Dairy prices rise for fourth straight time; US retail and factory data positive; World Bank downgrades growth again, but China a bright spot; UST 10yr at 0.96%; oil and gold up; NZ$1 = 72.4 USc; TWI-5 = 73.4

Dairy prices rise for fourth straight time; US retail and factory data positive; World Bank downgrades growth again, but China a bright spot; UST 10yr at 0.96%; oil and gold up; NZ$1 = 72.4 USc; TWI-5 = 73.4

Here's our summary of key economic events over the New Year holiday break that affect New Zealand, with news the greenback is fading in value internationally, undermined by four years of disastrous leadership, even though it retains its safe-haven status - for now.

But first, the overnight dairy auction was a positive one. In US dollar terms, prices were up +3.9% with satisfying rises for all products. Analysts had expected no change. This is now the fourth consecutive dairy auction where prices rose. In New Zealand currency, prices rose +1.8%, clipped by the rising Kiwi dollar. Still, as these rises are continuing it might motivate a positive review of farm gate payout prices.

In the US, all eyes may be on the unusual Georgia Senate election runoffs, but in their national economy, post Christmas holiday retail sales were positive and up +5.5% compared to the same period last year.

More positive are the widely-watched local factory PMIs. The globally benchmarked one was positive as we reported yesterday, but today's local one is much more so and recording a strong expansion and much better than expected.

Retail sales in Singapore also made a strong comeback in November, reducing the 2020 deficit noticeably. There was an "improvement" in Hong Kong too, but of a different order as they are still recording levels lower than the year-ago benchmarks.

The Chinese economy is on track to grow by almost +8% in 2021, following a +2% growth in 2020, the World Bank said in its latest Global Economic Prospects report. It sees the US growing +3.3%, the EU growing +3.6% and Japan up +2.5% in 2021. But all these represent lower estimates from their previous review and the world's economy will only expand by +1.9% this year they say, down from its previous forecast of 2.1% and the previous decade’s 2.5% pace.

Part of China's advantage is its use of forced labour in its Xinjiang province using interred Uighur people. See these comprehensive investigations here and here. These are both remarkable reporting given Beijing's very tight controls in the province.

And China has started the new year with a sharp strengthening of its currency against the US dollar despite Beijing's move to lower the weighting of the greenback in its currency basket amid broad US dollar weakness.

After losses yesterday, Wall Street is clawing some of those back today with the S&P500 up +0.5% in afternoon trade. Overnight, most European markets were -0.5% lower although London bucked the trend. Yesterday, the Shanghai market ended its session up +0.7%, Hong Kong was up +0.6%, but the very large Tokyo market was down -0.4%. The ASX200 was also lower, dipping very slightly. But the NZX50 Capital Index was up an impressive +2.1% in their initial 2021 session and the best daily results globally.

The latest global compilation of COVID-19 data is here. The global tally just keeps on rising, now at 85,900,000 and up +572,000 overnight. We are heading for 100 mln well before the end of January mainly because the UK variant is taking off worldwide now. And many countries are getting a surge from New Year's celebrations where social distancing was abandoned. It is still very grim in Russia (+24,000 overnight), the UK (+76,000), South Africa (+30,000) and Turkey (+14,000). It does seem to be easing in Europe, although not in the UK or Sweden (+7000 overnight). Global deaths reported now exceed 1,858,000 and surging +11,000 in a day as death rates rise everywhere.

But the largest number of reported cases globally is still in the US, which rose +244,000 overnight for their tally to reach 21,375,000. The US remains the global epicenter of the virus. The number of active cases fell overnight and is now at 8,270,000 and that level is down +45,000 in a day, so more recoveries than new cases for the first time in a long time. Their death total is up to 363,000 however (+3000). The US now has a COVID death rate of 1093/mln, but the disastrous UK level (1121) is actually rising faster now.

In Australia, their Sydney-based community resurgence seems to be coming under control. But that takes their all-time cases reported to 28,519, and +15 more cases overnight. Now 284 of these cases are 'active' (+5). Reported deaths are unchanged at 909.

The UST 10yr yield will start today up by +5 bps at just over 0.96%. Their 2-10 rate curve is steeper at +84 bps, their 1-5 curve is also steeper at +27 bps, and their 3m-10 year curve is much steeper at +88 bps. The Australian Govt 10 year yield is up +2 bps at 0.96%. The China Govt 10 year yield is down -2 bps at 3.22%, while the New Zealand Govt 10 year yield is down sharply by -6 bps at just under 0.94%.

