All posts by Grant Pedersen

NZ Primary Sector

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A new lens for NZ’s primary sector

The government offers a big cash hand-out to keep struggling businesses going.

When the disease came to New Zealand, it established a stranglehold in the South Island. To combat the disease’s progress, the Government adopted a ‘stamp it out’ policy, the likes of which other countries had found difficult to implement.

Movement was severely curtailed, and business owners compensated for the inability to operate. As thousands of animals died, questions were raised about the tracing system used to manage movement and track the M.bovis spread.

M.bovis was identified on a South Canterbury farm in 2017, sparking what is now nearly three years of aggressive disease management. As at 22 April 2020, 29 properties were under quarantine control.

Eradication may be in sight, but this massive biosecurity challenge has come at a great cost — financially and mentally — for farmers and for rural communities.

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The country is now fighting another pandemic, impacting all New Zealanders — not just those dependent on the agricultural value chain. Yet the opportunities for the primary sector emerging from the Covid-19 situation are coming into focus.

In the week ended 6 May 2020 compared with the equivalent week in 2019, total exports were down 8 per cent. However, key primary sectors still showed a positive growth in exports. For example, dairy exports increased by 19 per cent, fruit by 33 per cent and meat by 4 per cent.

As New Zealand starts to claw its way back from Covid-19, a growing tide of rural, economic and real estate commentators see the primary sector as being the bulwark for the sustainability of the country’s economy.

Even allowing for downward pressure on the milk payout, and subdued food demand from large consumers like China, New Zealand’s ability to safely feed more than 50 million people will likely haul the country through.

Dairy exports have grown by 19 per cent since this time last year.
Dairy exports have grown by 19 per cent since this time last year.

But this isn’t about business as usual, because we’re now facing a new normal as our country gears up to recover and thrive.

No industry is ‘lost forever’ — though some will take longer than others to recover, and they will probably not look the way they did in 2019. But if the primary sector has the weight of expectation on it, serious thought needs to be given around accelerating its growth.

As the country gets set to embark on a range of shovel-ready infrastructure projects, now is probably the time to reconsider the role of irrigation projects in prime growing areas, like Hawke’s Bay.

These projects would have a fundamental role in job and value creation. In this context, thought needs to be given around where to direct investment into the primary sector, or to divert from other industries, given its crucial role.

A second point is around talent. The primary sector workforce has radically altered, particularly in horticulture, where the largely overseas workforce is being replaced by Kiwis made jobless through downturns in tourism and forestry.

Budget 2020 includes an investment of $11.4 million to grow the agritech sector.
Budget 2020 includes an investment of $11.4 million to grow the agritech sector.

Budget 2020 allocates $19.3million over four years to help the recently unemployed to access training and work opportunities in the primary sector. This initiative aims to place at least 10,000 New Zealanders into primary sector jobs.

While those industries will grow once more, it’s likely restrictions on visitors will dampen the involvement of RSE and other workers in the primary sector over the short term. Again, this is a real opportunity to invest in many of the skills the primary sector needs, including in specialist degrees and related disciplines including the sciences and engineering.

The growth of automation, robotics, sensing and other technologies in horticulture mean these skills are needed. Fortunately Budget 2020 includes an investment of $11.4 million to grow the agritech sector.

The demand for this hasn’t been caused by Covid-19 — horticulture in particular has been crying out for skilled people for years — but it certainly has lit a fire under it.

Now is the time to look at the primary sector through a new lens and see the value it provides New Zealanders through job creation, economic and financial value, social and community cohesion, while doing so sustainably.

And the lessons the primary sector can relay and reflect following its own battles with disease incursions may well contribute to the resilience of all New Zealand.

Jane Fraser-Jones is a partner at Deloitte

Sharemarket winners and losers emerge from lockdown conditions

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Sharemarket winners and losers emerge from lockdown conditions

Investing in a post-Covid 19 won’t be easy. Dairy and meat could be good bets.

Two weeks into lockdown and thoughts are turning to recovery and what sort of economy New Zealand is going to have.

Already it’s clear that companies involved in the primary industry, in health or producing necessities are poised to benefit after the country emerges from its coronavirus lockdown.

On the other side of the divide, profit forecasts for even quite strong businesses have flown out the door.

