Content supplied by Rabobank
The Chinese dairy market is one of the world’s largest – and most significant – being the fastest growing, presenting big opportunities for the New Zealand dairy industry to cash in on China’s ‘white gold rush’, according to Rabobank.
Visiting dairy farmers around New Zealand last week, Shanghai-based Rabobank senior dairy analyst Sandy Chen says that the rising income of currently low-income consumers will drive growth of dairy demand into the next decade.
Mr Chen says the imbalance in the development of supply chains in China has led to a series of milk contamination – be it deliberate or accidental – scandals in recent years, which have contributed to the rising wave of imports seen going into China.
“The reliance on imported feed components and other challenges such as availability of land, water, biosecurity considerations and environmental protection factors will make it difficult to increase self sufficiency levels quickly for China,” Mr Chen says.
“With ongoing investments into their dairy industry capacity, local supply will rise over time but this will come at a cost.”
Adding to this, Mr Chen says that product safety has become an increasing concern for the Chinese consumers and this will be an important factor when it comes to brand value in the future.
Part of Rabobank’s Food & Agribusiness Research and Advisory division, Mr Chen joined Rabobank in early 2013.
In this role he researches and analyses trends and developments in the Chinese dairy market.
Mr Chen says that China already dominates the global traded market for dairy commodities so greatly that small changes in China’s demand and supply balance have a large impact on the global market and therefore commodity prices.
“As a result of how important China is in the global market place, New Zealand dairy farmers should endeavour to keep up to date with Chinese market trends,” he says.
“High milk production costs in China, for example, will result in imported product remaining attractive and this will continue to play an important role in fulfilling Chinese demand.”
Regulatory changes in China will also continue to impact the supply chain, Mr Chen says, and all participants will need to keep informed and adapt quickly.
“Chinese dairy consumers are already sophisticated and place high expectations on milk producers for quality, food safety and sustainability characteristics, providing a high level of evidence in these areas will become more and more crucial,” he says.
“This is where New Zealand has an opportunity to take advantage of its image as a reliable producer of quality, traceable dairy products destined for the international market. The fundamentals are there, now it’s time for the New Zealand industry to secure that market share by finding its ‘edge’ on other competitors looking to the Chinese dairy industry opportunities.”
Mr Chen presented these views to industry stakeholders and dairy farmers last week in various locations including New Plymouth, Wanganui, Palmerston North, Masterton, Invercargill and Christchurch.
Rabobank regional manager East Coast George Murdoch says that bringing an expert such as Sandy to meet with clients in their local areas provides extremely valuable insights for farmers interested in the opportunities taking place in China at present.
“China has been an integral part of the global dairy market for quite some time now and hearing Sandy present this week has reinforced the future growth that will materialise in due course,” Mr Murdoch says.
32 Comments
Claiming they're "sophisticated consumers" is one thing, and saying we have to be aware of their market, similar.
It's another thing entirely to have them _paying_ the full value of what they're demanding. And if there's one thing I have found with Asian (especially Chinese and Taiwanese) is that they _really_ don't like paying up (let alone full price!)
they'll fork out ridiculous amounts for brand named ego junk that's rubbish or throw away, or to gamble, but expect them to pay full rate for a quality basic item, no way.
This is made worse by the social/employment target system that they use, the goal of cheaper cost of supply and higher production, being their golden KPI.
Pot calling the kettle black here cowboy. I recall you challenging my comments about how workers needed to be paid properly here in New Zealand. I note again on the news this morning that farmers in the South Island are not cooperating with inspectors who want to inspect farmers employee records such as hours worked and wages received. These farmers must have something to hide otherwise they would gladly cooperate. This does not suprise me. Farmers like cowboy think their workers do not deserve to be properly paid for their endeavors. No wonder New Zealanders are reluctant to get into farming when they are treated like a commodity.
Gordeon, if you look back you will see I've been a clear proponant for decent wages in NZ, especially on farm. However, I also point out things like massive overheads (time required and legal liability) for calculating those rates for seasonal and diverse work (eg farms) especially when the compliance cost is so high on a ratio for small businesses is unreasonable. Set an annual hourly, and annual salary and be done. Want to stretch the hours, then weekly log, signed weekly, pay the penal rate in the wage _contract_. Don't liek the contracted deal...don't sign!
