Ongoing disruption and volatility in dairy, with winners and losers

In the last two weeks we have seen increasing signs of further disruption and volatility in dairy. First, there was good news with Fonterra announcing that they had turned the corner in relation to enhanced corporate profitability. But then, only two days later, there was another decline on the GDT (Global Dairy Trade) auction – this time of 7.9 percent overall and 11 percent for whole-milk powder.

In the meantime, The a2 Milk Company announced that they were almost doubling their previous estimate of profitability for the coming year, triggering another increase in the share price. From the start of November through to 24 November the price rose 60 percent on large volumes. Continue reading

Posted in A1 and A2 milk, Dairy, Fonterra | 8 Comments

China demographics and the two-child policy

China’s recently announced change from a one-child to a two-child policy has led to considerable media comment, including from our own Prime Minister at the New Zealand China Business Summit on 9 November. The media focus has been on the demand this will create for infant formula. However, much of the commentary has lacked an understanding of China’s demographics.

Relaxation of the one-child policy will lead to a short term increase in birth rate but it will only be short term. The reason for this is that the number of women in the child-bearing ages is about to decrease drastically. Continue reading

Posted in Agribusiness, China, Dairy | 6 Comments

Non-seasonal dairy

Recently, I have been writing about what we need to do in New Zealand to climb the agri-food value chain. I have been emphasising the importance of China – there really is no alternative – and the associated need for an integrated ‘NZ Inc’ approach to online selling direct to consumers.

The products we need to be selling through this dedicated and integrated ‘NZ Inc‘ portal (but also linked into the major Chinese online portals) include dairy, meat, wine, fruit, jams, biscuits, chocolate, and bottled water. Indeed almost anything else we manufacture for ourselves that has a shelf life of more than a few days, we can also manufacture for China.

For most products, the big changes we need to make are post-farm-gate. However for dairy we also need to make big changes down on the farm. Specifically, if we want to capture the value-add opportunities, we will need to build non-seasonal capacity into our industry. Continue reading

Posted in Agribusiness, China, Dairy, Fonterra | 6 Comments

The China Business Summit and Online Marketing of Food

On Monday 9 November I spoke at the China Business Summit. Held in Auckland, it was attended by more than 250 New Zealand and Chinese business people, plus some government officials.

I was part of a session titled ‘Maximising our position in China’s global supply chains: where are the opportunities’. The session was chaired David Green, Managing Director of ANZ Institutional The other panel members were Dean Hamilton, CEO of Silver Fern Farms, and Chris Hopkins, CEO of Scott Technology. We each gave an opening address followed by questions. Continue reading

Posted in Agribusiness, China, Dairy, Meat Industry | 3 Comments

Climbing the agri-food value chain

Recently I was asked to address the New Zealand institute of Agricultural and Horticultural Science on ‘climbing the value chain’. The address had two parts: first came a focus on understanding our consumers; second came some specific changes required down on the farm.

In this article, I focus on the first part. Arguably, it is because we are not focusing on our consumers that we are struggling so much to climb out of the commodity world. Specifically, we have to focus on China because that is where most of our future consumers live.

Now to many people that statement about China will be seen as very confronting, and it is a statement that many people will want to refute. But in the long run we do have to confront reality. Continue reading

Posted in Agribusiness, China | 2 Comments

On-farm strategy, tactics, and the Lincoln dairy farm

We all know that the current season is very stressful for New Zealand dairy farmers. What is not so evident is whether farmers are making the right decisions. I am seeing increasing evidence of some poor decision making down on the farm.

In early October, I was driving home to Christchurch from the Mackenzie Country. On the way I passed many dairy farms. I was surprised, particularly in South Canterbury, to see lots of predominantly light green pastures, with dark green urine blobs therein. I was looking at pastures that have not had any nitrogen since last season. Continue reading

Posted in Dairy | 4 Comments

Fossicking in Fonterra’s annual report

The release of Fonterra’s annual report on 24 September coincided for me with a long plane trip back from China. I used the time trying to work out what all the numbers really mean. It was not an easy task.

Fonterra’s annual report – like most reports from large companies –provides masses of numbers. Some are clearly there for public relations purposes. Others are there to meet the required rules of the International Financial Reporting Standards (IFRS). And then there is another set of numbers which Fonterra constructs according to its own rules.

These additional measures are called non-GAAP measures; i.e. ‘non-generally accepted accounting measures’. Fonterra itself acknowledges that these measures are not standard between companies, so comparison must be made with caution. Continue reading

Posted in Agribusiness, Dairy | 7 Comments