Surviving the dairy downturn

In recent weeks the short term dairy outlook has turned from bad to awful. Fonterra’s recently revised milksolids price estimate of $4.15 for the current 1015/16 season has already been overtaken by events, and is once again looking decidedly optimistic.

I now see a figure of about $3.90 as being more likely, but still with plus or minus 40c around that. Even more important, no longer can we ignore the likelihood that dairy prices are going to stay low for at least the first half of the 2016/17 dairy season, and possibly for all of that season. Continue reading

Posted in Agribusiness, Dairy, Fonterra | Leave a comment

A2 cows are the future

(As with many of my posts, this was first published at .   It is also forthcoming in NZ Farmer as one of my regular fortnightly columns there.)

Towards the end of 2015 there was a massive re-assessment of A2 milk on the New Zealand and Australian stock exchanges. The shares of ‘The a2 Milk Company’ (abbreviated hereafter to their NZX code of ATM) closed the year at almost four times their price back in May, and with market capitalisation at $NZ1.35 billion.

For a few heady hours the capital value was close to 1.7 billion – more than Trade Me and almost double The Warehouse. Since then the shares have settled back somewhat, but still showing a three-fold gain from 12 months earlier.

In essence, the drive was fuelled by several major Australian institutional investors building their stakes, and then hundreds of smaller investors climbed on board. This was in response to ongoing good news stories from ATM, based on sky rocketing sales of infant formula in Australia and China, with this news particularly well reported in the Australian media. Continue reading

Posted in A1 and A2 milk, Dairy | 12 Comments

The year ahead for agri-food

The year ahead is going to be challenging for many of New Zealand’s farmers. There are no quick solutions for either dairy or sheep. Amongst the bigger industries, only kiwifruit and beef have a positive outlook. The wine industry could go in either direction this year. Among the smaller industries, manuka honey could be the one to watch.

The year has started badly for dairy, with whole milk powder down 4.4% at the early January auction. For me, this number came almost as a relief. It could have been a lot worse. Continue reading

Posted in Agribusiness, Dairy, Meat Industry | 5 Comments

Agri-food good news for 2015

Recently I was asked by rural insurer FMG to identify for their social media, in no more than 90 words total, three good news stories from 2015. At first I found that a little challenging as it has not been an easy year for our major agribusiness industries. However, there are many good news stories out there to be found.

The three examples I finally chose are all examples of industries and companies that are striding ahead based on the application of new scientific knowledge. Continue reading

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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