Some areas are returning to the dry as hot weather and low rainfall shows a return to typical February conditions.
The big dairy areas of Southland, Taranaki, and Waikato have however had plentiful summer rains and the eastern areas of both islands have used their irrigation systems to keep the milk producing.
National January milk flows are steady on last year as summer grass growth has been above average, and the Lincoln University dairy farm reports they found the break even point easier to achieve, with better than expected milk flows and a heavy pruning of costs.
More big numbers dairy livestock are being offered for sale, with cull cows and young heifers still flowing into the saleyards and processing works.
Such has been the clean out, if milk prices do turn around, future lack of supply will surely hinder any adjustment back upwards, although such has been the present pain many will not be keen to repeat the past years production focus.
Last weeks milk auction result showed the market was still in decline, but the lower than expected drop was the only weak positive in a financial climate that is becoming dire.
Average dairy farms are likely to lose about $141,000 this year and next, and after three years in a row of significant losses, some properties will be under extreme pressure from their financiers.
Some dairy analysts are doubting prices will ever return to $6+/kg in the future as the US and Europe will keep producing and storing surpluses to sell when shortages arrive.
They are advocating NZ farmers trim costs back to $3.75-$3.80/kg ms and stocking at a rate relative to grass grown.
Farmers are voicing their concerns at the poor forecasting in this downturn, after early reports suggested it would only be short lived.
Fonterra went to the market with a $150 million bond issue to finance general corporate purposes, but some wonder if their loan to shareholders this year to be paid back when the payout reaches $6/kg, may come back to haunt them.
Landcorp announces they are not going to continue their sharemilking agreement with Shanghai Penguin after big losses for this Government SOE with a focus on dairy, forces them to refocus on the more profitable parts of their business.
Another environmental challenge has been issued to the sector this week, as scientists warn intensive dairying areas could allow oestrogen levels to contaminate ground water and cause fertility issues in fish.
Dairy prices
Select chart tabs
16 Comments
"but some wonder if their loan to shareholders this year to be paid back when the payout reaches $6/kg, may come back to haunt them."
Is this not the elephant in the room for Fonterra? How are Fonterra going to retrieve their loan which is in essence an advance payout? The fallout from calling in the loan in such fragile circumstances would seem catastrophic. Unintended consequences?
CO,I was more concerned about them requiring the principal repaid in these financial circumstances. I sincerely hope Fonterra have covered their bases with the fine print as the offer was made with all the right intentions re the benefits of being part of a co operative business. However given they were anticipating a quick rebound to $6 at the time is their balance sheet strong enough to carry that debt for an extra 2 to 3 years or will they have to call it in at sub $6? If so how does that play out...?
Its all wearing a bit thin
http://i.stuff.co.nz/business/farming/77277871/Minister-banks-not-keen-…
Plus see comments.
Continuing the theme this week. This time it borrowers liquidity whereas the GFC was bankers liquidity.
It is a lenders job to correctly appraise a borrowers liquidity over the term of a loan. This had seemed to be represented by the lender nominated farm gate price required for servicing analysis of the loan. Or was it.
Eg. One bank now seems saying use $3.90 and $2.70 as the advance for next year (not ASB)
Week before it was as low as you can go.
Means the loan now costs about twice as much milk.
So is this a demonstration of being the swing supplier, or busting the last assumption that the low cost supplier wins. (was that assumption valid?)
http://i.stuff.co.nz/business/farming/dairy/77247697/Dairy-industrys-wo…
Speaking to a Federated Farmers dairy and sharemilkers' council meeting in Nelson, Rabobank's dairy analyst, Thomas Bailey, who previously had four years with Fonterra, said there had been five big changes.
A huge increase in European milk production had caught New Zealand off guard, he said.
The extra nine million tonnes over the last 24 months was like New Zealand production growing 50 per cent. The Dutch were producing so much milk "they're probably going to have to start dumping it".
"We're completely over-supplied, which is why prices are so low, and why we're pinned down at $1800 a tonne for milk powder."
http://www.farmingshow.com/on-demand/audio/tom-bailey-challenges-of-the…
Tom, not Tim.
not the best picture
http://www.stuff.co.nz/business/farming/77220140/glass-half-full-5-fore…
"I think there has been a structural shift across dairy markets internationally that suggests the dairy payout is going to be a bit lower than we are used to for the next five to six years."
As a result, the bank had been telling farmer clients to get rid of 50-75 cents from its costs.
"That's not just to survive this year or next year, you have to do that on a sustained basis."
The global economy was very delicately placed and he doubted demand for dairy would pick up any time soon.
and by voice
http://www.radionz.co.nz/national/programmes/ninetonoon/audio/201790722…
Agriculture consultant Alison Dewes is one who believes the industry is undergoing a structural change rather than experiencing a short cycle of low prices. She told Nine to Noon the average dairy payout of $4.50 may never recover to even the $6 mark and widespread farm foreclosures were inevitable. She said banks had been front footing it with farmers where they could, and working with those that had been showing a moderate level of distress.
"But we're getting to a point now where things haven't played out quite as predicted. We're seeing what's potentially a structural change in milk price rather than a cyclical change where we're moving into almost three years of $4 / 4.50 payout and average farms can't just keep weathering this and we actually have to possibly face some quite difficult times ahead for New Zealand." She said one of the reasons why New Zealand was getting into difficulty was that it was no longer as competitive on the global stage.
and this morning
http://www.radionz.co.nz/audio/player/201790904
and the plight of the unsecured creditor...
Meanwhile:
http://m.alibaba.com/product/50027004954/100-German-Full-Cream-Milk-Pow…
Up fifth street...
Holdem can be learned in a few minutes and you can be playing fairly well with a few hours of practice. However, in order to learn the game you must play and you must play fairly often...
Rabobank general manager Hayley Moynihan told RNZ that the "severity and prolonged nature of this downturn" meant support would mean different things for different farmers.
"This will be very much be a case-by-case basis and not all farmers will survive in terms of their businesses being resilient enough to cope with what will effectively be three years of very low milk prices."
She said the majority of farmers would be funded through the downturn but it "wasn't in the bank's interest to fund losses where the losses can't be repaid even when markets improve".
Minister for Primary Industries Nathan Guy said the reality was that farmers went under even in good times.
http://www.stuff.co.nz/business/farming/dairy/77414152/farmers-getting-…
The stages consist of a series of three cards ("the flop"), later an additional single card ("the turn" or "fourth street") and a final card ("the river" or "fifth street").
The best five card poker hand is obtained by using the necessary cards from the community and/or a particular player's hole cards (if a player's best five card poker hand consists only of the five community cards and none of the player's hole cards, it is called "playing the board").
Players have betting options to check, bet/call, raise or fold. Rounds of betting include prior to the flop/"pre-flop", "on the flop", "on the turn", and "on the river".
it really is a lot like life.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.