Analysis

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 […]

Toilet train cows to combat climate change

Can we toilet train cattle? Would we want to? The answer to both of these questions is yes — and doing so could help us address issues of water contamination and climate change. Cattle urine is high in nitrogen, and this contributes to a range of environmental problems. When cows are kept mainly outdoors, as they are in New Zealand and Australia, the nitrogen from their urine breaks down in the soil. This produces two problematic substances: nitrate and nitrous oxide. Nitrate from urine patches leaches into lakes, rivers and aquifers (underground pools of water contained by rock) where it pollutes the water and contributes to the excessive growth of weeds and algae. Nitrous oxide is a long-lasting greenhouse gas which is 300 times more potent than carbon dioxide. It accounts for about 12% of New Zealand’s greenhouse gas emissions, and much of this comes from the agricultural sector. When cows are kept mainly in barns, as is the case in Europe and North America, another polluting gas — ammonia — is produced when the nitrogen from urine mixes with faeces on the barn floor. However, if some of the urine produced by cattle could be captured and treated, the nitrogen it contains could be diverted, and the environmental impacts reduced. But how might urine capture be achieved? We worked on this problem with collaborators from Germany’s Federal Research Institute for Animal Health and Research Institute for Farm Animal Biology. Our research is published today in the journal Current Biology. It forms part of our colleague Neele Dirksen’s PhD thesis. Toilet training (but without the nappies) In our research project, funded by the Volkswagen Foundation, we applied principles from behavioural psychology to train young cattle to urinate in a particular place — that is, to use the “toilet” Behavioural psychology tells us a behaviour is […]

Research highlights dairy cows can be part of the solution to nitrogen leaching

New Lincoln University Pastoral Livestock Production Lab research is defining how to get the maximum benefit from cows predisposed to urinate nitrogen (N), resulting in less leaching to waterways. PhD student Cameron Marshall, has just published two new articles in top scientific journals as part of his doctoral thesis, showing what cows with phenotypically lower milk urea N eat, and how they eat, is important to reduce their environmental impact. He said inefficient N use from pastoral dairy production systems has resulted in concern regarding environmental degradation “and cows are demonised for it”. “This is a result of excessive urinary N leaching into waterways and nitrous oxide emissions from urination patches into the atmosphere” “Dairy cows are demonised for it, but can be part of the solution too,” he said. His first paper* reports that cows with low milk urea N concentrations eating plantain rather than a ryegrass diet, urinate significantly less N excretion per urination event, thus reducing the potential N leaching to waterways. The second paper** found that the grazing and ruminating behaviour of cows selected for divergent milk urea N, masticate, and ruminate the pasture they eat differently, which determines their rumen function and the efficiency of N digestion and use in the rumen. This alters the N excretion patters to the environment. Cameron’s previous research has already shown that cows selected for low milk urea N had a 28% reduction in the urinary urea N loading rate per urine patch than cows with higher milk urea N breeding values. Those ‘better cows’ also yielded an increase in milk protein percentage. “The results of this new research indicate two promising tools that temperate pastoral dairy production systems can use to reduce N losses and ameliorate the negative impact on the environment.” Cameron’s research is showing promising results of using […]

DairyNZ supports next generation Overseer for farms and environment

Industry good organisation DairyNZ endorses further redevelopment of Overseer to continue its role helping optimise farm systems to protect water quality, farm viability and economy. DairyNZ strategy and investment leader Dr David Burger says science-based management and modelling reviews, such as the recent Government report into Overseer, helps improve nutrient management for the environment and farm businesses. “Overseer is vital in helping farmers, the sector and councils understand farm management, particularly nutrient and greenhouse gas losses to the environment. Therefore, we must have a high level of confidence in it as a tool,” says DairyNZ strategy and investment leader Dr David Burger. “It’s pleasing Government is committed to supporting Overseer and a re-development, while looking at other tools to improve nutrient management and on-farm outcomes.” Dr Burger said DairyNZ research shows nitrate leaching measurements from farm system experiments are generally well-aligned with Overseer predictions where actual climate data has been used on dairy land. “Along with this on-farm science, DairyNZ has contributed to improvements to the Overseer model, such as including plantain and updating the wetland and riparian modules. Our research and experience with farmers tells us Overseer is an important tool for helping dairy farmers manage nitrogen and reduce losses from farms. “Falling back on input controls or reliance on risk factors is not an adequate substitute for output modelling, especially when we have an increasingly sophisticated range of nitrogen management options that Overseer enables farmers to model,” says Dr Burger. “Farm systems are complex and there are a range of ways farmers can reduce their footprint. Overseer allows farmers to model different options in the context of their farm system – enabling innovation and flexibility. “Looking ahead, we support the Government’s commitment to examine a wider range of tools to support nutrient and sediment management at farm and […]

