Fonterra Cooperative Group forecast cautiously welcomed

25 May 2010

Fonterra Cooperative Group forecast cautiously welcomed

While Federated Farmers is cautiously welcoming Fonterra Cooperative Group's 2010/11 season milk price forecast of $6.60 per kilogram of milksolids (kg/MS), it is also warning this will not be 2007 revisited.

"Federated Farmers analysis highlights volatility of upwards of $2kg/MS is increasingly the norm and most farmers are attune to this," says Lachlan McKenzie, Federated Farmers Dairy chairperson.

"It also has to be remembered the 2009/10 season opened with an eye-watering $4.55 kg/MS forecast. Thankfully, over the current season, it has grown to $6.10 kg/MS.

"I should add that current Ministry of Agriculture and Forestry modeling shows that it costs a staggering $4.88 to produce one kilogram of milksolids. On top of that farmers have to pay the bank and put food on our own tables."

"I don't wish to be a curmudgeon but controlling non-farm costs and charges is a core function for Federated Farmers. New costs, such as the emissions trading scheme, are an unwelcome tax on our production. "

"Yet these recent commodity price surges are due to externalities.That's why we urge caution both inside and outside the farm gate. Expectations have to be realistic."

"The frigid start to the European spring has hit the production of the world's largest dairy exporter. Tight credit conditions affecting the United States dairy industry is constraining the world's number three dairy exporter. In the Australian state of Victoria, which accounts
for 60 percent of Australian milk production, hot weather has hit production there."

"New Zealand, similarly, has faced drought with a majority of the nation's dairy herds in drought declared areas. While the drought has now seemingly broken, its tail will hamper spring production and pasture in many parts of the country will need renewal."

"It's important to reiterate that drought assistance is not 'cash in hand' as some may think it to be. Drought assistance is about advice that speeds recovery back to full production."

"So if you excuse the cliché about the 2010/11 forecast, farmers and Fonterra need to make hay while the sun shines. Federated Farmers advice is to budget conservatively and use any windfall to retire debt, especially expensive short term facilities."

"If anyone thinks this will lead to another dairy boom then they should think again. We've seen very little conversions in recent time."

"Only last week, the Real Estate Institute of New Zealand confirmed that just 12 dairy farms sold nationwide in the three months to April 2010. The sale price of $34,766 per hectare was also down six percent on the average price for the three months to the end March."

"That's the market speaking loudly combined with tight local farm business credit conditions," Mr McKenzie concluded.

Rain welcomed by new Federated Farmers Northland provincial president

Northland farmer, Matt Long has taken over as Federated Farmers Northland provincial president. Mr Long succeeds the previous provincial president, Denis Anderson who retired at the AGM earlier this month.

“It’s a genuine honour to lead the Federated Farmers Northland province into 2011,” says Matt Long, Federated Farmers Northland provincial president.

“Obviously the big challenge when I took up the position was the severe drought in Northland. Luckily that’s subsiding now.

“Where I am in Whangarei, we’ve had more than 180mm of rain since the end of last week. Fortunately that’s been working its way through the soil and not all flooding off, so that’s fantastic.

“It’s been warm here too, so the hope is for some relatively good pasture growth before winter sets which would be a huge relief for many farmers who have been struggling through the summer.

“However farmers will still be going into winter with low pasture reserves and coping with financial losses of hundreds of thousands of dollars, which will flow through to the wider community.

“But the weather isn’t the only issue facing farmers in the twenty-first century, with the big one obviously being the Emissions Trading Scheme (ETS).

“Farmers need to work with all sorts of changes, whether it’s the weather or the Beehive. That’s why Federated Farmers is important for the farming community. The Federation handles the difficult side of local and national politics, ensuring member’s views and concerns are heard.

“In working together for the country’s best interests we need the strong national and provincial representation that Federated Farmers provides,” Mr Long concluded.

Background on Mr Long:

40 year old Matt Long farms on 255 hectares in Whangarei. The farm consists of 50 percent dairy and 50 percent sheep and beef. The farm has been in the family for 45 years.

Crafarm conditional sale highlights shallow capital markets

Crafarm conditional sale highlights shallow capital markets

Federated Farmers believes the conditional sale by the receivers of 16 CraFarm farms to UBNZ Funds Management, the New Zealand company partly owned by Hong Kong listed Natural Dairy (NZ) Holdings, reflects a lack of depth in New Zealand capital markets. The sale is conditional on Overseas Investment Office approval.

“This latest development reflects a lack of depth in New Zealand’s capital markets,” says Lachlan McKenzie, Federated Farmers Dairy chairperson.

“Ever since the receivers took control of CraFarm these farms have been available for sale. That New Zealand interests have not been front and centre is concerning.

“Either it reflects a banking sector that is frozen or a lack of Kiwi corporate interest. Given only a dozen dairy farms were sold in the three-months to April 2010, according to the Real Estate Institute of New Zealand, that tells me there is little domestic appetite out there.

“It’s not helped by an Emissions Trading Scheme, which will strip thousands from farm budgets already under pressure. Ironically the ETS will probably drive these large corporate investors going forward, given the investment needed to offset the ETS’ cost.

“As there is also an international tender out on these farms, overseas investors seem to realise the immense potential of New Zealand agriculture. Overseas investors wish to buy into a quality reputation we farmers have built over decades, valuing our dairy industry a lot more than New Zealanders outside the farm gate.

“I think this interest in New Zealand agriculture makes a mockery of KPMG’s prediction New Zealand will be swamped by low cost competitors. Hong Kong’s Natural Dairy is keen on New Zealand and not China, because we are in a pastoral sweet spot very few other countries possess.

“I think that non-farmers need to wake up to the potential of New Zealand farming or otherwise, our country will end up as one small cog in a big global supply chain,” Mr McKenzie concluded.


Evil Bench Cat Versus Plastic Mouse Trap

Yes you read right. It happened on Monday morning. Kids off to school.Two cats let in for breakfast time. Dog told to can his barking or no biscuit. Chickens attempting to do an invasion through one of my open windows. Chickens pushed off the window sill and window shut. Invasion plan #222222 (Part 3) foiled by the Mad Bush Farm...(insert obscene name in this space) management.

Little did I know Emerald had decided it wasn't good enough to eat cat biscuits and had jumped up onto my bench looking for anything other than..cat food to swipe and devour - out of the stupooid hooman's bad attitude gleam gaze. Little did now 'Bench Cat' Emerald the mighty realise..Mr Plastic Mousetrap was on the bench on duty for certain small furry rodents that might decide to come inside. Certain small furry rodents have been silent for a few days. So far no more seen (I won't hold my breath on that either). Back to the story here. The only thing there was Mr Mousetrap and the peanut butter bait stuck in the middle. 'Bench Cat' Emerald stalked Mr Mousetrap briefly then decided to investigate that nice tempting peanut butter just asking to be devoured. Yes she stuck her snout in there. Snap went Mr Mousetrap and 'Bench cat' (now yowling cat) Emerald ended up with a plastic mousetrap as a new attachment to her whiskers. After being half scratched and mutilated by her claws I managed to get the trap off her whiskers. Emerald has avoided jumping on my kitchen bench since. I am not in her popular list.

I have more to write but we'll leave at this one for now. More coming once I've replaced the plasters on my hands from being shredded by an angry Evil Bench Cat