Dairy and meat exports are expected to be in hot demand post-Covid 19 from a hungry world.
Dairy and meat exports are expected to be in hot demand post-Covid 19 from a hungry world.

The NZX is open during the lockdown but experts advise anyone looking at what seems like ultra-cheap shares to look at the company’s bigger picture.

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“I’d tell them don’t just look at the profit and loss statement, also look at the balance sheet and ask yourself, is the company capitalised to make it through to the other side,” Matthew Goodson, managing director of Salt Funds Management, says.


Primary industries-related

The two major supermarket owners Foodstuffs and Countdown are expected to do well out of the lockdown but neither is listed in New Zealand.

However, other companies exposed to the primary sector are enjoying fresh interest.

In that sector, listed companies – that is, companies that ordinary investors can get a slice of – include Fonterra, A2, Synlait, Scales, Seeka, T&G Global and fishing company Sanford.

Most primary sector businesses and ports are classed as essential businesses and still running in some way.

But it’s not as simple as picking a sector. For example, logging has been stopped in its tracks by the virus. “There are definitely winners and losers at this stage,” Goodson says.

Some companies are already in good positions. Dairy darling A2 Milk recently boosted its now-cornerstone shareholding in Synlait and its shares have risen 17 per cent in the last year.

Honey exporter Comvita and probiotic company Blis Technologies are both benefiting from demand for their immunity-supporting products.

However, age-old factors such as supply, demand and exchange rates still play their part. New Zealand supplies a big chunk of China’s milk powder, yet the world is currently awash with milk.

Doug Steel, a senior economist at BNZ says a fall in our dollar offers some protection.

“It helps insulate exporters from the worst of any world price weakness. In fact, at least through March, the drop in the New Zealand dollar has more than offset offshore [dairy] price weakness overall.”

The fruit picking industry is enjoying a boom but struggling to recruit and house enough workers for the harvest.
The fruit picking industry is enjoying a boom but struggling to recruit and house enough workers for the harvest.

Selected technology

As a maker of respiratory devices, Fisher & Paykel Healthcare shares are up 87 per cent over the last year.

And it is an essential business, as is Pacific Edge, a company that provides tests for bladder cancer.

The massive explosion in both demand and supply of ventilators may go either way for Fisher & Paykel, and the current disruption could affect its sleep apnoea business. “But on balance, FPH is a rare winner,” Goodson says.

PushPay, which provides payment services in the United States church donation market, has “conflicting drivers. Clearly church attendance is collapsing, however, some churches are really getting themselves sorted online”, he says

Fisher & Paykel Healthcare has upgraded its profit forecast as demand for its respiratory devices increases.
Fisher & Paykel Healthcare has upgraded its profit forecast as demand for its respiratory devices increases.

Entertainment and communication

With streaming services in high demand, shares in Spark, which recently sold its streaming service Lightbox to Sky TV, are up 22 per cent over the last year and fibre installer Chorus is up 10 per cent.

Conversely shares in sports-driven Sky TV are down 78 per cent.

Goodson says Spark and Chorus are companies investors often turn to in bad times for stability and consistent dividends.

“It’d be a stretch to call them winners but their defensiveness has seen a strong outperformance versus a lot of other names,” he says, whereas Sky is in an “incredibly difficult position” and sport in “a world of pain”.

As Kiwis get bored in lockdown, a few industries are emerging as “clear winners,” Jane Davis, director of workplace wellbeing firm The Flourishing Institute, says.

“These are likely to be entertainment providers, streaming organisations, app development companies, online training and online services.”

Spark's telco and streaming services are being heavily used during the lockdown.
Spark’s telco and streaming services are being heavily used during the lockdown.

Energy shares

With most people forced to stay at home, you would think electricity companies would be doing pretty well.

But that would be forgetting that many industries are not operating.

“It depends on the position of each company,” Goodson says. Power to households costs much more to provide and customers are more fickle, but it earns a higher margin.

However, when things are tough overseas, electricity is one sector that largely revolves around domestic drivers like low lake levels and industrial demand.

Meridian, for instance, is a major supplier to the Tiwai aluminium smelter, which is reducing its energy use for the next six months.