The price of gold is up again and by another +US$13 in New York to be now at US$1,951/oz.

Oil prices are much higher today by about +US$2 at US$49.50/bbl in the US, while the international price is now just under US$53/bbl. The Saudis and Russians have said they will cut production in February in an effort to raise prices.

And the Kiwi dollar has risen firmly today, now at 72.4 USc and up about +¾c and to a new 33 month high. Against the Australian dollar we have slipped marginally and we are now at 93.4 AUc. But against the euro we are firmer by nearly +½c at 58.9 euro cents. The net effect is that our TWI-5 is firmer at 73.4 and a 21 month high.

The bitcoin price has slipped again today, but only very slightly this time, and is now at US$32,444 or -0.9% below the level at this time yesterday. The bitcoin rate is charted in the exchange rate set below.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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50 Comments

12
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We got some rain would love some more, thunderstorms in the afternoon have been bypassing us. Markets are still nervous, bulls I sold early December are now worth at least .50c a kg less about $200 a head. I sold 388 kg bulls for nearly $1200, I have recently been quoted 300kg bulls for $2.50 a kg. That means they could sold those bulls in winter for the same money, or bull calves from 2019 you paid $550 for you now can get $750 and thats before commission, some losers in the cattle industry. My grandfather always said big money and big losses in the cattle industry. With the costs of running a farm it's easy to go negative

My rengen summer crop on my stoney soils is alive with bees, I take my grandchildren in to see then all at work.
Its the phacelia thats dragging in the bees. https://www.cotswoldseeds.com/species/44/phacelia

My brother in Law is back 80k on lamb income over last year, his beef sales will probably be the same. Argentina is a mess as government trys to keep a lid on food prices, China is selling frozen pork out of reserves to try to keep a lid on prices, thats USA pork.

China's release of 70,000 metric tons of national pork reserves in December 2020 brought the 2020 total to 670,000 metric tons. A total of 38 sales were held during 2020 as authorities sought to bring record-high prices under control. Reserve sales during 2019 totaled 170,000 metric tons during September and December--ahead of major holidays--as pork prices first began to soar. Releases were 20,000 metric tons in most weeks from December 2019 to September 2020 as pork prices remained stubbornly high'

WE should remember that once Argentina had one of the highest living standards in the world, will we go down the same path of stupidity?

https://www.nzherald.co.nz/the-country/news/jane-smith-urban-new-zealand...

Great linked article... thks ( Article suggests we are already on the same path of stupidity ).

In regards to CPI inflation, I think this is worth a read
https://www.thisismoney.co.uk/money/news/article-8340701/Could-inflation...

Great link - have bookmarked it for future student reading list. Thanks.

Talked to another vineyard this morning who are trying to arrange backpackers to do some work, they are wanting $22 an hour and they say it's unaffordable, they have lots of costs and labour has to be cheap so they can pay them. So looking at kicking the biodynamic grapes purely because they say wages are too high and trying some new ideas on the rest, but profits and viability issues abound.

Those almond orchards in Ca uses about 3 feet of water, they buy it by the acre foot. Thats ones on the river with historic high takes, the new orchards would be way more efficient. They grow them in a very near desert environment. Grapes are a very low user of water but I think you would find even here, many orchards are very high water users.

Nutrient limits and high cost dams don't go together well, we cannot build dams cheap enough without taxpayer subsidies.

https://www.pressreader.com/new-zealand/nelson-mail/20201230/28154799850...

Horticulture is a high risk business

https://www.pressreader.com/new-zealand/nelson-mail/20201230/28147927903...

".... they are wanting $22 an hour and they say it's unaffordable,...." The $22/h is about $3/h above current min. wage and they claim its unaffordable. When the min wage rises to $20 is that still unafordable? In my experience people frequently claim something is unafordable but in reality are able to afford it. Maybe the higher cost of labour will reduce their profits rather than result in a loss. I take their (the vineyard) statement with a pinch of salt unless you can see their books over the last few years one cannot assess the claim the labour is unaffordable. Perhaps they overpaid for the vineyard. Maybe they locked in interest rate at too higher cost. Who knows.

