Why Fonterra accepted defeat in the dairy aisle
OPINION: Fonterra's sale of its consumer dairy business to Lactalis is a clear sign of the co-operative’s failure to compete in the branded consumer market.
Both big farmer-owned fertiliser co-operatives Ballance and Ravensdown lifted prices last week.
Ballance told its farmer customers that the price of its SustaiN product had gone up by $100 to $999/tonne from October 28th. Urea rose by $117 to $960/tonne.
Ravensdown also lifted its N-Protect product price by $100 to $999. Urea moved from $845 to $950/t.
Federated Farmers dairy section chair Chris Lewis told Rural News that farmers are facing price rises on several fronts: staff costs, fuel prices and rates for hiring tradies and contractors.
At the same time, banks are raising interest rates.
He says an $8/kgMS payout "is only keeping up" with the rising costs.
Ballance Agri-Nutrients told farmers that the cost of urea production "is increasing significantly on the back of sharply rising energy costs".
"In the last three months, the import price has increased by close to US$200/tonne and we now need to pass some of these costs on," Ballance sales manager Jason Minkhorst told farmers in an email.
"In addition to energy costs, high global demand for arable crops has squeezed the global supply of nutrients, resulting in pricing volatility that is expected to continue over the coming months.
"Ensuring that you have a reliable and consistent source of sustainable nutrients remains our priority and we will keep you updated through the tail end of spring."
Ravensdown acting general manager customer relationships Gary Bowick told farmers that while spring is in full swing, global commodity trends, international demand for fertiliser and shipping costs have continued their upward swing.
"This has resulted in a necessary adjustment to urea prices," Bowick says.
Lewis points out that there are additional costs to what the store charges for fertiliser.
"Ther'es cartage costs plus spreading costs of between $100 and $300/tonne; growing grass isn't cheap."
Lewis says supplement feed is also costly.
"Buying palm kernel expeller (PKE) which is close to $400 is not a viable alternative either.
"What's the plan? Industry groups have been silent on giving advice."
Last week, Fonterra announced a 40c rise to its forecast milk price midpoint to $8.40/kgMS. If achieved, the milk price would match the record price paid by Fonterra in the 2013-14 season.
The co-operative's new forecast milk price range has been narrowed to $7.90 - $8.90/kgMS.
Fonterra chief executive Miles Hurrell says the lift in the price range is a result of continued demand for New Zealand dairy relative to supply.
Hurrell says it's still early in the season, a lot can change, and there can be increased volatility when prices are high.
