90 seconds at 9am: Dairy prices slump

US factories regain momentum; job growth questions; AU banks resist capital requirements; dairy prices fall hard; oil and gold up; bond yields lower; NZ$1 = 74.7 US¢, TWI = 79.8

2nd Apr 15, 7:23am by David Chaston

Here's my summary of the key issues from over night that affect New Zealand, with news of another very sharp fall in dairy prices in the overnight auction.

But first, in the US payrolls processor ADP said 189,000 new jobs were created in March, fewer than 225,000 expected and creating doubt in the markets that this weekend's non-farm payrolls report will be a good one.

On the flip side, American manufacturing PMIs released overnight were quite positive. Both the ISM and the Markit reports show American factories are expanding solidly with improving trends. Momentum is building again.

In Australia, banks are fighting moves to make them hold more capital, the objective of which is to make them safer in a crisis.

The GlobalDairyTrade auction has produced a widespread slump in prices. They were down -10.8% in US dollar terms and -12.7% in New Zealand dollar terms.

The key WMP price was down -13.3%, skim milk powder prices were down -9.9%, butter lower by -7.6% and cheese down by -10.5%.

These sharp falls come after an -8.8% drop just two weeks ago. Basically, prices have now retreated to where they were at the start of the year

Surprisingly, our currency hardly noticed. In fact, if anything, it has risen in the few hours after the dairy results were posted. This is probably because markets were expecting about a -10% fall which is what they got.

The shine is well and truly off the New Zealand dairy industry and it is now settling in for a more modest future, one that will need to absorb the new regulatory costs that have been imposed on it in the past few years, along with the higher debt levels being carried by more recent conversions. At the margins we could see some financial stress.

In New York, the UST 10yr yields slipped overnight to 1.87%. This was in contrast to a quiet and stable day yesterday for New Zealand swap rates.

The crude oil price has jumped in early trading today. The US price is up to US$50/barrel and Brent crude is at $57 a barrel. And this is despite record high crude storage in the US. However, American crude output fell last week for the first time since January.

The gold price also jumped and is now at US$1,208/oz.

The New Zealand dollar will start today pretty much unchanged from where we were at this time yesterday at 74.7 US¢, still very high against the Aussie at 98.1 AU¢, and the TWI is at 79.8.

If you want to catch up with all the local changes yesterday, we have an update here.

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73 Comments

by skudiv | 2nd Apr 15, 7:33am 1427913209

Bad news for dairy farmers, I wonder when this will have an impact on farm prices? It'l probably send this years milk price down further.

by fat pat | 2nd Apr 15, 7:52am 1427914332

I dont think the buyers of Crafar, Lochinver etc really care. They're the price setters.

by Wilco | 2nd Apr 15, 8:13am 1427915595

What do you mean -'at the margins we could see some financial stress' ?

We are bang in the middle for costs and debt level and our forecast shows us living off the bank from April till September.

Any change down in forecasts for next season will see the banks put more pressure on farmers now.

The first sign the banks are squeezing will be a drop in cow prices as they have held up well to date.

Great opportunity for Open Country and others to pick up even more Fonterra suppliers as they debate the value and return on the shares.

by Stephen Hulme | 2nd Apr 15, 8:50am 1427917831

Talking of pressure: the $75 trillion shadow bank market is facing rising cost structures.

The cost of borrowing cash overnight in exchange for U.S. Treasurys spiked on Tuesday to the highest level since the financial crisis, the latest sign that securities dealers are being squeezed by changes in short-term debt markets.

On Tuesday, interest rates on overnight repos backed by U.S. Treasury debt averaged 0.50%, according to prices from broker ICAP PLC. That was the highest since November 24, 2008, when it spiked to 0.59%, the ICAP i-Repo index shows, and was up from a recent high of 0.26%.

The repo cutbacks by dealers have been especially prominent at quarter end, because that is when they and others seek to reduce bondholdings for regulatory-reporting reasons. While the cost of repo borrowing has risen at the end of previous quarters, the jump seen Tuesday was especially sharp. Read more

by Plutocracy | 2nd Apr 15, 9:17am 1427919429

Just over a week ago you said:

"The crude oil price rose marginally to US$46/barrel and Brent crude is at $55 a barrel. The US rig count fell again last week, but output continues to rise in the latest EIA data. Drilling productivity is rising fast.""

