Outlook hopeful – DCANZ
He says it is very gratifying to see those who monitor the situation revising dairy prices upwards, but he adds that there is still a degree of nervousness worldwide about what might happen to the global economy due to Covid-19.
Bailey says last year, people were predicting that things would be a lot worse than they turned out to be and there is hope this may happen again.
“However, dairy companies would still be a bit cautious around price expectation in the coming year,” he says.
His comments come at the same time as the Ministry for Primary Industries (MPI) is projecting a 4.6% drop to $19.2 billion in export revenue for dairy products in the coming year. In its latest Situation and Outlook for Primary Industries (SOPI) it says, in the short term, dairy export prices will remain relatively constrained. It notes that although NZ will have a strong production season, it points out that milk production in the US, Europe and Australia will also be up.
At the same time, it posts a warning about the strengthening of the NZ dollar to the US dollar, saying if this continues, it could act as a drag on dairy export revenue growth.
“For farmers, these weaker prices are expected to flow through to reduced farmgate returns with the average price being $6.90 per kg/MS. This is based on the assumption that there will be no major negative shocks to commodity prices due to Covid in key NZ markets,” says the report.
Interestingly the MPI projection on the farmgate milk price is 30 cents lower that the prediction by the ANZ bank, which last week put the forecast payout for the 2020/21 season at $7.20/kgMS.
While the outlook for the dairy industry is somewhat blurred in the coming year, MPI says things should come right in 2022 and is predicting export returns in a year’s time to bounce back to what they were last season. However, there are caveats on that – especially given that the SOPI report was done before Christmas and therefore before the most recent world outbreaks of Covid-19.
- DCANZ
- Malcolm Bailey
- DAIRY COMPANIES OF NEW ZEALAND
Synlait earnings downgrade
This follows its strategic customer and cornerstone shareholder a2 Milk Company reporting a massive drop in infant formula sales.
Synlait now expects its total consumer-packaged infant formula volumes to be 35% lower than last year.
The company says it is trying to mitigate the impact of this drop in sales through its diversification strategy and keeping costs down.
“There has been no disruption to manufacturing or demand for Synlait’s ingredient, lactoferrin or consumer-goods businesses, and Synlait remains confident that it can deliver on its medium to long term objectives,” it says.
It says the updated guidance announcement reflects the impact that Covid-19 has had on Synlait’s strategic customer.
“It also remains subject to the ongoing effects of Covid-19, with consumer behaviour, channel dynamics and supply chain disruptions all subject to change.”
Synlait will provide an update on infant formula sales during its half-year result announcement in late March.
a2 Milk says disruption in cross-border exporting (daigou channel), which represents a significant proportion of its infant nutrition sales in Australia and New Zealand, had been more significant than expected.
“With the recent sales performance in the daigou channel not being as strong as previously expected, we now consider that the recovery in this important channel through the balance of the fiscal year will also be slower.
“We expect that Covid-19 related travel restrictions will continue to negatively impact the reseller channel due to reduced travel between Australia and China through the remainder of FY21, with limited prospect of a return of a significant number of international students and tourists to Australia during the period.”
- Synlait
- A2 Milk Company
Dairy’s star billing in NZ economy
Dairy Companies of NZ (DCANZ) executive director Kimberly Crewther says diverse markets and products have helped the dairy sector navigate market events.
NZ milk processors make about 1500 different products.
“These are meeting needs for a diverse array of customers, from consumer-ready products in retail to speciality products for chefs and food manufacturers, and products used in medical applications,” says Crewther.
“If they were considered individually, whole milk powder, cheese, butter, casein products, infant formula and skim milk powder would all be billion-dollar industries.”
The global trade environment will be key to dairy’s ongoing contribution to New Zealand communities and to globally sustainable food systems.
“Covid-19 has highlighted the importance of reducing barriers to global trade in food.
“We hope 2021 will be when governments globally lean into reinvigorating the rules-based trading system and turn statements on removing barriers to trade into real action.”
High quality trade negotiating outcomes, such as the elimination of tariffs in the UK and EU Free Trade Agreements, would further enhance the benefit of dairy trade across New Zealand communities, while removing barriers to European consumers accessing lower-emissions New Zealand dairy products.
Recent Sense Partners analysis, for DairyNZ and DCANZ, shows the sector is delivering $20 billion in export value.
DairyNZ chief executive Dr Tim Mackle says dairy’s sustained economic contribution is a key factor in the country’s Covid-19 recovery, but tourism will also become increasingly important again as borders open.
Importantly, dairy sector growth is supporting wage growth in regional New Zealand.
