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The Weekly Dairy Report: All eyes on tonights auction as the reality of the downturn starts to bite.

Rural News
The Weekly Dairy Report: All eyes on tonights auction as the reality of the downturn starts to bite.

More variability of rain received this week, as moisture levels improve in many areas of NZ, but fail to stimulate grass in others.

Temperatures are dropping and the days are now autumnal, as managers look to extend round length, plan when to dry off, and stimulate pastures with nitrogen fertilizer.

Managers are reminded to plan feed, back from this years calving date, so this seasons production does not compromise next years.

Body condition scores of cows and time needed to return animals to calving condition is the calculation advisers suggest, and northern managers are also warned to watch out for facial excema and theileria outbreaks.

Disappointment at Fonterra’s half year result for shareholders, as the predicted payout remained stable, but in a surprise, the dividend fell and shares dropped to an all time low.

Reports surfaced of big waiting lists of grumpy shareholders ready to supply alternative milk processors, as some farmers are looking to cash up their shares, as they aim to ease the financial burden of the dairy downturn.

Synlait increased their predicted payout to $4.50-$4.70 and Westland held theirs at $5-$5.40 to illustrate big is not always better, and remind Fonterra they need to balance expansion plans with ensuring shareholders get a good return on their investment.

Costs have now risen to $5.40/kg ms, and with the drought sure to push the costs of wintering higher, cashflows of many operators will soon come under significant pressure.

More nervousness in the market place, as confusion on where the extra volumes offered in the global dairytrade auction by Fonterra came from, resulted in a drop in dairy future values.

Tomorrows global dairytrade auction result will again be watched with intense interest, as if the upturn is slower than anticipated, next years optimistic price predictions  could be trimmed as well.

An announcement that Fonterra will be launching an Equity Partners fund at the end of the year, will be viewed positively by this capital hungry sector.

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10 Comments

Canterbury-based Synlait Milk part of venture aiming to drive price of baby formula in China down to global level.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11426052

A major disruptive play will be launched in the Chinese baby formula market in Beijing today which could ultimately have a big impact - some say seismic - on the price paid for imported product by driving it down through online sales to less than 100 RMB ($21.54) a can.

That's just a fraction of the retail price paid in Chinese supermarkets and baby stores for top quality imported infant formula from New Zealand and elsewhere.

 

How does this do anything other than drive buyers of milk powder to demand lower priced supply......

Or is the thinking that there are so many more people/mums that presently are not buying IMP that volume will win the day?.

 

To our epiphora its hard to make out the benefit to farms north of the Rakaia, make paying for the new water scheme any easier, enable funding to reduce N leaching/improve waterways etc, or kick the factory share price up several fold?

As for the value of "brands" / "NZ Inc" "quality product", its just being trashed. As the children's marketing books say as soon as one has competed on price, any other elements that had been considered as points of differentiation are now worthless..

What else is going on here?

 

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When cost is no object - an important message for dairying and farming and new zealand

 

There is a moral to this story

 

The international price of Iron Ore hit a decade low overnight

 

In the space of 6 months, Australia finds itself in financial a hole. Prime Minister of Australia is complaining that it's biggest source of federal taxation revenue, the mineral sector, has dried up. Federal government is contemplating increasing GST, cutting concessions to compulsory super, cutting pensions and welfare, closing and or merging government departments. Everything except addressing the issues around massive subsidies to the mining industry and tax avoidance by the international digital tax-dodgers

 

By most measures, iron ore producers should be curtailing output to boost prices at this point. Instead, the biggest producers - Vale, Rio Tinto and BHP Billiton - are shipping like there is no tomorrow, increasing tonnages, to protect market share. And China is pressing ahead not just with Sino Iron, but also with other iron ore projects worldwide, while many of its high-cost domestic mines continue to produce

 

.It is strategic. Cost is no object. Regardless of the collateral damage

read the full article here

http://www.smh.com.au/business/mining-and-resources/iron-ore-low-wont-s…

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Milk production in NZ is up and the options are sell it or store it, so how long do we store it? Next season production is going to be up all over the world but especially NZ ,with all those expensive irrigation schemes kicking in, which do need paying for we need to move volume.

 Why let the middle men take all the cream?

If China keeps paying high prices it will attract sellers like moths to a flame.  Maybe it's better to make it not so attractive and kick the middlemen out on the way.

 The EU is getting better at exporting Millk products and despite what Fonterra say will be adding more driers.

Even with quotas, EU dairy exports have increased by 45% in volume and 95% in value in the last 5 years. 

  http://www.farminguk.com/News/Ending-EU-milk-quota-a-threat-to-small-sc…?   In the USA its more, more, more   http://www.agrimarketing.com/s/95142?   In the EU

The European Milk Board, a federation of dairy farmers with member organisations from 13 countries, said it was likely that the market would not be able to cope with significantly expanded production in a reasonable way.

"Chronic price collapses are inevitable, the next crisis is on its way," EMB president Romuald Schaber said.

 

http://uk.reuters.com/article/2015/04/01/uk-dairy-eu-idUKKBN0MS2XO20150…

 

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the loss of Danone IMP manufact. sales was given as a reason for Oz not going so well

http://podcast.radionz.co.nz/ntn/ntn-20150331-1107-business_commentator_rod_oram-048.mp3

hence the Bmate tie etc.

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Flamboyant, but consistently wrong.

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You never know, if he hangs in long enough :-)

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Wrong?....As was every Banker and E-con-o-miss-ed at 2007/8  when printed matter was not trillions of  dollars.....in 2008/9/10/11/12/13/14/15 ...to fix a leaky tap....and bail-out the system....as the systems was .performing reasonably well until sub-prime, ..sub-standard loans, sub-zero interest rates....all in the name of............... sub-terfuge.

 

 

subterfuge ˈsʌbtəfjuːdʒ/
noun noun: subterfuge; plural noun: subterfuges deceit used in order to achieve one's goal. "he had to use subterfuge and bluff on many occasions" synonyms: trickery, intrigue, deviousness, evasion, deceit, deception, dishonesty, cheating, duplicity, guile, cunning, craft, craftiness, slyness, chicanery, bluff, pretence, fraud, fraudulence, sophistry, sharp practice; More

 

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An announcement that Fonterra will be launching an Equity Partners fund at the end of the year, will be viewed positively by this capital hungry sector

Some are asking what size the loan book in Australia already, and how equity would be preferred to loans of zero interest 

An example Loan of $AUD 220,000, and 0% here:

Page 20:

At 3 December 2014 the Group has a $220,000 interest free advance from Fonterrra Milk Australia Pty Ltd which has a maturity date of 30 November 2015.

http://www.asx.com.au/asxpdf/20150227/pdf/42wyx8fyqg1mzx.pdf

http://www.asx.com.au/asx/research/company.do#!/AHF

 

See page 19: 

Shows the value of land and buildings going down by $638 k to $8.3m - bad luck for the unit holders.

And then see the Stamp Duty of $502k, charged and taken as cash by the State Government...

 

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dp....

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