Mycoplasma bovis compensation mired in delays as plot thickens

The messages coming from MPI, and also mirrored by Prime Minister Jacinda Ardern’s recent comments, are that good progress is being made with Mycoplasma bovis eradication and that MPI is getting on top of its problems. The reality from where I stand is somewhat different.

As of 12 October, official data shows there have been 400 claims lodged for compensation, starting back in the late 2017. Of these, 183 have been either partially or totally paid, leaving 217 waiting in the system. Of those that have been paid, MPI provides no data as to how many are partially paid and how many are total.

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Fonterra has three alternatives for its China Farms and none are attractive

This is the second part of a two-part series putting Fonterra’s China Farms under scrutiny. The first part is here

In the preceding article I traced the internal thinking within Fonterra as to why Fonterra decided to produce milk in China. The underlying belief was that Fonterra had the necessary expertise but could not play the desired role within China without having in-country production systems.  By late 2009, having lost its key China partner San Lu from the melamine disaster, Fonterra decided to go it alone with an expansion that would become known as the Yutian hub. From there, additional hubs would be developed.

Fonterra decided it would work towards a supply of one billion litres of China-produced milk per annum and this would require about 80,000 cows milking at any one time. There was an assumption that high-quality milk from these farms would sell at a premium to other China-produced milk. Whether or not Fonterra would also undertake processing operations was seen as a question for the future, but with a likelihood this would occur.

Fonterra’s China Farms are a target for asset sales

This is the first of a two-part series putting Fonterra’s China Farms under scrutiny. In this first part, the focus is on the origins of how Fonterra managed to entrap itself in its loss-making China Farms project.

Fonterra’s new leadership team of Chair John Monaghan, CEO Miles Hurrell and CFO Marc Rivers has made it clear in recent farmer meetings that debt reduction is a priority.  All options are supposedly on the table. However, the only way to achieve rapid debt reduction is by selling non-strategic assets. In that context, Fonterra’s China Farms must surely be lined up in the cross wires.

Dairy co-operatives struggle without retained earnings

Currently there are three dairy co-operatives in New Zealand – Fonterra, Westland and Tatua.  The first two are struggling for capital, whereas the third, the tiny Tatua, has been an ongoing success story of prosperity.

The essence of the difference lies in retained earnings and their productive use.

Comparative statistics for the three co-operatives are available for the six years from 2010/11 through to 2016/17. In that time Fonterra retained a total of 70c of capital per kg milksolids, Westland retained 84c, and Tatua retained $4.85. Those numbers spell it out in spades.

Scratching beneath the surface of Fonterra’s accounts

[This article is published today at interest.co.nz and is forthcoming in Farmers Weekly]

Fonterra’s loss of $196 million for the year ended 31 July 2018 has left nowhere for the Fonterra Board to hide. Wisely, it has chosen to take the loss on the chin. In line with this, it has completed the jettisoning of CEO Theo Spierings. Two of its most experienced directors (Wilson and Shadbolt) are also departing.

Fonterra plans to now take stock of the situation before charting a path to the future. However, the latest Fonterra communications at farmer meetings are emphasising debt reduction.

A black and white sort of a guy
New Chairman John Monaghan has been described to me as a black and white sort of a guy. That might be exactly what Fonterra needs; someone who calls a spade a spade and cuts through the public relations massaging that bedevils Fonterra.

China is the key market for New Zealand sheepmeats

[This post first appeared online at Stuff and some of their hardcopy newspapers on 4 September 2018, but alas with the first paragraph edited out and with the title “China demand for New Zealand sheepmeat booming”.  In the process,  key apects of the message were lost. Here is the full version]

Some weeks back I wrote how the New Zealand sheep industry is in a sweet spot, with record prices. I also wrote that China is now easily our largest sheep meat market by volume. Here I share the story of some of the things that have been happening in that market, and how demand for New Zealand sheep meats has potential to further increase.

Methane narrative changes with less need for drastic reduction

[This article was published today (10 Sept 2018) at http://www.interest.co.nz and is forthcoming in Farmers Weekly]

The recent note on methane emissions  put out by Parliamentary Commissioner Simon Upton in late August, and underpinned by a contracted research report written by Dr Andy Reisinger from the Government-funded New Zealand Agricultural Greenhouse Gas Research Centre (NZAGRC), will change the methane narrative. History will look back at Upton’s note as a fundamental contribution that moved the methane debate towards a logic-based science-informed position.

The key message is that short-lived gases such as methane do need to be considered differently than long-lived gases. That does not mean that they are unimportant. But lumping them together with long-lived carbon dioxide and nitrous oxide has led down false pathways.