Prices independent grape growers get has been low for a while now. If they need 10 workers for ten days and it's costing the best part of 1k a day, thats just one job, it's easy to see how it's uneconomic @ $1450 a tonne, which it must be as they are shutting down one vineyard. They were complaining that it's no long worth while growing grapes. Big guys can get Islanders in, it's cheaper for them.

11
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Cheapskates.
$22 hour for 10 days casual work is a pittance. For casual work it should be $30+.
If the business can't stand that, they should get out

around here you are paying over $500 a week for a house, lots of farm reps etc are only on $30 an hour before tax. The new poor that were once middle class.

What does a farm rep do - drive around in a ute and sell stuff? Perhaps they get commission also?

and a ute, what I am trying to say is wages have not caught up with cost of living increases, especially housing.

It all depends on how you look at it
We arrived here 6 years ago and purchased a run down farm that was reverting to scrub and had not been maintained for many years. Covered in gorse and rubbish and overgrown trees. We lucked onto a young bloke who had been a chef in Australia, returned to NZ and retrained as an arborist and landscaper. He is the sort of person who doesn't need supervision. He is gold. We have cut over 600 tonnes of dead wood out of large stands of eucalypts and macrocarpas. There are 5 hectares of native bush which is overrun by dense Muehlenbeckia which we have controlled. Then there is the gorse, another couple of hundred tonnes. We figured his knowledge and efforts have improved the value of the property far more than we have paid him. So much so we pay him $35 hour with a guarantee of continuing weekly work for as long as we are here. The work never ends.

Your example is great but unfortunately your situation is an exception to the rule

Aj, your comment about your brother in-law being back $80k on lamb income this year, last year the schedule was very high, it peaked at $9 kilo in November which was probably seen as unsustainable going foward.

hard going backwards, he's grumpy. I talked to my brother in law in the UK and Southwest is going to level 4, lots of uncertainty, beef prices should have held up but didn't.

'Optimism in the cattle business has been in short supply for a very long time thanks to the arduous task of working through the backlog of cattle created by the pandemic shut-down of plants in Q2. But the industry has turned that corner and 2021 will see smaller packer margins than the 2020 records and an improvement in leverage for cattle feeders, especially as 2021 wears onward.

Beef demand the second half of 2020 has been incredible. Beef production was record the second six months of 2020. Beef exports YTD are down 5% and beef imports up 12%. Retail beef prices in 2020 have averaged $6.40 per pound through November, a record. This means the industry sold more pounds of beef domestically for more money than any time in history. This occurred during a pandemic when consumers could have purchased any protein they desired. Domestic demand for beef has never been better and as the industry heads into 2021, that fact is one to embrace.'

All red meats will be taking a hit, and for some time, quite likely, given the higher prices come from the good cuts to the restaurant trade. Currently, globally, there is no restaurant trade, thus red meat producers are just selling a bundled commodity. Existing commodity sellers, such a dairy farmers, are doing well as milk is in good demand within the pre-existing commodity trade.

Aye that top end, H & R white table, ready retail chilled if not quite a niche market is nonetheless vulnerable to downswings, ie the spending power of the consumer is checked. Something of an irony then that commodity such as manufacturing/grinding meats actually go a bit better, for example burgers and other take outs.

You are welcome to some of our rain Andrew ;-) Earlier on, this cherry season was looking to be a bumper one for the industry. Then while some shedding of fruit took place crop loading was still high, and there was a lot of small fruit pre-christmas. Then the rain came over New Year and the 10day forecast was for four dry days and six days with rain. The devastation to some Central Otago orchards has been widely shown in the various media. Outside of those areas who have suffered severe flooding, it appears those growing using the central leader system have been hit much harder than those using the UFO (Upright Fruiting Offshoot) system, by the rain. Though some UFO orchards have had damage when the choppers have come in to dry off the rain, with fruit showing marking and rubbing which potentially results in them unable to be sold for premium prices. It may mean this growing system needs to consider a different drying system for fruit grown without rain covers. There has been a noticeable increase in growers investing in rain covers the last couple of years, and this appears to have paid dividends this year. More growers are talking of investing in them in the future.

One of the potential issues facing the industry is its significant growth in plantings in recent years. The export market has growth potential, however, the domestic market is very small when considering how much fruit will be coming on to market in the next few years. When a situation such as the recent rain appears, the domestic market is simply too small to take all the non exportable fruit. There are a number of small growers for whom cherry income is supplemental to other income rather than the main income for the grower. There is chatter that this latest rain event may see some growers decide to leave the industry as cherries are uninsurable against rain.

