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Will crossbred wool producers invest in their products future? Is there a sustainable market-led strategy for strong wools?

25th Oct 12, 2:21pm by Tony Chaston

WOOL

The North Island wool market firmed again as an offering of fine crossbred, early shorn fleece and coarse second shear wools responded to a renewed interest driven by the short supply chain and a need for quick shipments.

The amount of passings was the lowest for a while and has allowed more wool to move into the supply chain.

The poor late August weather delayed shearing by 3 weeks in the central south island and contractors have struggled to make up lost time as the main shear looms.

Wools of NZ are now getting closer to promoting their capital raising efforts with a series of road shows with farmers throughout NZ, as they strive to drive a sustainable market led strategy for strong wools.

BEEF

Again small falls in schedule pricing as the market remains flat but processors are still reassuring farmers that better demand will arrive nearer the end of the year.

Local trade schedules and saleyard sales of prime animals are also weak, and as supply increases, could remain so, until the export market reignites.Good volumes of dairy beef have been reported to have been raised and animals will soon be seen to test the market optimism for beefs future.

DEER

With now 3 weeks since any price rise it appears the spring schedule has peaked a disappointing $1.35/kg CWT behind last year, and a concern for finishers who paid more to purchase weaners in the autumn.

Cautious purchasing of chilled product is evident but it is hoped Christmas delivery volumes will minimize stocks carried over into frozen product into the new year.

DAIRY

Volatile weather conditions return for this period of spring, with snow to some areas lowering ground conditions and limiting peak pasture growth. Reports suggest that growth nationally is at a similar stage to last year but cooler temperatures and lack of sunshine in the south is limiting potential.

Good milk flows continue with all processing plants at full capacity as they cope with near spring peaks. Heifer mating has started with artificial insemination for these animals and milking cows heats are being recorded ready for their turn, in the oncoming weeks.

The latest globaldairytrade auction produced mixed results with whole milk powders again lifting to be over $800/tonne up from the July lows, but cheese and anhydrous milk fat dropped again in price, to leave the multi product index slightly ahead and farmers still optimistic for some upside in the predicted dairy payout.

US milk production is falling as the nation's herd shrinks to an 8 year low and the dairy cow slaughter continues as higher feed costs begin to bite.

Trading amongst Farmers gets closer as Fonterra appoints directors to the Shareholders Funds board, but with only one farmer director appointed, opponents gain fuel for their concerns of losing control of the co-operative.

LAMB

Another flat week in lamb prices is reinforcing the new market pricing that farmers will have to adjust to and the predicted $4.80 per kg rate during the peak season will fail to instill confidence.

With tailing now well through in most areas numbers are ahead of last year, and farmers in the south are looking for more sunshine and heat to get the young lambs growing fast. Reports suggest that Alliances procurement plan has met a muted response with some gambling that, with the starting price being so low the chances of future upside improves.

Old seasons store lambs are falling rapidly in price and numbers, and southern local trade prices have hit yearly lows as the market adjusts to the new norm.

Y Lamb

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8 Comments

by ngakonui gold | 26th Oct 12, 9:57am 1351198666

just recieved olams takeover offer for nzs shares

in it they briefly outline at least seven reasons to sell.

i would suggest that those same reasons could be used to justify why you would hang on to the shares.

i wonder if the minority shareholders could somehow launch a counter offer to buy back all the shares that olam own.

seems to me that banks that loaned to crafar farms could be interested.

if this takeover succeeds then methinks it could be time to exit the nzx and look at other forms of investments.

by Henry_Tull | 26th Oct 12, 10:11am 1351199479

and here one baked earlier

Co-operative Bulk Handling director Vernon Dempster says a proposed $2.7 billion takeover of GrainCorp by US-based Archer Daniels Midland is "highly dangerous, because their loyalties are never going to be Australian," Fairfax newspapers report.

"Their loyalties are going to be to their shareholders," Fairfax quotes Mr Dempster as saying. "The worry would be whether ADM are going to be more hungry and more exploitative than the current owners, and there would be a suspicion that perhaps they would be."

and

http://www.smh.com.au/business/graincorp-soars-on-lowball-27b-bid-20121…

http://www.abc.net.au/news/2012-10-23/vff-airs-graincorp-takeover-fears…

by Christov | 26th Oct 12, 10:29am 1351200581

When we were doing this to death pre TAF vote HenryT you'd think there would have been more scepticism, particularly when Henry V started umming and aaahring about the percentage required for the vote...to succeed..

This has always had Corporate disconnect stink all over it....well at least they can't say any number of us didn't warn on the pattern this would follow...

Now I wonder just how many of those deeply indebted Farmers will be forced to revise their positons.......dear oh dear...