As for not showing private information...that's ripe coming from the gordon that wouldn't even say how he knew about farming or what his interests/occupation was . L.O.L. what you hiding Mr Asia.
Perhaps the farmers think they have a private contract and the nosey government can just f.o.
Maybe they'll be happy in commissioner gordons police state? cooperate or you must be a criminal.
My main argument against raising _minimum_ wage is that it results in lower employment, especially amongst the lower skilled people, and rising prices which again, effect those with low income worst. The complete opposite to what a minimum wage was supposed to accomplish - who it does help are banks and landlords, who can sell more and larger loans since low income people with minimum wage jobs can service more debt, and landlords who can bump up the inelastic end of the rent market
Cowboy you say on one hand you are a proponent for decent wages then you argue against raising the minimum wage. Don't you think that is a contradiction.
The whole idea of inspectors having rights is the need to protect workers from employers who will try to take advantage of their workers. People like you who will pay the minimum wage if they can get away with it when such a pay rate is clearly not a living wage. I would have thought the minimum wage is amongst other things a guideline and anyone with any sort of conscience would pay their workers more than the minimum wage to enable the worker and their family to have a reasonable standard of living.
What makes you think I pay minimum wage???
I don't mind paying more than that...when I can afford it ..sadly, as mentioned THE CUSTOMER doesn't want to pay more, and since the operation is already very efficient (or government mandated eg rates/insurance/taxes ) then paying more than is currently allocated is not an option ...... especially since I'm not making minimum wage myself....
CUSTOMERS with any conscience, that's you, would have to pay more gordon. You happy with that? I thought not. fonterra and the global Dairy Trade auctions say NO.
the couple of helpers that I did have that were getting minimum wage (from MY pocket) did work that had no financial benefit (clean up dead fall branches, wandering around looking for electrical fence shorts, spraying weeds around sheds)....how much DEAR CUSTOMER do YOU want to pay for them to continue. At least I paid $10/hr (I'm on $9/hr) how mcuh are YOU willing to pay.
And yes there are employers who take advantage of employees... but the employees don't leave do they. So whose ripping who off?
So simple and effective. Why has nobody implemented this yet?
If we all just voluntarily pay more for the products and services we use, then hey presto, we'll ALL be rich. So if you kind folk could chip in a bit more for your power bills and insurance bills, that's our household sorted. Thanks in advance.
Now how do I go about paying more for my milk and meat?
exactly Hamish. and the more I have to pay my staff, the more I'll need for that milk and meat.
The more the retailers and companies have to pay the lowest end, and those who don't want to be on the lowest end and have influence, then the more my costs go up, and the more you'll need to pay for that milk and meat.
And it is voluntary in many cases. You don't want to pay more you go for a lower quality product or you vote with your feet and don't buy it. But in farmers cases, their prices are set by the third party, the third party sell it expensive to you Hamish, then pay less than full production price (including rent & reasonable yield), back to the farmer..... so the farmers have to take short cuts, reduce staff, pay less, have less people and thus less time to chase paperwork.
So if people want the farmers to chase more paperwork (which takes risk and hours and is very different skillset to the rest of the job!) then those extra hours must be paid for somewhere.
Thus the real alternative is reduce the cost of compliance, reduce the amount of non-productive time, reduce the amount of "top premium quality" sold at "generic ass bottom pricing", and that will reduce the cost of production, which means we can pay more in wages, and not increase the prices so Hamish can buy his meat and milk.
You want more complaince, and more wages....you get more prices, or less suppliers (tends towards duopolies, which are also -so- cheap....)
But you have to pay people the minimum wage which is more than $10 an hour. What makes you think you are above the law. How do you expect them to live on $10 an hour. If you cannot pay them the legal minimum you should borrow the money to pay them like any other business does. Why can you not afford the correct wage rate Cowboy.
duh, because when they were taken on the minimum wage WAS $10/hour.
They were not called back when minimum wage hit $13, because by then I was only on $3/hr, and I had to do the setup, supply resources and equipment, oversee the workplan, and take responsibility for their safety and actions. (and cover cost of what they broke!)