Contact Energy also supplies Tiwai to a lesser degree but would be affected it there was a surplus of power in the south, which can’t be exported north until transmission lines are built in three to five years.

“Once those transmission lines are built, prices would fall all round the country. Meridian would get a higher price than what they’re currently selling it on contract for, so it’s a mixed bag for them,” Goodson says.

Southland's Tiwai aluminium smelter wants to reduce its energy contract from Meridian.
Southland’s Tiwai aluminium smelter wants to reduce its energy contract from Meridian.


Retailers, tourism and hospitality

As the economy steps out of lockdown, the hardest hit will likely be tourism and international education, as border restrictions may be some of the last restrictions lifted.

“The more successful New Zealand is at destroying the virus domestically, the more vulnerable, relative to the rest of the world, we become, as we will have little to no community immunity,” BNZ head of research, Stephen Toplis, says.

Goodson says it will take tourism and international education “many, many years to come back” and their absence will hurt hospitality as well.

Tourism companies such as Tourism Holdings and Millennium & Copthorne have been early victims of the country's border closures.
Tourism companies such as Tourism Holdings and Millennium & Copthorne have been early victims of the country’s border closures.

Hospitality companies on the NZX include fast food companies Burger Fuel and Restaurant Brands. The latter has a major international backer and has been running in Australia and Hawaii without dine-in options.

“They’ll see it through but they’ll take a tremendous earnings hit, as will every retailer,” Goodson says.

On the retail front, some companies like Briscoe Group, Smith’s City and The Warehouse Group have been able to carry on in a limited way by selling essentials during the lockdown.

Others are like outdoor clothing firm Kathmandu, a company with a string of overseas stores and known brands but whose shares have toppled from around $2.50 in February to around 64 cents currently.

Goodson said it was hard to value retail properly.

“The question is, what is the shape of retail when it comes back and who has the balance sheet to get through to the other side of the abyss.”

Investors have punished tourism-related stocks like Tourism Holdings, which dropped like a stone from $2.64, touched 55 cents and recovered to around $1.15.

Millennium & Copthorne Hotels quickly switched from forecasting interim revenue of $24 million to an annual loss.

And aviation is truly up in the air. Air New Zealand and Auckland International Airport shares have pummelled as passenger numbers evaporated.

But as crucial links to the world, Air New Zealand has been given a government loan, and Auckland Airport has announced a $1.2 billion recapitalisation.

Retirement villages and Fletcher Building are both vulnerable to the housing market.
Retirement villages and Fletcher Building are both vulnerable to the housing market.


Housing does not have a big direct presence on the NZX, but it’s there, with Fletcher Building and several retirement village providers exposed to the housing market.

Blue-chip Ryman shares, which were close to $16 at the start of March, dived to $6.64 before rebounding to about $11.

Key to this, according to Goodson, will be the unemployment rate. House prices are tipped to fall between 3 and 10 per cent, as immigration falls away and banks become credit-constrained.

He says if housing was to revert back to 2014 levels, prices would sink 30 per cent. “So I think a critical question for the economy … is how bad does the housing market get.”

And there are other external factors which individual companies can do little about.

A net 43 per cent of businesses in ANZ’s business outlook this week think their exports will decline.  A net 8 per cent of businesses think they will be lowering prices. “If that ain’t sign of deflation, nothing is,” Toplis says.

However, an economy without mass deaths will have definite advantages. Toplis is forecasting waves of the virus will potentially seeing businesses operating differently in different regions.

Wiping out the virus would be a “remarkable outcome … if every player in the economy – households, business and the government – plays their part, and we have a lot of luck.”

Time to cut the cord and let agriculture thrive

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Time to cut the cord and let agriculture thrive

Dairy cows endure the drought in the Manawatū heartland, at Awahuri in February.
Dairy cows endure the drought in the Manawatū heartland, at Awahuri in February.

OPINION: Tourism Minister Kelvin Davis said last year that tourism was New Zealand’s “largest export earner”, contributing $39 billion to the economy each year and directly employing more than 200,000 people.

Obviously, Covid-19 has upended the tourism sector, so Davis was left with no choice but to announce earlier this week that he has tasked Tourism New Zealand to lead a programme that includes the Ministry of Business, Innovation and Employment, the Department of Conservation, and industry parties to “reimagine the way we govern tourism, how we market domestically and internationally, who we market to, and how we manage visitors when they arrive on our shores”.