So one week later EIA has quickly changed tune. Perhaps they need to increase their well productivity more? As I posted yesterday from geophysicist David Hughes:

Irrespective of price, geology is trumping technology in the Bakken and Eagle Ford plays.
The widely reported ramp up in well productivity in the Bakken and Eagle Ford plays over the past year due to technology improvements does not exist when examined at the play- and county-level . Although some operators may have experienced productivity increases depending on the location and quality of their leases (eg. Whiting in Mountrail County of the Bakken), others have experienced correspondingly greater than average decreases.
Well productivity in the top-producing counties of both the Bakken and Eagle Ford is declining, despite the application of the best technology. This is due both to saturation of the best parts of these counties with wells and resultant movement to lesser quality areas, and potentially to well interference as densely spaced wells cannibalize each other’s production.
The decline in well productivity in top counties is particularly disturbing given the incentive for operators to move drilling into core areas to maximize economics given the drop in oil price.
The widely speculated decline in shale oil production due to the fall in rig counts will not become fully evident in actual production data for a few months, due to the typical 2-4 month lag in data release, along with inevitable revisions.

Ouch. Cae la vie.

by steven | 2nd Apr 15, 10:29am 1427923791

Hmm maybe noise. ie the present dip might not be a downward trend, though flat looks quite possible, (I like to see 3 data points minimum). There is also considerable comment that I have not seen numbers on that some or maybe many wells have been drilled but not fracked / completed (fracking is about 50% of the cost). This may mean that the drill count is artifically high looking and hence output guess was also high. Once we see April's numbers I think we'll know just where the US shale story is at ie peak way earlier than projected (originally crica @2016) NB. Once prices recover those wells could be fracked quickly and brought on stream.

by Boatman | 2nd Apr 15, 9:08am 1427918935

This MILK Price story is a driect consequence of EU moves to lift the restrictive quota's on EU Dairy production , AND that supply has not even hit the market yet , so its being "priced - in' by the market

And its a real problem , dairy farm labour in places like Poland is just US$ 3 PER HOUR

Ours is over US$11

I will will stick my neck out and predict that there will be a huge dairy surplus in the next 5 years and those Europeans will not hesitate to start sniffing aroiund our playing field like a pack of beagles...... pissing on it as well

by dtcarter | 2nd Apr 15, 9:49am 1427921387

"our playing field"

Do you expect the EU to start exporting large quantities onto the NZ domestic market (like we do to them), or do you consider that the likes of the Chinese market somehow belongs to us?

Do you object to England playing cricket against Australia at the MCG?

by DFTBA | 2nd Apr 15, 9:59am 1427921956

Where did you get this figure of USD3 per hour? The official minimum wage of Poland is EUR10.50 per hour (NZD15.16) .

.

A link to your source would be appreciated.

by Ergophobia | 2nd Apr 15, 9:44am 1427921070

I think you are right here BM. And European (and US) dairy farmers do not have to buy the neighbours farm or undertake expensive "conversions" to increase production - they pick up the phone and order more grain etc. We should shoot the fontera monster now before it turns nasty on us! A plethora of smaller, sharper, innovative companies all enjoying a New Zealand great outdoors marketing story is the way to go. Back to the future.

by waymad | 2nd Apr 15, 10:12am 1427922746

Just to remind the more excitable types, that prices paid to dairy farmers

are filtered via their suppliers (Fonterra, Oceania, Westland, Miraka, Synlait, Open Country, Tatua etc.) - each of which has differing abilities to smooth prices, hedge FX, make-to-inventory, adjust product mixes from the same raw materials, and so on.
comprise a mixture of retentions (another smoothing mechanism), announced per-product payment levels, and dividends. All are unique to the supplier involved (or, mixture of suppliers)
may not be the sole or even major source of income for some farmers: other income can include contracting, grazing, pure leases for e.g. crop or seed production, crop and grass, forestry, breeding, and so on.

Just as it's a fundmental mistake to think of a federation like Australia or the US as a single country or market, it's equally naive to think of 'dairy' as something singular.....

