sign up log in
Want to go ad-free? Find out how, here.

The Weekly Dairy Report: Most start new season with sound feed and cow condition but are apprehensive about slow arrival of market upturn

Rural News
The Weekly Dairy Report: Most start new season with sound feed and cow condition but are apprehensive about slow arrival of market upturn

While the rest of the country suffered from climate extremes last week, Canterbury missed the much needed rain, and moves closer to a spring with a severe sub soil moisture deficit.

Calving is now in full swing further north, but still at least two weeks away for most of NZ, and there is some apprehension about what the season will reveal both from a climate and financial perspective.

The new bobby calf rules are gazetted to start on August 1st, with the main requirements being animals must be a minimum of 4 days old and fit for transport if sold.

They are not allowed to be carted across Cook Strait and should be in a truck no more than 12 hours.

Loading and unloading facilities are needed for calves, shelter provided before and after transport, and blunt force killing is banned are other main rules that will be vigourously enforced.

Autumn born dairy beef calves have sold at record levels in saleyards as limited options have been created by some dairy support taken back home, and graziers needing to fill this space with animals of any sort.

Buying at the top comes with some risk as overseas markets are already showing signs of peaking, and with two years to finish, some purchases could end in poor returns.

The North Canterbury Hurunui Water project has reached another milestone with consents in place and the appeals process finalized, and now seeks investment for the construction stage.

This will be a huge relief for this drought prone region but how individual farmers will finance these costs after two years of losses is difficult to fathom.

Last week’s milk auction saw prices unchanged and reinforced that the tightening of global supply is the new influence in any upturn.

Dairy product sales now involve early production and at present the market is playing a wait and see game, but with storage schemes in Europe still filling, buyers are under no pressure to commit much forward.

There have been some indications that milk flows maybe slowing in Europe amid these poor prices, and Fonterra’s June production was back 10%.

Westland Milk Products appoints an interim CEO from the board, as it seeks a permanent appointment to take this company ahead into the future.

The OECD predicts that whole milk powder prices will only reach $3000/tonne again by 2018, which could mean farmers will have to wait until the next year before they will return to profit.

This delay in the upturn maybe too long for those with heavy debt, and financiers will be keeping a close eye on spring dairy real estate sales to ensure their investment does not come under pressure.

The biosecurity outbreak with velvet leaf in fodder beet could have long term implications and officials are now meeting with farmers to plan how they restrict it’s spread.

The MPI has also announced a "predator free by 2050 campaign" that has been laudably viewed, but some feel unrealistic on it's goals.

Dairy prices

Select chart tabs

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

20 Comments

Its time vets were called in to calf sales. Its not unusual to witness sick calves arrive at the sales. Sometimes these calves are pulled aside and sent home. To what..I ask. If someone will transport a sick calf to the sale, why send it home....by now usually in a deteriorating state ...to the home that sent it. The two most common problems are scours and navel ill. Both require immediate attention. Yet nothing is done. Why is it not a requirement to get a vet to them pronto seeing noone else is dishing out the required antibiotic or fluids.

Up
0

Perhaps if all saleyards were required to report such animals to MPI farmers may get the message not to send them, Belle.

Up
0

MPI are on the prowl around the calf sales. Yet these calves are sent home. To what I ask? Call in the vet and make the cocky pay. Alternatively hit Wrighties in the pocket. Make them have a vet on site. Calf rearers should all be checked out by MPI as well. So many come to a sticky end.

Up
0

Was talking to a banker re the NZX Milk Price Futures uptake. Said it is mainly corporates taking it up and there isn't a liquid market for options yet. The additional borrowing farmers need to cover their positions has to fit with current maximum lending/security criteria, so there's not a lot of farmers that have spare security to use for it. Many are taking a wait and see attitude.

What are others hearing on this? I got the impression that despite media reports it is not getting a lot of buy in?

Up
0

What you are hearing is correct CO. To be able to trade, a farmer first needs a clearance limit for their end of day positions to be credited or debited from. Given the current liquidity pressure that will not be improving in the near or even medium term, most farmers would be needing all of their existing limits and some just to pay the bills. Asking for an extra limit to play the market would be difficult to get approved even with a very good security position unless you were what a bank classed 'sophisticated' and able to understand the rules of the game. Remember swaps? Banks don't want to have their names attached to anything related to derivatives without being absolutely certain farmers won't throw their toys when it goes against them again.

It's the same guys using it now, corporates mainly, who were the main winners from GMP. When you have a CFO, or even if you just have the luxury of being able to spend more time in the office than on the tractor or in the shed, maybe then you can have the time to buy and trade futures. If you are in the shed once a day, forget it.

Up
0

Thanks HH. We aren't a corporate or even a 'large' farm by current standards but we did well out of GMP, and had a reasonably good understanding of it. However we wouldn't go near the NZX offering. Interestingly the banker referred to derivates as 'think of swaps'. I heard it described as 'similar to GMP' at Fonterra meetings. From where I sit - it's a world away from GMP.

Up
0

GMP was a no brainer, the negativity amongst farmers which pressured Fonterra to pull plug was misplaced and misguided at best, at worst a sign of envy by the non adopters. It's a long way from GMP - with GMP the only downside was opportunity cost, with NZX offer the OP Cost is converted to cash on a daily basis. Sure it evens out over a season, but without some serious liquidity in the buy side, I can only see the average dairy farmer coming out the loser

Up
0

Roger Welsch can best be described as a cross between Erma Bombeck and Dr. Ruth, except male and living in Nebraska with his wife and dogs.

https://www.amazon.com/Everything-about-Women-Learned-Tractor/dp/076031…

Up
0

Southland gets Chinese majority owned dairy factory.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=116…

Up
0

Lots buying up cheap PKE and pumping the milk tap........bring it on europe!

