Lockdown issues are compounded by the extended dry weather making farm livestock decisions hard, and in the face of a fast-changing farm labour situation

Lockdown issues are compounded by the extended dry weather making farm livestock decisions hard, and in the face of a fast-changing farm labour situation

Hopefully only one more week to go in the lockdown for many parts of New Zealand, but the lack of rain is still a major issue for farmers.

For parts of the East Coast of the South Island the benefits of some rain a couple of weeks ago are being dissipated from strong winds and the rapid approach of winter. Snow has fallen onto relatively low levels in parts of the South Island cooling soils and reducing any future rain benefits.

Northland in the meantime is still dangerously dry.

With this as a backdrop it was both surprising and disappointing that we heard that while Silver Fern Farms had kept meat processing shifts working over much of the Easter break; Alliance had decided to give its staff the break off.

Given that works are operating with reduced staff due to covid-19 spacing requirements I would have thought that the ability to keep shifts operating and provide workers with time off would have been possible. It sounded somewhat that management are out of touch with their farmer base. From my experience nothing creates more stress to a livestock farmer than drought. This season this is further compounded by the issues that the covid-19 virus has created. If the government decide that saleyards remain under lock down rules for further weeks plus the with the works likely to remain under ‘distance spacing’ there are going to be some major issues on many farms this winter with farms ‘over stocked’ and a general lack of feed. This issue is affecting both meat and dairy farms alike.

Lamb took another hit this week on the schedules while beef is largely unchanged. Venison continues its consistent slide to depths not seen for many years; that is, since 2015 and no sign of this trend being arrested. The NZ$ has risen to around 61 US cents against the US$ is not helping schedule prices. The only glimmer ahead for deer farmers is the likelihood that velvet is going to be in big demand as Asia hunts out traditional medicines to maintain good health.

One of the major consequences of the elimination of the virus, especially while there is the potential of it still being active in other parts of the world, is the shutting of the border to potential migrant agricultural workers. At the moment there are still quite a few still operating within New Zealand providing some relief, however, their time will be limited. Including work visas, residence visas and student visas, last year there were approaching 400,000 temporary migrant workers available in New Zealand. Obviously not all of these worked within the primary industries, but a lot did. If/when New Zealand’s unemployment lifts to around 10% as has been tentatively estimated by Treasury under one of its more positive scenarios, this will leave about 250,000 people unemployed - bout an additional 140,000 on what we had in 2019. This still leaves a 260,000 shortfall of temporary workers.

And let’s face it, on the evidence of the past, few of these additional unemployed are going to be looking for work on farms.

Some will, but not enough to make up for what has been lost. Horticulture and dairying are going to be the major sectors impacted upon but no doubt all sectors to a greater or lesser degree are going to be affected. It is accepted that a single foreign worker does not necessarily equate to one domestic worker to replace them as often they are only working part -time or for only a portion of the year. So the match is a bit fuzzy but the short fall is obvious.

Perhaps the only minor piece of consolation is that many other developed nations are going to be experiencing similar situations. Germany, the USA and Australia have all expressed concern at some level of a lack of foreign workers able to assist in the work force. Until the world gets back onto its feet there does not appear to be a solution to this problem and the biggest loser are those foreign workers who rely upon these jobs to maintain both themselves and families back in their homelands.

The US congress has approved a $23.5 bln farm support package (H/T Stevell) as there is concern over there for both farmers and food production. Several beef and pork processing plants have closed due to staff illnesses and there are reports of milk dumping through a lack of buyers. Perhaps of interest, some of the support money is coming from the USDA’s Commodity Credit Corp (CCC) funding authority. This is a fund set up after the great depression to help support agriculture in times of hardship and “has been repeatedly tapped by the Trump Administration for tens of billions of dollars to compensate farmers and assist the sector due to the U.S.-China trade wars.”