And a small note about 'labour costs' - largely irrelevant if yez buy robots......

by redcows1 | 2nd Apr 15, 3:39pm 1427942362

Can't agree on how the price is set. Westland and Tatua pay as cooperatives, Basicaly profit minus retentions . The rest bar Fonterra set their price around what Fonterra pay no matter what.

Fonterra just make it up as they go along. i.e na this year we'll just chuck the milkprice manual out the window (2014).

by @tony | 2nd Apr 15, 11:00am 1427925600

The governor of California has implemented the first mandatory water restrictions in the state's history.

"People should realise we're in a new era. The idea of your nice little green grass getting lots of water everyday - that's going to be a thing of the past,"

http://www.bbc.com/news/world-us-canada-32151413

Are we ready for this kind of effect... a little more than 10%!

Surprising; considering in "some states" its actually illegal for ANY govt employee to use he works "climate change" and "global warming" in ANY govt correspondance

Keep it in the ground

by steven | 2nd Apr 15, 11:06am 1427925960

The state grows a lot of food, water intensive food and some, um past time drugs.

When we get an El Nino they are likey to be swimming in water/mud....

by @tony | 2nd Apr 15, 11:43am 1427928210

California are having a small El Nino now... Seals are being saved from the beaches as they are starving to death (no fish in th sea as its too hot), fed up and then re-released futher up the coast.

The unprecedented amount of heat in the oceans is going to come up to the surface at some point so be careful what you wish for... if the rain comes all at once (likely) it could be disasterous (biblical!).

Also; so much water has been taken out of the ground (we will restrict this to to USA) that sea water has encroached miles inland making some wells pump sea water! Let alone the fact the water, even if it is available, is then taken off to be used for fracking! Aquifiers in large areas of USA are rediculously low and people are digging deeper and deeper; and those Aquifier will ONLY be replensihed by rain.. and there ain't any!

Its a massive disaster across the world, but like insulation in NZ houses, if you cant see it ain't there its noit a pronle (till Winter!).

You cannot use hsitory as a guide to the future; we are well past that point.

We have simply changed the planet so much there is now a new normal!

But of course, how much my shiny $1 is "worth" is still vitally important... or perhaps not...

by OnwardsUpwards | 2nd Apr 15, 1:52pm 1427935924

That's some serious doom porn you're peddling. Any credible evidence?

by steven | 2nd Apr 15, 2:04pm 1427936644

yes, science, never heard of it?

by OnwardsUpwards | 2nd Apr 15, 2:14pm 1427937292

see above

by OnwardsUpwards | 2nd Apr 15, 2:11pm 1427937114

What science? The science of the book of revelations? Or the science of Al Gore? I've seen the same doom reductions made again and again since I was a youngster in the 70's. I'm still waiting for the Earth to turn into a desert but apparently now it will turn into a snow cone instead.

by @tony | 2nd Apr 15, 2:21pm 1427937676

This is some recent science

https://www.youtube.com/watch?v=hZdhPnsp4Is

"We had to make it 5 years as no one would believe it happend in 2"... LMAO!

I personally love the part about empowering women!

How can society live with itself... killing the next generation(s)...

by steven | 2nd Apr 15, 2:29pm 1427938169

They live with it by ignoring it. la...la..la....it doesnt exist.....la...la...la....ohh isnt my iphone 6s pretty.....la....la...la....ooooh a shiney iWatch isnt it pretty....la.....la...la.

by steven | 2nd Apr 15, 2:25pm 1427937900

70s, yes and ppl have been ignoring the science it since the 1950s, the results we are starteing to see.

Al Gore "reports the science" he doesnt make it.

Well place your bets as they say.

by @tony | 2nd Apr 15, 2:27pm 1427938063

I would not want to be betting on long term building and renting in Christchurch.... barely above sea level...

But let some people... it's their money!

by steven | 2nd Apr 15, 2:32pm 1427938370

Ah but the thing is the likes of the above will be sueing the council for a) trying to put a warning on the LIM which damages its value, and b) 20 years from now sueing for a sea wall to be built, or sueing for capital/building loss. You dont get it, many think it will be others money being spent, socialise the losses and keep the profits is the modus Op.

by @tony | 2nd Apr 15, 2:40pm 1427938842

CCC (prublic Record) already broke... Good luck suing them! Income evaported!