Up
0

NZX ASX. What are listing rules. You know continuous disclosure and stuff.

In a surprise move, Fonterra will make a forecast farmgate payout and dividend announcement on Monday morning. ASB economist Nathan Penny said the dairy giant had not told anyone but he had "wangled" the information out of them.

http://i.stuff.co.nz/business/farming/82637743/Fonterra-to-make-surpris…

If it made the paper by 17:45. Difficult to see how tbe wangling could not have been outside market open and trading time. Maybe lunch on Friday wasn't long enough.

Whats a wangler to do.

maybe up 5c in Oz (2 hrs behind) today
http://www.asx.com.au/asx/research/company.do#!/FSF

Up
0

16 reverse and 4 forward gears the new road ranger strategy box. takes you to where you have been quick smart.

http://www.asx.com.au/asxpdf/20160729/pdf/438wzw1ymxpd3n.pdf

Adoption of Foreign Exempt ASX listing
9:17am, 29 Jul 2016 | GENERAL
Adoption of Foreign Exempt ASX listing
(NZX and ASX Release)

ASX has confirmed that Fonterra Shareholders’ Fund will change its ASX admission category from an ASX Listing to an ASX Foreign Exempt Listing, effective from 1 August 2016.

Fonterra Shareholders’ Fund will continue to have a full listing on the NZX Main Board. Fonterra Shareholders’ Fund units will continue to be listed on ASX as they are today.

Fonterra Shareholders’ Fund will primarily be regulated by the NZX Listing Rules and will be exempt from complying with most of the ASX Listing Rules.

Mike Cronin
Company Secretary - Fonterra Shareholders’ Fund
FSF Management Company Ltd (Australian Registered Business Number 190 539 935, incorporated in New Zealand) is the Manager of the Fonterra Shareholders’ Fund

-ENDS-

For further information contact:
Simon Till
Director Capital Markets
Phone: +64 21 777 807

Next step will be a ledger book on the bar at the Hurunui pub, been there since 1869 giving continuous service.
some things never change.
good for Simon types, needed only 2 days a week now.
oh whats the point. how big was the fee - never seen a fee they didn't pay.

Up
0

So what point exactly is Penny trying to make, by pointing out that he "wangled" the information out of Fonterra? Is it a play perhaps to justifiy his $6 payout forecast, he's smarter than everyone else?

Up
0

Mates looking after Mates

Another trap for foreign observers is to assume China has a market economy like ours, or that the Chinese government is busy turning its economy into a market economy.

That's easy to believe when you're told that, in 2014, China's private sector produced at least two-thirds of its GDP, with the private sector creating more than 90 per cent of the additional jobs and with the public sector accounting for just 11 per cent of China's workforce (compared with 14 per cent in Oz).

But China's economy is still far from being a market economy like ours, and it's not clear the Chinese government wants to make it one.

http://www.smh.com.au/business/the-economy/china-will-keep-doing-its-ow…

Up
0

I'd say going by their contuing strangelhold on personal freedoms, their increasing warlike moves in the South China Seas and total lack of regard for the environment in their "island building" defences, they have absolutely no intention of becoming a market economy, other than to control it other than in their own state.

Up
0

China at a crossroads
President Xi Jinping has reversed elements of China’s collective
leadership and asserted greater personal authority. This has had
implications for both economic policy and domestic and foreign
security strategies.
 Xi has asserted the importance of one supreme, visionary
leader. He is now committed to creating a personal
leadership cult which cannot be easily reversed. He is not
politically vulnerable in the short term, but the longer term
is uncertain. Both the new regime style and the man are
brittle.
 The transition to an economy led by domestic consumer
demand is not going smoothly as Xi tries to combine a
market economy with central economic direction. Fear of
the consequences of arbitrary measures is leading to an
outflow of capital. This hybrid of central direction and a
market economy can survive in the next two years. In a
complex domestic and international economy, however, it
is not viable in the longer term.
 China’s policy of confrontation in the South China Sea is
tied to Chinese national pride. The reaction of US regional
allies depends on their degree of confidence that the US
will fulfill its commitments. The linkages between Chinese
policies, regional reactions and US intentions, increase the
2018 Security Outlook
7
potential for conflict, possibly stimulated by an
International Tribunal ruling on the South China Sea
dispute. China also faces the alienation of Taiwan from
China’s increasingly authoritarian regime, and worsened
relations with either the US or North Korea over the latter’s
nuclear and ballistic missile program.

https://www.csis-scrs.gc.ca/pblctns/ccsnlpprs/2016/2016-06-03/GLOBAL_SE…

Up
0

Crikey....so Bega gets 100 million deal. Sounds good. Didnt Fonterra sell its shareholding? So Beingmate ups its half yearly losses to 49 million ....didnt Fonterra keep its shareholding?

Up
0

Dividend/royalty news
https://www.nzx.com/companies/FCG/announcements/286481
50 to 60 cents.

Change in fmp manual calculates, adds 4 to 5 cents.
Nominal forecast same number (incl. above).
Could be seen as slight easing.. $for $.

https://www.nzx.com/companies/FCG/announcements/286479

Up
0