The EU (and UK) is reporting to be largely self sufficient in most of its staple foods, although it still manages to import huge volumes of more exotic foods. There have been some concerns around logistics with border closures, but they look to be more of a temporary thing. For New Zealand the (main) concern is how much we can harvest and make from our primary products. This may prove to be a privileged position to be in. For many developing countries suffering under droughts, covid-19 and reductions of cheaper surplus food coming in from developed countries the next few years may be particularly bleak.

On a slightly more positive note Silver Ferns Farms have announced their 2019 financial results:

Silver Fern Farms Co-operative has reported a net profit after tax of $34.9m for the 2019 financial year. Its investment, Silver Fern Farms Limited, reported a net profit after tax of $70.7m for the 2019 financial year.

Silver Fern Farms Co-operative Chairman Richard Young said the financial result achieved by the Co-operative and Silver Fern Farms Limited for the 2019 year provides stability for both the Co-operative and the operating company.

“The Co-operative is in a strong position with no debt. Whilst this was achieved last year, we now have a strong platform to weather a period where our country and the world is in a period of considerable economic uncertainty.”

“We are pleased with the performance of our investment. Silver Fern Farms Limited’s result for 2019 was the strongest financial result in the past decade, and one that is more fairly representative of the significant scale of the business and our investment in it.”

Silver Fern Farms Limited’s Chief Executive Simon Limmer said Silver Fern Farms Limited’s performance in 2019 was positive given the new operating environment.

“While global market conditions and domestic challenges move by the day in 2020, our achievements in 2019 set us up well to meet today’s challenges.

“Silver Fern Farms is robust enough to withstand the global disruption caused by Covid-19. Our financial stability provides a platform to execute our strategy, develop our people, support our farmers, and feed New Zealanders and the world with sustainable, naturally delicious red meat.

“Last year’s performance is important for our 7,000 staff. Keeping our people safe and employed under the current environment is paramount to us. They are fundamental to the recovery. We are taking our responsibility seriously around how important our role is in the recovery of our country.

For the period Silver Fern Farms Limited achieved revenue of $2.6 billion, earnings before interest, tax, depreciation and amortisation (EBITDA) including share of associate earnings of $123.4m, and net profit after tax of $70.7m and net profit before tax of $89.6m. The Company again increased the level of capital expenditure, up $3m to $32m over the course of the year. Total shareholder equity is at $571m up from $501m at the end of December 2018.

“We came into 2019 facing an uncertain international geo-political and trade environment. However, the impact of African Swine Fever on Chinese pork stocks drove global consumer demand for protein and countered any downsides of Brexit and USA-China trade issues. 2019 was a China story. With customers in China looking to beef and lamb items to fill some of the void left by the culling of pigs, it set a positive benchmark for other markets to follow and they responded accordingly.”

“Through all of these dynamic shifts and turns in the markets we have needed to remain strongly customer focused and agile in order to take advantage of the opportunities they present. Our sales and marketing, and operational teams did an exceptional job in managing a changing market mix, growing our market penetration in markets such as China while still retaining optionality in traditional markets.

“We are creating a stronger alignment across our market, operations and supply functions in order to drive more effective decision making and maximise market returns.”

Richard Young said the Co-operative is taking a conservative approach to the current operating environment.

“Since balance date, Covid-19 has fundamentally changed the market. Market dynamics are changing daily, making scenario modelling of short and medium-term financial impacts difficult to accurately determine. Liquidity and cash flow management will continue to be critical in maintaining optionality in managing Silver Fern Farms Limited’s relationships with all stakeholders in uncertain times.

“We remain confident that Silver Fern Farms Limited is in a strong financial position. With cash on hand in the business, they will be equipped to respond to the pending rise in consumer demand post Covid-19 disruption.

“To ensure additional cash flow flexibility is maintained within Silver Fern Farms Limited during this time, Silver Fern Farms Co-operative and Shanghai Maling made the decision and requested Silver Fern Farms Limited to defer the dividend payment until the outlook for the global operating environment becomes clearer. As we come through the current crisis and enter a ‘new normal’ Silver Fern Farms Limited’s board will gain more clarity around business impacts, thus determining dividend payment options.

