Ups and downs of milk

Milk prices continue to fluctuate, with the latest auction down a little (-1.6%) after recent modest gains.

GlobalDairyTrade10yrto050116

At least some of the reduced returns to New Zealand dairy farmers will be offset by lower mortgage and borrowing rates and lower oil/fuel prices.

 

 

 

 

Ups and downs of dairy prices

After a major decline dairy prices trended back up for four auctions from August, but the trend is negative again after three successive drops.

 

DairyAuctionNov2015

And the 10 year index:

DairyAuction10YrTrendNov2015

After a little hope of recovery more worry for New Zealand dairying and the economy.

Source: Global Dairy Trade

Fourth milk price increase in a row

The latest milk auction prices are up again, the fourth increase in a row following a major slump that began about eighteen months ago. The latest prices increased overall by about 10%. The volume sold is also increasing.

MilkAuction2015-10-06

The price movements over the past ten years:

MilkAuction2015-10-06Trend

There may be some cautious optimism in the dairy industry that a recovery is under way.

Site: GlobalDairyTrade

TPP agreement may be reached soon, or not

There’s reports that the Trans Pacific Partnership agreement may be finalised soon, although other reports say talks have stalled. There’s also suggestions that dairy may not come out of it well for New Zealand, but any improvement on trade conditions would be better than nothing.

NZ Herald: Drugs hold up TPP as talks near end:

The biggest free trade deal in a generation could be reached soon – but wrangling over next-generation drugs has held up progress.

Trade Minister Tim Groser is in Atlanta, with last hurdles in the Trans Pacific Partnership (TPP) including pharmaceutical patents and dairy import limits.

United States negotiators wanted a longer period of market exclusivity for new biological drugs, but that was resisted by Australia and other countries, who had concerns about health care costs.

More affordable versions of drugs are delayed by longer protection periods.

Trade ministers from 12 countries are negotiating the controversial pact, which would cut trade barriers and set common standards for 40 per cent of the world’s economy.

TPP talks began in 2010 but strong public opposition to the deal here centre on concerns about its impact, such as making pharmaceuticals more expensive.

If the deal is not done by tomorrow, there will be one last chance, at Apec in the Philippines in November.

Canada in particular may be happy to leave the final negotiations until after their election which will be held in two weeks (October 19).

Jane Kelsey has just been on Breakfast, looking quite bitter. She said the way the agreement is negotiated in secret is undemocratic. Perhaps all the things being discussed should be put to the New Zealand people via referendum, we’ve shown how well we do democracy with the flag debate. /sarcasm

Kelsey has campaigned strongly against the TPPA (and a number of other things).

Jane Kelsey has an MPhil from the University of Cambridge and a PhD from the University of Auckland. She has worked at the University of Auckland since 1979 and was appointed to a personal Chair in Law in 1997. At Cambridge “left-thinking Marxist scholars … taught her the political theory that … underpins her daily work”.

She is a key member of the Action Resource Education Network of Aotearoa (Arena), and is actively involved in researching and speaking out against the World Trade Organisation, the International Monetary Fund, free trade and corporate-led globalisation.

Kelsey is an outspoken critic of the Trans-Pacific Partnership free trade talks, of which New Zealand is a part.

Bill English just said on Breakfast that it isn’t that secret if dairy and drugs being the final sticking points are being widely discussed.

Milk prices up again

For the third dairy auction in a row prices have risen significantly, this time up 16.5% overall. There’s a way to go before it can be called a recovery but the trend looks promising.

DairyAuctionSep2015

Ten year trend:

DairyAuctionSep2015-10yearTrend

Dairy prices up 14.8%

Just one rise after five months of falls but the latest dairy auction gives a little hope that the steep decline may have bottomed out. 14.8% is a significant turnaround.

Radio NZ reports Dairy price rise after months of losses:

Dairy prices have risen an average 14.8 percent in the fortnightly GlobalDairyTrade auction overnight, ending a five-month run of losses.

It is the first rise in the dairy price index since March.

The benchmark whole milk powder price has risen by 19.1 percent, to $US1856 ($NZ2820.68) a tonne.

The overall average price for dairy commodities has come in at $US1974 a tonne.

The amount of product put up for auction dropped by 9623 metric tonnes offered at the previous auction a fortnight ago to 36,904 metric tonnes.

That gives the dairy industry and the New Zealand economy some hope after a run of bad news.

At least it has temporarily stemmed a depressing decline.

DairyAuctionTrendAug2015

DairyAuction10YrTrendAug2015

Source: GlobalDairyTrade

Japan, Canada and US pressuring NZ on TPP

There are various reports that Japan, Canada and the USA are pressring Tim Groser (New Zealand) to ditch demands for better dairy access to enable a Trans Pacific Partnership agreement to be reached.

Fran O’Sullivan in the Herald: Groser under pressure to cave on TPP:

Japan, Canada and US are united in pushing NZ to ditch its demands for better dairy export access to their protected markets.

Groser is coming under what he labels “intense pressure” to cave in on New Zealand’s demands for better access for dairy exports to three heavily protected markets – Japan, Canada – and to a lesser extent the United States – so negotiators from all 12 TPP nations can quickly nail a deal.