Another major sector upended because of Covid-19 is international education. According to the Tertiary Education Commission, international education “contributes $5.1b to the economy and is the country’s fourth largest export earner” – it also supports about 50,000 jobs.

Undoubtedly, our universities and other education providers are worried the cash cow has dried up. Will we see the same number of full fee-paying international students on our campuses post-Covid-19?

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Lake Wanaka Tourism general manager James Helmore says the economic outlook is bleak.

The New York Times reported that with travel bans and “anger rising among Chinese students and parents at the West’s permissive attitude toward public health, enrolment could plummet in the coming years”.

So, are two of our major export earners out of the game? It seems that could be the case.

Last week, Infrastructure and Regional Economic Development Minister Shane Jones said tourism and international education would no longer be major industries for New Zealand.

He’s right – it might take years for both sectors to bounce back if they bounce back. Also, let’s not forget that businesses and workers who indirectly rely on our tourism and international education sectors will also be affetced.

And just like that, it’s doom and gloom, well, for tourism and international education at least. Further, if we are to believe the recent OECD report about the effect of Covid-19 on economic activity, then New Zealand’s economy is likely to suffer more than most in the OECD.

Although, to be fair, the OECD report did not consider efforts such as the Government’s wage subsidy. So, where to from here?

Sometimes the most obvious answers are right in front of you. In New Zealand’s case, that would be our primary industries of agriculture, horticulture, forestry, and seafood.

The latest forecasts predict the primary sector’s combined export revenue will reach $46.5b for the year ending in June – that’s with Covid-19 taken into account, although that figure should still be treated with caution.

Taihape farmer Daniel Mickleson is concerned that proposed water quality standards could put his farm out of business.

Suffice to say, we are heavily dependent upon our primary sector. In other words, from here on in, it will be the primary sector that’s putting kai on the table.

There’s also the potential to be putting actual kai on tables around the world if the chief economist of the UN Food and Agriculture Organisation is right about a possible global food shortage.

Accordingly, the Government needs to let go of its ideological biases, reset, and do all it can to encourage and grow our primary industries.

A good place to start would be to deregulate anything that hinders production for farmers, growers, foresters and fishers. For example, farmers face significant compliance costs to ensure they’re meeting requirements from the Zero Carbon Bill to freshwater management policies.

Last year, Stuff reported some farmers were choosing to exit the industry rather than pay for compliance costs. I don’t blame them for leaving – farmers have regularly faced the wrath of a holier-than-thou public who demand sustainability but are happy to fly to Bali.

Speaking of deregulation, now is a good time to have that wider conversation given the economic crisis.

The Guscotts are raising beef and lamb for export to the US on land that has been in the family for several generations.

With unemployment set to increase, deregulation across the board will assist low-income families because they spend a significant amount of their income on heavily regulated goods and services.

Also, more small businesses will be able to survive this crisis as the cost of compliance is higher for small-to-medium-sized businesses.

Obviously, it makes sense that any programme that removes unnecessary constraints on business can only stimulate and grow the economy – and that’s what we need for post-Covid-19.

Using the Government’s modus operandi, let’s hope it establishes yet another committee, but this time to “reimagine” business without unnecessary constraints, for the sake of us all.

Steve Elers is a senior lecturer at Massey University, who writes a weekly column for Stuff on social and cultural issues. His views are his own and do not represent Massey University. 

Fonterra Cut Jobs

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Fonterra has confirmed there will be job losses as it heads towards reporting a massive loss at the end of the month.

The extent of the cuts is unclear, but a number of sources have confirmed to Stuff they have heard about the losses.

It is understood middle management positions are more likely to go than processing plant workers.

A Fonterra spokeswoman acknowledged there would be cuts but would not say how many. “We have been open with employees that with a new strategy comes a new structure. Our new strategy is about being more focused, prioritising New Zealand milk, and being closer to our customers.

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Fonterra chairman John Monaghan has told a farmer there will be big job cuts.
Fonterra chairman John Monaghan has told a farmer there will be big job cuts.

“That means we will be changing our organisational structure to support our new strategy. It is premature to speculate on where in the organisation these changes may occur or how many roles may be impacted,” she said.


