Early Bird I Friday July 12th 2024

Shareholders approve crucial funding for Synlait Milk, dairy industry braces for possible market downturn, and stud breeders urged to contribute to ground-breaking beef research. Welcome to Proud Country's Early Bird - The top things you need to know that impact rural New Zealand delivered to you by 5am, because who doesn’t need better chat beyond the weather! Shareholders approve crucial funding for Synlait Milk Dairy processor Synlait Milk has gained approval for a critical $130 million loan from its largest shareholder, China’s Bright Dairy. The decision came during a meeting in Dunsandel yesterday afternoon, where minority shareholders voted in favour of the financial arrangement. A2 Milk, which holds nearly 20% of Synlait Milk, announced its intention to back the loan yesterday, after remaining tight lipped in the lead up to the vote. This declaration influenced the outcome, as Chair George Adams noted that initial proxy votes, cast before A2 Milk's announcement, showed 57% in favour. Due to NZX regulations, Bright Dairy which owns 39% of shares, was unable to participate in the voting process as a related party. The approved loan allows Synlait to meet an urgent $130 million debt obligation to its banking partners, due at the beginning of next week. The terms of the loan extend for 12 months, with an option to renew for an additional year. Synlait is currently developing plans for a capital raise, partly to address $180 million in bonds maturing in December. More details about this initiative are expected to be revealed in August. While Synlait's Dunsandel complex and its investment in Dairyworks remain profitable, the company faces challenges with its recently constructed nutrition facility in Pōkeno. This state-of-the-art $400 million plant is currently underutilised and has yet to achieve profitability. The dairy processor has undergone numerous changes in management and directorship, along with multiple earnings downgrades. George Adams, who joined as an independent director in March, assumed the role of chairman following the departure of John Penno, Synlait's co-founder and board-appointed director. Earlier this year, Synlait negotiated an extension for a $130 million debt repayment. This came after the company reported a $96.2 million loss for the first half of the financial year, ending January 31, due to asset impairments. Dairy industry braces for possible market downturn Dairy industry analysts are anticipating a decline in Global Dairy Trade prices during July and August, following a 6.9% drop in the GDT price index earlier this month. Experts suggest that a further 5% decrease in whole milk powder prices could lead to downward revisions in farmgate milk price forecasts. Stu Davison, senior manager for global market insights at High Ground, indicates that a whole milk powder price of US$3050 per tonne would trigger a revision in farmgate milk price predictions. At the recent auction, whole milk powder fell 4.3% to US$3218 per tonne. Analysts are drawing comparisons to the winter of 2023, when whole milk powder prices on the GDT platform decreased by 20% between late June and mid-August. This led Fonterra to reduce its farmgate milk price forecast range by one dollar, lowering the mid-point from $8 to $7. New Zealand-based analysts have generally forecasted milk prices higher than Fonterra's current mid-point of $8.00. However, the recent GDT auction results have prompted a reevaluation of these predictions. Westpac chief economist Kelly Eckhold now views his $8.40 forecast as having equal upside and downside risks. ASB senior economist Chris Tennent-Brown maintains his $8.35 milk price forecast for now, stating that multiple large price falls would be necessary to warrant a revision. He notes that New Zealand dollar exchange rates remain stable, underpinning dairy prices. Looking ahead, analysts expect milk fat markets to remain tight, with butter and anhydrous milk fat prices likely to stay above long-term averages despite recent declines. However, powder prices are anticipated to see the largest decreases, with whole milk powder leading the downward trend. As New Zealand approaches its spring milk production peak, increasing volumes of whole milk powder will be offered on the GDT platform. This, combined with weak demand from China, suggests a high likelihood of continued price slides in the coming months. The dairy industry now watches closely as these market dynamics unfold, with potential implications for farmgate milk prices and the broader New Zealand agricultural sector. Rural businesses hit hard by NZ Wagyu's financial collapse The recent liquidation of Christchurch-based NZ Wagyu could leave creditors with a nearly $8 million shortfall, according to the initial report from liquidator Brenton Hunt of Insolvency Matters. The company, which reared and finished cattle using traditional wagyu techniques, owes an estimated $10.4 million to 142 creditors. Hunt's report indicates that after liquidating assets, there may be a $7.774 million deficit affecting all creditors. The majority of the 131 unsecured creditors are farmers, transport companies, contractors, and rural service providers. Additionally, 11 secured creditors, including financiers and certain suppliers, are involved. NZ Wagyu owes its staff $189,000 in wages and holiday pay, while Inland Revenue is owed $915,000.  