Right now it looks as if Japan, Canada and the US have ganged up on New Zealand with some advance blame-storming singling out Groser in particular as the potential fall guy if agreement is not reached within the separate conversations that have been taking place on the remaining sticking points: cars and dairy.

Another sticking point – biologics – has now been solved, according to informed sources.

The big country gang-up – which is implied through news reports out of Japan and Canada and (more obliquely) through trade journals with strong access to the US Trade Representative’s officials and major business and agricultural lobbies – must be strongly contested.

New Zealand shoukld walk away from the TP rather than cave in to dairy trade protection. If we don’t make significant gains in agricultural trade it’s not worth us reaching an agreement, andf certaily not conceding ground on other issues like intellectual rights and medicines.

Mood of the Boardroom 2015

NZ Herald has published a summary of their annual ‘Mood of the Boardroom’: Dairy and infrastructure top worry lists which shows that business confidence has slipped.

Confidence (out of 5) in:

  • Local economy 2.3
  • International economy 2.54
  • Own business situation 2.99

 The country’s senior business leaders are becoming increasingly concerned about the slowing economy, the Government’s strategy and our reliance on China and dairy exports.

The 2015 Mood of the Boardroom, published today, surveys 110 top corporate chief executives and company directors as well as heads of our leading business organisations.

The results show 75 per cent want to see the Government formulate a Plan B in case the dairy slump continues. Eighty per cent want diversification of the economy accelerated.

Sixty-four per cent of respondents agreed that indicators pointed to an economic slowdown from their own business perspective.

On political performance:

  • Bill English 4.6 (down from 4.75)
  • John Key 4.28 (down from 4.49)

Drops for both is not surprising given the worsening economic conditions and increasing number of embarrassing issues. If this downward movement continues through to the election it will pose re-election difficulties for National.

Jacinda Ardern was rated the most impressive Labour MP for the second year running.

This makes National’s re-election chances less difficult unless Andrew Little and Grant Robertson can gain some credibility in the business world.

More gloomy export news – dairy dive continues

The dive in dairy prices continues, with prices in the overnight global auction falling a further 9.3%.

Radio New Zealand reports: New price shock for dairy products

The benchmark price of whole milk powder took a dive of 10.3 percent to $US1590 per tonne.

The biggest drop in the Global Dairy Trade (GDT) auction was a 14.4 percent tumble in the price of skimmed milk powder.

AgriHQ analyst Susan Kilsby yesterday said increased volumes of whole milk powder being offered for auction were likely to keep prices low.

“Volumes for whole milk powder are up by 75 percent, compared with the last auction, so there’s a lot more product to move through, and certainly a lot of the product didn’t even move off its starting price at the last auction,” said Ms Kilsby.

Strong growth in milk production in all dairy export regions – the EU, US, New Zealand and Australia – was also depressing prices.

That’s a huge increase in volumes, so coupled with softening demand it’s no wonder prices are falling.

The boom will have encouraged more dairying, but large increases in production are happening after the market has crashed, making the problems worse.

More ungloomy export news

NZ Herald have another instalment in their Gloombuster series – Fruit exports surge.

Demand for premium kiwifruit, apples and avocados helps counter weakness in dairy and forest products.

Data out from Statistics NZ showed the value of fruit exports reached an all time high of $2 billion in the year to June, up almost 20 per cent from a year earlier. Wine was another strong performer, up 7.3 per cent to $1.4 billion in the June year.

The performance of fruit and wine wasn’t enough to offset downturns in other parts of the primary sector – dairy exports were down by 24 per cent to $12 billion and log exports were down 11.3 per cent at $3.56 billion – but the data showed the downturn was not universal.

Both higher prices and a greater quantity of fruit exports – up 9 per cent – contributed to the overall rise, Statistics NZ said.

Kiwifruit and apples led the monthly increases, with exports in May 2015 being the highest value recorded for both kiwifruit ($280 million) and apples ($157 million).

Statistics NZ said kiwifruit was responsible for 59 per cent of fruit exports, followed by apples (28 per cent), and avocados (5.7 per cent).

Agriculture, horticulture and viticulture markets all wax and wane.

Agricultural analysts are bullish about kiwifruit as the sector continues to recover from the devastation caused by the Psa virus since its outbreak in 2010.

ANZ, in an analysis of the sector, said New Zealand kiwifruit sector typified many aspects of true “value-add” leading the way in producing and selling a premium offering.

While dairy trade is significant there is far more to the New Zealand economy than milk.

The apple sector is going from strength to strength with new plantings, by area, increasing by 5 per cent a year. NZX-listed Scales Corp – the country’s largest grower, packer and marketer of apples – said its export grade apple volumes were about 13 per cent ahead of prospectus forecasts.

The higher percentage of both premium apples and percentage of sales to Asia and “near” markets is expected to result in a higher average price per carton than prospectus forecast, said managing director Andy Borland.

Both higher volumes and higher prices.

The Opposition in particular and the media generally put a lot of focus om narrow negatives. It’s good the see the Herald lookig at the wider export economy.