Is A2 milk about to leap forward?

Shares in The a2 Milk Company (coded as ATM on the NZX stock exchange) have increased from 48.5 cents on 29 May to 75 cents at 3 July. The market capitalisation has risen from $330 million to $495 million. Where the shares will go in the next few weeks is a journey into the unknown.

What is known is that some of the international big boys have been putting together a syndicate to purchase ATM (also listed jointly on the Australian exchange as A2M). The publicly announced parties are America’s Dean Foods and Australia’s Freedom Foods. But in the background are Australia’s Perich family, Australia’s Moxey family, and China’s New Hope agri-food conglomerate. And hovering nearby is Richard Liu from the rapidly growing Chinese online marketer JD.com. Continue reading

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Strategic positioning down on the dairy farm

Right now, everyone in the New Zealand dairy industry is figuring out how to get through the next 12 months without too much pain. But eventually events will turn and we will be able to think more strategically about where the industry is going.

Down on the farm, the big long term issue will be how to remain profitable while living in the new world of nutrient emission limits. Continue reading

Posted in Agribusiness, Dairy | 6 Comments

Are the Mexico-bound sheep for breeding or barbeque?

Prior to this week, I had no particular knowledge about the current shipment of 50,000 ewe lambs that are heading to Mexico. So when I was approached by Jamie Ball from the NBR for comment, my immediate thought was to say nothing. I simply assumed that this was indeed a very large shipment of future breeding stock.

However, once my attention was focused, and I started scratching around, all sorts of warning bells started to ring. It seemed a very large number of breeding animals to be sending there. And surely, if this was a genuine shipment, then at the other end there had to be either a huge rural development project, or alternatively a very large agribusiness. Continue reading

Posted in Agribusiness, Meat Industry | 10 Comments

The Trans Pacific Partnership (TPP) gets caught on American rocks

Last Friday (12 June) was a bad day for proponents of the twelve-country Trans Pacific Partnership. To the surprise of many, the American House of Representatives has thwarted, at least temporarily, President Obama’s request for fast-track authority. Without that authority, other countries will not put forward their bottom line positions.

The irony is that the House has in theory offered Obama exactly the fast-track authority that he needs. However, the differences between the House and Senate versions of legislation are such that in reality he has been defeated.

The importance of fast-track authority is that the American Congress would then only be able to accept or reject the TPP without amendment. Without that agreement, ratification becomes unmanageable.

The issues that are causing so much controversy for the TPP in the USA have both similarities and differences to the TPP issues that divide New Zealanders. In both countries, big business is supportive. However, whereas in the USA there is widespread community concern about blue collar jobs, here in NZ the concern is about the power the big American corporates will be able to exert. Continue reading

Posted in Agribusiness, Dairy | 6 Comments

Biofuels, grain and the American Midwest

The American Environmental Protection Agency (EPA) has recently announced plans to reduce the 2015 and 2016 legal requirements for biofuels within American fuels. At the same time, the American Midwest looks like it could be heading for a bumper harvest year, possibly beating last year’s records.

The reason the Midwest is so important is that it is the American grain bowl. Increasingly, the Midwest is also becoming the centre of the American dairy industry. The twelve key contiguous states are Ohio, Michigan, Indiana, Wisconsin, Illinois, Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska and Kansas. Continue reading

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Managing the dairy downturn

It is still far from clear whether we have reached the bottom of the dairy price cycle. The Chinese seem to be coming back into the market but no one much else is. But even if prices do start to rise in the next few months, down on the farms things will be tight at least until Christmas.

There are considerable lags in the system between prices at the Global Dairy Trade auction, and the milk cheques that farmers receive. Hence the financial crunch is just coming on. Continue reading

Posted in Agribusiness, Dairy | 6 Comments

Fonterra’s advance price is the crucial number

This week is important for all New Zealand dairy farmers. The key announcement will be Fonterra’s decision as to the advance price for milksolids, which will be paid to farmers during the first half of the forthcoming 2015/16 season.

In contrast, most media discussion as to milk prices for the forthcoming 2015/16 year has been and will be about what Fonterra will estimate this week as the expected overall price per kg milksolids for the coming year, which runs from 1 June 2015 through to 31 May 2016.

Most pundits are suggesting an overall expected price for 2015/16 of between $5 and $6 per kg milksolids. But right now that estimate, which is little more than a guess, is largely irrelevant. It is the advance price that counts down on the farm, but which the media largely ignores. Continue reading

Posted in Agribusiness, Dairy, Fonterra | 2 Comments