Tag Archives: dairy industry

NEW ZEALAND – South Island Dairy Event – Challenging The Future – June 24, 2011

NEW ZEALAND – There’s no doubt this year’s been a positive one for most in the dairy industry, but there is a lot on the horizon for farmers to keep their eye on. Helping them to see the bigger picture will be presentations and discussion at this year’s South Island Dairy Event (SIDE) conference on June 27 to 29 at Lincoln University near Christchurch.

The “Challenge your future” theme of SIDE will cover many of the concerns facing the industry now and into the future. Organising committee chair Simon Mackle said it will be the ideal place to bring some of those issues forward for discussion, and he’s hoping for a big farmer turnout this year.

Some of those challenges farmers need to be aware of are external political and economic influences, and sustainability in resources like people, as well as environmental sustainability including climate change.

“As an industry, and as individual farmers, we have to be increasingly aware of the environmental impact of farming, and what we have to do to still have our families farming in 50 year’s time. At the same we have be conscious of meeting the consumers needs and public expectations. What we do to attract and retain new generations into the industry also needs to be aired.

“Many of the global economic fluctuations are things we can’t change, but being aware of the climate we operate in and what’s going on beyond the farm gate helps each of us with long-term decision making.”

Having speakers and discussion forums to address just some of those concerns assists to understand the issue better, hear new ideas, focus the thinking, and make better-informed choices. “If we don’t talk about these things and plan our own future we lose control of our own direction.”

But as well as looking at what is facing the industry, challenging your future is also looking at what individual farmers can do to challenge themselves.

“So it’s the perfect opportunity for all farmers to take some time out, assess what we’re doing well, where there’s room for improvement and what we need to do next. And as well as stimulating the brain, farmers tell us it’s a great chance to chat with people and have a good time.”

“We’re also looking forward to having the event at Lincoln, something that will help the Christchurch area economically,” Mr Mackle added.

As always, SIDE has secured top speakers, this year including All Blacks coach Graham Henry talking about high performance leadership and Finance Minister Bill English on the importance of dairying to the New Zealand economy. Other keynote speakers address sustainability, climate change, and world macroeconomic conditions and trends, while a panel discussion looks at how South Island dairy growth can be sustainably managed.

SIDE Workshops have traditionally been popular, but new this year are some with a longer format and extended presentations prior to open discussion. Thirty-one topics across five workshop sessions over three days range from career progression to employment law and understanding financial statements, to wet weather management and OAD milking and low cost grazing systems.

Information presented at Business SIDE 2011 is pitched at owners, sharemilkers and equity partners looking to improve the governance, strategy and risk management of their businesses.

More than 400 registrations have already been received for this year’s event, and organisers are encouraging farmers to register promptly and avoid disappointment, as venue capacity will limit numbers.

SIDE 2011 is on 27-29 June 2011 at Lincoln University, Christchurch.

Full registration is $290 (including GST) with a discounted rate of $265 if more than one registration is received at the same time from the same farm. Business SIDE is an additional $100 with a full registration.

A copy of the programme and registration form can be downloaded from http://www.side.org.nz

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CHINA – China Dairy Has Lowest Quality Standards – June 20, 2011

CHINA – China’s dairy industry has the lowest quality standards in the world and much of the blame is down to the large companies that dominate it and the rock-bottom prices they pay farmers for raw milk, industry experts told China Daily.

“Milk processors and farmers all know that the problems of low protein content and high bacteria counts in milk are easy to solve with money but they have instead reduced investment because of the low profit margins,” said Wang Dingmian, the former vice-chairman of the Guangdong Provincial Dairy Association.

Mr Dingmian told China Daily on Sunday that, if cows are fed enough, the protein content of the milk they produce would rise within a week. He said dairy farmers have instead reduced the amount of feed they give their animals because of the low price they get from the big dairy companies for the milk they produce.

The high bacteria count in milk is also caused by insufficient capital investment.

“The prolonged duration and high temperature during milk processing has caused the multiplication of bacteria in the milk,” he said.

China relaxed its national milk quality standards in 2010, increasing the maximum limit of bacteria acceptable in raw milk from 500,000 per milliliter to 2 million per milliliter and lowering the minimum requirement for protein content from 2.95 grams per 100 grams of milk to 2.80 grams.