This Central Otago season was shaping up to be a great one - the packhouse we sell to had a full complement of pickers and accommodation organised, while some early varieties had small fruit, later varieties were looking to be good size and fruit loads, good consumer support domestically and offshore, and reasonable prices for growers despite increased costs. But for many it wasn't to be.

Our grapes are looking good, another year without a frost, must be 5-7 years of no frost. Used to get 5-7 a year with at least two decent ones -4 to -5. Worst frost we had on November the 5th -6degrees 2004 or2005.

Lots of new planting in Hawkes Bay, lots of people spending other peoples money. Even Cherries being planted, horticulture is a difficult industry, If I had advice for anyone it would be,' don't grow where you live, own a block you can sell when it starts to look ugly, without losing your house. Flexibility is a must and knowing that sometimes you just have to get out and when to do it, is important.

As always, love the sitreps from the Ag front - er - Paddock - er - Orchard. Keep 'em up.

Forced labour is an ugly euphemism. By way of examples, so too were the Helots to Sparta, and millions of nationals conquered by the Nazis. All just a whisker off slavery in reality. If this is the final outcome of Mao’s long march, adding to that the subsequent 70 mill or so purge of his fellow country folk, think might have been better for China and the rest of the world, if he had simply stayed at home. To where and how does China march next then?

In more news they now have a designer bull that gives %75 male calves, personally I gave %100 female but thats another story.

https://thecattlesite.com/news/56276/meet-cosmo-a-bull-calf-designed-to-...

Classic !!! That's really blowing your own horn. :) :)

Greenback will slowly loose more trust...- a president can openly pressure a official to commit fraud and no penalty?

But there has to be an alternative to the greenback. Yuan definitely ain't it, Euro has too many chiefs. Bitcoin maybe??

Its happening already - there will be multiple digital currencies replacing the current FIAT system which time is up. The brave will start moving now..

Special drawing rights

"undermined by four years of disastrous leadership"

Come on David, that's incorrect.

The US has been in trouble for a long time https://www.statista.com/statistics/187867/public-debt-of-the-united-sta...

Trump was voted in by rust-belt angst, but his tenure has only carried on a trend. It is dangerous territory when we blame the wrong thing as the driver; tends to produce knock-on deductions which are incorrect.

12
up

That there are underlying issues that led to trump doesn't change the fact that his administration has been disastrously inept.

Same comment; inept in what manner?

You can change the Captain all you want, but once the Titanic has struck the iceberg, some things are inevitable. You can, dispassionately, observe whether the replacement Captain is making optimal calls (filling the lifeboats fully, etc) but if the replacement Captain is as in-denial (or equally ignorant) of the sinking, the persona becomes irrelevant. Certainly it isn't valid to attach blame to him, at this late stage in proceedings. I wrote a piece here where I said 'the question is not who Farage? it's why Farage? Just as it not who Hitler, it's why Hitler?

Same applies to Trump. The 'economy' was nothing more than a resource/energy flow. The forward betting, growing from a zero start, made the mistake of projecting itself forward indefinitely. You wouldn't design a doorway on the basis of projecting our Plunket-book height-gains;everyone knows we stop growing (and if they think about it, there are reasons why; habitat capacity, need for mate and biodiversity within that habitat). Why we don't understand that economic growth always had similar limits, beats me.

But to blame Trump for them (no amount of eptitude will change the Limits, and not even AOC is addressing them) is to avoid discussing them. And that is dangerous territory, societal-discussion-wise. Sure, he's on the spectrum, narrowly brilliant but narcissistic and full of holes, sure he could have played some cards better, but never forget what was in the hand he was dealt.

well said -- the same was true in the UK for the Brexit vote -- it was not rich entitled right wing fascists' that voted for brexit -- but working class labour heartlands - fed up with feeling second class -- America -- it was ordinary americans fed up watching the US subsidise the world and world agencies

when someone leaves your organisation -- Ask why they were looking .. not why they are going -- thats the key answer

Exactly. He is the symptom of the cancer that is the US political system. Not bloody rocket surgery

11 people who don't study linguistics, obviously.

Define 'disastrous', people.

Sure, the sentence appealed to those who abhor Trump from the left, and for those who resent what they see as anti-trade from the right - but it has no more basis in fact, than the comments I referred to.