Key financial metrics FY 2019 Silver Fern Farms Cooperative Ltd Silver Fern Farms Ltd
Net Profit Before Tax $35 mln $89.6 mln
Net Profit After Tax 34.9 mln $70.7 mln
EBITDA n/a $123.4 mln
Revenue n/a $2.6 bln

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44 Comments

Yep. Agree with your statement "Northland is still dangerously dry". Still on total fire ban in mid April. Saw 4-5 fire engines and support vehicles out working yesterday. Staff looked tired.
We are over stocked, minimal supplements. Been on the phone desperately trying to get cattle into the works. Having to join the queue with everyone else. Trying to unload yearlings but no buyers as everyone in the same position. Selling week old calves for $10-$20 as the other option is to put them down.
Couple of overseas staff haven't been home to see their wives and children in over a year and unlikely to be able to any time soon.
Covid-19 has rightly overtaken the news but we are still dealing with a pretty rough drought and on top of that friends are dealing with Bovis issues and MPI.
I just hope groups like Rural Support Trust have the resources to find individual farmers who will need support, many of whom wont know how to ask.

Wilco, lots of us in the same boat. I don't like the look of these falling schedules, I'm just hoping to keep my numbers down, trying to get some cover. My young grass paddocks are dust, grass is still a tinge of green but won't be in a week if it doesn't rain. Im getting quoted lots of Heifers but I don't really have the feed and weary about counting my chickens, if you know what I mean.

If we go down to 3, I'm going to need to get the boat out and get away for a few days.

Wilco, if you are concerned about any farmers mental health then you can call Rural Trust. Or suggest the farmer calls 1737. Sometimes farmers don't want to call their local Rural Trust because it involves locals and calling or texting 1737 and talking to a professional can be what they feel more comfortable about.

Casual Observer - In the last dairy downturn the Rural Trusts ran a number of community dinners for farmers. A meal and a couple of beers and many of us felt better just getting off the farm and talking to other farmers and realizing we were not individual failures, times were tough for everyone. We also did a mental check list of our neighbours who didn't attend to see if any should be called on. As well Fonterra asked its staff to take note of farmers who's behaviour changed.
My concern is that under Covid 19 rules the lack of social interaction will make it much more difficult to identify at risk farmers. And the coming winter is going to be hard for many.

Yes agree. There are webnairs, online discussion groups etc that I have been encouraging people to take part in where they can just for the social contact if nothing else. In the deep South we are seeing communities rally around each other via digital means. Not the same as face to face, I know, but some of it involves ph calls etc. Strong friend networks are critical at times like this for everyone.

Winter is going to be ugly. I got this from Alliance yesterday. I have heard wait times for culls at SFF in the South are not much different.
Our best estimate of processing waiting times is shown below.
South Island North Island
Bookings made Tuesday 14 April Wait time Wait time
Ovine 4-6 weeks 1-2 weeks
Bovine 5-6 weeks 2-3 weeks
Cervine 1 week

Edit Apologies the formatting didn't come through properly

Importing cheap labour to solve our problems when we have so many unemployed? Doesn't make sense to me.

We need to get some of these young no-hopers off the couch and into jobs. Can't just leave them to be permanently unemployed.

Never going to happen while governments hand out benefits without work requirements.

Come up with another plan.

Its a market. Pay enough to make it worth their while. If you can't meet the market. It's because your business is non viable.

Ohh, so easy (not)...how often we hear this tune. Pay enough and our unemployed will flood in to give the would-be employer good value for a "liveable ")NZ wage.
But meantime, in the real world, the input costs are largely determined by the sale price willing buyers are prepared to pay.
As an example NZ once had a bouyant apparel industry, but how many Kiwis are prepared to pay a price for that suit to enable any manufacturer to pay staff even a basic wage? No, we are keen to buy that bargain online or at cut price retailers, both of whom source their product from factories in Bangladesh or similar. Who's fault is that? Look in the mirror before telling employers how they should run their business!

