The economy is in for a $2 billion transfusion from Fonterra’s forecast of a potential record 2010-11 season payout of “well over $8″ – but the patient is being warned not to party up large again.

 Yesterday Fonterra startled the industry and financial circles by following up a respectable opening forecast payout of $6.90-$7.10/kg milksolids for the season, which begins next week, with a longer range forecast of a possible $8-plus final season payout – if international dairy prices and foreign exchange rates hold at current levels.The opening forecast, which combines a milk price of $6.60 and a forecast distributable profit of 30-50c/kg, means around $650m more for the economy in the 2010-2011 year – but an $8-plus payout would mean a $2b economic bonanza, says Bank of New Zealand head of research Stephen Toplis.The $8 payout would mean a close to $1m income for a farmer producing the industry average of 120,000kg in the season. Out of this has to come the farm’s running costs, tax, labour, family costs and new Emissions Trading Scheme taxes reports Stuff.

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Fonterra has set its first payout forecast for the 2010/11 season, lifting its outlook for the milk price by around 50 cents per kilo to around NZ$6.60/kg.

Once dividends from profits are added, Fonterra could produce a payout of around NZ$7/kg. This would be the second highest payout in Fonterra’s history after the record NZ$7.62/kg paid out in 2007/08. Fonterra chairman Henry van der Heyden said it was possible the final payout could be over NZ$8/kg if the exchange rate and commodity prices stayed at their current levels. This would add up to NZ$2 billion to the economy from the NZ$2009/10 season, assuming the drought of the last few months does not hurt output too much reports interest.co.

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The Animal Health Board (AHB) has successfully prosecuted a Waiuku farmer for the illegal sale of cattle from a bovine tuberculosis (TB) infected herd. Geoffrey William Muir pleaded guilty at the Pukekohe District Court today to moving and selling cattle in breach of a restricted place notice imposed by the AHB in June 2008.Muir was fined $30,000 and $140 court costs. The AHB was awarded $10,454 in costs and $2,500 in legal costs. Muir was convicted on four charges of failing to notify the movement of an infected herd, making a false and misleading declaration, moving cattle to a third party’s farm and knowingly selling 157 cattle from a herd that was suspected of harbouring TB reports Scoop.

AHB chief executive William McCook said the prosecution showed the AHB would take action against farmers who fail to abide by livestock movement regulations. “It is clearly unacceptable that one man put his fellow farmers at risk for his own pecuniary gain. Selling cattle from a herd that is suspected or known to harbour bovine TB could have serious consequences for the national TB control programme. “We know a vast majority of the 73,000 cattle and deer farmers in New Zealand willingly comply with movement control restrictions and expect us to come down hard on those farmers who do not.

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The proposed merger between Lincoln University and Telford Rural Polytechnic has moved a step closer to reality. Lincoln University Vice-Chancellor Professor Roger Field says the primary driver for the proposed merger is to protect and develop land-based education and vocational training for the benefit of New Zealand.
 
“Both institutions recognise that an industry-based workforce of highly educated, skilled and technology-literate individuals is required to maintain and grow New Zealand’s global competitiveness in the land-based sectors,” he says.Telford Rural Polytechnic CEO Jonathan Walmisley agrees. “Together, it is possible we have the potential to generate more co-ordinated and integrated land-based education, in keeping with national education strategies and goals.”
 
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Yesterday’s budget brought little good news for farmers and the rest of the agribusiness sector, a senior business consultant says.”Beyond the changes to the tax structure … there is little new for the agribusiness sector which had not already been well flagged by the Government in pre-budget announcements,” said Ian Proudfoot, lead partner in KPMG’s agribusiness arm.

KPMG warned last month that NZ has little as five years before its farmers are undercut by trade rivals reports The ODT.”South America, Western China and Central Asia’s large scale intensive farming practices have the benefit of lower cost land and labour and normally have less complex regulatory regimes,” said the firm’s agribusiness chairman, Ross Buckley.

