All posts by Joelene Prier

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Farmers Flock to Finance Classes

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Source: Stuff

Farmers are flocking to finance classes as they look to guard against more sudden changes in the dairy market.

Primary ITO adviser Liz Sanders said an increasing number of farmers had signed up to modules on cash flow, financial planning and reducing risk as part of the diploma in agribusiness management course since the forecast changed.

Exact figures on the rising popularity of the courses were not available but there had been substantial increases in both enrolments and inquiries, Primary ITO said.

“The diploma qualification builds farmers’ skill in key areas of their business like human resource management, financial planning, tax and investment,” Sanders said.

Bank of New Zealand agribusiness partner Emma Hennigan said farmers were generally more aware of how their business was positioned.

The drop in Fonterra’s Global Dairy Trade index had made financial planning more important than ever and farmers could avoid being ‘ambushed’ by market changes if they planned and managed cash flows, she said.

Dairy prices fell to 3.6 per cent at Fonterra’s latest Global Trade Auction this month – the third decline in a row.

Fonterra also slashed its forecast dividend to 20-30 cents per share last month, despite widespread expectations in the farming community that the figure would rise.

Hennigan said those who were studying the course appeared to have an increased awareness and confidence about what they could do to improve their on-farm finances.

Southland Federated Farmers president Russell MacPherson said financial management was an important aspect of any business.

Having a thorough understanding of finance was beneficial for farmers at all levels of the industry, he said.

“Upskilling farmers is very important, but finance is also a big part of our personal lives,” MacPherson said.

“If you’re a farm worker who has aspirations of becoming a sharemilker or a farm owner, understanding finance is a great starting point.

“It’s great that organisations are offering these courses.”

GORE COUPLE GROW IN CONFIDENCE

A Gore sharemilking couple say studying finance has made it easier to cope with the challenges of what has been a tough season for dairy farmers.

Bryden and Vanessa Rufford are completing a diploma of agribusiness management through Primary ITO, and say they now feel they are “speaking in the same language” as their accountant.

Vanessa said since starting they have been tracking their expenses and adjusting their budgets more regularly, making them more confident when making financial decisions.

“Looking forward, we can already see that next season is going to be even harder than this season,” Vanessa said.

“It’s important to talk to your accountants and your bank manager early.”

Having a greater financial awareness made their 175ha operation a stronger business, she said.

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Maori In Freshwater Bid

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Source: Sunday Star Times

Maori leaders have mounted a bid for effective ownership of a share of the country’s freshwater.

This would allow them, and other with water rights, to onsell it to those who need water for irrigation, hydropower and other commercial uses.

Talks between the powerful Iwi Leaders Group and the Government, fronted by Deputy Prime Minister Bill English and Environment Minister Nick Smith, are at a critical stage after ministers rejected a nationwide ‘Waterlords’ settlement along the lines of the Sealords deal over Maori commercial fishing claims.

The Government is adamant it will not hand over rights in perpetuity to Maori – but it may compromise by allowing regional councils to do local deals with Maori.

Farmers are worried that there will not be enough water to go around if significant quantities of freshwater are set aside for Maori.

In a Cabinet paper, Smith points to possible “catchment by catchment” deals at a regional government level. The Crown has acknowledged Maori interests and rights in freshwater but their extent and nature is at issue. The Government may set criteria by which local iwi can get preferential access to water, catchment by catchment, Smith says.

Ministers and iwi leaders held a summit at Waitangi during the February 6 commemorations, in a swift response to an iwi- commissioned report proposing radical ways to deal with freshwater and Maori claims. The report, by research group Sapere, proposed a nationwide settlement, an end to 35-year renewals of water consents. and a move to permanent rights and a market in tradable water rights.

It argued the regime would not only be a boon for Maori but would add $2 billion to the value of power-generating assets, $5.5b to the primary sector and boost the overall economy, while helping reduce the effects of drought through more efficient use of water. It would also open the way for the Government to levy resource taxes on income from using the water.

But demoted minister Judith Collins has come out swinging against the plan, describing it as a cash grab that would hit consumers in the wallet.

Officials put the value of freshwater to the economy at $34.85 billion a year.

Kevin Ferris, who has dairy farms in the Waikato and Southland, has consent to use water in his dairy sheds. “We need water and if there’s a risk that the water’s going to go elsewhere, it’s going to shift the ability to finance our business, ” he said. “People don’t want a knee-jerk. We want to get it right. To me it affects every New Zealander, not just me.”

Ian Mackenzie, a Canterbury farmer and Federated Farmers’ spokesman, said the Government needed to be careful not to solve one grievance by creating another. “New Zealand’s water is already allocated so the only way the Government could allocate further water to iwi is if they build more water storage infrastructure.”

