She says there’s “upside potential” for the forecast farmgate milk price if prices the recent price rises on Global Dairy Trade (GDT) auctions continue this year.

The latest Global Dairy Trade (GDT) auction, the first for 2021, recorded solid gains in whole milk powder (WMP) and fat product prices, building on gains in the two December auctions.

WMP prices, used by Fonterra to set its payout, sit at a 12-month high of US$3,306/metric tonne.

Skim milk powder prices rose 4.1% to over US$3,000/MT.

Higgins says while an overall lift in commodity prices for the last GDT event wasn’t surprising, the magnitude of the rise was unexpected – particularly for skim milk powder (SMP).

“We are happy with our current forecast milk price of $7/kgMS for now, but there’s certainly upside potential for the forecast farmgate milk price should these prices continue into the New Year,” she told Dairy News.

Last month, Fonterra narrowed its forecast payout range to $6.70-$7.30/kgMS. ASB lifted its forecast to $7/kgMS.

ASB senior economist Chris Tennent-Brown notes that the latest GDT price rise built on gains of December that led to the bank lifting its forecast price.

He says WMP prices have now edged comfortably ahead of where they were a year ago.

“The contract curve remains flat and stable, so price gains aren’t being driven by short-term supply fears.

“The latest GDT result provides a buffer to our $7 forecast, and more of the same over the coming events could well see Fonterra narrow its forecast range.”

Gains on GDT auctions over the past two months are being mostly attributed to strong demand from China.

While most countries are still dealing with waves of Covid-19, China’s economy is bouncing back after weathering the Covid storm.

Fonterra said last month that China was continuing to recover well from Covid-19 and this was reflected in recent GDT auctions.

The co-op noted a strong demand from Chinese buyers for WMP.

“The impact of Covid-19 continues to play out globally, and we continue to have a watchful eye on the increasing Northern Hemisphere milk production and New Zealand dollar,” said Fonterra chief executive Miles Hurrell.

“However, we have contracted a good proportion of our sales book for this time of the season, which has given us the confidence to narrow and lift the bottom end of the forecast farmgate milk price range.”

New Zealand milk production also impacts GDT prices; a drop in production can spark supply fears.

Data released in late December by the Dairy Companies Association of New Zealand (DCANZ) showed NZ November milk production was down 2.5% on a tonnage basis and down 2.7% on milksolids basis on November 2019.

The comment follows the conviction of Manawatu dairy farmer Daniel Reuel Sproull, who entered no plea to two charges under Section 176 of the Health and Safety at Work Act, and a deemed not guilty plea was entered by the court at a pre-trial hearing.

Sproull was convicted on both charges at the Palmerston North District Court and fined $4,000 for preventing inspectors from accessing his property and failing to attend or make alternative arrangements to complete a required interview at WorkSafe’s offices.

WorkSafe Area Manager Danielle Henry says the incident occurred in November 2018 when WorkSafe inspectors met with farmers across Palmerston North to help educate and upskill them about hazardous substances. As part of this work, inspectors visited Sproull’s property on multiple occasions.

He refused the inspectors entry onto the site without proof of proper authority to do so. He was shown WorkSafe identification cards by inspectors but did not accept these as proof of their appointments and turned the inspectors away.

He was then provided further confirmation but still refused to assist them or allow him onto his property. In one instance, he blocked access to areas of his business and failed to attend a required interview.

During sentencing, the judge confirmed that he found the behaviour to be deliberately obstructive.

Sproull was ordered to pay a contribution to the prosecution’s legal costs totalling more than $4,000.

Henry says under the Health and Safety at Work Act, all reasonable assistance must be given to WorkSafe inspectors who are entering or inspecting a site.

She says there was no indication or belief at the time of the incident that Sproull had breached the Act.

“Our inspectors simply wanted to ensure Sproull knew how to keep workers safe when working with or storing hazardous substances,” she says.

Henry says that Sproull’s unlawful prevention of the inspectors’ entry to the site left WorkSafe with no option but to prosecute.

“Our education work is critical to lifting health and safety performance and deliberately obstructing our inspectors from carrying out their work at any time makes no sense at all.”

The AfiCollar, worn around the cow’s neck, collects data on animal health, wellbeing and fertility.

Afimilk is one of the dairy industry’s leading producers of cow behaviour sensors, farm management software and milk meters, and supplies cow collars internationally.

LIC unsuccessfully sought shareholder approval last year to by a 50% stake in Afimilk; the $109million deal failed to receive the required shareholder support to proceed.

LIC chief executive Wayne McNee says, as sector leaders, the parties remained in contact and recently reached a new agreement regarding Afimilk’s cow collar technology.

“We are working to build an integrated, collaborative technology ecosystem that makes it as easy as possible for farmers to adopt new technologies. Farmers need to be able to choose the technology and products that are best suited to them.