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Dairy Workers’ Union secretary Chris Flatt said milk would not stop coming, and workers were needed to process it.

The last time the dairy giant shed a large number of jobs was in 2015 when 750 staff were laid off. At the time it said the downsizing would bring about $100 million of savings.

Worldwide, New Zealand’s largest company has about 22,000 staff.

Last month Fonterra announced it would make an annual loss in the range of $590m to $675m, after making write downs of $820m to $860m. It was supposed to deliver the results on September 12, but has delayed that until the end of the month.

The Financial Markets Authority has also requested information from the dairy giant after receiving a complaint about the expected record annual loss and asset write-downs.

Recently, Fonterra said staff would not receive bonuses for this year, and those earning over $100,000 would not receive a pay rise next year.

Of those being paid over $100,000, 4035 are based in New Zealand and 1729 are overseas.

Critics have long questioned why Fonterra needs to lease prime downtown Auckland property for its head office.
Critics have long questioned why Fonterra needs to lease prime downtown Auckland property for its head office.

A source who Stuff has agreed not to name said Fonterra chairman John Monaghan had phoned him to tell him a large number of jobs would be shed. The farmer had earlier placed feedback on the Fonterra app.

The Waikato farmer said while it was good to see Fonterra addressing its problems, people at the top should be answerable for the situation it was in.

“Still no-one’s been held accountable.”

The company could blame former chief executive Theo Spierings, who has been replaced by Miles Hurrell, he said. “But John Monaghan was on the board and I confronted him, and he said ‘but we’ve got Miles on board now’.

“Miles is being put up as the saviour, but there’s no accountability on the board. They backed Theo, they gave him free licence,” the farmer said.

Fonterra shareholder and DairyNZ director Jacqueline Rowarth said the cuts were appropriate.

“They’ve lost billions of farmer assets. In meetings we’ve been asking how they have been valuing Beingmate so highly and asking for data since 2012 on which companies overseas were doing what – we’ve never had it.

“They’ve gone on saying everything is fine, but we’ve never thought that. At meetings I’ve been shouted at and told variously by [former chairman John] Wilson and Monaghan ‘you’re not to say any of this in public’,” Rowarth said.

Fonterra supplier Jacqueline Rowarth says she has been questioning the accounts for years without satisfactory answers.
Fonterra supplier Jacqueline Rowarth says she has been questioning the accounts for years without satisfactory answers.

Fonterra senior management and the board were due to go on investor roadshows next week, but Rowarth said she had now received notice the meetings were to be postponed.

She envisaged Fonterra’s consumer and foodservice business might have the biggest staff cuts.

“The whole China thing is a debacle, so if they’re getting out of China then people there could go. They’ve taken on vast numbers of people to do good stuff overseas and they haven’t been able to do that,” Rowarth said.

ASB analyst Nathan Penny said he did not know of any figures, but Fonterra was looking to save money and one place they would focus on was wages and salaries.

“So maybe there’s substance to the rumours, it wouldn’t surprise me.”


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.





Stephen Winter of Nind Dairy Services in Invercargill

Dairy downturn hurts other businesses

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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.”


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

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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.”


Sharemilkers, farmers urged to work together

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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.”


Dairy industry needs to stay competitive

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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.”

A milking buffalo at Whangaripo Buffalo farm, north Auckland.

Water buffalo make a splash as rewarding all-rounders

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Source: Stuff

Getting started in farming water buffalo in New Zealand today will be about as exotic as a trip to the gas station compared with the Wills-Armstrong family’s journey of discovery to these endearing great grey creatures.

The family, who operate Whangaripo Buffalo in north Auckland, started farming water buffalo eight years ago after a quest which took them to Germany, Italy and Africa.

While water buffalo are still not exactly thick on the ground here, you could, if you fancied cashing in on the growing demand from restaurants and discerning and health-conscious food buyers for their milk, cheese and meat, buy some without taking on a tangle of import red tape. (Whangaripo Buffalo has enough animals now to sell you a complete herd.)

But when Chris and Pam Wills, their daughter Annie Wills and husband Phil Armstrong, and then-toddler son Marin, set off overseas about nine years ago, few Kiwis had ever seen water buffalo unless they happened to pass AgResearch’s Ruakura campus in Hamilton while a trial was under way.