In recent years, NZ Wagyu expanded its operations, investing in various aspects of the wagyu supply chain. This included building large farming facilities, calf rearing, and ventures into abattoir services, butchery, commercial kitchen operations, jerky production, and hospitality businesses. The company faced significant challenges due to COVID-19 restrictions and subsequent increases in farming and construction costs. The current economic downturn and weak  NZ Wagyu was placed in liquidation on June 28 by shareholders after becoming insolvent. Stud breeders urged to contribute to ground-breaking beef research An innovative beef genetics program is calling for nominations from Angus, Hereford, and Simmental stud breeders. The Informing New Zealand Beef initiative aims to enhance the sector's profitability by $460 million over the next quarter-century. This seven-year project, backed by Beef + Lamb New Zealand, the Ministry for Primary Industries, and the New Zealand Meat Board, focuses on increasing genetic uptake in the beef industry. The program requires bulls for the upcoming mating season at Pamu's Kepler farm near Te Anau and Lochinver Station near Taupo. Dr. Jason Archer, is the genetics specialist at Beef + Lamb New Zealand and science lead for the initiative. He says the test allows them to evaluate good bulls on a level playing field while demonstrating differences and similarities between breeds, as well as the advantages of hybrid vigour. The project builds upon data gathered from a earlier progeny test conducted between 2014 and 2020 across several large-scale commercial cattle operations nationwide. It encompasses four main areas: developing genetic evaluation and data infrastructure, establishing progeny test herds, creating breeding objectives and indexes, and identifying new data sources. Breeders whose bulls are chosen for the test will receive detailed information about their bull's offspring performance, including processing data for steers. This valuable feedback will contribute to the ongoing improvement of New Zealand's beef genetics. The Beef Progeny Test is a crucial element in fortifying the future of New Zealand's beef farmers and the broader industry. It offers an opportunity for breeders to actively participate in shaping the genetic landscape of the country's beef cattle. Interested bull owners can submit their nominations through the Beef + Lamb New Zealand Genetics website.  Pāmu Farms launches innovative apprenticeship scheme for aspiring farmers Pāmu Farms New Zealand is introducing an exciting new apprenticeship program, aimed at nurturing the next generation of agricultural talent. The initiative, beginning in January, is now accepting applications for its inaugural group of nine apprentices until July 31st. The program seeks individuals with a genuine love for animals, a strong dedication to safety, and the ability to work outdoors in varying weather conditions. Carl Carmichael, Aratiatia Farm Manager and program overseer, says that prior farming experience is not required, but applicants need to come with the right attitude. Apprentices will reside at Aratiatia in Taupō, one of Pāmu's 110 farms across New Zealand. The first year offers hands-on experience in livestock management, dairy operations, and machinery use. Participants will work towards achieving their Level 3 and 4 NZ Certificates in Agriculture qualification. Following the initial year, apprentices will be placed within the Pāmu farming network as dairy assistants or general shepherds. This two-year program provides a unique opportunity to learn from experienced farmers and industry experts while earning a wage. The scheme aims to attract a diverse group of candidates, including school leavers and anyone over 16 with an interest in agriculture. Apprentices will live in shared housing on the farm, creating a supportive community as they adapt to their new environment. Interested individuals can find more information on the Pāmu New Zealand website. See omnystudio.com/listener for privacy information.