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National Banks December rural report
Read this banks summary of the financial crisis,and how it will affect agricultureand the global and NZ implications. Also they update their predictions for product prices for the year 08/09. A summary is as follows: Exchnge rate .60c US .46 Euro, Wool xbred 200-260c greasy, Lamb $75/hd (17kg), $40 for mutton,Steer/bulls 295-320kg $3.30-3.60/kg,Venison $7.25/kg, velvet $60-70/kg, and a dairy payout of $5.50-$6.00/kgms. more>>

Fonterra faceoff
The relationship between Fonterra’s board and its shareholders is at rock-bottom and an independent facilitator has been brought in to ease tensions. Differences over the cooperative’s future capital structure have fuelled the conflict. Fonterra leaders made the admission after concerns were raised by Waikato dairy farmer John Bluett at the cooperative’s annual meeting in Palmerston North last week. Fonterra chairman Henry van der Heyden says there is tension between the board and the council. Heyden told the meeting that an independent facilitator has been brought in to sort out differences. We all want the same thing out of the cooperative,’ he says.‘The difference is how we get there.’The coop board is under fire for its handling of the capital structure review.Shareholders claim the board’s preferred option was dumped on them without consultation.Farmers have made it clear that retaining ownership and control of the cooperative is a priority. more>>

PGGW & Tasman start velvet marketing company
PGGW, NZ’s biggest rural services company, and Tasman Velvet Processors agreed to set up a joint venture to market the deer product into key markets in Asia. NZ Velvet Marketing Co. will market about two-thirds of NZ’s velvet sales into China and South Korea, where it is used as a medicinal tonic in traditional therapies. “Producers have been galvanised by low velvet prices in recent years to create structure to drive industry reform,” Chris Taylor, director of Tasman Velvet, said in a statement. “The key element missing has been a link to a proven marketing company.” The new company will mirror marketing developments in other rural products, such as the fine wool industry. Ownership of NZ Velvet Marketing will be split between Wrightson, Tasman Velvet and farmers. Wrightson shares fell about 2% to NZ$1.50 and have tumbled almost 45% in the past three months. more>>

DNA technology helps studs select sires earlier
DNA technology will let the stud industry produce proven bulls at less than 12 months of age. But it could also see a move to composite cattle bred for traits rather than breed, which puts a question over the future of breed societies. This is according to Meat and Livestock Australia genetic improvements manager Rob Banks, who said while bulls were now six to seven years old before being proven, DNA markers could help to identify traits in bulls as young as six to seven months. "The thing it will give the beef industry is the ability to select bulls and heifers much younger, we can double the rate of (genetic) progress," Dr Banks told a Team Te Mania gathering near Mt Gambier last week. He said cattle producers had to achieve genetic improvement because costs of production were rising much faster than cattle prices. Dr Banks said scientists could read up to 500,000 pieces of DNA information from a cow. more>>

Steady profits from Merino co
New Zealand Merino Co has reported a steady profit before tax of $1.9 million for the year ended June 30. It was $100,000 lower than the previous year's profit, but reflected a decision to increase spending on marketing and innovation. The result represents a 28% return on an average shareholder's funds.Total revenue was $95 million, representing about 85% of the country's merino wool sales. Chief executive John Brakenridge said the strong result would help NZM - jointly owned by growers and PGG Wrightson – through difficult times. more>>

Milkpowder prices dive in Fonterra online auctions
Fonterra says whole milkpowder prices today fell for a fifth time in its internet auctions, taking them to their lowest in more than two years. Fonterra's trading manager, CRA International, said the average price across all products and contract periods for whole milkpowder (WMP) was $US2223/tonne, 14% lower than for the previous auction in November. Prices ranged from $US2045 a tonne to $US2455 a tonne, with milkpowder for February delivery down 15 per cent to an average US$2078 ($NZ4000) a tonne. "The current economic crisis has resulted in a significant drop in the demand for dairy commodities, and a continued decline in prices was expected," said Guy Roper, Fonterra's commercial director of GlobalTrade. Fonterra said that over the past two years, the US Department of Agriculture had reported a 45% decline in EU Skim Milk Powder prices. more>>

