Yet again the slippery slope of the Global Dairy Trade auctions continues their slow slide backwards. Fortunately, the ‘height’ the slide began from has had enough altitude to keep prices within the ‘good to positive’ range. However, unless this trend reverses soon Fonterra’s forecast for the 2022-23 season will start to be chipped away at.
The broad range they provided has created a buffer that helps having to make any short term knee jerk reactions but even this cannot sustain too many more negative sales.
Overall, the GDT weighted average has dropped by 2.9% at this weeks auction with the individual changes below:
- Butter index up 0.2%, average price US$5,204/MT
- Cheddar index up 4.2%, average price US$5,005/MT
- SMP index up 0.1%, average price US$3,524/MT
- WMP index down 3.5%, average price US$3,417/MT
SMP provided the only bright note and has returned to its position of being valued more than WMP which I can never quite understand. There have been 9 falls in the last 10 auctions and the high for WMP of US$4,757 back in March is starting to seem a distant memory. Adding insult to injury and having a similar impact upon dairy farmers pockets the Reserves Bank adjustment to the OCR today had its 6th increase since October last year going from 0.25% to 3.0% an over a tenfold increase.
Despite the poor news coming from the GDT results both Westpac and the ASB are sticking to their earlier forecasts of $9.25 and $10 respectively largely it seems through weak global production. No doubt the scratchy economy in China is making its impact felt with issues other than just Covid impacting on their domestic economy. Property markets are very shaky with several large firms facing closure and mortgage repayment ‘strikes’ occurring. A combination of issues has seen the country’s consumption and output in an unexpected slowdown in July. However, with the upcoming National Congress in November this year likely to be set to endorse President Xi for a 3rd term the Party will not be wanting too much discontent in the population to undermine this and initiatives such as lower interest rates are being enacted to soften the impacts upon consumers. Perhaps the sabre rattling in the Taiwan Straits has a bit to play here also stirring up some national fervour.
Looking at red meat returns to the farmgate, they continue to be at record levels (venison aside but that is also on the move). Price spikes from now until later September are largely due to competition between meat companies trying to keep through-put through the works viable and we have seen quite harsh readjustments later in the season as companies try to restore profits. At least one article via Rabobank regarding our biggest market China casts some doubts on sheep meats future returns. Due to changes as a result of continuing covid lockdowns New Zealand-based RaboResearch agricultural analyst Genevieve Steven said, “Reduced Chinese demand for sheepmeat has had an adverse impact on our sheepmeat exports into this market, and over the first half of 2022 they have fallen by 33 per cent on the same period in 2021." This trend she says is likely to continue into 2023.
Sheepmeats have largely been sourced by the food service sector and it hasn’t been ‘picked up’ by the take home consumer, at least not to the same degree that beef has which still appears to be achieving good returns from China. Adding to this she did say that world supplies of beef are low at the moment. Not that farmers will need to be told, but the uncertainty in returns is not confined to the dairy sector.
Sticking with the red meat sector is was a little disconcerting reading Keith Woodford’s summary of the New Zealand carbon-forestry conference. Unless there is some readjustment of the economics of carbon versus red meat the future of the red meat industry looks somewhat dire.
This readjustment needs to happen reasonably soon as while forestry can be converted back to livestock farming at any stage, to do it economically is a different question. As some-one who dreamt about farming at an early age, and left school at 16 to follow my dreams I can appreciate how unsettling it must be for young aspiring farmers to have the spectre of a greatly reduced industry to look forward too. If only we could have known how much simpler things were back in the 1970’s we should have appreciated them more. It is with a little trepidation I await the next release of New Zealand’s sheep numbers for 2022 which is likely to be below 25 million, a level last seen in the mid 1920’s.
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23 Comments
It is not just carbon farming that is causing an impetus for the reduction in red meat production.
This opinion piece in the UK Guardian newspaper is titled "The most damaging farm products? Organic, pasture-fed beef and lamb"
https://www.theguardian.com/environment/2022/aug/16/most-damaging-farm-…
"Pasture-based livestock farming faces new uncertainties all of a sudden"
Au contaire Guy - pasture based livestock farming faces a very certain future and this didn't happen all of a sudden. The eye water sums paid for carbon boondoggles, and lack of any farming leadership, means pasture based livestock farming is largely finished in this country. Why crutch lambs when for much better money you can bludge carbon and hypothetically watch the climate turn in to the Little Ice Age again?
World's led by the stupid when we are paying people to stop producing a trace element necessary for life while penalizing growing food.
Who knows how long till the madness stops but one day people will look back and see that climate change polices are about as sensible as think big
profile,
hypothetically watch the climate turn in to the Little Ice Age again? You wouldn't care to provide some actual evidence for this would you?
I won't quote it it in full, but i am looking at an article in a NZ newspaper from 1912 with the heading; Coal consumption Affecting Climate. It quotes figures for the increased CO2 in the atmosphere and that this raises the temperature. Now, I can't be certain, but feel sure that this would have been based on the work of the Nobel prize winning Swedish scientist Svante Arhennius who had worked out, with remarkable accuracy, what the effect would be of doubling the level of CO2 in the atmosphere. Then, he thought that the process would be very slow and that it might make the Swedish climate more temperate and pleasant!. He of course, had built on the work of earlier scientists like Tyndall and Fourier. Now we have the decades long stats of the keeling Curve plus other observations from satellites to show the extent of global warming. It's getting harder for the denialists to avoid seeing what is increasing visible to most of us.