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The rural property market remains constrained with no significant rise in either prices or farm sales in the latest market statistics for the three months to April released today by the Real Estate Institute of NZ. “Though there have been lots of inquiries the slow inactive market continues as buyers are being very cautious,” says President Peter McDonald. The national median farm sale price rose to $1,000,000 for the three months to April 2010, fractionally up on the median of $970,000 for the three months to March 2010, but still down on the February figure of $1,045,000 reports Scoop.

The total number of farms sold in the three months to April was 267, almost the same as the 266 in the same period last year but well down on the 786 farms sold in the three months to April 2008. Though it is effectively the last month in the dairy farm sales season, only 12 dairy farms sold in April and the median price for the three month period fell from $3,600,000 at the end of March to $3,550,000. The average price per hectare for the April dairy farm sales was just $34,766, a further decline on the March average of $36,905, and the February average of $43,970. And the average sale price per kilogram of milk solids fell to $36 from $42 in March and $47 in February.

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A meat industry leader says if NZ processors continue to shun consolidation it is inevitable that a multinational processor will step in reports Rural News. And unless there is consolidation of meat processors here, overseas supermarket chains will continue to take the bulk share of returns. Northland farmer James Parsons points out that a low cost of production is not a competitive advantage “unless you can bank it”.

The Nuffield scholar and M&WNZ director says in the EU supply chain funnel, the power lies with the big supermarkets. In the UK, the big four supermarket chains – Tesco, Asda, Sainsbury’s and Morrisons – have boosted their market shares and collectively hold about 75% of the market. Because of their power in the supply chains, these supermarkets are able to pressure suppliers to discount prices, resulting in lower returns for farmers.

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Sheep and beef producers should pick the companies they supply carefully to avoid becoming casualties of an impending “train crash” in the industry, says the chairman of one of the key players in Rural News. Speaking at a M&WNZ monitor farm meeting in South Canterbury last week, Anzco chairman Graeme Harrison  said average return on shareholders’ funds across the four main companies is “not even the cost of capital”.

Normalised earnings figures – with exceptionals taken out to leave only meat industry activity – for the four largest meat companies over the past five years show combined earnings in 2008-09 were well below the five-year average even though turnover and assets employed increased.Average margin on sales was just 0.7%.“You can all see from these numbers a train crash is coming.”

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It had been another tough year for many of the region’s farmers, Mr Evans said in his annual report in the Marlborough Express. A cold, wet spring had produced insufficient growth in areas, in particular the high country, but other parts of Marlborough had seldom had a better run into summer. However, the good times had come to an “abrupt end” with a very dry autumn. The emissions trading scheme was a major issue for farmers and nothing less than “workplace bullying”.

 Meat and Fibre chairman William Grigg said the demand for both beef and lamb was up on last year in international markets. Mr Grigg said Australia and the United States were in a herd-rebuilding phase and a looming shortage of beef, domestic and imported, had seen prices soar in recent weeks.

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Police and the Southland District Council will take a hard line against farmers whose stock are found wandering on roads after a reported 13 crashes this year reports The Southland Times.Three drivers were injured in the crashes, seven of which involved cattle. Horse, sheep and deer were also involved.Senior Sergeant Kerrin Price, of the strategic traffic unit, said in the latest serious incident, officers were on Saturday called to deal with a “stroppy and aggressive” bull wandering in Oporo Flat Rd, near Wallacetown, that had tried to attack a cyclist.

Stock control officers were called and they recognised the bull as one they had been called out to twice four days earlier. The owner could not be found so the bull was shot because of public safety fears. A Dacre woman who narrowly escaped serious injury after hitting a cow near Woodlands last month said she wanted farmers to take more care with fences. The woman said she had little time to react when the black cow loomed up in her headlights while travelling home one night.”It’s not good enough – the farmer should have the boundary fence hotwired. Cattle have no respect for ordinary fences.” Mr Price said officers were amazed she had walked away without injury. The next motorist hitting wandering stock might not be so lucky, he said.

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