And if I -borrow- the money to pay people I can't afford what happens?
Any other business doing that will go broke! (after the extra interest it will make it HARDER to pay the wages. And yes, I know of couple of businesses that went that way, and the employees had their wages, and lost their jobs and the owner was left bankrupt and destitute).
Why can't I afford that rate?
Because I have to pay rent, which is based on NZ property and land prices, and because my suppliers are passing higher costs on to me, and if I can't charge my consumers (dairy) more then there isn't money on the magic money tree to cover it. Insurance, rates, petrol, wages, interest(now), service work, power, phone, government cost recoveries...all gone up, all going up. If payout / customer prices don't go up as fast, where is the money for an efficient business going to come from to pay the increase for minimum wage effects? And why should I get less than my staff?
Because they acted in good faith when they accepted your offer and trusted you to keep the business going. They did not expect you to be a failure . What you get out of the business is irrelevant to them. They give you time and effort and can expect to be reimbursed in a fair way. Have you not heard of overdrafts. Most businesses have them. Have you ever had enough capital in your business.
I am not a failure, and I am keeping the business going.
They were hired to do a job worth, at most $10/hr. I went out of -my- way and helped finance them the extra until it hit $13.
Capital is fine.
Overdraft works ok.
Neither compensates for sustained operational loss.
The cost of providing the product to the customer is $X, which allows for about $7 for them, so I subsidise from my wage so they can be paid for small tasks which are of minor use to me.
The customer (YOU) doesn't want to pay them, doesn't want to pay them what they're worth, doesn't want to meet the price of production at the new minimum wage amount. My business is highly efficient. And yes there is high interest costs...but if I wasn't paying interest I'd be expecting yield on the equity I invested!
You keep saying "borrow" for operational expenses. Please stop doing so, it's absolutely ludicrous and weakens any semblence of business, finance or accounting skills. Do the math to work out why
(hint: If I produce 100 widgets in a week at sale price of $100ea and lose $1 for each one (due to high wages) If produce 5200 widgets in a year... I'll lose $5200...if I borrow that $5200. And repeat it next year... I'll only have achieved losing $10400+interest on the first 5200 !!) If my business is highly efficient, which it is....what changes....
(and finally My business isn't actually there for the delight and support of the employees. It's there for my purposes, hence my risk, my return. Not theirs; they sell labour. Now the labour department is overpricing that labour, so I'm not buying it. and the contract compliance cost is too high for me, so again, I'll pass on buying the labour they're selling)
Cowboy you should not be in business or more importantly you should not be in the business you are in now if you need employees but you cannot afford to pay them the minimum wage. The MW is there for a reason , to give employees a reasonable wage for their efforts. Businesses have overdrafts to cover times when cash flow is insufficient to cover overheads. Again you say the government has overpriced labour. Do you really think a family man can support his family on $10 an hour in 2014. Sounds like you would be better closing down your failing business as you would be better off on the MW.
... the minimum wages is there to protect lazy Kiwis from needing to perform a service to any degree of competency ...
If you have skills and a decent work ethic , you will eventually find an appreciative employer who'll give you well above any state mandated minimum wage ...
They don't have a minimum wage in Germany .... and it was recently rejected by voters across Switzerland ...
... the minimum wage keeps youngsters out of a job ... out of getting that first step onto the employment ladder ..
Yes, and in 20% of Germans are paid so low for their efforts the government has to top up their wages to provide them with a decent standard of living. Its not so easy for entry level workers these day, modern economics reforms, globalization, and technological chabge has hollowed out the sectors of the economy that require a middle level of skills, pitting those previously employed or may have otherwise been employed in those occupations to compete with those with low skills and few prospects of improving their chances. Thats not even counting the thousands of young foreigners who come on the working holiday scheme . And not all skilled migrants continue in their original jobs, nor do all foreign tertiary graduates granted residency find skilled employment. Nor does it account for those granted residency on the basis of family connection. All this when expectations of employers are rising continually and reluctance on their part to accept responsibility for training and upskilling their workers grows. The burden and cost falling more and more on the shoulders of workers.