“Dairy provides long-term stability for our communities. Export earnings translate to well-paying jobs, but also support farmers and dairy companies to purchase more than $22.5b worth of goods and services from other industries,” says Mackle.
At a community level, in 2019 the dairy sector accounted for more than 5% of GDP in seven regions – and more than 10% in four of those. West Coast has the greatest GDP from dairy, at 16%.
“In dollar terms, this equates to dairy contributing more than $100 million to GDP in most regions – including nearly $2 billion in Canterbury and $2.5 billion in Waikato. This is especially significant because of the limited scale of other high-value export sectors in rural New Zealand.”
The dairy sector is a significant employer in many districts, accounting for up to one-third of jobs in Waimate, and as many as one in four jobs in South Taranaki and Otorohanga.
“Around 50,000 people are employed in the dairy sector, on and off farms, generating $3.4 billion in wages in 2019. Twenty New Zealand districts see between $50 million and $100 million in wages from the dairy sector, which flows on to local spend.”
Mackle says increased efficiency on the farm is a factor behind dairy’s success, particularly as farmers develop from a sustainability perspective too.
- DAIRY NZ
- Tim Mackle
- Kimberly Crewther
- DAIRY COMPANIES OF NZ
- DCANZ
$7.20/kgMS and scope for more
The bank’s forecast is 20c higher than Fonterra’s forecast range midpoint and those of other major banks – ASB, Rabobank and Westpac. Milk price futures are currently priced at $7.05/kgMS, having peaked at $7.11/kgMS in early December. Most banks could also be lifting their forecast payouts in coming weeks.
ANZ agriculture economist Susan Kilsby says global dairy commodity prices have continued to firm – gaining 3.9% in the first Global Dairy Trade (GDT) event of 2021.
“This follows on from prices firming in the latter part of 2020,” says Kilsby.
Kilsby says it remains cautious about the longer-term outlook and still sees scope for dairy commodity prices to soften in the second half of 2021, which could impact the milk price for next season.
But the farmgate milk price for the 2020-21 season is becoming more certain as about 70% of the product that will be produced from this season’s milk supply is now contracted.
Most of the FX requirements for this season will also have been put in place, thereby limiting the impact of the rising New Zealand dollar on the farmgate milk price for the 2020-21 season.
However, the rising NZD will curb returns for next season.
“Commodity prices may also ease next season – particularly if the milk supply in the Northern Hemisphere continues to rapidly expand,” she says.
“Economies still have a long way to go to offset the economic impact of Covid-19 and further lockdowns are likely to dampen demand for dairy products.”
Global milk supply has also continued to expand but so far demand is keeping pace.
Kilsby notes that there has been an enduring lift in milk supply in some of the major dairy exporting regions of the world, including the US, EU, Australia and New Zealand.
“It was feared that this extra supply would not be able to be absorbed by the markets but thus far demand appears to be holding up well, despite some consumption channels being compromised by social distancing restrictions put in place to prevent the spread of Covid-19.”
The additional milk from the US is currently matched by additional demand created by the Government-funded scheme to provide food boxes to those in need. These food boxes must contain drinking milk and other dairy products such as cheeses and yoghurts.
Funding for this programme was recently extended to the end of April. The dairy portion of this stimulus programme is expected to absorb 2.5–3% of the total milk being produced in the US when considered on a milk equivalent basis. This is very similar to the rate of growth in milk supply seen recently. In the second half of 2020, milk supply in the US increased by just over 2%.
In Europe the expansion of milk production has been more modest, says Kilsby, with growth of about 1% observed in 2020.
And while there were disruptions to demand patterns in the early lockdowns, the supply channels have now adjusted to the increase in retail demand at the expense of food service.
“The recent growth in EU milk production has mostly been achieved through increased yields as cow numbers have decreased. In 2021, growth is expected to remain modest,” she says.
Kilsby says any significant growth in the EU will no doubt result in larger volumes of product being exported, which potentially would be negative for global prices. However, at present production is at its seasonal low and output won’t peak until about April/May.
The resurgence of Covid and tighter restrictions on people movements that have been put in place to prevent the spread of the new, more contagious strains could result in some reduction in demand for dairy products, but in general demand has remained relatively strong through previous lockdowns.
- Milk
- ANZ
- SUSAN KILSBY
- GLOBAL DAIRY TRADE
Eradication of Peste des petits ruminants disease in sight
Outbreaks of Peste des petits ruminants (PPR) have decreased by two-thirds between 2015 and 2019, according to data from the Food and Agriculture Organization of the United Nations (FAO).
FAO say this is raising hopes for meeting the goal of global eradication by 2030.
Just over 1,200 global PPR outbreaks were recorded in 2019 compared to more than 3,500 in 2015.