Statistics show that international standards for protein content call for 3 grams per 100 grams of milk. The acceptable amount of bacteria in raw milk in Europe is 100,000 per milliliter.

“The revised standards for raw milk, normal-temperatured milk and pasteurized milk were drafted by two Chinese dairy giants – Mengniu Dairy Co Ltd and Yili Industrial Group,” Mr Dingmian said.

Food safety experts claimed the dairy giants helped ensure there were looser standards in place because some of their branch plants could not meet higher standards.

“It’s common that branches don’t keep up with the standards of the parent company,” said Sang Liwei, a food-safety lawyer and the China representative of the NGO Global Food Safety Forum.

In April, 251 children at Yuhe township primary school in Yulin, Shaanxi province, fell ill after drinking school milk manufactured by one of Mengniu’s local plants in the province. Test results released later said the milk met China’s national standards.

“This shows the national standards for milk quality are imperfect,” Mr Liwei said.

“A lot of bacteria in milk may mean microbiological problems occur more easily,” Mr Liwei said. “If companies handling the milk do not strictly follow procedures for the storage and transportation of the milk, there will be food safety incidents.”

Mr Dingmian suggested that a flexible policy be brought in under which high prices are paid to farmers for high-quality milk, so farmers are motivated to ensure their farms produce better quality raw milk.

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CHINA – China’s Chief Vet Meets Fonterra CEO – June 16, 2011

CHINA – On 31 May 2011, Chief Veterinary Officer Yu Kangzhen met with New Zealand Fonterra Co-operative Group Global CEO Andrew Ferrier. They exchanged views on matters related to strengthening cooperation in the field of dairy industry.

Mr Kangzhen said he greatly appreciated the development of dairy cooperation between China and Fonterra, acknowledging the increase in NZ dairy exports to China.

Mr Kangzhen said that NZ could continue to help China in many ways:

  • Cooperation in supervision over quality and safety of fresh milk
  • Exchanges in breeding and improvement of dairy cows
  • Technical cooperation in quality and safety of fresh milk production
  • Demonstrations of large-scale dairy cow farming
  • Strengthening of dairy farmer training and technical skills

Mr Ferrier agreed with what Mr Kangzhen said, and noted that Fonterra would have closer cooperation and coordination with various authorities and regions through joint efforts for greater achievements.

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AUSTRALIA – Future Dairy Industry Is In Good Hands – June 07, 2011

AUSTRALIA – Policies, regulation and decision making for the dairy sector of tomorrow is in good hands now the pilot Developing Dairy Leaders Programme has been completed.

A group of 15 young people from across Australia (listed below) completed the programme which involved a four-day residential skills development programme in Melbourne with state and national industry leaders and time in Canberra learning about advocacy and policy development at a national level.

The programme, developed by Australian Dairy Farmers (ADF) and Dairy Australia and delivered by the National Centre for Dairy Education Australia (NCDEA), aims to build on the leadership skills of people aged 18-30 who are committed to the dairy industry and have been identified as potential future leaders.

Throughout the programme participants learned to articulate, present and debate ideas, provide advocacy and representation and participate as a member of a board. The group was also given media training and now know how to lead community or industry organisations and balance work and professional development. Participants have also gained formal accreditation through the NCDEA as a result of the programme.

Gippsland participant Sally Pate said the programme provided an in depth look into the operations of the Australian dairy industry and the many leadership avenues available.

“The media training provided throughout the programme has helped me develop some key skills in how to present myself and communicate more effectively,” Ms Pate said.

Ty Maidment, from Meadows in South Australia, said the program had helped him develop his leadership and networking skills and strengthen his knowledge of the overall industry.

“It’s been a great opportunity for me to learn about industry board structures, corporate governance and government related issues and I’ve been able to hone in on my public speaking skills. It’s definitely going to help me in the future in the industry and open up different options for me.”

ADF Vice President Adrian Drury said the programme was a key activity in supporting the development of the dairy industry’s state level leaders and the dedication and willingness of participants to put something back into their industry was great to see.

