Early Bird I Wednesday September 18th 2024

Agri sector optimism rises for first time since 2021, crucial day for Synlait as shareholders decide on major restructuring, and rural expertise bolsters Environmental Protection Authority. 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! Agri sector optimism rises for first time since 2021 For the first time since late 2021, farmer confidence in the broader agri economy has returned to net positive levels in the latest Rabobank Rural Confidence Survey. The survey, completed earlier this month, shows a significant turnaround in sentiment. Farmer confidence in the agri economy jumped to a net reading of positive three percent, a substantial improvement from the negative 25 percent recorded in the previous quarter. Rabobank CEO Todd Charteris attributes this upswing to the arrival of spring and improving conditions across all farming sectors. He notes that 30 percent of farmers now expect the performance of the broader agri economy to improve in the coming year, double the figure from last quarter. Key factors driving this optimism include higher commodity prices, cited by 40 percent of positive respondents, and expectations of falling interest rates, mentioned by 31 percent. However, rising input costs remain a concern for 48 percent of those with a less favourable outlook. The survey also reveals improved expectations for individual farm business performance. All major sector groupings - dairy, sheep and beef, and horticulture - recorded net positive readings on this measure. Dairy farmers lead in optimism, with 42 percent expecting their business performance to improve in the next 12 months. On the investment front, there's a modest uptick in intentions. Nineteen percent of farmers expect to increase investment in the coming year, up from 14 percent last quarter. This marks the first time in over two years that investment intentions have been in net positive territory. While the percentage of farmers assessing their operations as 'unviable' remains relatively steady at eight percent, there's been an increase in those viewing their businesses as 'viable' or 'easily viable', rising to 55 percent from 48 percent previously. DairyNZ report reveals unexpected upturn in dairy farm finances Meanwhile The dairy farming outlook for New Zealand has taken an unexpected positive turn, according to the latest DairyNZ Econ Tracker update. Despite earlier predictions of a challenging season, recent economic shifts have created a more optimistic landscape for dairy producers. Mark Storey, head of economics at DairyNZ, says two key factors are driving this improved outlook: declining interest rates and higher farmgate milk prices. These changes are expected to provide dairy farmers with greater financial flexibility in the 2024/25 season than initially forecast. This positive trend aligns with farmer sentiment captured in DairyNZ's recent Farmer Perceptions survey. Even before the latest economic indicators, a majority of farmers expressed high confidence in their financial sustainability, with only a small fraction feeling less assured. The latest farm financial forecast paints an encouraging picture, with the national breakeven point now standing at $8.09 per kg of milk solids, while the projected average payout has risen to $8.84 per kg. This widening gap between costs and income signals improved profitability for many operations. Despite minor increases in farm working expenses, including electricity, irrigation, wages, and maintenance costs, the reduction in interest rates and higher milk prices more than offset these rises. The result is a notably stronger financial position for most dairy farmers. The Econ Tracker's September 2024 quarterly update delves deeper into the potential impacts of interest rate changes. Storey's analysis shows how the timing of interest rate cuts could affect farmers' discretionary cash positions, with earlier reductions potentially leading to greater cost savings compared to later-season cuts. While the outlook has improved, challenges remain. A slight cash deficit persists on average across dairy farms, indicating that interest costs continue to exert pressure on farm finances. Crucial day for Synlait as shareholders decide on major restructuring Today marks a critical juncture for Synlait Milk as shareholders gather to vote on a $217.8 million recapitalization plan.  The proposed plan aims to bolster Synlait's balance sheet and address its debt concerns. If approved, it will see China's Bright Dairy increase its stake to 65% through a $185 million share issue at 60 cents per share. Meanwhile, a2 Milk will maintain its 19.8% holding by investing $32.8 million at 43 cents per share. While the deal appears likely to proceed, it's not without controversy. Minority shareholders face significant dilution, with their collective stake potentially dropping from 41.2% to just 14.9%. The New Zealand Shareholders' Association, despite initial reservations, has decided to vote in favor of the deal. Synlait's chair, George Adams, emphasizes the interconnected nature of the recapitalization elements. These include the share placements, constitutional changes, refinancing, and settling a supply contract dispute with a2 Milk. Adams warns that if any component fails, the entire plan collapses. In a positive development on Tuesday, Synlait secured a new $450 million facility agreement with eight banks, contingent on today's vote outcome. The company's struggles stem largely from its underperforming Pōkeno plant. However, a recent strategic review has led to a decision to focus this facility solely on advanced nutrition products, moving away from raw milk processing. Rural expertise bolsters Environmental Protection Authority Environment Minister Penny Simmonds has announced a major renewal of the Environmental Protection Authority (EPA) board, injecting fresh rural and agricultural expertise into New Zealand's national environmental regulator. Four new members will join the EPA board for three-year terms ending in August 2027. They are Barry O'Neil, Jennifer Scoular, Alison Stewart, and Nancy Tuaine. Each brings valuable experience in horticulture, agricultural science, and governance to the table. Paul Connell, a current board member, will continue his role and take on the additional duty of acting interim chair. His reappointment ensures continuity of leadership and maintains the board's commercial insight. The EPA plays a crucial role across New Zealand's economy, overseeing the Emissions Trading Scheme and regulating chemical use in various industries. This refresh aims to balance timely decision-making for the agriculture and horticulture sectors with achieving positive environmental outcomes. The new board members bring diverse expertise to their roles. Barry O'Neil, a trained veterinarian, has led Kiwifruit Vine Health and held key positions in Biosecurity NZ. He currently chairs Horticulture NZ and Tomatoes NZ. Jennifer Scoular, a chartered accountant, recently concluded her tenure as CEO of NZ Avocado. She now serves as deputy mayor of Tauranga and directs the International Fresh Produce Association. Dr. Alison Stewart, CEO of the Foundation for Arable Research, brings extensive knowledge in plant pathology and forestry science. She chairs the Forest Growers Research Tissue Culture Partnership. Nancy Tuaine, CEO of Ngā Tāngata Tiaki o Whanganui, contributes valuable iwi governance experience and insight into environmental legislation implementation. Their collective expertise promises to enhance the EPA's ability to make informed decisions that balance agricultural productivity with environmental stewardship. Fonterra Calls for Council Candidates Fonterra has launched nomination rounds for its Co-operative Council and Directors' Remuneration Committee.  The Co-operative Council comprises 27 elected dairy farmers, and acts as a vital link between Fonterra and its member community. It interprets farmer needs, monitors company performance, and collaborates with the Board on key decisions affecting the co-operative's future. This year, ten Council wards are up for election. Three current Councillors are stepping down, while seven aim to continue their roles. The Directors' Remuneration Committee also has two vacant positions. This independent body, made up of half a dozen farmer owners, evaluates and recommends pay levels for Elected Directors and Councillors. Warwick Lampp from electionz.com, the appointed Returning Officer, is overseeing the nomination process. Interested dairy farmers can obtain nomination papers and candidate handbooks directly from Lampp. For Fonterra farmers considering throwing their hat in the ring, all nominations must reach the Returning Officer by noon on Thursday, October 3rd. See omnystudio.com/listener for privacy information.