Stepping back
Lest We Forget
Blair Rutter leaves WCWGA » PG 21
SERVING MANITOBA FARMERS SINCE 1925 | Vol. 73, No. 46 | $1.75
November 12, 2015
manitobacooperator.ca
Western Canadian wheat class consultations coming to a head
New Zealand grass greener, but milk prices are sour
CGC proposing creating a new milling wheat class
Many New Zealand dairy farmers are reducing inputs and lowering output as they adjust to what they hope will be a short-term slump in milk prices
BY ALLAN DAWSON
BY SHANNON VANRAES
Co-operator staff
Co-operator staff/Hamilton, N.Z.
C
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a n a d a No r t h e r n Hard Red could be the name of a new western Canadian milling wheat class being proposed by the Canadian Grain Commission (CGC). However, both the class and the proposed name aren’t a done deal, say CGC officials Remi Gosselin and Daryl Beswitherick. “We’re going back to industry stakeholders and engaging in discussion to see where they stand,” Gosselin, the CGC’s manager of corporate information services said in an interview Nov. 6. In addition the CGC is proposing changes to the Canada Western General Purpose class, including the name and scrapping the little used Canada Western Feed class. The CGC hopes to reach
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very day, John Fisher loses money. Surrounded by lush, green pastures, some of which have been established for more than half a century, the New Zealand dairy farmer says his cost of production is now above the international milk price and has been for some time. “You’ve got to take a longterm view of these things,” Fisher told a group of international farm journalists here recently. How long can he continue to lose money? “Not too long,” he said. “But all the economists and the experts tell us that the milk price is going to pick up post-Christmas, but they did tell us that this time last year about last Christmas too, so we will see.” Like most dairy farmers in New Zealand, Fisher’s milk goes to Fonterra Co-operative Group, of which he is a member and shareholder. Christened the “Saudi Arabia of milk” by the Wall Street Journal in 2008, New Zealand and Fonterra have long been pointed to by opponents of Canada’s supply-managed dairy sector as a system to praise and emulate. Fonterra is currently the world’s fourth-largest dairy processor and is responsible for about 30 per cent of dairy exports worldwide. As a country, New Zealand accounts for about 2.5 per cent of the world’s milk production. But the island nation’s white gold is beginning to tarnish. With the international price of milk near all-time lows, Fonterra has had to slash its farm gate price for one kilogram of milk solids to NZ$3.85 (C$3.41). In early 2014, Fonterra was offering farmers $8.40 and had originally predicted that farmers would still receive about $5.25 this season. But even $5.25 is below the cost of production for most producers.
A media horde of unprecedented size descends on the farm of John Fisher, as part of the International Federation of Agricultural Journalists annual congress. Photo: Shannon VanRaes
Fisher said his cost of production hovers at NZ$5.30 per kilogram of milk solids, and that takes into account changes he’s made to reduce his input costs. “I mean that $5.30 is the average farmer,” he said. “Some farmers will have lower costs than that, some will have higher.”
High land prices
However, that break-even mark doesn’t take farm debt into account. And in a country where dairy land sells for as much as NZ$65,000 per hectare (C$22,900 per acre), farm debt can be significant. “It’s quite dangerous to talk in averages, but it gives you an idea,” said Jenny Jago, a strategy and investment manager at DairyNZ, New Zealand’s dairy producers’ association. She said while not all dairy farmers are losing money, many are experiencing difficulty following the drop in milk prices. Fonterra — which processes about 90 per cent of all milk produced in the country — recently announced that it will provide farmers a 50-cent-per-kilogram advance or loan, which will be
interest free for two years. Producers will need to begin repaying their loan once milk prices reach the $6 mark. Fonterra director John Mon agh said, “as a board we’ve dealt with some unprecedented volatility and geopolitical events in the last while and we’ve made the deliberate decision to get as much cash as we can to our farmers.” Speaking at the International Federation of Agricultural Journalists annual congress in Hamilton, N.Z. Fonterra preferred to focus on its future investment plans, opportunities in the food ingredients sector and world protein demand, rather than layoffs or recent ratings downgrades. Over the last two months the dairy giant has cut 750 jobs, and for the second time in as many years, credit ratings agency Standard & Poor’s has dropped the ratings on both Fonterra’s long- and short-term debt. When pressed, chief financial officer Lukas Paravicini said this year’s downgrade was the result of changes to how companies
and co-operatives are rated, not to any particular action on the part of Fonterra. “Standard & Poor’s has actually changed the way it rates companies, it has created a new agricultural co-operative segment, and it has introduced stricter metrics, which limit the benefits of subordination,” Paravicini said. “I think what you are seeing in September is a setting in of that. “And yes, 750 people have left the organization over the last two months, which is unfortunate, but let’s be clear, if you put that into the perspective of 22,000 employees, that’s less than two per cent,” he added. Out in the Waikato hill country, Tracy Brown is undeterred by the meagre price of milk. Her faith in Fonterra and its model remains unshaken. “It’s a co-operative, we believe in the co-operative. We’ve always supplied Fonterra and I think that even though the price has gone lower at the moment, we see that it has highs and See N.Z. MILK on page 6 »