“Our role is to ensure that proven technology can integrate with LIC’s existing systems and herd management software into the future.”

McNee says AfiCollars are among the best in the world and well suited to meet the unique challenges of New Zealand’s pastoral dairy environment.

“Our proven work in genomics, reproduction and animal health is enabling farmers to be more efficient and their herds to be more productive each year. Cow behavioural monitoring devices like the AfiCollar will deliver complementary on farm benefits such as more accurate heat detection and animal health and welfare monitoring.”

AfiCollars will integrate with Protrack, LIC’s farm automation technology, which will allow for increased efficiency and faster, more informed decision-making on farm.

There is already strong demand for cow wearable technology by farmers, and for it to integrate with LIC’s farm automation systems.

“The ‘connected cow,’ wearing this technology, will shape the future of the dairy industry and help New Zealand maintain its world leading edge in precision farming,” says McNee.

“LIC is looking to work with other leading New Zealand and international technology providers to continue to offer the very best options for our farmers wanting to utilise new technologies coming to market.”

Afimilk chief executive Yuval Rachmilevitz says he is excited to be cementing a new agreement with LIC for the distribution of AfiCollars.

“We share a combined commitment to enabling farmers to continually improve on-farm productivity through new technology and it is exciting to be further enabling this in New Zealand.”

The overnight Global Dairy Trade (GDT) auction has delivered another solid result.

The GDT price index rose 4.8%, its fifth straight rise.

More importantly for farmers, whole milk powder price rose 2.2% to a four-year high of US$3,380/MT.

Fonterra uses WMP price as a benchmark to set its farm gate milk payout.

Key Results

AMF index up 17.2%, average price US$5,398/MT

Butter index up 4.6%, average price US$4,735/MT

BMP not offered

Ched index down 0.3%, average price US$4,082/MT

LAC index up 6.6%, average price US$1,173/MT

SMP index up 7.0%, average price US$3,243/MT

SWP not offered

WMP index up 2.2%, average price US$3,380/MT

Last month, the co-operative announced that it had obtained anti-trust clearance in China. The $531 million deal will be finalised before July subject to a few other regulatory approvals.

The co-op will use cash proceeds from the transaction to pay down debt, as part of its overall debt reduction programme.

Fonterra announced in October last year that it had agreed to sell its two wholly-owned farming hubs in Ying and Yutian to Inner Mongolia Natural Dairy Co. Ltd, a subsidiary of China Youran Dairy Group Limited.

Over the past 10 years the co-op has invested over $1 billion in China Farms with very little returns.

In October last year, Fonterra chief executive Miles Hurrell admitted that China Farms had been a challenge.

“We don’t shy away from the fact that establishing farms from scratch in China has been challenging, but our team has successfully developed productive model farms, supplying high quality fresh milk to the local consumer market. It’s now time to pass the baton to Youran and Sanyuan to continue the development of these farms.”

Hurrell says the sale of the farms will allow the co-op to prioritise the areas of its business where it has competitive advantages.

“For the last 18 months, we have been reviewing every part of the business to ensure our assets and investments meet the needs of the co-op today. Selling the farms is in line with our decision to focus on our New Zealand farmers’ milk.

“China remains one of Fonterra’s most important strategic markets, receiving around a quarter of our production.

“Selling the farms will allow us to focus even more on strengthening our Foodservice, Consumer Brands and Ingredients businesses in China.

“We will do this by bringing the goodness of New Zealand milk to Chinese customers in innovative ways and continuing to partner with local Chinese companies to do so. Our investment in R&D and application centres in China will support this direction,” says Hurrell.

Separately, Fonterra has agreed to sell its 85% interest in its Hangu farm to Beijing Sanyuan Venture Capital Co for $42 million. Sanyuan has a 15% minority shareholding in the farm and exercised their right of first refusal to purchase Fonterra’s interest.

That will be the key message when they host the winner’s field day on January 27 – about nine months later than usual because of the Covid pandemic.

The couple’s Canlac Holdings business consists of two dairy farms near Dunsandel in the Selwyn District, running a total of 2150 cows.

Known for their willingness to step up and take part in initiatives such as the Forages for Reduced Nitrate Leaching (FRNL) research project, they have exceeded the district’s tough Environment Canterbury nitrogen leaching targets while maintaining profitability.

When they were named the winners back in March, BFEA judges commended them for their environmental commitment and for promoting wellbeing within their own team and wider community.

Coltman says they recognise four key parts to their business – the financial, the environmental, the people, and the animals – and says the business would not be stable if any were out of kilter. However, the key message is that a farm needs profitability to be able to spend on those other areas.

Explains Carver: “You can’t make changes that are going to help the animals, land and people if you don’t have money.

“You might make one call which is really going to help the animals but it could actually make things trickier on the cash books and trickier on the people. What levers do you pull, remembering that you have four things you have to look after?

“You see a lot of businesses go completely green and they go under.”