You're a bit inaccurate regarding the ragtrades former glory days, that was all propped up by subsidies and import tarrifs and other protections. Once the true marketforces were unleashed the sector proved to largely be unable to stand on its own two feet and went bust. Of course piss poor business management and refusal to invest in cutting edge equipment wouldn't have anything to do with it...just blame the workers instead. I remember a friends mom who was a highly qualified tailoress telling me her equipment at work was WW2 era! That sums it up in a nutshell I reckon!

"Passengers on a flight bound for Tunisia underwent a blood test administered by the Dubai Health Authority, the airline said in a statement. Results were available within 10 minutes.

The airline said the test was performed near the check-in area."
https://www.businessinsider.com.au/emirates-tests-passengers-coronavirus...

That's interesting.

I'm assuming Dubai was a transit point which leaves the question - What happens if someone on a flight returns a positive? Does everyone go into quarantine?

You want 'shovel ready' projects? Build lots of water harvesting/storage to service major agricultural regions. Every farmer will have good ideas on how to get this done in their particular region. Great long term payback to NZ.

They cannot build them cheap enough, Waimea was meant to be a little gem, cost overruns are out of control, Nelson council is considering writing off the 30 million already spent.
All the good storage options were built years ago, what's left are the marginal ones. if you start doing the math it's 10 m3 a hectare for one mm, around here we lose a lot of water to evaporation, I would need 500mm pa. The Wairarapa scheme being considered is budgeted at .40c a m3. = $4 a mm pr hectare. I'm never going to sign up to a scheme like that, also in dry years like this they are unreliable, you need massive storage capacity, we now have tough nutrient limits, irrigation increases nutrient problems.

So long as they pay for the on farm system and running costs should work out fine.

but those costs can spiral out of control. What do we grow once we have the irrigation?

I was being a ass implying the water needs to be free on the ground to be worth it to the land owner.

that would be a wonderful gift from the taxpayer, i'll take it

and as a taxpayer Im not prepared to pay for it unless there is CGT, land tax and cost of the water is fair to the taxpayer.
And before all you cockies start ripping up your blankies, thats how it is in most parts of the world where farmers are not a protected species by their mates in the National party.

https://www.usatoday.com/story/news/politics/2020/04/17/coronavirus-trum...

Your assertion is not totally fair to the NZ farmer.

Irrigation has major drawbacks and is uotimately unsustainable, we should be focussing on developing drought resiliant farms not trying to water them in the middle of the dry season. The whole model has to change.

That's the end of horticulture then.

Yes Doris, it will be the end of horticulture/viticulture/market gardening etc. If we go with 4th estates thinking ("not trying to water them in the middle of the dry season") will be interesting to see just how self sufficient we are in food.

Well we used to be. Merino's in dry areas instead of cows, market gardens where there is now houses. Cows on wetter ground.
But massive greed kicked in so now we try and farm unsustainable. It's not working.
The costs are through the roof. It just doesn't make sense.

Well if you are the benchmark then it certainly is curtains... Go to Israel and find out how they feed their nation...in a desert...with very little fresh water...I pity your chiodren....clue...its called a dripline...you are a drip now go find your line..honestly we depend on these people for foreign exchange? Are you kidding???

Interesting. I did a bit of digging around why Burger King liquidated themselves, on their labour V profitibility equation it would seem the evaporation of their convenient pool of low cost and timid international students is a clear and present threat to the current business model not suprisingly Dominos Pizza is advertising one thousand jobs...how will they sustain that $6.99 dollar deal I enjoyed so much?

They wont need to. With half the industry closed permanently, they can pretty much charge what they like in the future.

I predict a $4.99 pizza stacked with unexportable meats of all kinds...tasty cheese 1kg now under $9 a block! There goes the primary sector!

Catch 22 isn't it? - employing the rising of unemployed Kiwis, or open up migrants workers tap again.. cheaper.. but bug risk? - As some officials stated that NZ has 'very strong & robust border screening', will they opt to choose the second? - as the current rising unemployment, already being subsidised - specially for their landlords (rental payment) or Banks (loan payment).

