Content supplied by Rabobank
Tim Hunt, New York-based global dairy strategist with international agribusiness banking specialist Rabobank, says while current market conditions are “extremely tough” for many local producers, the New Zealand dairy sector is “unbroken” and has the fundamentals in place to enjoy a strong, competitive future in the global dairy trade.
In New Zealand for a series of presentations to Rabobank clients and industry stakeholders, Mr Hunt said the current cyclical price downturn had been made worse by a number of additional shocks – including the dramatic reduction of Chinese buying, the Russian trade ban and the removal of EU quotas – leading to the recent dairy market price crash.
But the factors were in place to lead to a sustained price recovery, likely to begin in mid-2016.
“We are in the midst of a nasty downturn. But this is what it is – a very bad cycle, not a shift in the medium-term fundamentals,” he said. “In the medium-term – looking out from the second half of next year – we continue to expect trade growth and profitable pricing in the dairy sector.”
And once that occurs, the expectation is New Zealand trade will again expand, with the local dairy sector well positioned to compete on global export markets.
“New Zealand dairy farmers are well placed to continue to compete well in international export markets – they are cost competitive, the New Zealand supply chain is low cost and effective and New Zealand has leading market access,” Mr Hunt said.
Speaking to local producers, he said while the current downturn was extremely painful for the dairy sector – particularly in New Zealand where prices had been hit far harder than those in other major dairy export markets – the “medium-term story” for dairy remained a positive one.
“In the next five years, the world economy is still widely expected to grow,” he said. “And there is ample headroom for dairy consumption growth in emerging markets, which a period of lower prices will help to fuel,” he said.
In addition, Mr Hunt said, these emerging markets – including China and South-East Asian countries – were still high-cost producers of their own domestic dairy, making imports more competitive.
Mr Hunt said Rabobank’s forecast was for international dairy trade to expand at a compound annual growth rate of 3.3 per cent, over the medium-term (next five years).
1 Comments
however at the operating level
Beingmate joint venture
Fonterra Australia managing director Judith Swales said the Bellamy's partnership was a key part of increasing production at the Darnum factory, which is the centrepiece of a joint venture with China's Beingmate.
The venture, in which Beingmate has a 51 per cent stake, involved the company buying the Darnum plant from Fonterra and the right to half its 60,000 tonne a year output.
"The joint venture with Beingmate is potentially really important but the partnership with Bellamy's is very much about us filling our half of the factory," Ms Swales said, adding the company was looking at striking similar agreements with other infant formula brands.
"We have plenty of open capacity. In a perfect world we would have a small number of strategic partnerships because clearly you want efficiency in the factory. You don't want to be swapping and changing the formulation."
Under the agreement, Bellamy's would supply Fonterra with all the infant formula ingredients, including organic milk powders, Ms Swales said.
"This is our strategy in action for Australia where we focus on the areas we can win in a highly competitive market to deliver the best returns.
"And I'd say producing organic baby powders is right at the top of food chain in terms of getting the value out of every drop of milk."
Fonterra expects to start producing Bellamy's infant formula in 2016.
Read more: http://www.smh.com.au/business/bellamys-strikes-partnership-with-fonter…
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the JV with Beingmate has been a headline element, it seems the "Fonterra" share of the pipeline capacity to China infant powder mkt is to be deployed by a virtual brand (a wholly outsourced venture) - rather than a Fonterra brand..
Mind you seems its not Fonterra supplier milk that's being processed either - see the Fonterraers comment re organic below:(
The milk used for Bellamy's products will not come from Fonterra farmers because none of them are organic. A spokeswoman for Fonterra Australia said there were no plans at present to convert its Australian suppliers to organic, partly because it took three or four years to make the transformation.
Bellamy's has been experiencing revenue growth of 156 per cent over the last financial year, with its share price soaring from just over $1 to over $9 in a year. The spokeswoman said in Australia the company was "massive" and one of its major markets was China. Fonterra managing director Oceania Judith Swales said the agreement was part of Fonterra's transformation of its Australian business.
http://www.stuff.co.nz/business/farming/74578715/fonterra-sign-deal-to-…
and
http://www.asx.com.au/asxpdf/20151130/pdf/433dymb4gg801w.pdf
Is this toll processing, what are we missing here?
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