Their recipe for success includes improved and more efficient irrigation, increased effluent area, lower nitrogen use and lower N-content in imported feed, while maintaining production.

Faced with having to reduce leaching by 33% by 2022, they have achieved 50%, says Coltman.

“We’ve got some headroom there, so that’s all good.”

They are also well-placed to meet the central Government-imposed limit of 190kg/ha a year of applied nitrogen announced last year.

Having got the basics right, the couple have continued to make improvements – aimed as much at the wellbeing of their staff as improved production.

That includes adding another milking shed, which allows work to start an hour later each day and gives greater flexibility in rostering and reduces the stress on workers.

“Now we can run each of these places on public holidays with just two people so people can have the day off,” says Coltman.

Automated cup removers have been added to both sheds.

Coltman says it is all part of their holistic approach to provide a pleasant working environment, investing in both people and equipment to be in the best position to respond to coming pressures or changes in regulations.

The Big Unknown 

A big unknown for Tony Coltmore and Dana Carver is expected greenhouse gas (GHG) regulations because it is unclear how those emissions will be assessed, measured or taxed.

Because the farm has high production, using a lot of grass and a lot of feed, its total GHG emissions are higher than average but it is more efficient than average, he says.

“Per kg of milk solids we’re better than the average but at this stage we don’t know how they’re going to measure it and it doesn’t sound like it’s going to be a total figure.”

Carver adds that the science on GHG isn’t as clear, and the targets aren’t as clear, as for nitrate emissions.

Tony Coltman and Dana Carver say a farm needs to be profitable before being able to spend on animals and sustainability.

They are looking at plantings to both reduce emissions and provide shelter for animals but Carver says they have to be careful not to do anything that could cut profit with no gain.

“There’s this huge grey area but the government started saying we expect to see a drop in your methane production in the next five years. How do you start that journey when you don’t have the science?”
For Coltman and Carver the key is to stay involved, keep learning and keep improving the business so they have a strong platform to act from when the time comes.

Awards Disruption

The 2020 Ballance Farm Environment Awards will finally conclude in late March after a year of unprecedented disruption caused by the Covid pandemic.

A round of on-farm judging will take place over the next few weeks before the 10 regional winners convene in Wellington for a series of interviews then the announcement of the national winner at an awards dinner on March 25.

The winner will receive the Gordon Stephenson Trophy and be named the National Ambassador for Sustainable Farming and Growing – traditionally funded for an overseas study tour.

James Ryan, the general manager of the New Zealand Farm Environment Trust, says there is a question mark over that, because of Covid.

“They probably won’t be going overseas but who knows? That could change.”

Ryan says the awards dinner “is really about celebrating some of the great things that that these farmers and growers are involved in.”

Normally the national award would have been decided in the middle of last year, following the series of 10 regional awards.

Instead, the Covid lockdown forced the regional competitions online after only two had been held – Canterbury and East Coast.

The delays also forced a decision not to conduct a national competition for 2021.

“We just felt there was too much uncertainty,” said Ryan.

However, Waikato is conducting a regional competition this year, having secured independent funding. Judging is currently underway.

Waikato was the one exception “just to complicate things,” quipped Ryan.

“They felt they’d built up some great momentum…and because that’s where the awards originated more than 25 years ago, they were determined just to carry on as per normal.”

Ryan says the awards will be “tweaked” for the future with more emphasis on feedback rather than just the accolade of an award.

“Now we have reflected on where we want to be over the next three to five years, we’re looking to put more emphasis on giving participants in the programme quality feedback that they can use to improve the sustainability of their businesses.

“Farmers are dealing with so much at the moment we just want to make sure that we’re giving them feedback which builds their confidence up.”

The statistics, released by DairyNZ and Livestock Improvement Corporation (LIC), show that New Zealand dairy companies processed 21.1 billion litres of milk, containing 1.90 billion kgMS, marking a 0.6% increase in milksolids from the previous season.

Meanwhile, the latest count reveals that New Zealand has 4.921 million milking cows, a 0.5% decrease from the 2018-19 season.

According to DairyNZ, this increase in productivity is due to farmer uptake of herd improvement tools such as herd testing and animal breeding.

“Interest in the highest genetic merit animals continues to grow year-on-year, with farmers investing in the latest artificial breeding technologies and indexes that focus on productivity, as well as animal welfare and the environment,” a DairyNZ spokesperson told Dairy News.

“Farmers are also considering feed quality for their herds, while seasonal factors such as weather conditions which affect feed also have an impact on milk production,” they said.

“These factors have all meant that despite cow numbers reducing, our cows are more productive than ever.”

They say that innovation and research will continue its role in ensuring the productivity of the national herd.

“New innovations, research and agritech solutions will also continue to play a role in ensuring that farmers can breed more productive and profitable cows.”

In the 2019-20 season, 3.68 million cows were herd tested.