Analysis

Why global food prices are higher today than for most of modern history

Global food prices shot up nearly 33% in September 2021 compared with the same period the year before. That’s according to the UN Food and Agriculture Organisation (FAO)‘s monthly Food Price Index, which also found that global prices have risen by more than 3% since July, reaching levels not seen since 2011. The Food Price Index is designed to capture the combined outcome of changes in a range of food commodities, including vegetable oils, cereals, meat and sugar, and compare them month to month. It converts actual prices to an index, relative to average price levels between 2002 and 2004. This is the standard source for tracking food prices – nominal prices, as they’re known, which means they’re not adjusted for inflation. While nominal prices tell us the monetary cost of buying food in the market, prices adjusted for inflation (what economists call “real” prices) are much more relevant to food security – how easily people can access appropriate nutrition. The prices of all goods and services tend to rise faster than average incomes (though not always). Inflation means that not only do buyers need to pay more per unit for food (due to its nominal price increase), but they have proportionately less money to spend on it, given the parallel price increases of everything else, except their wages and other incomes. Back in August, I analysed the FAO’s inflation-adjusted Food Price Index and found that real global food prices were actually higher than in 2011, when food riots contributed to the overthrow of governments in Libya and Egypt. Based on real prices, it is currently harder to buy food on the international market than in almost every other year since UN record keeping began in 1961. The only exceptions are 1974 and 1975. Those food price peaks occurred following the oil price spike of 1973, which […]

Top 10 ways Government could back our dairy farmers

DairyNZ is calling on the Government to partner with dairy farmers to achieve better outcomes, invest more in research and development, and stop overloading farmers with too many regulations. Ten recommendations for Government have been drawn from DairyNZ’s latest ‘View from the Cowshed’ survey of 425 dairy farmers. DairyNZ chief executive Dr Tim Mackle says it’s critical the Government work more closely with farmers to support investment in research and development, so farmers can continue working to reduce their environmental footprint, while maintaining profitability. “This year’s survey indicates farmers are making on-farm changes to improve their environmental management and their workplaces, but are feeling under pressure from constant regulatory changes,” said Dr Mackle. “We want to see more focus on ensuring regulations are fair, practical and don’t overburden farmers with too many different requirements. “Dairy is New Zealand’s leading export sector, employs 50,000 Kiwis and is forecast to contribute over $40 billion to our economy this year, so it’s important for our country’s success that farmers are supported to keep contributing to New Zealand.” 57 percent of farmers surveyed said changing Government regulations are causing them stress, with 55 percent also saying perception of dairy farmers by the public and in media was also keeping them up at night. A further 67 percent of farmers feel there isn’t enough support for farmers dealing with mental health issues. Positively, the survey revealed 70 percent of farmers surveyed have a Farm Environment Plan – a key tool farmers use to identify and manage environmental risks through adopting good farming practices. “Dairy farmers are operating in a complex environment and managing a lot of challenges. Around half previously reported being short-staffed and 45 percent don’t have the internet service they need to efficiently run farm operations,” says Dr Mackle. In the past two years, the Government has proposed changes to policy on freshwater management, wintering, climate change, biodiversity and vehicle taxes which would all significantly impact on farmers. These issues may have contributed to 32 percent of farmers saying they feel less positive about farming than 12 months ago – despite strong milk prices. Only 17 percent reported they felt more positive. Matamata dairy farmer Sam Owen says there isn’t one cause of mental health issues in rural […]