So, Realterms, define disastrous.

Thank you.

Define disastrous? 4 years of accelerated environmental vandalism?

Compared to the last 150 years of environmental degradation? drop in the ocean

The bitcoin price has slipped again today, but only very slightly this time, and is now at US$32,444 or -0.9% below the level at this time yesterday
The oldest game in the books.. the illusion of a legitimate market. Tether prints $500,000,000 of USDT into existence this weekend alone. One player - pumping the whole thing. #Bitcoin Link

Any explanation welcome.

Tether is not bitcoin

Here's me thinking it was just Tesla style retail investor mania.
You would have to mad to buy or hold Bitcoin for anything other than short term speculation.
Whatever it is, it's not the new gold.

Come back in 10 years Tim - right now the US Dollar is in a hyper inflationary collapse against BTC...

Right now most of the BTC trading is done using other crypto currencies with the majority of the buying being done with a not so stable coin (the USD backing it gets weaker as time goes on). @OptionsIntelli1 assets that this coin was recently printed.
The net USD trade looks too small to be in control of the price or to indicate any real dumping of USD.
It looks like the coin traders are all playing speculative games with their coins relative values and are enjoying slowly sucking proper currency in.
Why would the dumping of an obscure "USD equivalent" out size the real USD trade. This is their game and the retail investors are the suckers if you hold.

Right now most of the BTC trading is done using other crypto currencies - how do you know that?

Well net trading, its in Audaxes link. I have not checked the source it but that's a slice of what's happening right now.
If you check Tethers wiki it looks like they may have done this before. They look like they are converting USDT into the real stuff.
At a quick glance it looks like Tether does not have to continually prove its coins are backed by USD but in this particular market the coin is accepted at exchanges as though it is.

Overall Tether holding BTC trade is about 7% - would need to be much higher than that to be manipulative?

https://coinlib.io/coin/BTC/Bitcoin
Scroll down to the "Money flow from/to Bitcoin in the last 24 hours"
3B net proper currency to 10B Tether net flow.
If you know where the stats are for the past couple of weeks maybe its different flow.
The turnover for USD must be much higher but that would mean there as many sellers as buyers, so no active dollar dumping. Where your source for this dollar crash "right now"? It may happen this year but no real data shows it currently happening.

Anyone looked at tsla/btc for the last little while? I wonder...

Surely our economists and institutions will be worried about the the NZD appreciation punishing our exporters. While I understand many will be hedged, the longer the appreciation continues, the greater the problem. Why is nobody talking about it?

Because it's a two-way street? A low dollar is great for exporters but punishing for consumers, who bear the brunt of more expensive goods in a market where things are already priced for incomes we don't have.

Because it's not that high yet? NZD has risen strongly over the last 7-8 months but half of that was a bounce of CV lows. We're only back to where we were 2.5 years ago (against USD) and well below levels from 6-10 years ago. The historical solution was to drop the OCR but can that really be done now?

Expert on RNA talks about covid-19 vaccine

https://twitter.com/i/status/1346171177073573890

Hi Andrew, I always enjoy your refreshing and down to earth commentary on what's going on in the country. May I ask the point of your link to the RNA expert?

While she says the mRNA solutions are gene therapies rather than vaccines, that seems to be only semantics, as these gene therapies "use mRNA to program a person's cells to produce many copies of a fragment of the virus. The fragment then stimulates the immune system to attack if the real virus tries to invade the body."
https://www.asgct.org/research/news/november-2020/covid-19-moderna-nih-v...

Secretly, always enjoy your real productivity updates. In philosophical way, the past 12months worldwide collaborative effort is to reduce mortality amongst earth senior population, yet most younger one is the carrier, as well as future tax payers cost bearer for the whole saga. If mortality by natures way of balancing things to be avoided, one tend to ponder what will be the result of all these mRNA vaccine principalities for future mankind demographics, unknown yet. We are all in short term reactionary thinking, fair enough...thought we're brilliant.. but still can't cure cancer or find HIV effective vaccine all these years. Human may touch this divine particle of knowledge, mature for 'current virus issue' but still in my opinion in it's infancy due to the unknown/future nature of RNA.. which subject to various of gene typo error. Read more into DNA & RNA fascinating.. messenger.. uh? first thing spring to mind is that initial Thalidomide, nicotine, asbestos, alcohol (still on) and radio active materials eureka promo.