Open Country unveils major expansion plan
Confirming its "immense faith" in the dairy industry, the country's second largest milk processor is embarking on a significant investment programme.
The country's second largest milk processor is optimistic that global demand for dairy products will improve end of this year.
Open Country Dairy is telling farmer suppliers that demand from China will pick up from January.
It expects Chinese consumers to start buying more dairy products, despite the economy moving into full gear.
The Talley's-owned milk processor has announced a final payout of $7.37/kgMS for milk supplied between February and May this year. Suppliers will be paid this month.
Open Country pays its milk suppliers in full four times during the season and chief executive Mark de Lautour describes the May payment period as a good result.
"While at the lower end of our forecast range, it is a good result considering the softening market conditions the industry has been facing," he says.
De Lautour notes that the last Global Dairy Trade (GDT) event was a shocker.
The overall price index dropped 4.3% with flagship whole milk powder prices slumping by 8%.
Open Country do not sell on GDT. However, most contracts are indexed in some way to the GDT results, noted de Lautour.
"The addition of volume onto GDT during a time when few bidders are active is creating a supply-demand imbalance on the platform," he says.
The gloomy GDT result was followed by Fonterra reducing its milk forecast price range midpoint by $1/kgMS.
De Lautour believes this has sent a worrying signal that low market pricing may be with us for a bit longer.
But he says Open Country still sees global demand improving, particularly from China, from January 2024.
"This is consistent with what we have been communicating at our supplier meetings.
"However, the upturn will now be from a lower base following the recent GDT reduction."
Open Country is still forecasting a higher milk price than Fonterra's $7 mid-point for the rest of the year. For milk supplied between June and September, Open Country is forecasting a milk price range between $7.25 and $7.55. For milk supplied in October and November it has a forecast range of $7.30 to $7.70.
De Lautour says they don't believe that a significant turnaround in the Chinese economy is required to improve their purchasing behaviour.
However, he admits that the economic performance from China remains well below expectation, and some serious stimulus is required. "We are now seeing different perspectives from milk processors for the coming season and their respective views on milk price.
"While we can never guarantee our predictions are right, we continue to present what we see in front of us, operate very conservatively, efficiently and do not have excess unsold inventory."
De Lautour says this season will be "extremely tough" and urges farmers to manage their running costs and capital spend diligently.
"Cash is king and I trust our payment model will provide you with a working capital/overdraft advantage during these tougher times."
Farmers appear to be backing the Government's recent Resource Management Act (RMA) reforms announcement.
For the first time, all the big names in agricultural drone technology are being brought together under one marquee at the National Fieldays.
Fonterra has announced an improved third quarter performance – with a profit after tax of $1.15 billion, up $119 million on the same period last year.
The Fieldays Innovation Awards competition has attracted a diverse and impressive array of innovations from across the primary industries, highlighting the growing importance of technology shaping the future of farming.
Coming to the fore following the carnage of Cyclone Gabrielle, Starlink became well known for providing internet access even in NZ's most inaccessible places.
From this winter farmers will have a greater choice of feed types and blend options than ever before, thanks to Farmlands' purchase of animal nutrition company SealesWinslow.
OPINION: The Free Speech Union is taking this one too far.
OPINION: New national data from The Drug Detection Agency (TDDA), a leading workplace drug tester, shows methamphetamine (meth) use is…