Environmental gains as farmers reduce nitrogen loss

Dairy farmers in Canterbury’s Selwyn catchment are actively reducing their footprint, with data indicating many have reduced nitrogen loss by 30 percent. “Selwyn farmers have been working hard to achieve this milestone, taking steps on their farms to look after the environment,” says DairyNZ solutions and development lead advisor Virginia Serra. “Preliminary information shows 70 percent of Selwyn farmers have met their 30 percent nitrogen loss reduction target set by Environment Canterbury. “Another 20 percent are well on track to achieving it and are receiving support to get there. The remaining farmers will be supported this season to make progress.” DairyNZ collated the data from dairy companies and irrigation companies, plus a DairyNZ survey. Dairy farmers are using Farm Environment Plans to identify actions to reduce footprint, including improving water quality. Nitrogen is one of several contributors to water quality, with phosphorus, sediment and E. coli also playing a vital role and covered by the farm plans. “Reducing nitrogen loss over time helps improve water quality and helps reduce greenhouse gas emissions,” says Mrs Serra. “Achieving these results is not easy and farmers are working hard to deliver. They are doing their best to keep up with regulations, across the spectrum of farming.” DairyNZ has been working with farmers from Selwyn and Hinds for three years through the Meeting a Sustainable Future project, supporting them to reduce nitrogen loss. This includes trialling options with 40 partner farms and sharing knowledge with local farmers. A recent DairyNZ survey showed all Selwyn and Hinds farmers surveyed are adapting practices to reduce nitrogen loss. This includes improving irrigation efficiency and effluent management, reducing fertiliser use, using the grazing herb plantain (which reduces nitrogen loss) and some are changing their stocking rate. Most Selwyn dairy farmers are required by current Environment Canterbury rules to […]

AIMI Survey: Cereal areas and volumes: October 10, 2021

Key Points at 10 October 2021 For the 2020/2021 season, cereal grain production (wheat, barley and oats) in NZ totaled an estimated 761,300 tonnes (down 7% on last year). Maize grain production was estimated at 214,900 tonnes. Total production of grain in NZ was therefore estimated to be 976,200 tonnes. Unsold stocks of cereal grain, summed over all six crops, are estimated to have reduced by 62% between 1 July 2021 and 10 October 2021. When compared to the same time last year, unsold stocks of cereal grain, summed over all six crops, are estimated to be 54% lower, mainly because of much lower unsold stocks of feed wheat and feed barley. As at 10 October 2021, unsold stocks of feed wheat and feed barley were estimated at 18,300 tonnes (down 37,200 tonnes on last year) and 19,300 tonnes (down 17,900 tonnes), respectively. On-farm storage of sold grain is down 20% (down 43,900 tonnes) on this time last year. Total on-farm storage, including both sold and unsold grain, summed over all six crops, is down 31% (down 101,200 tonnes) compared to the same time last year. The total area sown or intended to be sown in cereals is estimated to be 98,300 hectares, which is up 7% (up 6,600 ha) on last season. Roughly 87% of this total area had been sown, with 13% still left to sow. Crops are generally growing well, despite a slow start for spring crops as a result of cold and wet weather across NZ. Read full report here

Tourism reset would hurt agricultural exporters

The Government’s proposal to reduce future international tourism visitor numbers post-COVID to concentrate on higher spending visitors may solve one problem but create others. Research by Lincoln University’s Dr Rob Radics, Dr Muhammad Umar, and Associate Professor Anthony Brien, highlighted that most of our agricultural products delivered fresh to market are transported on passenger planes, and tourists contribute to the cost. The drop in tourism numbers could push up transport costs to the point some businesses do not export at all and are put out of business. Their work showed that before COVID-19 hit, there were 550 international flights into and out of New Zealand each week, which carried 80% of New Zealand’s overall export airfreight in their belly-holds, and that it was worth $10.8 billion in December 2019. Only 20% of New Zealand’s airfreight was carried by dedicated air cargo-only freighters. Before COVID-19, air freight was less than 1% of New Zealand’s total trade by volume, but about 16% in terms of dollar value. The report raised that the decision may show a lack of understanding of the inter-relatedness of industries. “What COVID-19 has highlighted is the not previously considered symbiotic relationship of some sectors of the New Zealand agriculture industry and tourism.” Transport costs have already gone up because of reduced flights, as In March 2020, COVID-19 bought tourism to a halt and reduced airfreight capacity. This resulted in an immediate increase in competition for freight space and the Government stepped in to fund additional dedicated airfreight cargo flights to ensure the export of perishable products. It initially funded 53 weekly flights to key export markets. By November 2020, airfreight flights (dedicated cargo and empty-of-passenger flights) had increased to 120 per week; however, export freight costs also increased as producers competed for space on flights. The top product […]

