Learning from Tillamook dairy

This last week I have been in Tillamook, in Western Oregon. Together with three colleagues from Calder Stewart, I have been exploring the dairy systems here, to see what learnings we can bring back to New Zealand.

Tillamook is a high rainfall zone on the Pacific Coast and has much of the same feel about it as the West Coast of New Zealand.  It is one of the few places in the world where dairy cows can be grazed on perennial pastures, and using the same grass species as we use in New Zealand. The latitude is 45 degrees North, which is a latitudinal mirror image of Oamaru, Alexandra and South Westland.  But climatically, it Westland that is the best comparison.

Alternatives to dairy in New Zealand – the challenges are under-estimated

Readers of my articles will know that I believe we can find solutions to the multiple problems that face our New Zealand dairy industry. However, the current conventional wisdom within New Zealand’s dominating urban constituency is that there is no path ahead for dairy and that we therefore have to find alternatives. My key message here is that finding non-dairy alternatives will not be easy.

There is a clear logic as to why New Zealand has focused so much on dairy. Quite simply, it is the most efficient of the pastoral industries at turning grass into animal protein.  Economic factors have led inexorably to industry expansion, and for many it has paid off big-time.  This is despite the dairy downturn from 2014 through until recently.

Fifty years of Canterbury farming revolution

The ideas for this article were triggered by a recent reunion of former Ministry of Agriculture Canterbury farm advisers. There were about 45 of us who got together to tell tales of former years. Our collective experiences that day went back to 1946 when Austin Ebert joined what was then the Department of Agriculture, followed by Les Bennetts in 1947, and then Lyndsay Galloway and Dave Reynolds a few years later.

Synlait transforms from bulk powders to infant formula

Synlait is currently undergoing a strategic restructure from a producer of bulk milk powders to a producer of consumer-packaged infant formula. These investments will make Synlait the dominant New Zealand producer of infant formula.

So far, Synlait are still in the early stages of the transformation, but with a current construction contract with Tetra Pak to double their wet-kitchen capacity to 80,000 tonnes per annum, plus a foreshadowed announcement about doubling canning capacity to 60,000 tonnes, it is ‘all systems go’.

Fonterra produces a solid half-year set of results but it is not all plain sailing ahead

Fonterra has produced a solid set of results for the first half of the 2016/17 season, with after-tax profit up two percent to $418 million.

Results were broadly in line with market expectations. Prices for Fonterra units had been drifting down on the NZX in the weeks prior to the announcement from a high of $6.39 to $6.20 and lost another five cents over the following two days down to $6.15.

As always, the half-yearly and annual reports from Fonterra are a masterful exercise in communication. It takes effort to scratch beneath the surface to figure out what the numbers are really telling us.

Dairy outlook cools down

The latest dairy auction on 7 March has brought a cool breeze to the dairy outlook. There are signs it could turn even colder at the next auction.

Whole-milk powder (WMP) at this last auction was down 22 percent to US$2785 from the 6 December 2016 high of US$3593. Skim milk powder (SMP) was down by 20 percent compared to December.

The decline has come as a surprise to many farmers and commentators, but the signs were there and had been building. As one derivatives broker said to his clients in the week before the latest auction, it was going to be ‘wretched’.  And it was.

Synlait and The a2 Milk Company strengthen their alliance

The a2 Milk Company (A2M) and Synlait have each announced to the market today that A2M has purchased 8.2 percent of Synlait. This was an off-market transaction with Dutch-owned Friesland Campina, previously Synlait’s second largest shareholder after Chinese-owned Bright.  The purchase and sale makes strategic sense for all three companies.

A2M is listed on both the New Zealand stock exchange (listed as ATM) and the Australian stock exchange (listed as A2M).  As from 2016, Synlait is also dual listed on the two exchanges.

I watch both companies closely, and the buy-in has come as no surprise. Both Synlait and A2M are now increasingly dependent on each other.  All of the ‘a2 Platinum’ infant formula that underpins the remarkable success of A2M in Australia and China comes from Synlait.