Timeline set for Agritech school
NZ's first agritechnology educational centre will be established by Wintec at AgResearch's King Country dairy science farm within two years. The farm, currently the subject of a $6 million conversion from sheep and beef to dairying at Tokanui, will be the source of teaching material for a range of student groups. The centre will service secondary school and tertiary education students as well as farm workers and employers. Steve Payne, Wintec's project development manager, said the centre had received $1 million funding over three years from the Tertiary Education Commission. The facility would be completely operational by the end of 2010. Students will be able to work with farm-generated data across environmental sustainability, production systems, waste management technologies and automation and technology, he said. Tertiary and Secondary school students will be able to study science and agriculture in action. Mr Payne, who is also a business development manager at Innovation Waikato, said Wintec's new bachelor of technology degree would give students an opportunity to specialise in agritechnology. more>>

Recession's bite a deep one
Red Sky managing director David Beca said the world recession is likely to have an impact on lowering prices and further demand for global dairy products, which in turn will mean a lower payout for dairy farmers. Red Sky is a company providing software, which enables farmers to analyse their business. Mr Beca, who is based in Victoria, Australia, said he was pretty pessimistic about the future of dairying. "I am concerned in that we are not just seeing a significant softening of commodity prices, but the climate of recession in the major western countries, will affect us as well." The two were not a good cocktail, he added."We're having the same warnings that the payout in Australia will fall by about 10%. Mr Beca doesn't believe the impact will be a quick shock and the biggest concern may come the year after, with people having less disposable income. more>>

NZ beef 'punches above its weight"
NZ beef is a premium product that is highly sought after in overseas markets, McDonald's Australia and NZ purchasing manager Arron Hoyle says. Mr Hoyle said NZ grass-fed beef had a strong flavour compared with grain-fed beef and was an excellent source of lean protein. "From a global perspective NZ punches above its weight," he told a Beef Council field-day at Millers Flat last week.Mr Hoyle said NZ beef was sold in 70% of McDonald's 33,000 restaurants in 20 countries worldwide. "It is one of the most important countries in our global supply chain." Mr Hoyle said the the outlook for beef was "pretty darn positive" because of strong demand. more>>

Big production on big property
Mararoa Station can be dry, unforgiving country. Manager Tim Smith has adopted a risk managment policy that involves 10,000 lambs being transferred to neighbouring Lynmore Station for finishing each year. He and wife Trish have managed Mararoa Station, a 5540ha rolling hill country property in the Te Anau basin, for state-owned enterprise Landcorp for the past four years. Mararoa Station is home to 19,000 landmark ewes, which he describes as an "improved romney" comprising three-quarters romney with a touch of east friesian and finn. While the ewes scan an average 180%, the real challenge is to get more live lambs on the ground as we're pretty exposed here," he said. Mr Smith achieved 130% lambing this year as the late-summer drought took its toll on the lamb crop, but aims to consistently achieve at least 140%. He has plans to grow more shelterbelts and forestry plantations on Mararoa in an effort to reduce lamb deaths. more>>

Gloomy outlook for farming
A depressed outlook for agriculture as it weathers the global financial crisis is foreseen by the Agriculture and Forestry Ministry in briefing papers prepared for the incoming government.The papers, released yesterday by Ag Minister David Carter, say a world economic slowdown is likely to reduce demand for agriculture products and will reduce export revenue. Dairy: Reduced demand from oil producing nations and emerging Asian economies that currently take about 40% of dairy exports. Meat: Demand for NZ lamb is likely to fall as consumers turn to cheaper substitutes. Demand for beef is expected to remain strong as consumers switch to lower-cost ground beef. Wool: Prices are likely to remain low as new housing is the biggest market for wool carpets. Currency: The depreciation in the NZ dollar will mitigate the reduction in demand for exports.This is the largest eight-month fall since the NZ dollar was floated. The ministry sees the global crisis making it harder to obtain and service debt. This follows a rise in farm indebtedness and an increasing vulnerability to financing costs, particularly for dairy farmers, and lower commodity prices, especially for sheep and beef farmers. more>>