Far worse contagion...the militant nz worker. Funny how the immigrant community has been so fast to organise once they are here, in their own country it would be...broken legs!

I don’t recall anyone breaking my legs in my home country.

..yet we're all here right? .. It's just figure of speech, but anyway usually we only have one home country.. then how many are they in this world?

The one remaining shining light in NZ agriculture - our milk price, just got a fairly big vote of no confidence by farmers. Fonterra have been offering fixed milk contracts so farmers could lock in up to 50% of their production at a price. Last year there was moderate interest at the monthly offerings with the December 2019 contract around $7.30kg ms for our season finishing next month.
Tonight Fonterra advises that their offer this week to purchase 7.5m kg ms at a nett fixed price of $6.32 received offers of nearly 58m kg ms. That is more than seven times over subscribed and indicates farmer pessimism on next season's milk price. The latest Rabobank forecast may have had an impact.

Who are the customers purchasing 7.5 kg/ms for $6.4+, when Rabobank forecast is less? Does the standard milk price subsidise the guaranteed price?

this could be interesting for you dairy guys. Don't know what language it is.

https://www.youtube.com/watch?v=samLXzDk7Cw&feature=em-uploademail

Or are the FMP kilos contributing to profit and therefore increase final payout? It's swings and roundabouts. For those suppliers who take it up, it gives some certainty of cashflow and it may result in some remaining in the co-op. OCD offers FMP too - its not just a Fonterra offering.

How's your season this year Omnologo?

Fair points CO, although it dilutes the principle underpinning a cooperative, and I’m not confident the shareholders council has transformed into a body with compunction let alone ability to monitor transparency.
Our season is drawing to a close, down in production so grateful for the stronger payout. Had some recent rain, so hoping the winter crops pick up (on/off grazing) and the pasture thickens up for winter. Trying to come to terms with C19 and it’s significance. Grateful to be working.

The great reckoning started to appear, for NZ master economy basket country: the US, UK, France started to questioning the source of this Covids, how's been handled, reported.. more countries shall follow suit.
https://www.msn.com/en-nz/news/world/china-revises-wuhan-coronavirus-dea...
https://www.msn.com/en-nz/news/world/emmanuel-macron-questions-chinas-ha...

Classic deflection. This damn thing was obvious if you were paying attention. The worlds leaders including China US France UK etc refused to face this thing. Everyone was too late. Too many in responsible positions didnt just play it down, they made fun of it. With the exception maybe Taiwan and a few other asian countries, the response by those in charge has been tragic. So instead of looking to themselves for responsibility, everybody is looking for a scapegoat.

NZ shouldnt need migrant workers. There will be plenty of unemployed workers available. The trick will be encouraging them to get off the couch and go do the work.

That will happen if unemployment rises to 10%, there will be plenty of motivated, hard working people.

It does need some facilitation for seasonal work - supplying transport and accommodation for people who need it and allowing a seamless transition between work and benefit.

There may be no feasible big irrigation schemes left , but there are plenty of small ones.I can thing of 10 or so , 1/2 hours drive from where I live. Most could incorporate wetlands , which could / should be subsidized. The problem with irrigation schemes , the cost is so high , they need pivotal irrigators going 24/7 to justify the cost. That means diary or high yield crops on land that isnt really suited. Then they are losing 70 % of the water during the day to evaporation. Viscous circle. Problem is after the drought is over , noone is going to give it a second thought . Most won't change their high yield grasses for something more drought tolerant. I think there is scope to take 3 issues , clean streams drought tolerance , and need for more wetlands, and come up with a plan that helps all 3. It would need govt , local councils and farmers / landowners , and conservation groups / individuals to work together , something that may be hard , but not impossible. First it needs the research to tie all 3 together.

good sense....schools opening a mistake and we are not yet ready to test and trace at the necessary level...continue level 4 and make good use of the time to prepare