The back story to the family’s travels and subsequent importation of 17 in-calf buffalo heifers and two bulls from Australia starts with Waikato-born Annie, (birth name Andrea) who has an agriculture degree from Massey University and worked for some time with big tented safaris in Botswana.

Her husband Phil grew up on a dairy farm at Maketu, on the Bay of Plenty coast. He went to sea straight from school and spent 17 years on deep sea trawlers and two-man fishing boats, meeting Annie in 2000. Buying the boat Phil was working on then was a stretch for the couple, so he went into the building trade.

Meanwhile Chris, an engineer in the waste industry and wife Pam, who had long farmed cattle on a small scale, were looking for a retirement business that could support the family in future.

Urged by Annie to see Africa, they set off initially for Europe where they saw buffalo being milked for Italy’s famed mozzarella cheese industry. Later it was on to Mozambique where they had thoughts of buying land and establishing a fishing business. But Chris became ill and without confidence in that country’s health system, the family came home.

Unable to afford a viable dairy or sheep and beef farm, they bought 20 hectares in the postcard-pretty Whangaripo Valley between Matakana and Wellsford, and started thinking hard about the buffalo they’d seen in Italy.

With Annie’s mantra “how hard can it be?” and a bit of research spurring them on, the family imported buffaloes from Queensland.

This involved a five month quarantine rigmarole but the rest has been easy, and the returns rewarding.

“We don’t advertise, but we sell everything we make,” says Phil.

The family’s original intention was to sell milk, recognised for its higher levels of crude protein, fat, calcium and phosphorous, and slightly higher level of lactose, compared to cow’s milk, to a local dairy company. The high levels of total solids make the milk ideal for processing into value-added products such as cheese and it can be tolerated by people allergic to dairy cow’s milk.

But they also had an eye to farming buffalo for meat. The animals don’t store fat in their meat (marbling) which has about one-third the fat content of chicken, says Chris.

What the family didn’t plan to do was make cheese – now a significant part of annual revenue.

This side of the business came about when the initial milk sales plan fell through and the family had to learn to make cheese – fast.

Today the company sells a large range of buffalo cheeses, including Marin Blue (named after Marin, now 10) and a hard cheese called St Malo, named for youngest son Malo, (who isn’t a saint, says Phil) and a brie rolled in ash called St Benedict the Black.

The company produces 6-8 tonnes of cheese a year for sale around the country as well as bottled fresh pasteurised milk and milk for other cheesemakers.

Whangaripo Buffalo prime meat – sold mostly as burgers from the herd’s R2 year bulls killed at Ruakura, Hamilton – is in demand at north Auckland’s Matakana market, organic shops in Wellington and Auckland, and top restaurants, selling for up to $40a kilogram.

While the family’s aim is never to lose the artisan food production touch, this is no cottage business.

The buffalo herd currently numbers 115 which includes 50 milking cows, 20 in-calf heifers and the remainder bulls and calves. Cows are milked once a day all year round and are producing about 6000kg of milksolids annually.

The business is operated over three properties – a leased 50ha block at Dairy Flat, on leased 20ha at Leigh Road, Matakana, and at the family-owned land at Whangaripo Valley.

The bulls and calves are farmed at Dairy Flat, where the family is living until a new house is built at Whangaripo Valley, and where cheese making is done in a converted container.

When heifers are a year old they go to the Matakana property and then on to Whangaripo Valley to join the milking herd. A bull is run with the females year round and Phil is expecting 70 to calve in the next 12 month cycle. He’s currently milking 26 cows every evening for about 80 litres of milk.

Bulls are sent for processing aged 18 to 22 months and when hooked, can weigh up to 300kg. Ruakura is one of only two buffalo processors in the country approved by the Ministry for Primary Industries.

There’s nothing not to like about farming water buffalo, says the family.

The animals are good natured, smart, easy calving and very hardy. Phil says he’s had the vet out only twice in eight years. They’re great converters of what dairy farmers would call “unimproved pasture”, says Annie, and clean up the rushes on the properties.

They’re long-lived – a cow can be expected to milk for 20-25 years. This means herd numbers build up fast and Phil says he could easily spare up to 30 cows today for someone wanting to enter the industry.