“I have met the participants of the Developing Dairy Leaders Programme and believe them to be a group of young people who are more than capable of responding to any challenge thrown at them, leading our industry and staying true to themselves,” Mr Drury said.

Dairy Australia managing director Ian Halliday said the course had attracted a group of enthusiastic and passionate young people from the industry.

“It is very encouraging to see a group of young people so keen to build on their dairy careers, which just goes to show the future of our industry, is in extremely good hands,” Mr Halliday said.

The programme was developed in response to the Australian Dairy Industry Council (ADIC) Dairy Leadership – An Industry Blueprint 2010-15, which identified that 200 leadership roles are required across the industry – 40 new people each year.

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AUSTRALIA – Strong Platform For Dairy Growth – May 23, 2011

AUSTRALIA – Positive economic indicators and widespread favourable seasonal conditions would appear to give many parts of the Australian dairy industry a platform for growth, according to the 2011 Dairy Australia Situation and Outlook report released last week.

Operating conditions for most in the Australian dairy industry have improved dramatically in 2010/11 and national milk production has been maintained with a marginal gain of less than one per cent taking the total to 9.1 billion litres. However, varying price signals and demand outlooks highlight significant regional differences.

“South eastern Australian dairy farmers are in a good position, but this has not yet translated into strong growth intentions”, Dairy Australia managing director Ian Halliday said.

“A more sustained period of reliable returns for farmers is required before we can expect to see significant investment in herd growth or infrastructure.”

The Australian market has represented a safe haven for the dairy industry in recent years, in contrast to the more volatile international market. However, with increasing pressure on margins, manufacturers will be carefully assessing the relative returns and opportunities for growth represented by the domestic and export markets.

“While the initial cuts to private label retail dairy product margins have been absorbed by the major retailers, the dairy industry has raised concerns about the long term impact on the profitability of the fresh milk supply chain if the discounting is continued,” Mr Halliday said.

The international dairy market has enjoyed a strong price recovery in 2010/11 with the combination of good demand from the developing markets led by China and Russia and the general weakness of the US currency. This delivered higher farmgate prices to Australian farmers. For exporters however, the benefits of higher commodity prices have been offset by the strong Australian dollar.

“Farmgate milk prices for 2011/12 are expected to open higher than last year, with the full year price in line with the current season, which is good news for southeast coast farmers,” Mr Halliday said. “The Australian dollar is a risk to this price outlook should it continue to strengthen ahead of the currencies of our competitors and customers.”

The annual report analysed a range of factors impacting the dairy industry, and pointed to high international commodity prices, the global economic recovery and robust growth in Asia as cause for optimism.

“Overall, the industry’s position has improved with steady demand growth in key markets such as China and South East Asia”, Mr Halliday said.

Despite initial concerns about the effect of the Japanese disasters and Middle East unrest on dairy consumption, the demand for imported product in those regions appears to be increasing.

“The international market now appears to be consolidating at relatively high levels, with far less price volatility than has been experienced in the past 3 years,” Mr Halliday said.

However, some economic uncertainty around the US economic recovery and the sovereign debt issues facing some European Union member countries remains. Economic growth and dairy trade will instead be focused on developing countries.

The report highlights limited substitution of lower priced vegetable oils and proteins, despite the sustained higher dairy products prices. Rising oil prices have contributed to increased volatility in vegetable oil markets, decreasing the attractiveness of these alternatives and consumers have shown a strong preference and willingness to pay for premium products using dairy-based ingredients.

At the farm level, the larger south eastern industry ― based in Victoria, the Riverina, South Australia and Tasmania ― is enjoying arguably the best conditions for a decade, with a stable international market, competition for suppliers and good seasonal conditions. While the northern and western industry are recovering from extreme weather conditions and dealing with uncertainty created by ongoing plant closures and private label milk discounting.

Looking further ahead, Mr Halliday believes policy settings around continued access to water and the impact of any carbon pricing schemes will be important drivers of the Australian industry’s future competitiveness and growth prospects.

The ability of the industry to attract, develop and retain people will also be important drivers of the industry’s future sustainability and development,” he said.