Remember that article I put up on Mark Weldon stating he would much rather see farmers lose control of the Co-op in order to get the model to suit Market shareholder behaviour......it was like a little siren ...!, in that you just knew he wasn't alone in that thinking.

by Omnologo | 26th Oct 12, 1:33pm 1351211590

Christov, although I think your vision for Fonterra is correct, I've just finished watching a presentation on TAF by the A Team (Henry, Theo, John Wilson, and Ian brown). It covered the time line on the launch of the sharholders fund and market etc, apparently a very exiciting time for the Fonterra family.

Henry stated that TAf will deliver a)100% farmer shareholder control, b), flexibility for farmer shareholders and 'most importantly' c) permanent capital for Theo to execute his growth strategy. These points were repeated by Ian 'Bad News" Brown, and possibly by the others, but without the 'most importantly' qualifier.

Apparently the re-run vote of resolution 2 (cap shareholder fund at 25%) is absolutely critical according to Brown and Wilson, but didn't mention if shareholders council would pull it's support of TAF if it didn't pass second time around, given it's crucial importance in maintaing '100% farmer ownership and control'.

Theo said TAF will make Fonterra the most innovative and exciting cooperative in the world, but apart from that there was no mention of preserving cooperative model or status.

by Christov | 26th Oct 12, 2:16pm 1351214166

Despite where I think they will take the model Omnologo, I sincerly wish you all the best as one who was at least prepared to challenge information fed to them concerning TAF and the shape of Fonterra in the future.

Crusty old idiom..forewarned is forearmed...still has merit..

by Casual Observer | 26th Oct 12, 2:26pm 1351214788

Omnologo - I too saw that televised 'interview'. I hope Fonterra wasn't paying to broadcast it - if so what a huge waste of money. It told us exactly zilch in regards to new information. Have you noticed how they were 'dressed down - Henry and Theo in checked shirts. I have noticed that at the annual accounts meeting I attended too.

The shareholder councillor was held to account in Rotorua accounts meeting when he said that all six conditions for the council had been acheived. It was pointed out to him that Resolution two has not being voted in yet. When asked what will happen if it fails again, Wilson said the Board will act as if it is. Could make some interesting times if it fails and shareholders who find they can't sell their shares decide to launch a 'class action' style challenge to hold the Board accountable under the terms of the constitution.

I am hearing a few farmers who were 'turned' from no to yes votes, in the week leading up to the vote, now rueing their change of heart. A mate was recently at a discussion group (around 40 people) right in the heart of 'Henry Country' and the general feeling was Fonterra seriously needs to stop this governance review, and bed in taf before any more changes are made.

The cockies said they are tired of the demands being made on them by Fonterra, and some have woken up to the fact that

a) they may have to pay a lot more for shares than they thought for increased production.

b) they weren't aware that they had to be fully shared up every month in order to receive full milk price and the issue this will raise for those with contract/sharemilkers on. This means that this side of things for those increasing production, now will have to be actively managed every month. It appears that only a few had this explained to them. I know at the two different meetings I attended - one nth is and one sth is, this was never mentioned. This particular group were badly affected by the three year drought the Waikato had, and so had sold down their shares and are now back to increasing production back up to where it was.

c) they feel that the Shareholder's Council is no longer working for shareholders but are now just another mouthpiece for the Board.

Given these folks were strong Henry supporters this is a big shift in attitude.

With eleven standing for directors things could get rather interesting. I am already hearing of political lines being drawn over candidate support. The fun hasn't even started yet. ;-)

by Omnologo | 26th Oct 12, 10:11pm 1351242682

Thanks Christov, and interesting comments CO, you are well informed for a Southlander!

Yes I have noticed the dressed down look from Henry and look. I've got nothing against good presentation, but Henry and friends seem to have a knack of taking casual to ostentatious, do you think Fonterra employs someone to advise them on dress code, or is that the way you go from time spent in Auckland rubbing shoulders with those well manicured souls such as Bernard and co.

I fear we are all going to get used too and eventually accept this orchestrated corporate rubbish peddled out by the leadership and watchdog council lemmings. It's not an inspiring prospect.

Director elections are the biggest orchestrated undemocratic joke this side of Texas. In my opinion, apart from one or maybe two candidates, they have all been hand picked. The CAP makes a mockery of, is an embarrasement, and poor reflection on Fonterra shareholders.

by Casual Observer | 26th Oct 12, 10:32pm 1351243966

It's not where you live that counts Omnologo - it's the networks you have! lol! ;-)

Have you heard about the Fed Farmers organised meeting in Cambridge on TAF? I heard they had some Fonterra folks coming to talk about it. 180 people turned up, only to have the 'heavies' in the form of shareholder councillors turn up and say that 'taf is not to be discussed tonight'. And that was that! What a fundamental PR stuff up for Fonterra.