FAO attribute this decrease to the impact of vaccination campaigns in more than 50 countries. The campaigns were led and funded by countries with support from FAO and its partners.
In just 12 of these countries, over 300 million goats and sheep were vaccinated between 2015 and 2018.
PPR has spread at an alarming rate, with more than 70 countries reporting outbreaks of the disease since it was discovered in Côte d’Ivoire in the 1940s.
At its worst, the disease threatens to infect up to 80% of the world’s 2.5 billion small ruminants if not controlling, putting pressure on rural families who rely on sheep and goat for food and income.
“Eradicating the disease is possible and essential,” says Maria Helena Semedo, FAO deputy director-general.
“A world free of PPR will also mean more security and empowerment for rural women as they are often responsible for looking after livestock,” Semedo says.
As of May 2020, 58 countries were declared free of PPR. Russia and Lesotho were the most recent nations added to the list.
A further 21 countries, which have had no cases for five consecutive years, can prepare their documentation for validation by the World Organisation for Animal Health (OIE) for a PPR-free status.
“Whilst PPR outbreaks have decreased significantly in recent years, the infection scope of the PPR virus, both geographical and host range, is still wide and more needs to be done to fight the disease,” says FAO PPR programme coordinator and veterinarian Felix Njeumi.
Shortage of vaccines, livestock movement, and logistical challenges in carrying out vaccinations continue to remain the main obstacles for PPR prevention and control.
Council urges farmers to be vigilant
Waikato Regional Council is urging farmers to be vigilant after seven separate court cases found farmers to have unlawfully discharged farm effluent into the environment.
The cases have been sentenced over the last three months, with the final case being made public today, resulting in convictions and a total of $318,025 in fines.
The prosecutions were made by Waikato Regional Council under the
Resource Management Act (RMA).
“Farming is obviously a huge and vital industry that contributes to this region’s economy and communities in many ways,” says Waikato Regional Council regional compliance manager Patrick Lynch.
Lynch says that the farmers and businesses prosecuted represent a very small portion of the industry.
“However, clearly there are still some in the industry who are not taking their environmental obligations seriously and continue to let the side down,” he says.
“It is now well over 20 years since the current environmental regulation has been in place to manage effluent in this region. I have no doubt that many will be disappointed to see cases such as these still happening.
“Many farmers have excellent systems in place, but we continue to urge all rural businesses to invest in the infrastructure needed to manage effluent effectively, and to ensure they manage those systems every day they are in use,” Lynch says.
In the first case, Trevor George Aitchison, a farm owner in Morrinsville, was convicted due to an event where he discharged effluent from an overflowing effluent sump and a disconnected irrigator in August 2019.
Aitchison was fined a total of $52,500 by Judge Brian Dwyer in the Hamilton District Court on 27 October 2020.
In the second case, Brok Farming Limited, a company operating a farm in Tamahere, was convicted in relation to over application of effluent that made its way to a nearby tributary in September 2019.
The company was fined $35,000 by Judge Melinda Dickey in the Hamilton District Court on 25 September 2020.
A third case saw Taupō dairy farmer John Richard Lockwood convicted in relation to over application of effluent in September and October 2019 and again in August 2020.
Lockwood was fined $80,500 by Judge David Kirkpatrick in the Taupō District Court on 1 December 2020.
In the fourth case, Sonya Liddle, a Te Pahu contract milker was convicted due to over application of effluent from two irrigators in August and October 2019.
Liddle was fined $33,500 by Judge Jeff Smith in the Hamilton District Court.
David Bruce Major, a contract milker employed on an Ōtorohanga dairy farm, was sentenced on three charges in a fifth case relating to inappropriate application of effluent from an irrigator in September and October 2019.
On each occasion, the effluent flowed into the Matapara Stream that ultimately flows to the Pūnui River.
Major was fined $32,500 by Judge Brian Dwyer in the Hamilton District Court on 28 October 2020.
Natural Spreaders Limited, a company operating a farm effluent spreading company based in south Waikato was convicted in relation to over application of effluent on a farm at Putaruru in August 2019.
The company was fined $37,125 by Judge Melanie Harland in the Hamilton District Court on 20 November 2020.
In the final case, Trinity Lands Limited, a company operating 20 farms in the south Waikato was convicted due to an incident of over application of effluent on a farm at Tirau in October 2019.
The company was fined $46,900 by Judge Melinda Dickey in the Tokoroa District Court with the sentence formally issued on 18 January 2021.
Good growth year for Claas
While many sectors of the agricultural machinery were hit by the ravages of Covid-19, the effects of the pandemic did not prevent the privately-owned Claas Group from enjoying a 3.7% increase in sales during 2020.