Don't look to the insurance companies either... either they go broke (sound familiar) or add weasel words to get out of it. In UK there are soooo many houses that cannot be insured for flood now... some ???? granted resource consent to build in flood plains and swaps...

Once people cotton on (and actually notice the rising sea levels), in x years!, then the panic will start and prices collapse.

by OnwardsUpwards | 2nd Apr 15, 2:47pm 1427939253

Now you're talking sense steven. After the GFC, the zeitgeist is to socialise losses and privatise profits. If there is a property price crash and the banks could fail, then savers will have to bail the banks out. Last time it was the taxpayers. If there is a flood because of 'so called climate change' then it will be the tax payers to foot the bill. Luckily I'm not a PAYE so it won't affect me. But I can understand your frustration with the system. You need to take part or get taken for a ride. It's your choice.

by @tony | 2nd Apr 15, 2:54pm 1427939693

Perhaps if it gets this bad... we won't have to worry about goverments and money...

We put people on the moon in decade

We wiped out 40% of the spicies on the planet

We, as humans, can really make differences if we choose to!

by skudiv | 2nd Apr 15, 4:24pm 1427945069

That's sad, I like spices.

by @tony | 2nd Apr 15, 4:54pm 1427946898

Number of animals by 50%

http://www.theguardian.com/environment/2014/sep/29/earth-lost-50-wildli…

can't find link to species loss!

by Gummy Bear Hero | 2nd Apr 15, 7:37pm 1427956628

... I'm with Mr skudiv on this , I'd be seriously annoyed if spices went extinct , most particularly Curry ... and it's sub-species ; Tikka Masala , Balti , Rogan Josh , and of course ... the main course , those elusive little finely feathered swamp dwelling Butter Chickens ... bless the little Butter Chickens ..... yummmmmmmmmm !!!!!

by Henry_Tull | 3rd Apr 15, 12:09pm 1428016148

bless the little Butter Chickens (1)

Gummy, you're back, you have returned (for is that you).

Its an easter miracle

(1) Well, obviously it's not meant to be taken literally; it refers to any herders of livestock & manufacturers of dairy products

by Alter Ego | 3rd Apr 15, 2:39pm 1428025180

I thought Gummy Bears had gorn extinct. But no...just waiting to add a little spice to an argument....yet again.

by profile | 2nd Apr 15, 7:46pm 1427957184

maybe all those missing species you can't find are hiding in grass?

http://www.theaustralian.com.au/news/health-science/forests-and-fields-…

by DFTBA | 2nd Apr 15, 2:59pm 1427939963

Those are not the only choices.

if you take part you become part of the problem - but then, that's on your conscience.

The better (but yes, harder and more difficult) choice is to protest and try and change the system.

Through voting, protesting, getting a community organised, petitioning, civil disobedience, activism.

I realise it's not easy and requires some effort - but THIS is our war, and I for one, choose to fight it.

by @tony | 2nd Apr 15, 3:01pm 1427940077

Seen this:

by cowboy | 3rd Apr 15, 5:09pm 1428034196

if you take part in what?

you have to exist and have economic behaviour, the system is rigged so there is no outside, as outsiders create water empire problems (as Fonterra is finding out).

voting is rubbish

protesting is a waste of time just used to sell newspapers and act as a venting for people.

community organised is even bigger rubbish - just look at the climate change "community"

petitioning might work... could we get the TPPA derailed like that ? no.

http://theantimedia.org/tpp-critics-fake-progressive-group-corporate-tr…

because petitions are large, expensive, and non-binding.

civil disobedience is known as "breaking the law" and the jail time and fines won't change anyones mind in apathetic NZ.

activism? nope, no one listens, no one cares. their wages get paid their bhills get paid, why should they care.

even most NZers resist education unless it is approved and correctly branded. They just not interested in fighting city hall.

by frazz | 2nd Apr 15, 2:04pm 1427936695

Thats Rich Onwards...never seen you back up any of your 1 liners comments ?? Great to hear you are a investor of growing software company Xero, we need more people like you and less landlords. Oh bugger your one of those as well.

by @tony | 2nd Apr 15, 2:18pm 1427937506

>> Thats Rich Onwards...never seen you back up any of your 1 liners comments ?? Great to hear you are a investor of growing software company Xero, we need more people like you and less landlords. Oh bugger your one of those as well.

