elsewhere,” she said.

“Fonterra is shifting the goal posts because they are not winning the race and what is happening is the rest of us suppliers who did not abandon Fonterra are actually going to be subsidising those suppliers who can come in without buying shares.”

Federated Farmers Waikato provincial president Chris Lewis said farmers were questioning the plans.

“Shareholders are asking where the co-op is heading, and I think it’s a fair question,” said Lewis, who does not supply Fonterra.

“You have got to give Fonterra credit for trying something to make sure that they are competitive and that they are the first choice for New Zealand farm owners.

“I just hope that they have got a solid business case where they can be competitive enough without offending their shareholders who are fully shared up,” Lewis said.

“In some cases farmers have paid millions of dollars to buy shares and they have borrowed that money, so I guess there is tension there with shareholders saying ‘Why have all this money borrowed if I can get the same prices without having all those shares’.”

Miles Hurrell, Fonterra Co-operative’s group director of co-operative affairs, said there would always be discussion within Fonterra’s large shareholder base.

He said they spent “quite some time” talking on the farm to various shareholders about mymilk.

“Once they have talked through the detail and the rationale behind the initiative, they understand and come on board,” Hurrell said.

“To remain globally relevant we have to ensure that our number one asset – New Zealand milk – is secure for the long term.

“It is a stepping stone, so it is supporting the existing shareholders by ensuring we bring in milk to the co-operative for the long run.

“We are certainly of the opinion that a fragmented industry is not in the best interests of New Zealand as a whole and we see that the strength of the co-op is paramount,” he said.

Hurrell pointed out that mymilk suppliers will not have access to its farmer initiative, Farmsource, which will have additional benefits rolled out this year.

“You only have to look at the number of new entrants to our industry – in the last five years in particular – to know that it is evolving and that Fonterra needs to ensure that we are doing the best thing in the interest of our shareholders,” he said.

Lewis said Fonterra should be congratulated for trying to ensure the co-operative remains competitive, and that it remains the first choice for New Zealand farm owners.

“But in the end, the market will decide.”

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Generating Wealth From Dairy

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Source: Sunday Star Times

OPINION: The current dairy downturn is inevitably turning attention to the wisdom of having so many eggs in the same basket. When times look rough, it can be helpful to look back and remind ourselves of the journey we have travelled to get where we are.

The driving forces that have led to the present have had very little to do with industry policy. Rather, the outcomes we are now experiencing are the consequence of thousands of individual farmers and rural investors deciding that dairy was where the profits lay. And to a large extent they got it right.

Taxation policy is the one key area where governments have influenced investor behaviour. The longstanding taxation policy of all governments has been to not tax capital gain.

New Zealand is particularly unusual in the developed world in having no capital gains tax on rural land and other investments. Australia, Britain and the the United States all tax capital gain on farm lands.

This absence of capital gains tax is part of the reason that rural land is so expensive in New Zealand. It has made rural land a very desirable investment. However, it has also encouraged farmers to re-invest profits back in the land, build up their assets, and increase their productive capacity.

In essence, there are two parallel businesses on dairy farms. There is the cash business that comes from production. And then there is the capital gain business, which comes from owning the land, undertaking development when the cash allows, and then waiting.

For survival, farmers must first focus on the cash business. In difficult dairy years like right now, it means trimming the sails, eliminating all investment, deferring non-essential maintenance, and keeping a close watch on personal expenditure. Phosphorus fertiliser can commonly be foregone for a year, but nitrogen has to be maintained or production will quickly slip.

Reducing supplementary feeds is a dangerous ploy, as hungry cows always penalise their owner. The key is careful feed budgeting and minimising waste. Farmers now understand these principles much better than even 10 years ago.

In the long run, most farmers who borrow heavily end up profiting from those borrowings. As long as they can survive the down years, then financial leverage ensures high overall returns when the returns are averaged out over the commodity cycle. It is the capital gain that generates the wealth.

DairyNZ publishes an economic survey each year which includes data on both operating returns and capital gain. In the 10 years leading up to and including 2012/13, the return to owner operators, measured as the operating return on dairy assets after deduction of working expenses but before finance charges, ranged from 1.6 per cent to 6.9 per cent. The capital gain on total assets ranged from 15.1 per cent down to -8.2 per cent a year. Total returns to equity capital, ranged from 25 per cent in 2004-05 down to -14.6 per cent in 2008-09.

The overall return on equity capital over the 10-year period was 152 per cent. On a compound basis, the annual increase was 9.7 per cent. Although this does not sound spectacular, the power of compounding means that considerable wealth has been generated. Savings from salary are additional.

The comparable ten-year equity returns to 50/50 sharemilkers, who own the cows but not the land, ranged from 169.3 per cent in 2007-08 down to -62.4 per cent in 2008-09. The average compound return on equity was 25.7 per cent a year but with massive variability and hence also massive risk.

There is no survey data yet for the last 18 months, but we know that 2013-14 was a stellar year with record payouts and considerable capital gain. However, in the current 2014-15 season the gold has turned to dust. The better farmers will weather these tough times and still be there when the sun shines again. The farmers who deserve sympathy are the ones who got their timing wrong and by misfortune are in their first year of ownership. For them it is truly tough. However, many of them will have other farms to cushion the blow.

Much more sympathy should go to first year 50/50 sharemilkers. There will be several hundred of them. Typically, they will be a couple who have worked for five to 10 years in the industry building their asset base. They will then have bought a herd for about $1 million dollars with equity of perhaps $600,000 and borrowings of about $400,000.

They will almost certainly end this current year with a large cash loss, and could easily lose much or all of their equity. These are the young people who are aspiring to be the next generation of dairy farmers. Life is not always fair.

Within the dairy industry, there is still great confidence about the long-term future. But there is increasing concern about how far away those good times might be. Commodity prices cycles are inherently volatile and impossible to predict. If we could predict that volatility, then we could dampen it with counter cyclical behaviours.

* Keith Woodford is honorary professor of agri-food systems at Lincoln University. He combines this with project and consulting work in agri-food systems. His archived writings are available at http://keithwoodford.wordpress.com