The family sells week-old calves for about $400-$500 and would expect to get up to $6000 for a milking cow, which can produce up to $3000 worth of milk in their first year plus a calf annually.

Water buffalo can be run with any other animal except for sheep and goats, which carry a disease fatal to them, he says. They don’t get facial eczema, probably because of their tropical origins which condition them to heat and humidity.

They can jump a standard wire fence but are very respectful of a single or two-wire electric fence.

“They’re a big solid, well-grounded animal and a little bit of electricity goes a long way,” says Phil.

“They’re easy to handle, you can pack them into the yard for milking and walk through them and never get a knock. We tie a foot down in the milking shed because they take the cups off. They don’t kick at you, and most will lift a foot for you (to tie). They can get very protective with a new calf.”

Phil milks in half a herringbone shed but is building an old-style walk through dairy shed.

“I know it means getting up and down, but it will be good particularly at this time of the year when I have new cows coming in which take a while to milk out while others that have been (milking) in for a while milk out quickly.

“The walk-through will mean they each have their own stall and can’t play with the neighbour.”

Phil milks with an old duo-vac system which starts at a low pulse and vacuum rate and builds pace.

“They hold their milk differently to a dairy cow. They hold it right up so it looks like they have a very small udder. When they start to let down it (the duo vac) changes to a higher pulse rate and higher vacuum. It gives them that time.”

The herd is fed entirely on grass. The family cuts about 70 bales of baleage a year. In the new dairy shed cows may get molasses “as a treat”, Phil says.

The herd is not drenched or vaccinated because with their broad diet of rye grass and clover, tropical-type grass, some plantain and rushes, it’s unnecessary, says Annie, a passionate advocate of the nutritional value of “unadulterated” buffalo milk and strongly critical of the dairy industry’s use of palm kernel extract as a cheap feed supplement.

Mum Pam agrees: “If cows were meant to eat PKE they’d be born with sharp teeth.”

Early lessons about farming buffalo included not offering them large water troughs – they climb in – and to make sure trees are protected.

“We always offer trees for shelter but they need to be on a fence line because they sharpen their horns and ring bark them,” says Phil.

Water buffalo need wallowing space. They will dig their own in wet ground, and in winter Phil makes available to them areas that are too wet to graze.

He’s been subdividing paddocks for easier break fencing so that in winter the big heavy animals can be moved daily to limit pugging. A stand-off pad is planned.

Chris says the family has invested about $300,000 so far in the business, including the cheese making facility. Annual revenue is $120,000 to $150,000, he says.

The aim is to utilise every part of the animal, and the next challenge is to find a New Zealand processor for the thick hide, valued overseas for handbags and shoes.

The horns are popular with bone and knife carvers and for jewellery, especially earrings.

After eight years the family can start to think about consolidating the operation.

Phil says that means focusing on genetics and being able to cull animals.

“At the moment we’re bringing a lot of young ones through. It would be nice to have four or five replacement cows a year to deal with instead of 20.”

There are two types of water buffalo – swamp and river.

The family’s herd foundation imports were a mix but breeding now leans to the river species.

Expanding the farming operation is not on the agenda.

Finding good sized pieces of land in the highly subdivided district is challenging and more animals would mean establishing a second herd just for milk production, says Phil, who is aiming to be in the milking shed less, not more.

“I don’t want to milk more than 40 at any one time. That’s a good amount of milk for cheese while remaining artisan.”

The family is keen to move more into high quality meat production which means a greater focus on bull genetics, the possibility of importing semen instead of using sire bulls, and less cheesemaking.

The aim is have calving only three months of the year. The family is keen to see Whangaripo Buffalo meat stocked in supermarkets.

They’re committed to encouraging and supporting new entrants to water buffalo farming.

“They’re an amazing animal,” says Annie.

“Buffalo milk is the way of the future, the export potential is huge including for milk powder.

“The meat is good and lean, and totally organic. You get a lot of bang for your buck.”


  • Contribute 72m tonnes of milk and 3m tonnes of meat a year to world food supply
  • More than 130m domestic animals
  • Depended on for food more than any other domestic animal
  • Recommended by conservation scientists to manage uncontrolled vegetation and open clogged waterways for wetland life