The year also saw the company for the first time top €4.0 billion turnover.
While sales in its home country of Germany and the rest of Western Europe remained stable, the company reports these grew significantly in Eastern Europe – especially Russia. At 20%, the company also achieved its strongest growth in sales outside of Europe, with North America proving to be the most important growth driver.
Meanwhile, Claas says it also implemented several important investment projects as planned during the year, including new production technologies at the Le Mans tractor plant to increase efficiency. At Harsewinkel, the first phase of a modernisation project for combine harvester assembly was completed. Meanwhile, new sales centres in France and the UK were opened, alongside a new high-bay warehouse at the global parts distribution facility at Hamm in Germany.
Capital investments in fixed assets for 2020 was €131m (2019: €125m), and R&D expenditure continued at a high level of €237m (2019: €244m).
Despite the pandemic, global employee numbers remained stable at around 11,400 people.
Green machine frugal on fuel
According to the industry respected independent DLG PowerMix test, John Deere appears to be the best choice of tractor for transport applications with its new 7R330 model.
Having already achieved a best ever DLG PowerMix transport test result in 2018 with the 6250R, and still holding that record, the new 7R330 – with a new Stage V engine – has set the benchmark for all tractors rated at 250hp or more.
Delivering a combined fuel consumption of only 375g/kWh diesel and 17g/kWh DEF, the tractor delivered an 8g/kWh diesel plus 28g/kWh DEF advantage over the next best competitor in this horsepower class. Depending on local fuel and DEF pricing, the result is said to equate to hourly savings of 1.5 to more than 2 Euros in transport applications.
Launched at Agritechnica 2019, the 7R330 tractor delivers a maximum power rating of 373hp with IPM and an advantageous power to weight ratio of only 30kg/hp.
This has a further positive impact on performance, acceleration and fuel consumption.
Available since 2017, the 6R Series flagship 6250R tractor provides up to 300hp – thanks to an engine boost of 50hp with intelligent power management (IPM), alongside a maximum permissible weight that allows a 5.7t payload.
Both tractors undertook PowerMix test at the DLG test centre in Groß-Umstadt, Germany, where the individual test cycles are designed to replicate typical heavy and light transport work.
App takes pressure off
TRS Tyre & Wheel, owned by Trelleborg Wheel Systems, has introduced the TLC Plus App to the New Zealand market.
The new app is an advanced, sensor-based check system, which measures potential differences between the optimal and the actual tyre inflation pressure, then relays this information via wireless connectivity to the farmer’s mobile device or PC.
Adopting the right pressure can help reduce variable costs by over 20%, with optimal tyre pressures reducing fuel consumption, while increasing traction power and promoting better crop yields.
While the standard functionalities of the TLC permit the precise calculation of the appropriate pressure for any application, the new app’s premium functionalities check whether the machine fleet is set with the optimal tyre pressure and recommend adjustments where and when needed.
This is delivered via a TLC Plus KIT, which integrates the app with TMPS sensors mounted on the tyre valves, which in turn transmit data to mobile devices.
Cloud technology, permits the management of tractor fleets remotely, allowing farmers to assess machines are operating at the optimum with pressure from their office. This configuration ensures maximum safety and efficiency for operations on larger farms or for contractors, who operate with large fleets of machines.
As part of the NZ launch, TRS are offering a free TLC plus system with purchases of a set of Trelleborg radial tractor tyres during the month of February.
Government to fund more Jobs for Nature
The Government’s Jobs for Nature funding is being made available to conservation groups and landowners, says Minister for Conservation Kiri Allan.
The move has been made in an attempt to boost local biodiversity-focused projects.
It is estimated the fund will create more than 400 jobs with opportunities in ecology, restoration, trapping, pest control, fencing and project management through a $34 million funding boost.
An $18 million dedicated Private Land Biodiversity Fund will be made available to established organisations that support groups of private landowners to work together to protect and restore habitats that safeguard populations of native species on private land.
“We know many farmers value and are active in managing biodiversity on their farms, and this fund provides the opportunity to support groups of landowners to expand biodiversity projects while also providing jobs,” Allan says.
$16 million has been set aside for a Community Conservation Fund designed to be used by community-led conservation projects on public and private lands.
“This approach will help established community groups scale up their projects, take their conservation goals to the next level and provide great employment opportunities for locals.”
“This is not only a big win for biodiversity on private and public land, it is also a big win for local communities and their post-Covid economic revival,” Allan says.
The investment is part of the $1.245 billion Jobs for Nature Covid-19 recovery package aimed at providing nature-based job opportunities for 1000 people over the next four years.