Frazz please.... good intentions but please please keep this site civil... then we will have more opinon makers reading it...

by the sounds of it; Steve has the time to go blockade the refineries until the govt agrees to ban petrol cars in 5 years.... I don't... Think!! NZ could lead the world on this!

by frazz | 2nd Apr 15, 2:57pm 1427939827

Are you the moderator Tony? My comment was civil , you should see them when I get nasty.

Looking forward to Telsa new house battery technology..should be a game changer

by @tony | 2nd Apr 15, 2:59pm 1427939988

Sorry I misinterpreted...

(puts on cone of shame)

I am VERY much looking forward to the Tesla house battery... haveing 15KW solar I would like to use more of the electricity than sell it...

by @tony | 2nd Apr 15, 5:09pm 1427947786

Methane:

http://arctic-news.blogspot.co.nz/2015/03/methane-levels-early-2015.html

Aborbtion of heat:

https://terrastendo.files.wordpress.com/2015/03/hiroshima-2.jpg

Never mind the science...

You can see for yourself...

http://www.theguardian.com/us-news/2015/apr/01/california-governor-orde…

http://www.theguardian.com/global-development-professionals-network/gal…

http://www.theguardian.com/environment/2014/sep/29/earth-lost-50-wildli…

It should make us cry!

http://4.bp.blogspot.com/-3yLhIwsOC0Q/VHHEzP5Yv-I/AAAAAAAAPZE/7tQByi4yueA/s1600/Diagram-of-Doom-Apr-15-2014.png

by steven | 2nd Apr 15, 2:07pm 1427936878

The mild el nino has only just started so I dont think California has seen the effect yet.

The NET effect is going to be interesting, they should be wetter but also hotter I wonder if then the hotter will cancel out the wetter.

by skudiv | 2nd Apr 15, 3:45pm 1427942722

Doesn't look that big of an el-nino, time will tell. Either way it's bad policy to pin your hopes on a 1 in 7 year event.

by @tony | 2nd Apr 15, 3:54pm 1427943288

They said it was very mild this time (and late)...

They are still figuring when/where all that pent up heat is going to pop up (some, of course, is melting the ice from below)!

by steven | 2nd Apr 15, 6:21pm 1427952071

I assume when we finally see a strong El Nino it will be 1998 on steroids as that will release the heat.

by skudiv | 3rd Apr 15, 8:32am 1428003156

I'm not so sure, el nino is a heat engine, and the strength is caused by temperature differential, not by how hot it is. If the cold portion of the ocean is warmer, it reduces the differential and you get a weak el nino. Ocean currents are slowing down, which could also reduce the chances of an el nino forming. Truth is it's all about probability, anything could happen though some are more likely.

by steven | 3rd Apr 15, 9:06am 1428005163

From what I have read an El nino releases the ocean's heat and for the last decade the ocean has been storing massive amounts. ergo when an El Nino occurs a "1998" happens. this is the effect/impact (if I understand this correctly).

That heat suggests a lot more water in the atmosphere and that heads across the pacific to the Americas, suggesting very wet events, but I need to read more of the El Nino stuff.

What you are pointing to I think is the risk in frequency and "size" of most EL Ninos happening maybe declining. So for arguments sake say it was once in 10 years for a big one, maybe now its once in 20 or 30.

There also seem to be considerable discusion on ocean currents, Mann says yes, others who have monitored them as their speciality say no. That is a debate to watch as the science gets worked on. If Mann is right that points to a huge effect for the Atlantic Nations.

by Mike B | 3rd Apr 15, 10:46am 1428011210

Steven - Thought you may be interested in this

http://atimes.com/2015/04/sinopec-energy-shocker-chinese-fuel-demand-to-fall-as-alternative-energy-grows/

Bloomberg News quotes Sinopec Chairman Fu Chengyu’s prediction on a “little-reported” March 23 conference call that fuel sales will become a non-core activity in as little as a decade, when gasoline sales will peak. That runs counter to the Western consensus, which holds that China’s fuel consumption will anchor world demand growth for the indefinite future. “In the future, fuels will become a non-core business of Sinopec,” the Sinopec chairman reportedly said. “Petroleum or oil and gas will continue to be a major energy source in the future, but they won’t be the only source, more emphasis will be put on our new energy and alternative energies.”

by steven | 3rd Apr 15, 5:52pm 1428036752

The thing is EROEI, energy return on energy invested, and the good old vested interest plus some spin.