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AUSTRALIA – Australian Dairy Industry – Growth In 2011 – May 2011

This Dairy Situation and Outlook report, by ABARE, provides a clear, timely picture of what is happening in the Australian dairy industry and expectations for the future.

The industry in 2011 – a platform for growth?

Operating conditions for most in the Australian dairy industry have improved dramatically in 2010/11. However, differences in price signals and demand outlooks highlight significant regional differences.

In 2011, the industry’s position has continued to improve. Global economic recovery and strong regional growth has underpinned steady demand expansion in key markets, while lower-than expected international supplies saw dairy commodity prices rise sharply in US dollar term through 2010 and into early 2011.

While the benefit of higher commodity prices for Australian exporters has been constrained by the strong Australian dollar, farmgate prices for southern producers have improved strongly in the 2010/11 season.

Improved milk prices, combined with low grain prices and generally favourable seasonal conditions have provided southern farmers with the best production conditions for more than a decade. In some regions, the excessively wet conditions have actually curtailed feed production and herd productivity.

While cash flows have generally improved, this has merely enabled many producers to restore their financial positions following the shocks of the previous two seasons, while the finance sector is also now generally operating with much tighter controls on debt exposures.

Milk prices in southern regions will finish the 2010/11 season close to an average of $5.50 per kg milk solids. Based on current indications, it is expected that milk prices in these regions over the full 2011/12 season will be close to these levels. Opening prices announced by manufacturers should be stronger than the previous season’s openings, when there was less certainty about the strength in recovery of world prices.

 

Figure 1: Indicative farmgate price vs average export returns

The 2011/12 opening farmgate milk price announcements will again be important signals for farmers assessing short-term actions regarding their dairy herd size and composition and their longer term confidence in the industry. The outlook for indicative southern farmgate milk prices, based on current commodity price and exchange rate expectations is for an opening price range of $4.60 to $4.90 per kg MS up from $4.30 to $4.60 per kg MS in 2010. This implies a full year average price range between $5.10 and $5.50 per kg MS – similar to the current season.

International dairy market fundamentals support this price outlook – however, the wider global economic situation remains a threat to the stable market. Currency movements – in particular the strength of the Australian dollar – pose the major threat to the full year price expectations being realised.

The low growth outlook resulting from the uncertainty facing many producers and a slow build in milking cow numbers will sustain the intense competition for southern milk supplies, due to increasing export demand, the need to fill factories and improve efficiencies as well as support future expansion plans.

In northern states, the lingering effects of record rainfall and widespread destructive flooding in most regions of Queensland and Northern NSW will affect the recovery in herd production and feed supplies for a proportion of producers. At the same time WA farmers are dealing with drought and some uncertainty in the processing sector.

While farmgate prices remain stable for many producers, the changes in supply of sizeable supermarket private label milk products is increasingly disruptive for processors and suppliers alike. Increased exposure for many producers to lower milk prices for a portion of their milk supply – reflecting supplies of milk in southern Queensland and NSW that are in excess of processor requirements.

This adds to margin pressures being experienced due to the lack of wholesale price improvements in the retail market. As a result, processors are building in sharper signals which will limit further growth in new supply contracts.

While the external operating conditions for most farmers are positive, overall confidence levels are generally unchanged. There are distinct regional differences, with Victorian regions more positive about the industry’s future and northern and Western Australian farmers increasingly pessimistic. The recent volatility associated with the industry sustains caution in the outlook for many farmers who are seeking a platform of reliable returns before investing further in herd and infrastructure expansion for a longer term future.

Current conditions offer significant opportunities, and there are many examples of producers that continue to adapt and galvanise their production systems and grow their businesses to take advantage of the environment given the strong global demand for dairy products.

Australian market

The Australian economy continues to outperform most in the developed world with GDP growth estimated at 4.25 per cent for 2011/12. However, this healthy growth rate reflects a two-speed economy – with the mining and resources sector continuing to drive the currency higher and the unemployment rate lower. For other sectors such as the dairy industry, the competition for skilled labour and the impacts on international competitiveness are the less positive side-effects of this concentrated mining boom.

