Andrew's blog

Down (and up) by the escalator?

The normal saying is, of course, "Down by the escalator and Up by the stairs" referring to market movements.  The escalator is the precipitous fall in prices that we saw in July and early August.  The stairs was supposed to be gradual price increases over the season.

The overnight gDT auction was very strong with the average index increasing by 16.5% and the crucial WMP market increasing by 20.6%.  This is the third in the row and we seem to be traveling back up much more quickly than most commentators considered likely.

Fonterra structure no impediment

by Brian Cloughley

Despite recent commentary to the contrary, Fonterra’s evolving co-operative structure is both a source of significant strength and compatible with its seemingly disparate goals of maximising both Milk Price and profit.

More significantly Fonterra’s structure gives it a competitive advantage in the international market place where the bulk of its products are sold. As an industry, we forget that at our peril.

$3.85 is actually $3.30

Some are calling the announcement on Friday "Black Friday".  That is probably over the top as a price reduction was widely signaled by others.

Time to budget, budget, budget

Today's gDT auction is confirming what we have all come to view as reality - a second year of very low milk prices.  Farmers will make losses as will our dairy syndicates - it is now a question of how much and keeping all stakeholders on side - including the bank.

Reducing milk isn't answer

Although the current Milk Price forecast is below the total cost of production, most farmers should still produce as much milk as they can this season.

Brian Cloughley explains why.

High land values not just a NZ thing after all

It is my personal view is that NZ dairy farm land values are too high - and are supported by too much debt.  When the milk price falls like it is at present that leaves the whole industry including our Co-ops vulnerable.  Collectively buyers need to demand a higher return on our investment so wealth isnt continually bled in favour of those exiting.

Time for a positive view

I attended a rural professionals conference last week - put together by CCH the Agri-Industry summit.  It was well attended and the speakers and their talks were impressive (myself excepted).  A lot of discussion was about the dairy scene with a low milk price and how it is important that farm's accountants provided needed support to their clients.

What US forecasts mean for us

by Brian Cloughley


The six monthly USDA GAIN report on dairy was released last Sunday, and it contains some encouraging forecasts - if you read between the lines. USDA Dairy: World Markets and Trade

Bobby calves down in value - bull beef?

In a meeting with our Meat Company partner they confirmed a semi-dire situation with bobby calf values this spring.  There are three main components to the value of a bobby calf; the veal itself, the skins and the blood.  Unfortunately the outlook for two of these three components is poor.

The day after

Yesterday's GDT auction price saw a 13.1% fall in Whole Milk Powder prices.  We are starting to get to some scary levels with prices at or around US$1700 or $1800 per tonne of WMP.  We haven't seen these levels since the global financial crises in 2008/09 - a far cry from the notional global break even price of US$3500/tonne.