Waikato Federated Farmers president Chris Lewis said many catchments around the region were already over-allocated. “There’s no more to give out . . . You can’t allocate something when there’s not enough there.” Waikato iwi were already well-organised with water and had what they needed for their enterprises, he said. “They have got the water they need and they have applied for it like everyone has: industry, farmers, city councils, district councils.”

Smith and English this week told the Sunday Star-Times they rejected key elements of the Sapere report, including the removal of the 35-year limit on water consents. “Both industry and iwi want that shifted to rights in perpetuity and the Government will not, ” Smith said.

The Government’s view was that nobody owned water, neither the Crown nor iwi, and it was a public good. “There is not going to be any national settlement or allocation, or any sort of iwi by iwi exclusive rights. We have been making that very plain to them, ” he said.

English insisted freshwater claims would not spark a foreshore and seabed-style controversy like the one that engulfed the Clark Government.

Some councils have preference in their plans already. For instance, in Nelson there is an agreement between iwi and the council about how it will allocate surplus water from Motueka River.

Smith said the Government was reluctant to switch from a consents-based regime to the rights-based trading advocated by Sapere, but did not rule it out at a local level, pointing to existing trading schemes in North Otago and Taupo that are allowed under the Resource Management Act. Asked if some existing rights could be removed from farmers and given to iwi, English said: “I simply don’t know the answer to that.”

A spokesman for the Freshwater Iwi Leaders Group would say only that the group “continues to engage with the Crown on Iwi freshwater rights and interests.”

Lawyer James Dunne, a partner in Chen Palmer, warned of a possible uninformed public backlash in light of the controversy over the Foreshore and seabed issue.

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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.”

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Expensive Wintering Barns Have Feel Good Factor

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Source: Stuff

The infrastructure to support a herd wintering barn can add up to 70 per cent to the million-dollar plus cost of basic construction, a new study of the financial and environmental impact of barns has found.

The DairyNZ-AgFirst study of five South Island farms with free stall barns found additional costs around machinery and farm infrastructure added 10-40 per cent to the overall cost, and if the cost of additional cows and dairy company shares were included, the capital required increased the cost of the barn by 25-70 per cent.

AgFirst consultant Phil Journeaux said the basic construction cost of the barns in the study ranged from $1.2 million to $3m.

The study concluded that investing in a wintering barn delivered a feel-good factor for the farmers, but the outcome was not necessarily profitable.

It showed that inclusion of a barn without intensification of the farm system may reduce nitrogen losses, but at a significant cost.

With good management and intensification of the system, the investment could be profitable but this was dependent on the milk price, feed costs and initial capital outlay.

But intensifying the farming system to make the barn profitable risked eroding environmental benefits, the study found.

However, the farmers had generally invested in barns for farm management reasons, such as reducing paddock pugging, better utilisation of supplementary feed, better control of grazing management and feeding and shelter for livestock in adverse weather, better working conditions and reducing the cost of wintering cows off-farm.

Financial and environmental reasons were well down their list, said the study report.

In most cases, the introduction of a barn had resulted in more cows and higher feeding levels.

DairyNZ senior economist Matt Newman said in general, farmers with barns were trading some of their climatic risks for financial risks, particularly in servicing increased borrowings and sourcing appropriate supplementary feed.

The results showed three of the farms were making money in the sense of returning a positive internal rate of return, but only one farm, in Southland, had a positive net present value, meeting the 8 per cent discount rate.

This was deflated for inflation and tax.

The base discount rate of 8 per cent is a Treasury guideline rate, based on the “government opportunity cost of capital”.

All of the case study farmers said they were highly satisfied with having a barn, apart from any economic considerations.

While some of this sentiment could be due to having made a multi-million dollar investment, they had no wish to criticise it, the report said all the farmers had spoken positively about the ease and flexibility of management provided, especially in adverse weather; better working conditions (not picking up calves in mud, wading through muddy paddocks); more content cows; less treading damage to pastures.

One farmer, when asked about the cost of a loafing area in the barn complex, had said: “Bugger the cost, I wouldn’t do without it”.

The capital value of a farm was not necessarily proportional to the investment in a barn, real estate experts had suggested.

For example if a $2m barn was built on a $10m farm, the property would not necessarily be worth $12m.

Newman said overall, the decision around investment in a barn tended to be either/or.

“Either you make money out of it or you reduce the environmental footprint of the farm.

“It is difficult to achieve both.”

All farms but one in Canterbury, and to a lesser extent, one in Southland, showed little change in nitrogen loss from pre-barn to post-barn, said the report.

Stage two of the study is under way in the Waikato.

In this stage, nine Waikato barns, of a different type to the South Island structures and including Herd Homes, will be studied for economic and nutrient loss impacts.