BTW. With the return of the Youth wage rates, the chances of employment for the young couldn't be better, though at the expense of older workers competing for the same job.
http://blogs.lclark.edu/hart-landsberg/2012/02/15/germany-a-false-model/
http://www.nytimes.com/2011/08/19/business/global/many-germans-scrambli…
:) I thought you would have guessed that by now... inability to pass on costs.
The second is that productivity increase is hugely capital intensive.
The third is that traditionally everything is done on the cheap or with huge labour input. Creating a gulf between the those able to continue operating at owner-subsidised rate, and those who are developing to a modern market. Which is influencing #1...because they have owner-subsidisation they are cash rich, and profit poor, so they can afford the toys and the staff, but without having to pay the real cost of production (or taxes on the margin). this means small efficient operationers get squeezed out, while the incuberents lumber along. And yes the worst bit, is with that model, anyone trying to work for a smaller outfit doesn't get paid well.
Rent makes up 17-25% of gross revenue, depending where the third party sets the price, the dollar, and the auction prices.
as a comparison, Long Term Interest payments for me are around 3 - 7% of gross revenue (principal excluded).
Others in the industry, who have been here longer and have more political influence, don't pay the rent, as they or their Trust or company owns the property and doesn't charge them rent, it just passes on the interest of any loans or mortgages. That's 17-25% that they have to soak costs, or pay higher wages ... but it's because the property owner isn't getting paid, and also doesn't pay tax (my landlord has to pay tax on their income), it all passes under the radar.
It allows the third-party processor to underbid the real cost of production.... and THAT is why I can't pay decent wages (and I really do want to, as I want happy excited staff, not ones looking at others with new vehicles and kids without the handmedowns that my kids have). If the property owners were made to declare the profit (loss subsidises) then the third party processor would have to be competitive and pay full rates. Instead of the current situation where the property owners take a small wage/drawing 0.1-2% yield in return for not charge full rent.
So until I have enough equity to set up my own tax shelter system to support my business, there's not a lot of free cash in the pot to pay the wages (and the expert staff*) that should in a proper business be done.
* expert staff, for example, a consulting employment specialist - because there's not the margin to pay well, there's not the margin for anything but the most rudimentary support businesses. So if a specialist travelled and checked small business books and helped with contract detail, it would be well worth hiring...but because the wage budget is so small, and such expertise is so specialised (larger fees, short visit, wider customer base) there isn't the depth in wage budget to financial support such businesses. Which is why smaller areas in NZ are penny pinching themselves to death.
So, do you understand that I WANT to pay more, I just can't squeeze it into the unreliable payouts. Fonterra are promising a drop in payout upcoming year 8.50 to 6.00, a 27% drop in gross margin across the whole range (based on 5.50 cost)
http://www.stuff.co.nz/business/farming/10074851/Inspector-checks-farme…
Gordon, I suspect that most of the farmers caught out are young farmers who are lower order sharemilkers/sharemilkers and contract milkers.
Even big business gets it wrong: http://www.epmu.org.nz/news/show/173464
Cowboys comments show such an incredible ignorance that one wonders whether he/she ever had the opportunity to go to school. I hazard a guess that cowboy has never been to China and all his opinions stem from what he's read in local media... and I will guess again that everytime he purchases something he looks for the best price he can get... probably even bargains with many suppliers. His comments are totally bigotted and downright embarrassing and show breathtaking ignorance.
I shop and often pay premium for good quality equipment that lasts.
I have noticed that the Chinese based product, with a few exceptions (iPad, Samsung) have poor material strength, design and endurance.
Anto whom do I talk..? people who do business in Asia, Asian tenants, and friends from the International Pacific College, and people who are tourists and/or immigrants.
And I've had friends and family who have toured through China as well.
Now Chris...since you don't know me or my business? Which of us was _really_ showing "incredible ignorance"
Bringing things back on-topic.
Any suggestions as to what that edge for NZ Inc. may be?
E.g:
1. should we have a 30 or 40 yr supply contract (al a Russian gas) that sees WMP shipped across at their mega dairy milk processed price less 10%, 20% or 30% - (but priced like a gas deal..)
2. should we go for the doctor with A2 type cows/herd, given the pop. tolerances to milk
3. should we be running drinking water (ex milford only) thru' the same supply chain/channels
4. should we have a UIP mixer in every shopping mall dispencing WMP on spot mixed with water in NZ flavours (like these pop up youghurt places)..
