A review of things you need to know before you go home on Tuesday; optimism on dairy prices, volatile farm prices, some lifestyle property sales sag, OIO approves SFF partnership, farmer confidence surges, swaps and NZD steady

Here are the key things you need to know before you leave work today.

TODAY'S MORTGAGE RATE CHANGES
No changes to report today.

TODAY'S DEPOSIT RATE CHANGES
No significant changes today.

FAST RISING PRICES
There is a dairy auction tomorrow morning. The futures market thinks it is going to be strong. Today's trading suggests WMP prices could be +9% higher tomorrow. That would be on top of +7.7% at the last auction, +12.7% at the one before and +6.6% at the one before that. If it materialises, that would mean prices are +36% higher than at the end of July. We will know in less than 12 hours.

FARM PRICES VOLATILE
The number of farm sales were up slightly in August by about +6%, up about +10% for an average August. Prices overall are up too, and there are some substantial movements in some key dairy areas. Prices per hectare are down -22% in Northland from the same month a year ago, down -30% in the Waikato, but up sharply in Taranaki, Otago and Southland. Grazing land prices were down -10% overall, driven by some big falls in Northland, Canterbury and Southland.

VARIABLE TRENDS
Lifestyle block sales were up +5.5% in volume nationally in August from the same month a year ago, with Canterbury, Otago and Southland leading the way. But they are down quite noticeably in Auckland (-19%) and the Waikato (-12%).

APPROVED
The Overseas Investment Office has approved the Silver Fern Farms partnership with Shanghai Mailing. Shanghai Maling will invest $261 mln into the company to create a 50/50 partnership - but the Chinese will appoint the chairman who will have a casting vote. The deal is now unconditional and is set to complete on 4 January 2017. On the other hand, the company will fail if farmers ever withhold stock, so in effect the future of this partnership is in farmers hands. Shanghai Mailing controls a huge distribution network in China. This deal forces Silver Fern Farms to process product consumers want.

CONFIDENCE SURGES
Farmer confidence has surged higher. The Rabobank survey – completed earlier in the month – found the number of farmers expecting the rural economy to improve had risen to 48% (up from 25% last quarter), 37% were expecting it to remain the same (down from 52%), while only 13% were expecting the agricultural economy to worsen (down from 22%).

GOVERNMENT PROBING INTERCHANGE FEES
The Government is reportedly probing Retail New Zealand's claims that the costs merchants face from interchange fees on credit and debit cards, excluding EFTPOS, are too high.

WHOLESALE RATES STEADY
Swap rates are only minorly changed today, up +1 or +2 bps across the curve. You can find our chart for all terms of swap rates here. The 90 day bank bill rate is up by 1+ bp at 2.24%.

NZ DOLLAR INCHES UP
Our dollar has risen marginally again today. It is now at 73.2 USc. On the cross rates, it is at 97 AUc and 65.5 euro cents. The Trade Weighted Index (TWI-5) at 76.6, exactly where it was at this time on Friday. Check our real-time charts here.

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USD 
NZD
End of day UTC
Source: CoinDesk

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7 Comments

China’s desire to stabilize the yuan risks undermining its future as a global reserve currency.

For the second time this year, the overnight cost to borrow the offshore currency in Hong Kong surged above 20 percent amid speculation the People’s Bank of China is mopping up liquidity to boost the exchange rate. The volatility comes less than two weeks before the yuan’s inclusion in the International Monetary Fund’s Special Drawing Rights -- an event seen as a validation of President Xi Jinping’s efforts to promote its standing on the world stage.

"This is not the sort of behavior you would expect from an SDR currency," said Sue Trinh, Royal Bank of Canada’s head of Asian foreign-exchange strategy in Hong Kong. "You can’t have funding for a reserve currency blowing up or moving in such a volatile fashion; it would be a nightmare for short-term portfolio management."

Any use of borrowing rates to shake down bears risks eroding authorities’ pledges to give markets more sway in the world’s second-largest economy and undercutting Hong Kong’s position as the biggest offshore yuan trading center. The yuan’s funding costs at home and abroad have been more volatile than the four existing currencies in the IMF’s reserve basket over the past three years, data compiled by Bloomberg show. Read more and more

NZD/ CAD going for parity reaching multi decade high

Silver Fern Farms has to be very wary! A new meat processing company may well rise from nowhere.

Is that comment out of some knowledge? A sad day, Alliance group and Affco now only significant New Zealand owned companies. Tenants in our own land.

You really have to wonder where Key's "bright line" lay where that went. Remember those words from him about 6 years ago?

Long since given up believing Key has any core beliefs apart from wanting to hold on to power.

Further to SH.

http://dimsums.blogspot.com.au/2016_09_01_archive.html?m=0

The Agricultural Development Bank of China (ADBC) agreed to bankroll the Ministry of Agriculture's five-year rural policy blitz by committing to provide no less than 3 trillion yuan ($450 billion) in loans for agricultural modernization during 2016-2020. The funds were committed in a "strategic agreement" signed with the Ministry of Agriculture September 18, 2016.

Few specifics were announced. The two parties agreed to deepen rural reform, push forward stronger policies that benefit farmers and agriculture, upgrade agriculture, raise the efficiency and sustainability of agricultural development, in order to effectively accelerate agricultural modernization. Priorities were as follows:

maintain national food security
construct high-standard fields
improve in agricultural structure
promote innovation in agricultural science and technology and modernize the seed industry
foster new-type farm operators
push forward sustainable agricultural development
accelerate agricultural “going global”
promote rural industry integration
advance antipoverty projects
advance reforms of the state farm "reclamation" system