In Brazil farmer credit dries up
The global credit crunch is slowing Brazil's roaring agricultural sector -- at a time when more food, not less, is needed around the world. A steep drop in global crop prices and rising costs of farm supplies, combined with tighter credit, are causing the slowdown in one of the world's fastest-growing breadbaskets. Many Brazilian farmers had hoped a booming grain market would help them dig out of debt and become more competitive with American farmers, long the global leaders in farm productivity. But now, strapped for cash, Brazilians are reducing the size of their crops and even forgoing debt payments. In the past several years, amid surging global demand for grain, farmers plowed up land at a feverish pace to plant soybeans, and roads were carved into the countryside to move the goods. Climbing grain prices through the first half of 2008 accelerated the growth. Now, growers are finding it harder to get loans sufficient to cover the rising costs of fertilizer, pesticides and seed. Unlike in the U.S., where farmers depend on loans from private banks and the government, Brazilian farmers get as much as 40% of their financing from agriculture companies. That could drop to as low as 25% this year,as the volatile commodities market and the global financial crisis have increased the risk and expense ,and big grain companies are reining in lending. more>>

Farmers wary of lamb contracts
Past bad experiences are holding back some NI farmers from taking up lamb contracts. Dannevirke farm consultant Greg Sheppard has noticed that farmers are reluctant to sign up to contracts, mainly because they have been burned in the past. On the other hand some farmers think it wise to sign part of the lamb crop up to a fixed price given the economic climate. Recession and feed issues are creating most of the uncertainty. Feed is tight in many eastern parts of the North Island and it may be difficult to find finishers. However, Sheppard is optimistic that store lamb prices will remain strong despite some areas already being drier than normal. He picks that if meat companies pay around $4.50/kg CW in January then store lamb prices may stay around $2/kg LW. At this margin there is money to be made in finishing. If store lambs are $1.80/kg LW and schedule prices in the $4.40/kg CW mark there should be around $18/head to be made. A calculation by an Ashburton-based farm consultant shows that there should be a return of around $0.18/kilogram drymatter consumed from finishing lambs. This takes into account killing charges and animal health. This is based on taking a 28kg store lamb to a 17.2kg CW lamb. more>>

Farming is the backbone
Ag Minister David Carter is ranked tenth in the Cabinet, but he expects to have more influence than his predecessor, who was third. "We've got a caucus and a cabinet that have a close association with agriculture," he says. "A quarter of the caucus are actively or have been actively involved with farming or represent strong rural electorates. I don't think there's an issue where there will not be a discussion about how it will affect rural communities." Mr Anderton promised farmers an emissions trading scheme would not apply to them if a scientific solution to their stock methane problem could not be found. "But that's not the law he voted for," Mr Carter says. "He voted for a law that absolutely sets in concrete financial implications for agriculture." He says he can "absolutely" give the same assurance Mr Anderton gave. Even though the issue of how the country responds to its Kyoto Protocol commitments is to be reviewed by a select committee, he says farming's security is a bottom line that will not be changed. more>>

From profit to plunge
What a huge change around in fortunes that is illustrated by AFFCO and Westland dairy results this week.
Plunge-The West Coast farmers who topped the nation's dairy payouts last season with an average of about $900,000 each have been hit by plunging payout predictions. Westland Milk Products (WMP) says its forecast for the season is now down by more than $2/kg milksolids, the Westport News reported.The payout was likely to be between $5.20/kg and $5.60/kg. Last season's payout was a national record -- $8.29/kg milk solids, but a payment of $5.20 this season would be a drop of more than 37 percent. more>>
Profit- Meat processor Affco has posted net profit of $60.2 million for September year, in stark contrast to the $1.2m profit it made in 2007. The 2008 profits were boosted by more favourable than expected trading conditions in the second half-year and increased market share. Affco said $40.8m of the full year profit came from trading activities.The remaining $19.4m stemmed from Affco's shareholding in Dairy Trust, which launched a successful takeover of Open Country Cheese Company. more>>