From my perspective gasoline sales will indeed peak inside a decade as price is the only rationing mechanism we have. The reason is price. Lets say US shale holds global oil output per day up for 3 years. After that for 7 years oil output drops 4% per annum after that, the price has to climb to take ppl off buying. So just maybe theis gy sees peak oil for what it is and is doing some PR spin to keep confidence going in his company. Just one more thing the problem we face is a liquid fuels problem so its a bait and switch or serious mis-understanding that we will move to solar / nuclear etc.

Robert Hirsch on youtube is well worth watching, he explains this well.

by profile | 3rd Apr 15, 9:21pm 1428049263

The same Robert Hirsch who stated that US natural gas production had reached its "geological peak" in 2005. Nice theory until technology and innovation trumped geology.

"U.S. natural gas production has peaked and moved into geologically controlled decline."

Http://www.rggi.org/docs/ceed_report_4_6_05.pdf

by OnwardsUpwards | 2nd Apr 15, 11:02am 1427925762

Looks like Wheeler has the green light to sell, sell, and sell NZD

by Mark | 2nd Apr 15, 11:13am 1427926433

Just wait for the impact of the removal of EU quotas to hit the dairy markets, then the bloodletting will really begin. There are some pretty uncertain times ahead for dairy, that's for sure!

by rastus1 | 2nd Apr 15, 3:20pm 1427941222

.........I am convinced no one will panic/worry about anything at all in NZ, unless/untill (whatever), house prices in Auckland start crumbling. Dairy prices, climate change, world chaos and so on, will mean zilch.... so long as Auck ppty keeps going up. Happy Easter.

by skudiv | 2nd Apr 15, 4:28pm 1427945293

Happy Easter.

by DFTBA | 2nd Apr 15, 5:44pm 1427949864

It doesn't take much for a bubble to burst.....and nobody can predict what the trigger will be (well, they will be able to with hindsight).

I was in Ireland during the boom years and left just when it started turning a bit hairy. NZ now (or should I say, Auckland) is as obsessed with housing and immigration as Ireland was back then.

Immigration was also blamed.....and people were convinced those immigrants weren't going to leave and would need housing.....guess what happened.....the tap got turned off, building stopped, immigrants had no jobs so they left.

The bottom fell out of the 'economy' which was just Dubliners selling houses to each other.

House prices crashed, in some areas up to 50%. Lots of people stuck with negative equity....think it could never happen here?

Think again.

by Belle | 2nd Apr 15, 5:56pm 1427950601

Thanks for that dftba. Things going pear shaped out here in the rural areas, wondering if or when it will hit Auckland.

by Andrewj | 2nd Apr 15, 6:34pm 1427952861

Belle, I spent today with an Almond/Walnut grow out of Sacramento. Prices are good for nuts at present. We talked Glyphosphae and Manzate, pruning, water and mechanisation etc. Almonds like 36"pa, so its a problem with the lakes being low, although up here the lakes are pretty good but no snow.

We talked about the same old problem that haunts farmers all over the globe. Prices go up so we produce more, maket satutates, prices collapse, we are never able to stay in the sweet spot. Its exacerbated by the super low interest rates , so everything from Almonds to Grapes are being planted in record amounts and if prices go south growers can 'hang in longer', due to low interest payments.

I don't think NZ is going to produce less milk next year, I'm expecting more ( do you?) lots more from everyone, no country is cutting production so I'm expecting volumes to stay up for much longer and prices to stay down for much longer. It's not a win win situation and I think we have all our eggs in one basket and it's not looking good.

I also don't think we can tell whats going to happen in China but its were we pinned all our hopes and borrowed billions in the process, which makes some of those big irriagtion schemes look unwise, government interference screws up again.

