Category Archives: News

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.

Fonterra’s ‘skeletons uncovered’ as it predicts loss of $590-675m for year
Fonterra loss of $196m its first ever, Spierings gets $8m farewell pay

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.”


Emissions landscape not as clear-cut as tech firms good, farmers bad

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ExportNZ supports the goal to reduce our greenhouse gas emissions along with the rest of the world. But we are seriously concerned about the survival of our food-producing export sector and our energy-intensive firms that export.

That is because economic analysis done by NZIER for the Ministry for the Environment shows that to get to net carbon zero by 2050, the price of emissions needs to be about $272 a tonne, under the most optimistic scenario. It factors in innovation breakthroughs in energy and farm animal emission reductions, and access to international emission reduction credits.

Given that the price of carbon is currently about $25 a tonne, this is a huge price increase which will flow through into the cost of food and energy. If other countries don’t adopt similar constraints leading to similar prices, we will put our farmers and our energy-intensive companies out of business. This will not just be bad for our economy but bad for the environment as well.

That is because we are verifiably less emissions-intensive producers of food and energy than other countries and if we price ourselves out of the market, other countries will fill the gap we leave with increased greenhouse gas emissions for our planet.


This problem, which is called “carbon leakage”, is why tackling this global challenge is such a wicked problem.

An OECD agricultural expert was recently in New Zealand. I asked him whether other countries would put a price on emissions from farming and food production. He said New Zealand is leading the rest of the world in lower emission farming already, both the way we farm (grass-fed) and due to our 20 years of greenhouse gas research. He said no other country would be likely to include agriculture in emissions trading schemes, either because it was a small part of their economy, or they were developing countries.

According to some economists, by the time the price of emissions gets to around $75 a tonne, most of our livestock farms would be converted into forestry. In my opinion this would happen way before that price was achieved.

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
The a2 Milk Company's managing director Geoff Babidge expects the significant growth in Platinum formula to continue.

The a2 Milk Company profit and share price soars on infant formula growth

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Source: Stuff

Shares in the a2 Milk company have rocketed 24 per cent after it announced huge growth rates in infant formula sales.

The NZX-listed company hiked its guidance for the full year after turning in what it called an “outstanding” result for the six months to December 31.

The record half-year profit of $10.1 million in the six months to December 31 compares to $125,000 previously.

Shares immediately climbed 24 per cent to $2.51.

The company’s share price is now five times higher than it was 12 months ago, with investors taking a keen interest in opportunities to export to China.

Its latest market capitalisation of $1.8 billion puts it in the same ballpark as market stalwarts such as Sky TV, Infratil or Xero.

Total revenue of $139.1m was up 86 per cent compared to the same time last year.

Sales of a2 Platinum formula across Australia, New Zealand and China contributed $73.9m to that figure, a growth rate of 340 per cent.

The company said it now expected full-year operating profit to be in the range of $45m to $49m, with revenue of $335m to $350m.

The China and Other Asia business unit made an operating profit for the first time, with significant growth in formula sales.

Managing director Geoffrey Babidge said the company expected the Platinum infant formula to continue as a driver of growth.

The majority of sales took place in Australian grocery and pharmacy stores, while direct sales into China increased significantly.

The company said the infant formula business was being well supported by New Zealand manufacturing partner Synlait Milk.

After experiencing stock shortages, the company had increased its production schedule with Synlait to meet demand.

It said it was in the process of further building milk supply in New Zealand to prepare for increases in infant formula production.

Besides the Platinum product, Babidge said there positive prospects for growth of a2 whole milk powder, which was launched in the last financial year.

In Britain,the company said its fresh milk business was improving after repositioning into specialty milk.

A Federated Farmers poll shows worrying levels of stress over mortgages.

More dairy farmers under pressure from banks as prices fall

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Source: Stuff

As world dairy prices continue to slide, dairy farmers are increasingly feeling the pressure from their banks.

World dairy prices at the overnight GlobalDairyTrade auction fell 2.8 per cent to an average of US$2235 a tonne, after a 7.4 per cent fall at the last auction two weeks ago. New Zealand’s major export, whole milk powder (WMP), fell 3.7 per cent to US$1890.