While unemployment is low and interest rates are on hold, Australian consumers remain cautious, saving in preference to spending and seeking out value. Rising household fixed costs such as servicing the mortgage, utility and insurance costs, and now petrol prices are limiting the amount of discretionary spend. As a result, eating out is losing some ‘share of stomach’ to take-home retailers.

The major supermarkets have supported this trend by ramping up their private label offerings for “every day” purchases at discounted prices. As a staple, milk has been a key product in this strategy, with price cuts announced at the end of January particularly impacting the higher-margin modified milk category. While still too early to assess the impact of the change, it seems there has been a switch toward private label and an increase in supermarket share of milk sales.

While the initial cuts to private label margins have been absorbed by the major retailers, the dairy industry has raised concerns about the long term impact on the profitability of the fresh milk supply chain if the discounting is continued.

The Australian market has represented a safe haven for the dairy industry in recent years, in contrast to the more volatile international market. However, with increasing pressure on margins, manufacturers will be carefully assessing the relative returns and opportunities for growth represented by the domestic and export markets.

World market

The international dairy market has enjoyed a strong price recovery in 2010/11 with the combination of good demand from the developing markets led by China and Russia, while product supply has been limited due to shortages from southern hemisphere exporters.

Figure 2: International dairy commodity prices

The general weakness of the US currency has contributed to higher commodity prices, supporting import demand by making dairy products more affordable in most local currencies.

Product prices peaked in early 2011 at levels below those reached in 2008, retreating due to buyer resistance with the expectation of better product availability from the European production peak and uncertainty surrounding the impact of Middle East unrest and Japan disasters.

The market now appears to be consolidating at relatively high levels, with far less price volatility than has been experienced in the past 3 years. The uptake of futures products has been slow, but the market has become more accustomed to the price signals generated by globalDairyTrade’s more frequent auction events.

There has been limited substitution of lower priced vegetable oils and proteins, despite the sustained higher dairy products prices. Rising oil prices have contributed to increased volatility in vegetable oil markets, decreasing the attractiveness of these alternatives. It seems premium products that are utilising dairy-based ingredients are less likely to be substituted as consumers have shown a strong preference and willingness to pay for these superior items.

World supply

World milk supply has improved in 2010/11 after the effects of price shocks in Europe and the US curtailed output. EU milk output has been well ahead of the prior year, with stronger growth in the past six months, while US monthly total milk lows have been more than 2 per cent above the prior year since the middle of 2010. Despite improved consumer demand in both regions, export availability has also increased.

New Zealand milk production growth is expected to finish the 2010/11 season not more than 3 per cent higher than the prior year, again due to drought conditions affecting the North Island. Production is expected to at least return to the longer term average of 2 to 3 per cent in 2011/12 as farmers respond to stronger milk payouts.

South American production has rebounded strongly since late 2010, however available export volumes are limited somewhat by stronger demand within the continent. Brazil is now a net importer of dairy products, while Argentina’s strong growth is to a large extent a recovery from the effects of poor weather. Their participation in international trade will be heavily dependent on whether or not the government re-imposes export taxes in an effort to curb domestic food inflation.

Figure 3: Incremental annual changes in production (millions of litres)

The farm sector in 2011

The Australian dairy industry faces very different circumstances regionally and in terms of market exposures. The southern industry is enjoying arguably the most favourable conditions for a decade, with good export demand growth, competition for suppliers and favourable seasonal conditions. There appears to be a platform for returning to growth with farms re-starting in Northern Victoria, and manufacturers actively encouraging increased output.

In Queensland, and northern New South Wales and Western Australia the industry is geared toward domestic fresh milk supply – a stable market but with limited growth prospects. The uncertainty created by ongoing plant rationalisation and the changeover in increasingly sizeable private label supply contracts for processors is undermining the confidence of farmers in the region and providing limited opportunities for growth into the future.

The polarisation of conditions facing dairy producers around the regions remains a strong feature of the farm sector in 2011, although the differences are virtually all due to the nature and security of milk pricing and supply arrangements. With the exception of Western Australia, all regions will in 2011/12 benefit from wet conditions and plentiful feed supplies at affordable costs.

