Dairy News april 30, 2013
news // 3
No milk left to sell PAM TIPA pamelat@ruralnews.co.nz
A2 infant formula off to China. PG.09
More milk at lower cost to environment. PG.22
Bringing cow condition back to normal. PG.27
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FONTERRA IS running out of milk to supply global customers following the drought. And Fonterra chief executive Theo Spierings says this is “not the best situation”, “Yes the drought is affecting us,” Spierings told Dairy News. “Volumes are coming off very fast so there is simply no milk available to sell at the moment; it’s limited. “A lot of people are on allocation in the world, so it’s affecting us. If the milk doesn’t come sufficiently then our plants are under-utilised and our customers are being allocated. Not the best situation to be in to be honest.” A drop in milk supply from key exporting countries New Zealand and Australia has spiked global dairy prices. But Spierings points out New Zealand needs to produce milk to benefit from the high prices. “Of course prices are high but if there’s hardly any milk available then you don’t benefit from high prices.” Spierings says the answer is rain and “we brought some more cash to farmers to prepare for next season. This season is over.” He was speaking following a blessing ceremony for the UHT plant building site at Waitoa. Westpac economist Nathan Penny said at a ‘Farming and the Future’ event in Morrinsville that a media report had quoted Westpac as saying there would be no economic effect from the drought. He said this was wrong – this drought had been “massive”. Agricultural production and the downstream processing will be “hit hard,” says Penny. Total costs
Need more milk: Fonterra chief executive Theo Spierings (left) and director policy and advocacy Sarah Paterson at Waitoa last week.
from lost production are estimated at $2 billion. “There is some help on the way, that has come in the form of prices. Milk powder prices have risen 66% in the last five Global Dairy Trade auctions.” Converting those milk powder prices into the farmgate price Westpac sees a ‘6’ in front of the milk price for this season and next season. “Costs from lost production will be about $2billion; if we can get $6 for the milk price, this will add back in $1 billion. Fonterra has upped its payout already; we see another increase in the payout in the not-too-distant future.” Looking beyond the drought into the future, New Zealand is in a good position. Chinese consumption of milk powder has risen 10% every year for the last five years and “the’ve got it from us”. “The challenge is to build ongoing relations to cement our place in the Chinese marketplace as the
leader in dairy. And then we can fend off competitive response that will come.” Until 2020 China will account for a third of world growth, but there will be competition from places like Brazil, Penny says. Minister for Primary Industries Nathan Guy, speaking at the ‘Farming for the Future’ event organised by Westpac, says it was good to see the grass growing again in Waikato. It had looked like the whole region had been sprayed with Roundup during the drought. Westpac head of agribusiness David Jones says the bank will be organising more such events around the country to support farmers in heavily drought-hit areas, with speakers tailored to those areas. @dairy_news
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Drought ‘helped repair rural/urban divide’ THE DROUGHT has helped repair the urban/
rural divide, says Minister for Primary Industries, Nathan Guy. It has shown to city people how much rural communities matter to the economy, he said at the ‘Farming for the Future’ event in Morrinsville. The media did a good job in portraying the difficult times rural communities were going through. “In last few years there’s been a bit of a discon-
nect… over the last few months we had a reality check for urban New Zealand to realise that the powerhouse of this economy is based on primary industries.” A big sector of that is pastoral farmers and they are having a tough time. But he warns that pressure for environmental improvements doesn’t just come from the urban sector anymore but overseas customers. “The market has moved,” he says.
Previously, overseas market visitors would want to see our processing plants and we have the best food safety system in the world. But now they want to know what’s happening behind the farm gate. Nathan Guy