5. should we be running a NZ Inc web presence (say an on-line cash and carry - refer Booker plc, but for fine food) with 2 day shipping ex Christchurch Int. airport
6, should we do the same with youghurt and ice cream?
7. and one for our corporate types, what weaknesses of our competitors may we play upon.
(NZ Inc. does not include non-nz headquatered multi-nationals)..
Hi Henry
2. No. Better to add value to what we've already got. e.g. lactose free, calcium rich etc. The science behind A2 isn't robust enough IMO to worry about A2, despite it's sucess in Oz. In Oz Parmalat are taking A2 on. http://www.stuff.co.nz/business/farming/dairy/10079036/NZ-milk-venture-…
5. Great idea - especially if promoted correctly. But why Christchurch - trying to 'spread the jobs around'? I understand at present Fonterra is doing well its on-line milk sales in China.
Yes the Paramalat chappie really seems to have the bit between his teeth.
It seems a look blow, (as the leaking of activities would suggest). One wonders if this is a local under pressure, in a corner with no real idea of how to increase company revenue, or a fullly headoffice approved strategic plan. - but seems extreme for the dairy industry.
The French are well known for doing their own thing - rules or otherwise, (eg. the "Battle of Nantes"). Fonterra has its hands full with Danone, so it really seems the French corps. are putting it on NZ Inc.
As if giving us a stiff arm over access to Europe had not been enough, they are applying the same approach in our patch... - correct we are not impressed...
Could the OIO apply some super good corporate citizen terms to the Suttons sale... - not like they don't have form...
Background:
Parmalat S.p.A., which is listed on the Italian Stock Exchange, is controlled by the Lactalis Group since July 15, 2011.The Parmalat Group is a global player in the production and distribution of foods that are essential for everyday wellness: milk, dairy products (yogurt, cream based sauces, desserts and cheese) and fruit beverages, which generated revenues of about 5.4 billion euros in 2013. http://www.parmalat.net/en/
being:
As a result of an on-market takeover bid Parmalat Australia Pty Limited (a subsidiary of Italian company, Parmalat Finanziaria SpA) acquired 100% of shares in Pauls Limited. http://www.parmalat.com.au/index.php?option=com_content&view=article&id=429&Itemid=45
Re: Chch
CIAL is a council controlled trading organisation in which the Crown has a 25% shareholding. The remaining 75% is owned by Christchurch City Holdings Limited, a 100% owned subsidiary of the Christchurch City Council.
and not a listed/geared infrastructure fund run out of some where other.....
Lactose free is easy,just buy some Lactase and add 3 drops, leave for a day and hey presto
Andrew Patterson was saying on Radio Live the other day , that in 10 to 20 years , technology will earn more in exports for NZ than the entire dairy industry currently does ....
... XERO is just the prominent tip of the technology industry iceberg in this country ....
And it doesn't poison Chinese babies with melamine ..... or pollute our own waterways and aquifiers with nitrates .... or crap in it's own nest that it may have botulised it's own products , or not ....
From the Hero to Xero , to infinity , and beyond : Yippppppeeeeeee ki yay !
Nah Mr moa man , Xero as a company is tracking just fine ... it's shareholders , on the other hand , are in a bizzarro wonder land , projecting futuristic profits to infinity and beyond ...
... my reference to the NZ tech sector was covered on AP's interview with the director of MIT ( Manukau Institute Tech ) on Radio Pacific this morning ... replays are available on RP's website ...
He asserted that tech will earn more for NZ than the dairy industry by 2020 , just 6 or 7 years away ...
And no need to burn any fossil fuels ... am sure that our dear friend Mr PDK would glow heartily at that prospect !
( P.S. I wonder if you're getting so many " thumbs up " because folk like your reply to my post .... or because they like the prospect of PDK having sunk a'la the Titanic ? .... naughty children , play nicely ! )
what can be done profitably, that a feedlot supplier with subsidised inputs can't mimic at a moments notice?
#4 is that powder anything like wha tis currently on supermarket shelves and whose taste only barely resemebles milk?
Like the gross stuff that comes in those little pottles of UHT milk product?
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