Delivering calm in the kitchen

Fonterra’s Foodservice business, Anchor Food Professionals (AFP), has reached a milestone to become a $3 billion NZD annual revenue business. Fonterra CEO Miles Hurrell says the success is down to the Co-op’s strong connection to customers who value our sustainably produced, high-quality, nutritious milk and innovative products. “It’s really pleasing to see this milestone be reached despite the impact of COVID-19 on restaurants and other out-of-home eating. Our people have worked hard to find new ways of working with customers and new product applications to suit the pandemic environment, and we can see this has been a success. “Foodservice is a high value channel for our farmers’ milk and a key part of our long-term strategy. This is why we’re aiming to increase our milk solids into Foodservice by approximately 50% by 2030 and grow our presence across further markets including Greater China, South East Asia and the USA. “To support our Co-op’s growth to 2030, we intend to invest about $1 billion in moving milk into higher value products and increase our R&D budget by 50%. These investments will enable further product innovation in the Foodservice channel, among other things, and help put us on track to meet our next Foodservice target of becoming a $5 billion annual revenue business,” says Mr Hurrell. Fonterra’s Director Global Foodservice Paul Harvey says Anchor Food Professionals chefs works alongside customers in their kitchens to match their needs with our Co-op’s dairy innovation expertise. “To offer solutions we need to know what the problem is, and in many cases the issues are in the kitchen, and that’s where we are spending much more time with our customers who want our help. “We now have 55 chefs around the world who go into kitchens like this where […]

FarmIQ acquires Farmax in strategic partnership with AgResearch

Two leading agricultural software providers will join forces to create a value proposition for New Zealand’s pastoral farmers. FarmIQ Systems and Crown Research Institute (CRI) AgResearch have formed a strategic partnership with the acquisition of Farmax – a decision support tool for farmers. AgResearch will become a shareholder in FarmIQ Systems and FarmIQ’s preferred provider of science and research going forward. CEO of FarmIQ, Will Noble, said the partnership was long overdue as both organisations have shared the same vision for the agriculture sector since its inception from the Primary Growth Partnership in 2010. “If we want to become the leading decision support platform of choice for all pastoral farmers in New Zealand, then having AgResearch as a shareholder and the Farmax product to our whanau, brings with it strong industry credibility and a vast amount of science to our software – it’s incredibly exciting for our farming customers and the industry as a whole”. The agricultural ‘science’ integrated within Farmax makes it unique and has helped deliver real impact to the sector estimated to be $1.1 billion in increased gross margin over the last decade alone. AgResearch Director of Technology and Digital Services Greg Rossiter said the decision was made as part of the CRI’s commitment to providing the agricultural industry with quality science and software-based decision support tools. Going forward FarmIQ will invest the capital and provide the infrastructure to take Farmax to the next level, which was not considered AgResearch’s core business. Mr Rossiter said “the partnership delivers our scientists opportunities to collaborate and strengthen relationships with key partners and FarmIQ shareholders”. Gavin McEwen, CEO of Farmax views the partnership as having plenty of benefits for Farmax’s own customers. “The business will continue to provide its standalone products and services to our valued customers. Our goal is to unlock tangible benefits to all by improving interoperability and integration between both applications […]

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Sustainability win-win as producer puts the squeeze on waste