Dairy farmers celebrated on Farm Worker Appreciation Day

Today is Farm Worker Appreciation Day (August 6), where Kiwis are encouraged to pay tribute to the dedicated workers on our farms. DairyNZ general manager responsible dairy Jenny Cameron says Farm Worker Appreciation Day provides the opportunity to celebrate the success, dedication, and contribution of our farmers. “Our farmers undertake a lot of work on farms throughout the country, every day of the year. It’s not an easy job, but it’s an incredibly important and rewarding role our dairy farmers play for New Zealand – caring for animals and the environment, while providing around 140 countries with highly nutritious food,” says Ms Cameron. “This year they have also been faced with many challenges, including natural disasters, and a workforce shortage worsened due to COVID-19 border restrictions, while many of our international employees on farm continue to be separated from their families.” The on-farm success of our farmers results in around $20 billion in export value, while employing around 50,000 people on and off farm. Dairy farmers nationwide have also fenced waterways, 100 percent of stock crossing points have bridges and culverts, while thousands of farmers are carrying out extensive planting alongside waterways. “While our farmers are lucky to have a unique lifestyle and are supported by great communities, they also work in remote locations, with early starts, through all conditions to look after their animals, their people, and their land,” says Ms Cameron. “Their hard work and commitment provides us with safe, high quality, environmentally efficient products, while contributing to New Zealand’s local communities, and regional and national economies. “So, today, I encourage us all to thank the farmers that work on our farms. Let’s celebrate the work that they do every day of every year, especially during the extra challenges presented in the past 18 months.” Dairy sector statistics: […]

Visa extension gives dairy farmers some certainty

DairyNZ says the Government decision to extend Essential Skills visas provides some welcome certainty for farmers and employees who have their futures at stake. Many workers and their employers have been living under a cloud of uncertainty since COVID-19 border closures, and today’s announcement should provide some relief to some of those affected. DairyNZ chief executive Dr Tim Mackle said the changes are a positive as they will help resolve short-term pressure on some farms. “It’s great to see the Government is listening and recognises the pressures dairy farmers and other sectors are under,” said Dr Mackle. “However, it’s important to note this decision doesn’t add more workers into our workforce, so there’s still a gap between what we have and what we actually need. It’s about helping us hold onto the valuable migrant workers we already have.” Since the closure of the border due to COVID-19, farmers have been crying out for dairy farm staff, with almost 50 percent of farmers reporting unfilled vacancies on farms. “There are plenty of jobs on farms for Kiwis and migrants but at this time the reality is, not enough Kiwis are applying for jobs. This is despite a recent survey showing 87 percent of farmers had made changes to make their business more attractive to staff, so we need our valued workers from overseas as well.” From 19 July, Essential Skills Visa holders will be able to apply for a longer visa, enabling them to remain in their current role. The application process for Essential Skills visas will also be simplified for workers remaining in current roles. Dr Mackle said while that’s a positive step, more needs to be done to ensure sufficient staffing on farms throughout the country for the wellbeing of staff and farmers, and animal welfare. “This is where […]