Southern regions have enjoyed abundant rainfall that has filled water storages servicing irrigation regions. In some areas this has created production difficulties due to water-logged pastures and herd health problems, limiting growth in output for the current season.

Nevertheless conditions heading into the 2011/12 season are highly favorable, with a good home-grown feedbase, guaranteed access to irrigation water, cows in good condition and continuing export market demand. In general, confidence levels were slightly higher in southern regions compared to this time in 2010, with producer intentions to increase herds by 2-3 per cent over peak herd numbers in 2010/11 and stronger investment intentions.

Sentiment is far less positive in northern states and WA with the perceived threats to the sustainability of farmgate prices in 2011/12.

Nationally, ABARE estimates indicate average farm cash incomes in the current 2010/11 season of $100,000 – up nearly 30 per cent on last year’s $77,300 – and around 9 per cent up on the ten-year average of $91,000. The percentage of farms with a negative cash income has fallen slightly from 24 per cent to 22 per cent.

Average farm business profits are projected to lift from a loss of $1,400 last year to a marginal $5,000 profit. Meanwhile, the percentage of farms with a farm business loss has also fallen slightly from 59 per cent to 55 per cent.

Figure 4: Attitude to the future of the dairy industry

Milk production outlook

Milk production in 2010/11 will post a marginal gain of less than 1 per cent over the prior year to provide close to 9.1 billion litres. Production in northern regions has been constrained by flooding and cyclones in early 2011. In southern regions feed quality and cow numbers have been the major constraints on production growth.

The outlook for 2011/12 is for a gain of 1 to 2 per cent based on herd growth intentions, and the likely positive margins for southern producers over feed costs. Southern regions should post strongest growth, while some further contraction can be expected in northern regions in response to differential milk prices available.

Should these intentions be realised, Australian milk production for 2011/12 would reach 9.25 billion litres. However, there may be some further upside in this forecast, should seasonal conditions continue to be favourable in most regions.

Looking further ahead however, three year production intentions from the 2011 survey showed a further decline in the medium-term growth expectations compared with the 2010 survey. Based on these expectations and assuming reasonable seasonal conditions and prices, milk production could range between 9.2 and 9.5 billion litres by 2013/14.

While sustained milk prices and favourable climate for the majority of producers provides potential for stronger growth into the medium term, there are challenges to expansion. The policy settings around continued access to water, the impact of any carbon pricing schemes on competitiveness and the ability of the industry to attract, develop and retain people will be important drivers of the industry’s future sustainability and development.

 

Figure 5: Proportion of farms intending to grow production in 3 years time

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AUSTRALIA – 2020 Vision – The Dairy Industry’s Future – May 13, 2011

AUSTRALIA – The United Dairyfarmers of Victoria (UDV), the dairy commodity of the Victorian Farmers Federation (VFF), will gather in Gippsland from 19 – 20 May to discuss the industry’s vision for the future at its 36th Annual Meeting and Conference.

UDV President Chris Griffin said the Conference, to be held at the Esso BHP Wellington Entertainment Centre in Sale, Gippsland, would be themed 2020 Vision: the Victorian dairy industry and would provide a platform for dairy farmers to explore future issues for dairy production and decision making.

“The UDV Conference will offer dairy farmers the opportunity to hear from a range of leading speakers on issues that are contemporary to the dairy industry, including President of the Federated Farmers of New Zealand Don Nicolson who will speak on the effects of the emission trading on New Zealand dairy farmers.

“As well as having the opportunity to participate in debate of resolutions, attendees will also enjoy a series of workshop sessions covering a broad range of topics. For example the issues surrounding market competition will be explored, which is a topic of growing importance in light of current supermarket activities.

“The sessions will also look at the role of regulation, developing issues like carbon tax and we will spend time on future dairy leadership issues including the future structure of dairy farmer representation in this state. All of this will be done within the framework of strengthening the UDV/VFF policy advocacy role for Victorian dairy farmers.

“I encourage every dairy farmer to enjoy a few days away from the farm to rest and recharge the batteries in Gippsland at this year’s UDV Conference,” Mr Griffin concluded.

For further information about the UDV Conference, or to access the online registration form, visit http://www.vff.org.au or phone VFF Member Services on 1300 882 833.

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