I suspect Fonterra's costs are high, farmers costs certainly are, my bank manager tells me costs are up significantly this year.

Keep it simple and low cost,trade when there's a decent margin, stay short. Have fun.

by Belle | 2nd Apr 15, 7:34pm 1427956469

I love reading your posts Aj they are always interesting. Thank you. Yes if the NZ dairy production can stay high in a dry year, then the question is , what if we get a good season? And how will that affect global supplies. My rellie that is well ensconsed in Fonterra is always full of doom n gloom tales. He was as doom as ever the other day. Stuff ups in factories everywhere. Units that usually run smoothly are having problems. He always asks this. Why dont they fix the NZ problems instead of buying more facilities overseas. I dont know the truth of it. But there you go.

by Andrewj | 4th Apr 15, 5:27am 1428078471

Belle, in the States there is a kind of balance in the meat industry. You don't go into Costco and find there is no Beef, In fact Salmon is cheaper than Beef, isles are full of fish, Chicken, pork and even small NZ Snapper at $7.99 a lb. Aussie lamb is $4.50 a lb for bonned leg roast, but i find it very strong. Aussie lamb is always on sale.

My ranching friends are very happy getting $1700+ for their weaners, they are keeping every cow back, have been buying feed and will have increased production this year.

Eventually the increased Beef will run into all the Chicken and Pork that has been produced to fill in the gap left by low beef numbers, also higher beef quota's for Brazil.

http://www.beefcentral.com/trade/competitor-watch-brazil-edges-closer-t…

Feed is significantly cheaper

http://finviz.com/futures_charts.ashx?t=ZC

http://finviz.com/futures_charts.ashx?t=ZM

Don't forget that mono gastric animals like Chicken and pigs can create protien from meal at %80 more efficiency than ruminants.

Monogastric Digestion
- One stomach
- Digestion of simple carbohydrates only
- Eat daily feed requirements quickly
- Efficient users of feed (2kg eaten = 1kg meat)

Ruminant

The amount of feed eaten compared to the amount of weight gained is poor, typically a ruminant eats 5kgs of feed to produce 1kg of meat

http://bhsagriculture.wikispaces.com/Ruminant+and+Monogastric+Digestion High prices attact investment and risk, the higher the prices the more investment and risk. The beef industry will over produce, the longer it takes the more people will switch to alternatives. ( we only buy beef mince now, better cuts are too expensive, more fish and Chicken) The high prices are building the very collapse we hope to avoid. Carefull of figures, the feedlot industry is investing heavily in the Dairy beef industry. When prices fall those dairy bulls will be even more attractive. Holstein bull calves and sex selection will transfrom the industry, things are going to change. http://www.stockjournal.com.au/news/agriculture/cattle/beef/feedlot-fig… Then we get government meddling, look at this governments push behind the dairy industry, from Nait,AHB, Chinese delegations and Irrigation schemes, it thought it could create a better fuuture if it gave private enterprise a bit of a push, cocked up big time. The EU lifted quota on agriculture because it believed Asian demand would absorb any production increases in the foreseable future, EU farmers were missing out on potential sales and the EU in export earnings. Cock up. Hope you get good rains, it's meant to rain this week in California but it never rains in California. We leave in June for Cornwall/ Devon fro summer and family commitments. Been a fun three years and a positive season for us and our children. We made a lot of friends and will always have a connection here..

by skudiv | 3rd Apr 15, 11:13am 1428012818

Marlborough grape harvest is down about 50% from last year, though they may get a better price. Drought has hit the farmers hard with many being forced into selling a large portion of breeding stock, add in the dairy prices being down 50% and I suspect the banks will be looking very hard at balance sheets, tough times ahead for Blenhiem.

by Andrewj | 3rd Apr 15, 12:39pm 1428017953

Last year the wineries eye's were bigger than their stomachs. I believe there is still a bit hanging over, they will be relieved if this years crop is smaller. It's not getting any easier to sell.

by cowboy | 3rd Apr 15, 1:41pm 1428021705

according to dairy INDUSTRY (not farmers) the answer to not getting any easier to sell is to increase productivity, and make more to sell and get profit that way... Then they can all be "Fonterras" (noticed F shareprice dropped over 50c on last news, over 10%)

by Andrewj | 3rd Apr 15, 3:09pm 1428026977

I defence of Fonterra, the other major producers have large internal fresh milk markets which provide a lot of stability in times like this. Mind you that should have set of big red warning lights.