A leading New Zealand food processing company committed to ongoing excellence in sustainability has become an early adopter of a sludge dewatering technology engineered to cost-efficiently reduce the environmental footprint of food, beverage, and wastewater treatment throughout Australasia. The international fruit processing facility in Hawkes Bay processes tens of thousands of tons of fruit for both local and export markets, using a compact and cost-efficient KDS multidisc roller system from CST Wastewater Solutions as part of their process. The low-energy KDS technology dewaters wet, sloppy screened waste from the processing of fruit such as such as apples and pears, reducing waste volumes by up to 90 per cent. It transforms the waste to a much drier product that is less messy, easier and hygienic to handle, and cleaner to transport for recycling to stockfeed for the rich agricultural region of Hawkes Bay. In addition to saving fossil fuel and other transport and disposal expenses – which can amount to hundreds of dollars a ton – the drier waste helps protect water tables and conforms with the strong environmental and pure food credentials of the processor. The fruit processor – located in an area famous for its fruit production – has previously won an export award in which the judges of which said they liked the level of engagement across the wider team in developing the company vision, and the continuous improvement and commitment to innovation was genuinely impressive. The factory was well laid out, effort that was put into health and safety stood out. CST Wastewater Solutions Managing Director Mike Bambridge said the durable stainless steel KDS technology was another step forward in the company’s cleaner/greener process enhancements and new state-of-the art facilities, which are designed to benefit the entire region and community of which the company is part. “In […]

Honing management skills while working on the farm

Farmers can now improve their decision-making skills without having to stop milking – they can just put in some earbuds. Lincoln University Honorary Associate Professor Peter Nuthall’s audiobook “The Intuitive Farmer” is written in an innovative novel-style. A managerial ability researcher, he tells the fictional story of group of farmers meeting to improve their intuitive decision-making skills. It is based on actual data collected from hundreds of farmers. Each chapter addresses a different issue affecting farmers, such as risk management, benchmarking, budgeting, and planning, negotiation skills, active listening, and farm ownership. By the end of the novel, the listener will have absorbed important farm management principles and practices through the activities and findings of the group. Dr Nuthall said improved intuitive skill requires farmers to constantly and objectively self-critique their decisions so that slowly, the appropriate approach becomes second nature as part of their kit of intuitive tools. The book is described as the first of its kind to be applied to agricultural management practices, providing a dependable source for farmers, agricultural and farm management students, and people involved in agricultural industries. An Amazon review described “The Intuitive Farmer” as an innovative and useful resource for farmers. “Having the author appear as a character in the book is a nice bonus, as it gives the reader a rare chance to get an insider’s view on the personal and professional life of a researcher,” the reviewer wrote. His next book in the farm management series is called “The Decisive Farmer” and will be published before Christmas this year by the Commonwealth Bureau of Information (CABI). Listen to a sample of the audio book on the Google Play app here https://play.google.com/store/audiobooks/details/Peter_L_Nuthall_The_Intuitive_Farmer?id=AQAAAEA8AW1BQM

Fonterra completes reset, announces annual results and long-term growth plan out to 2030

Annual Results Summary Total pay-out for 2020/21 season: $7.74 per kgMS Final 2020/21 Farmgate Milk Price: $7.54 per kgMS 2020/21 dividend: 20 cents per share, comprised of 5 cent interim dividend and 15 cent final dividend Reported Profit After Tax: $599 million, down $60 million* Normalised Profit After Tax: $588 million, up $190 million# Total Group normalised EBIT: $952 million, up $73 million# Net debt[1]: $3.8 billion, down $872 million Debt to EBITDA ratio: 2.7x improved from 3.3x Full year normalised earnings per share: 34 cents * 2020 financial year included the gain from the divestments of DFE Pharma and foodspring® # Normalised numbers reflect the underlying performance of the business. Fonterra Co-operative Group Limited today announced a strong set of results for the 2021 financial year, reflected in a final Farmgate Milk Price of $7.54, normalised earnings per share of 34 cents and a final dividend of 15 cents, taking the total dividend for the year to 20 cents per share. The results come as Fonterra moves through its business reset and into a new phase of growing the value of its business. CEO Miles Hurrell says the last three years have been about resetting the business. “We’ve stuck to our strategy of maximising the value of our New Zealand milk, moved to a customer-led operating model and strengthened our balance sheet. “The results and total pay-out we’ve announced today show what we can achieve when we focus on quality execution and an aligned Co-op. “I want to thank our farmer owners and employees for their hard work and commitment over the last few years that has got us to this position. Together, we’ve shored up foundations and done this despite the challenges of operating in a COVID-19 world. “Although the higher milk price and tightening margins put pressure […]

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