The final report with full results will be finished by the end of next month.

Dairy prices rise at Fonterra auction

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Source: Stuff

Dairy prices rose again at the GlobalDairyTrade auction overnight, on the back of an increase in the value of milk powder.

However, prices still have to increase a long way if Fonterra is to achieve its payout forecast.

The 1 per cent increase is the third rise in a row at the fortnightly auctions, and follows a 3.6 per cent jump two weeks ago.

Whole milk powder, New Zealand’s largest dairy export, rose 3.8 per cent offsetting falls in several other categories including anhydrous milk fat which was down 5 per cent.

Butter milk powder was down 6.4 per cent and cheddar was down 4.3 per cent.

Rennet casein rose by 3.3 per cent, skim milk powder rose by 1 per cent and butter was flat with a 0.1 per cent increase.

Volume was down again with the quantity sold falling by more than 6 per cent to 31,326 tonnes. Despite the overall increase prices are just over half what they were this time last year.

AgriHQ has lifted its Seasonal Farmgate Milk Price forecast by 20 cents to $4.40 per kilogram of milk solids, below Fonterra’s forecast of $4.70/kg.

AgriHQ analyst Ivan Luketina said the increase was mainly due to increases in dairy futures pricing since the previous auction a fortnight ago.

“Although milk production in NZ is well past its seasonal peak, milk flows are still high at this time of year, so it’s hard to see prices rising quickly in this market environment without something significant tipping the supply and demand balance,” he said.

“That may yet come, however, if the current dry weather pattern persists in key dairy producing regions of New Zealand.”

Yesterday ANZ slashed its forecast for Fonterra’s farm gate milk price this season to $4.35/kg. In a note following today’s auction, ANZ economists said milk powder prices needed to rise by an average of 3.2 per cent at each auction until July for Fonterra to meet its $4.70/kg forecast.

“Last night’s auction was encouraging for whole milk powder, but outside this price action remained poor for the other products,” ANZ said.

“The run of good results for milkfat products looks to have done their dash as they have caught up to offshore prices from other sources and skim milk powder prices were little changed.”

The dairy co-operative achieved a record milk price of $8.40/kg last season.

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.”

New Zealand Dairy Statistics 2013-14

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Source: Dairy NZ

New Zealand Dairy Statistics 2013/14 is a report that shows historical information up to and including the 2013/14 season. The purpose of New Zealand Dairy Statistics is to provide statistical information related to the New Zealand Dairy Industry. Funding is provided by Livestock Improvement Corporation (LIC) and DairyNZ Incorporated (through the dairy farmer levy). Contributors include New Zealand Animal Evaluation Limited.

Quick stats on the dairy industry

We have put together the following fact sheets with some handy numbers on dairying in New Zealand. Click on the links to view.

National

Regional

Dairy Growth Leads To LIC Subsidiary Merger

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Source: Waikato Times

LIC chief executive Wayne McNee is not ruling out redundancies when two of the farming co-operative’s subsidiaries are merged next year.

Details of the integration between Protrack and Dairy Automation Limited (DAL) will be decided in January and McNee expected the review to be finished by February.

Until that detail was thrashed out, it was impossible to rule out any job losses among the 50 staff who work within the two businesses, he said.

McNee said the merger was initiated by the staff of the two companies after LIC decided to launch an international version of Protrack and DAL into Ireland and Britain next year.

“They approached us and said we think we should be put together. It’s been received very positively.”

It has also been approved by LIC’s board of directors.

He expected the merged businesses to grow substantially over the next two years and the bulk of that growth would be in the international market.

This anticipated growth meant the new company would need a new building that would house at least 80 staff.

“Overall it’s going to grow and we will need more people and more resources, but until we actually sit down and go through the process, we don’t know exactly what it’s going to look like.

“What I can categorically say is that we see this as a growing business. We will be adding more people to it.”

LIC bought DAL last year and has since increased its staff from 12 to 20.

Protrack is a dairy shed automation system launched by LIC in 2003 and is installed on more than 1500 dairy farms. Some integrate with the co-operative’s herd management software, MINDA.

DAL provides milk testing sensors that measure fat, protein, somatic cell counts, lactose, conductivity and volume, and present real-time data while a cow is being milked.

McNee said it was business as usual for farmers, but he expected they would see improved service delivery once the move was completed.

LIC is a co-operative owned by 10,500 dairy farmer shareholders across the country.

Shareholders Council chairwoman Jenny Morrison said feedback she had received suggested there was widespread support among farmers for the merger.

“What we hear from farmers is that they want integration. They want all their automation to work together so it makes it simple for them.”

This was what LIC was trying to achieve with the merger, she said.

gerald.piddock@fairfaxmedia.co.nz

Waikato Times