Don't forget there are a lot of very well paid people in Fonterra who designed an auction system which works well when supply is tight but gives buyers total control when ther's a surplus. I just got to get me one of those jobs.

Wait till those AKL auctions go south ,real estate agents know theres a time to auction, a time to tender and a time for private sales.

Fonterra would have been wise to employ a few off Harcourts.

by cowboy | 3rd Apr 15, 4:38pm 1428032317

exactly. which is why we've been telling them to develop home markets, control supply, not go volume.

yeah would mind one of those gravy train jobs myself. dont think i can do the "yes sir" fast enough to qualify though.

Fonterra just needed to mind its market, not its marketing, thats all.

by steven | 2nd Apr 15, 9:28pm 1427963308

how so?

by profile | 2nd Apr 15, 5:47pm 1427950073

And on the good news front... "An Australian-led analysis of satellite data has found the amount of carbon sequestered in plants has risen by almost four billion tonnes since 2003, reflecting a surge in the biomass of global flora — possibly the first such increase since the Industrial Revolution.

The researchers found that natural growth in northern Australia and southern Africa had more than compensated for mass deforestation in hot spots such as the Amazon, Borneo and Sumatra.

The upsurge, reported this morning in the journal Nature Climate Change, was driven by higher rainfall in dry savanna areas.

Tree planting in China and natural reforestation of abandoned Soviet farmland had also contributed.

The findings reflect a virtuous cycle in the warming climate, with elevated concentrations of atmospheric CO2 speeding up photosynthesis and causing more carbon to be captured by plants."

http://www.theaustralian.com.au/news/health-science/forests-and-fields-…

by steven | 2nd Apr 15, 6:17pm 1427951828

Despite this CO2 continues to rise. and good news?

"Plants absorb around a quarter of the carbon dioxide that people release into the atmosphere by burning fossil fuels. With a greening globe, more plants may mean more absorption of carbon dioxide. If so, this will slow but not stop climate change" However, questions remain over how long plants can keep pace with our increasing emissions in a warmer climate.

http://theconversation.com/despite-decades-of-deforestation-the-earth-i…

by profile | 2nd Apr 15, 6:44pm 1427953487

The good news is there is more flora. I keep getting told here we are suffering from over population on a finite (does anyone claim otherwise?) planet. I guess no one told the plants about all this over population stuff.

by Gummy Bear Hero | 2nd Apr 15, 7:44pm 1427957079

... in point of fact Mr profile ... if you were to stand the entire human population of planet earth shoulder-to-shoulder , back-to-back , we would take up an area less than 600 sq. km. ...

... less than the area of Singapore .... smaller even than the Chatham Islands ... less space than the remote Auckland Islands ...

And that doesn't take into the equation that many folk live above/below one another ... allowing for verticalities , and a prevailing sou-west wind , the entire 7 billion of us Homo saps could be squeezed into Lake Taupo ...

... of course ... that'd seriously bugger up the trout fishing for the current season ...

by profile | 2nd Apr 15, 8:02pm 1427958169

Ah fishing - that explains the lack of comment of late from Mr GBH.

by skudiv | 3rd Apr 15, 8:42am 1428003725

Yup in the future we can all live like factory farmed pigs.

by don'tgetmegoing | 3rd Apr 15, 11:52am 1428015124

Doesn't matter how many people you can cram onto a piece of land the size of a postage stamp, somewhere else is required x amount of land/ocean to feed, clothe and provide minerals and fuel for their lives and dispose of their waste, so a better way to look at it is to place each person onto a map of the planet surrounded by the amount of it required for that person to live, your picture of there is plenty of room is going to look a whooooole lot different

by don'tgetmegoing | 3rd Apr 15, 11:54am 1428015246

So what are you saying, is it that Orang Utans and the Sumatran Rhino along with all the other species that share their space on the planet can be moved to Siberia?