Early Bird I Monday June 3rd 2024

Fonterra’s new season forecast leaves little wriggle room for farmers, banks agree to keep rural banking hubs open, and beekeeping not as sweet as it could be. 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! Fonterra’s new season forecast leaves little wriggle room for farmers Fonterra's new season midpoint forecast of $8/kg MS indicates that dairy farmers will continue to face tight budgeting conditions. The dairy cooperative announced a forecast range of $7.25 to $8.75/kg MS in a financial update on May 29. Richard McIntyre, Federated Farmers' dairy chair, commented that the $8/kg MS forecast should allow many farmers to turn a profit, provided the forecast rises as analysts predict. He emphasised the importance of cautious forecasting to avoid the stress of unexpected downward adjustments. Although some farmers may have hoped for a higher forecast, the $8/kg MS midpoint and the $6/kg MS advance rate are seen as morale boosters. DairyNZ head of economics Mark Storey says that this is the fifth consecutive season with milk prices above $7/kg MS, but these prices are offset by historically high expenses. DairyNZ's Econ Tracker tool reported an average break-even point of $7.76/kg MS for the new season, which Storey expects to rise closer to $8/kg MS in the next update. Storey says that for the average farm, the breakeven price is very close to the forecast milk price, leaving little margin for discretionary spending. While operational expenses are forecast to ease slightly, non-operational expenses like interest, rent, tax, and drawings remain high, comprising 42% of total farm expenditure for 2022-2023. This situation suggests that farmers will still struggle to break even. However, Fonterra's dividend plus capital payment will help farmers through the current season and potentially get them over the breakeven line for the next year. Synlait announce conservative milk price Meanwhile Synlait has announced an opening forecast for the 2024/2025 season at $8.00 per kgMS, adopting a conservative stance due to the inherent volatility of global dairy commodity prices at the start of the season.  Over the past two seasons, Synlait farmer suppliers have benefited from incentives averaging $0.28 per kgMS above the base milk price, and the company expects to maintain similar incentive levels for the 2023/2024 and 2024/2025 seasons. The forecasts provided are based on the most current information available to Synlait, and the company plans to keep its farmer suppliers informed about any significant changes.  The final milk price for the 2023/2024 season will be confirmed with the release of Synlait’s full-year results in September.  Additionally, an updated forecast for the 2024/2025 season will be provided at that time. Banks agree to keep rural banking hubs open In a significant victory for rural advocacy groups, New Zealand’s five largest banks have agreed to keep their regional branches open for the next three years.  The New Zealand Banking Association announced that ANZ, ASB, BNZ, Kiwibank, and Westpac will extend their commitment to maintaining these branches as a result of the conclusion of the regional banking hubs trial. Federated Farmers is satisfied with the banks' decision, crediting their advocacy for the positive outcome, but are still calling on Reserve Bank Governor Adrian Orr to reconsider New Zealand's stringent capital requirements. Rural Women New Zealand has been another leading voice against the closure of physical bank branches in rural communities, arguing that such closures affect customer service options and discourage service switching behaviours. In their submission to the Commerce Commission, RWNZ emphasised the importance of face-to-face services in rural areas. The commitment to keep regional branches open will apply to areas outside the council boundaries of New Zealand's six major metropolitan areas: Auckland, Hamilton, Tauranga, Wellington, Christchurch, and Dunedin. However, it will not apply to Kiwibank agencies or in cases where a branch must be closed due to earthquake strengthening, health and safety issues, or lease expirations. The decision includes most of the existing hubs, except for those in Stoke and Opunake. The Stoke hub will not continue due to the need for disruptive refurbishment, and the Opunake hub will end as it primarily served as an ATM. In both locations, a multi-bank deposit Smart ATM will remain available. Global wheat outlook expected to affect our grain industry Offshore market influences are expected to impact the New Zealand grain industry significantly, as the global 2024-25 wheat outlook anticipates lower supplies and increased consumption.  According to the United States Department of Agriculture’s May report, the global wheat outlook includes slightly reduced supplies, increased consumption, modestly higher trade, and reduced stocks.  Consequently, the US is expected to become more competitive in wheat exports. David Birkett, chair of Federated Farmers' arable industry group, says that although New Zealand exports little grain, the global market increasingly influences the domestic market due to rising consumption and demand. He pointed out that milling wheat is particularly sensitive to global trends and emphasised the need for timely signals regarding its demand. Despite the goal of producing all the wheat New Zealand needs, a significant obstacle remains the lack of contracts for milling wheat. Birkett noted that the availability of these contracts is inconsistent, leading farmers to switch to feed wheat when milling wheat contracts are inadequate or quickly exhausted. He stressed the importance of transparent and open contracts to provide growers with reliable options. Beekeeping not as sweet as it could be Beekeepers in New Zealand are facing significant challenges, including diseased hives, depressed honey prices, and a lack of investment in marketing and research, leading to calls for the reintroduction of a marketing and research levy to support the struggling industry.  The 2023 New Zealand Colony Loss Survey by Manaaki Whenua Landcare Research highlights these issues and reveals that beekeepers have the lowest well-being scores across primary industry roles. The survey, which included well-being questions for the first time in its nine-year history, found that commercial beekeepers reported lower well-being compared to dairy, sheep-and-beef, arable, horticulture, and forestry farmers.  This decline in well-being is attributed to several factors, including the impact of American Foulbrood disease, which led to the destruction of over 10,000 beehives by a North Canterbury beekeeper. The survey was conducted shortly after severe cyclones that caused significant losses for some beekeepers. Additionally, there has been a downturn in honey prices, including the highly valued mānuka honey, adding financial pressure on beekeepers. Beekeepers are calling for more mental health support, highlighting the solitary nature of beekeeping and the importance of community and support networks for maintaining mental health. Reintroducing a research and marketing levy and increasing mental health support are seen as critical steps to help the industry recover and thrive. See omnystudio.com/listener for privacy information.