A recent poll of members by Federated Farmers showed more than one in 10 dairy farmers (11.1 per cent) are now under pressure from banks over their mortgage. That is up from 6.6 per cent in August and 7.6 per cent in November.

Prices fell for the fourth consecutive auction.

Prices fell for the fourth consecutive auction.

Dairy chairman Andrew Hoggard said that while banks were continuing to support farmers, it was a “worrying statistic” that one in 10 farmers were feeling the squeeze.

The poll was conducted at the beginning of February, with a sample of 1225 members representing all 24 provinces and seven industry groups.

“There’s now a question over the viability of lower order workers such as sharemilkers. I know of some who are switching to contract milking,” Hoggard said.

Commenting on an analyst’s description of dairy prices presenting farming with the worst crisis since the 1980s, Hoggard agreed that expansion had put pressure on farmers.

“We were leaner and meaner in the days when I entered the industry in the late 90s,” he said.

Hoggard called on the Government to hold European farmers to account for the subsidies they received, which were fuelling production.

“This is something our government needs to take up through direct diplomatic channels and the World Trade Organisation, and if next season is going to be any different to this one they’re going to have to move quickly,” he said.

“It’s concerning that some European countries are wanting to move backwards to more regulation. Instead they need to keep moving forward to more market orientated structures. The more farmers around the world live with the economic realities of the decisions they make, the more stable a market we will get for all farmers.”

Rabobank analyst Emma Higgins said the price fall was not surprising and “could have been worse”.

“All eyes will now be on whole milk powder and skim milk powder. This is where the bulk of the volumes are sold and they are the key indicators of the farmgate milk price.

“We’re sitting in a bit of an ugly mix at the moment where there’s modest powder demand combined with high inventory levels as well as strong global growth, especially from Europe,” Higgins said.

Rabobank was preparing to do its forecast milk price but that would not be ready until March.

Westpac economist Anne Boniface said the auction result was “broadly in line with our expectations and leaves us comfortable with our recently updated payout forecasts”.

The bank was now forecasting a Fonterra farmgate milk price of $4 this season and $4.60 in 2016-17.

Agri HQ’s Susan Kilsby said prices were higher than anticipated, judging by futures market indications, which had foreseen a drop of 4 per cent in WMP.

“Overall market sentiment still remains very bearish meaning a sustained price recovery is unlikely to occur until the later part of 2016,” Kilsby said.

There were 151 bidders trading 22,021 metric tonnes of product.

Dairy farmers may lose $1.50 for each kilo of production capacity they have over the next two seasons.

ANZ forecasts more pain for dairy farmers

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Source: Stuff

ANZ is forecasting a longer, deeper trough in dairy prices.

The bank has dropped its forecast price for milk solids this season by 30 cents to $3.95 a kilo.

It now “tentatively” expected a price of $5 a kilo in 2016-17, which is 50c to 75c less than it had previously been predicting.

Farmers would be losing about $1.50kg on their production over the two seasons, it said.

The bank said there appeared to be “simply too much supply for the market to handle”.

Milk production in Europe was increasing and the cost of production was coming down, it said.

“Both these factors are expected to continue to supress prices and delay expectations for a rebound.”

Chris Lewis, the Waikato chairman of Federated Farmers, said the ANZ report was probably correct but it wasn’t good reading.

“You can’t argue with where the market is and what it’s telling you,” he said.

However, it cost farmers about $5 to $5.50 a kilo just to break even, and they needed more than that for capital such as new fencing or replacement stock.

“You need to be earning well above $6, to be fair.”

The saving grace had been that the predicted drought had not been as bad as expected in his region.

“We’re still having to spend money feeding cows but it’s not as bad. Our crops of maize are looking fantastic at the moment.”

ASB lifted its New Zealand milk production forecast for the season by 3 per cent earlier this week saying fears of a summer drought had largely receded.

But Lewis believed that if prices were as ANZ forecast next season, there would be casualties.

“There’s 12,000 dairy farmers all in the same boat as me. If it gets any worse, it’s a national issue.”