What you are not seeing is the predicted runaway global warming. Researchers following Arhennius are finding lower climate sensitivity not higher. Here is a handy chart for you that sums up recent research.
https://landshape.files.wordpress.com/2015/06/climate_sensitivity5.png
The satellite data is showing us the warming today is no faster than pre 1945 when anthro CO2 was tiny. 0.13 degrees per decade in the satellite era compared to 0.16 degrees/decade 1910-1945. The warming is not matching the keeling curve.
Why are the predicted feedbacks not happening - because we still can't model basic parameters like clouds for example.
"As the planet warms from increasing greenhouse gases (GHGs), it is not yet clear whether changes in cloud properties will further amplify or dampen the GHGs induced warming, or by how much. Uncertainties in predicting this radiative feedback from clouds are the largest cause of spread in model predictions of future global warming (Boucher et al., 2013; Ceppi et al., 2017; Zelinka et al., 2020)."
You are deluded if you think planting farms in trees in NZ is going to make any difference to the global climate. The Polynesian Warm Period prior to the LIA was warmer than today. At this rate the doubling of CO2 might get us back to our old kumera growing range. Hardly catastrophic and can also be seen in the global greening phenomena of recent decades.
"Climate change seems a plausible explanation for the retreat of gardening, if not necessarily the only one. Kumara will not produce in soil temperatures of less than 150C for five consecutive months, conditions barely met in central New Zealand even today.20 A northward retreat of 150 km on temperature grounds implies a decline in mean annual temperature at sea level of about 10C. Looking at evidence of changing temperatures over the last millennium, it is apparent that an early period, estimated as 0.3-0.50C warmer on average than the twentieth century, was followed by a cold period of similar deviation below the twentieth century average. This is recorded in various sources."
Feeder calve prices are pretty low , a sign that the future outlook is uncertain, though higher CMR and meal prices also play a part.
I don't know if anyones done the sums , but grazing livestock on a block planted with the minimum number of trees to claim carbon credits might be the best of both worlds. Poplar , Accacias , and many other fodder providing trees qualify as hardwood for the ETS. 30 %canopy cover , and your going to get some pasture growth , not as much as pure grass in spring , but i reckon in summer and winter , you would't be far behind. Plus you have the fodder.
At 30% canopy cover your white clover will disappear and your pasture quality will fall through the floor. 25 years of agro-forestry research established that fact.
"The research project at Tikitere produced an amazing amount of data. The overall finding would have to be that the combination of trees and pasture on the same land unit was not good for wood quality, pasture production or animal performance."
Pasture quality, animal performance and wood quality are quantifiable and we know all are sub standard under agro-forestry. Why would you squander three parameters for the carbon construct fad? If "climate extremes" are so bad why are we seeing global greening? Net productivity per ha is increasing not decreasing.
"Here we use three long-term satellite leaf area index (LAI) records and ten global ecosystem models to investigate four key drivers of LAI trends during 1982–2009. We show a persistent and widespread increase of growing season integrated LAI (greening) over 25% to 50% of the global vegetated area, whereas less than 4% of the globe shows decreasing LAI (browning). Factorial simulations with multiple global ecosystem models suggest that CO2 fertilization effects explain 70% of the observed greening trend, followed by nitrogen deposition (9%), climate change (8%) and land cover change (LCC) (4%)."
"Venison aside". Even 9 bucks us bloody long way off when it went up 10 cents this week and nothing last week. One of the few niche markets NZ ag has actually exploited is just about dead.
Remember when all the experts used to tell us how important it was to get away from commodities.
Strong forecasts at the start of the season by Westpac and ASB. Rural industry suppliers whomp up prices around this this. Will it stick though, soften by christmas after all the years major costs accounted for?
At what carbon price would it be economic to plant dairy farms in pine trees ?. Are the banks supporting carbon such as they did with dairy conversions back in the day ? Would see some serious uptake and decline in pastoral land.
Strong wool, incredible product.
Why are reduced stock numbers a bad thing? How about quality over quantity?
If the markets work properly than the price per kg should go up, assuming there is lower supply but stable demand.
I don't see an issue with lower meat production figures as long as the prices go up accordingly.
One thing is certain, we can't have our cake and eat it!
Either we start returning the face of our Earth to what it was hundreds & thousands of years ago or we will be doomed very quickly (decades a century at best).
High coverage with native trees would bring back huge amounts of flora & fauna. It is a known fact living native forest supports much more life (much higher yield of fat, protein & carbs) than pastoral land.
This could be harvested in a selective manner that permits recovery. The problem is we consumers have been conditioned to steak & potato mash, hence everything we produce must be one of those!
"High coverage with native trees would bring back huge amounts of flora & fauna. It is a known fact living native forest supports much more life (much higher yield of fat, protein & carbs) than pastoral land."
You mean life like pigs, goats, deer, rats, feral cats & wasps.
We can't afford to even maintain the current native forests.
"High coverage with native trees would bring back huge amounts of flora & fauna. It is a known fact living native forest supports much more life (much higher yield of fat, protein & carbs) than pastoral land. This could be harvested in a selective manner that permits recovery."
Would you be more specific please.
"The problem is we consumers have been conditioned to steak & potato mash, hence everything we produce must be one of those!"
Speak for yourself. You are obviously way out of contact with current consumer food tastes which, at least on the zero areas have and are changing quite rapidly under the influence of immigration, extensive travel by Kiwis to Asia and attitudes to non traditional foods.
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