No easy ride for struggling sheep farmers
Stubbornly high farm input costs, a slow Chinese recovery and a flood of Australian lamb onto the global market are the main factors contributing to the tough times being faced by NZ's sheep farmers.
Demand for dairy products in China hangs on what further steps the Chinese Government takes to stem the spread of coronavirus.
Westpac market strategist Imre Speizer says there are risks to near-term demand which could be affected by coronavirus developments.
The steps that China has taken to contain the outbreak – such as extending the Lunar New Year holiday period, and limiting the movements of people – has kept many factories closed.
Speizer told Rural News has meant less demand for their inputs, including milk powder.
“These disruptions might prove to be short-lived, but that depends on what further steps the government might take to contain the spread of the virus.”
Last week, global prices tumbled; whole milk powder price dropped 6.2% to hover just above the US$3000/MT mark.
Speizer says the obvious explanation for last week’s decline is uncertainty regarding the coronavirus outbreak.
“Financial markets have been reacting to those developments for around two weeks, with global equities, interest rates, industrial commodities and risky currencies falling sharply,” he says.
“Moreover, whole milk powder futures prices had been falling since late January. It was unsurprising, then, that last week’s GDT auction followed suit.”
The forecast milk price also hinges on supply coming out of New Zealand: persistently dry conditions in the upper North Island and eastern South Island could see milk production fall short of what the market is expecting.
Fonterra figures show in December 2019, the co-op collected 184 million kgMS from farmer suppliers: 0.6% down for the same month in 2018, according to its monthly global dairy update.
Season to date collection was over 909m kgMS, 0.5% down on the previous season.
North Island milk collection in December was 106.4 million kgMS, down 2.5% on last December. Season to date collection was 564 million kgMS, down 0.4% on last season.
Fonterra says December weather had some impact on pasture quality in some northern regions, however grazing crops are doing well, and cow condition remain very good.
South Island milk collection in December was 77 million kgMS, up 2.2% on last December. Season to date collection was 345 million kgMS, down 0.6% on last season.
“Favourable weather conditions across Canterbury continued, allowing for excellent pasture growth rates,” it says.
Westpac is still maintaining its $7.40/kgMS forecast milk price for Fonterra suppliers.
Analysis by Dunedin-based Techion New Zealand shows the cost of undetected drench resistance in sheep has exploded to an estimated $98 million a year.
Shipping disruption caused by Houthi rebels in the Red Sea has so far not impacted fertiliser prices or supply on farm.
The opportunity to spend more time on farm while providing a dedicated service for shareholders attracted new environmental manager Ben Howden to work for Waimakariri Irrigation Limited (WIL).
Federated Farmers claims that the Otago Regional Council is charging ahead unnecessarily with piling more regulation on rural communities.
Dairy sheep and goat farmers are being told to reduce milk supply as processors face a slump in global demand for their products.
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