NZ wool relaunch 'big issue'
Iain Abercrombie confesses to underestimating the size of the challenge he faced when appointed chief executive of Wool Partners International, a new body charged with resurrecting the fortunes of the wool industry. It would be hard to find a more difficult job than resurrecting the once proud, profitable export fibre industry that in recent years has been neglected while a generation of retailers and consumers grow up knowing little about its merits. Mr Abercrombie has endured a range of emotions since taking on the WPI position, from being overawed in the first few weeks at the job in front of him, to feeling much more confident after visiting carpet manufacturers and retailers in the US. Any confidence was tempered by the task he faced of uniting growers, creating a co-operative, creating demand for wool and educating retailers and consumers about its merits. more>>

Meat holding up, lamb showing gains
Meat appears to have so far missed the worst of the international economic crisis. Meat companies remain upbeat about prospects for lamb especially, with in-market prices 15% to 18% higher than at the same time last year because of lower volumes, along with an exchange rate more sympathetic to exporters. SFFs chief executive Keith Cooper told farmers at a suppliers' meeting at Finegand this week that he remained confident lamb would not be affected by the economic meltdown. While the restaurant and food service sectors were struggling, with fewer diners, that had been offset by an increase in retail sales as more food was bought to be cooked at home. There had been a correction in beef prices, but that was related to unsustainably high prices reached for grinding beef and not the credit crunch. Heavy-weight lambs could be the way of the future as SFFs reduced its reliance on the UK, it needed lambs heavier than 17.5kg to satisfy new markets. The goal was to get lamb legs of sufficient size to be boned out into 300g packs that could be cooked with the minimum of preparation. more>>

Fonterra tightens reins
Fonterra is imposing a "severe clampdown" on non-essential spending, freezing staff levels and planning to sell some assets and aggressively cut debt to cope with the global recession.
At Fonterra's annual meeting in Palmerston North yesterday, attended by about 300 farmers, few questions were asked about its handling of the Chinese melamine-in-the-milk scandal. Chief executive Andrew Ferrier said the cooperative would look to sell some assets but this was not related to bringing down debt levels. Fonterra has a debt to debt plus equity ratio of 57% but aims to reduce this to 45% during the next few years. "Although Fonterra's banking relationships are sound, the world we are in is so unpredictable, it pays to be prudent," Mr Ferrier said.Chairman Henry van der Heyden said it was likely Fonterra would have to write off the remaining $62 million of its investment in disgraced Chinese company SanLu. more>>

Not good enough dairy farmers
One in five Canterbury dairy farms fails to meet environmental standards for effluent disposal, a new report says.Environment Canterbury's annual dairy-shed effluent report found more farms fully complied with environmental standards from 39.6 per cent in 2006-07 to 45.8% in 2007-08. It also recorded an increase in the number with significant or major non-compliance problems (20%, up from 17.7% last year). Major problems include ponding of effluent, waste being dumped into waterways or nitrogen overload. One farmer has been fined $8500 for environmental breaches and another court case is pending. About a third of the 696 farms monitored had minor non-compliance problems. The report, released yesterday, said there had been little change in compliance rates for the past five years. more>>

To contract or not is the farmers question
Information on pricing of lamb contracts is still thin on the ground, even Agridata is having issues, writes Graham Butcher.The Mega Silver Fern Farm contract is of particular interest because it is the one most likely to fit, given some farm management tweaks.This is where you supply lambs for six months of the year with 80% during December to April. Given an "average" farm, this means about 600 lambs taken through to May and June. In return you get a full year of guaranteed prices, which rise going into the winter months. The big question is, though, whether it is better to fix your prices for the year or take an opportunity to look at weekly spot prices and take the best on offer. You also need to think about your own financial position with the bank. By not fixing prices you are taking on board risk. There is no blanket answer to "contract or not" so I'm not going to give one. I will say, however, that a contract system targeting supply to suit customers and formulated for the whole of NZ is sound and sensible. Full credit to SFF for presenting its opportunity to farmers but, with other companies yapping at its heels trying to steal lambs, I wonder about this contract's future.
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For news archive for 2008 -click here