Fonterra agrees sale of China JV farms

Fonterra has agreed the sale of its two joint venture farms in China, with the sale expected to be completed on 30 June. The farms in Shandong province will be sold to Singapore-based AustAsia Investment Holdings for USD 115.5 million. Fonterra, which owns the farms with a joint venture partner, has a 51% stake in the business and will receive NZD 88 million* in total asset sale proceeds, which includes cash on completion. The sale of the JV farms is unconditional and requires no further regulatory approvals. Fonterra CEO Miles Hurrell says the sale is another important milestone for the Co-operative and aligns to its strategy of prioritising New Zealand milk. “The sale of the JV farms allows us to focus even more on our farmer owners’ milk and follows the sale of our two wholly owned China farming hubs earlier this year. “Greater China continues to be one of our most important strategic markets. We remain committed to our China business, bringing the goodness of New Zealand milk to Chinese customers in innovative ways and partnering with local Chinese companies to do so. We are well placed to continue to grow our business in Greater China,” says Mr Hurrell. Fonterra sold its two wholly owned China farming hubs in Shanxi and Hebei provinces to Inner Mongolia Youran Dairy in April for NZD 552 million. * Based on an USD to NZD conversion rate of 0.714 ENDS

Safety profile – It’s so important to take time out

Working in the agri-nutrient sector, Calvin Ball says he has seen a significant change in farmers’ attitudes to health and safety in recent years. Calvin, the Northern 2021 FMG Young Farmer of the Year, grew up on a Northland dairy farm, studied agriscience at Massey and began his career with an agri-nutrient company in 2013. After his OE in London, he returned to the company and is now Northern North Island Regional Sales Manager, heading a team of nutrient specialists. “Going out on farms, I have seen farmers’ attitudes change significantly since 2013,” he says. “Back then, many could be pretty dismissive in their response to conversations about health and safety, but now they are much more on board with the requirements and attitudes are very different.” For Calvin, a strong awareness around farmers managing fatigue and the importance of looking after their mental health and wellbeing and that of their people is a critical part of any health and safety plan. “I’m a strong advocate of being aware and noticing if someone doesn’t seem well. I try to encourage them to talk and to seek help.” Calvin is also a volunteer with Surfing for Farmers in Whangarei. The voluntary organisation started in Gisborne and has spread countrywide. “We help organise it. All the gear is provided, and farmers come along and get free lessons. It gets them off farm and provides the opportunity to learn something new and to catch up with other farmers. We’ve had 100-150 farmers in the water – and we have a barbecue afterwards.” Calvin grew up as one of five children. Like many farm kids, they worked alongside their parents on the farm, learning how to do jobs safely. His father would always supervise them until he was confident they could do a […]

From the ‘Should Have Seen it Coming File’…

Australia has just competed a new trade deal with the UK including agricultural products, which includes a removal of all tariffs. The UK will export to Australia cars, Scotch whisky, biscuits and ceramics. The deal makes up for EU imports lost (due to Brexit) being made up by Australia. Its a decent win for Australia and was settled after keeping the British meat producer in mind. It is also a deal keeping in mind the UK’s aim of joining a wider Asia-Pacific free trade agreement. This on top of the pressure Australia has been under by standing up to China (for the world!), losing billions of dollars of product exports – including wine – being blocked by that country. So well done Australia! Then – almost predictably – the NZ prime minister at Mystery Creek Fieldays, Hamilton had a say about all this. She said ( words to the effect) that her government was taking negotiations with the UK slower, so that we get a proper deal? Is she saying Australia hurried theirs by coming up with an Agreement with zero tariffs? These are the words of a person who worked in a fish and chip shop in Morrinsville. These are the words of someone who continues to confirm the inferiority complex that NZ has with Australia. Did she want to be invited to the G7? Damien O’Connor has just arrived in London to talk trade deals with his UK couterparts – let’s hope they come up with something similar.

DairyNZ: climate plan must set farmers up to succeed

As the Independent Climate Change Commission deliver their final advice, DairyNZ are calling on the Government to deliver not only a pragmatic emissions reduction plan – but the funding and support to achieve it too. “Dairy farmers are committed to playing their part alongside the rest of the economy and doing our fair share when it comes to reducing emissions – but the Government needs to be setting our farmers up to succeed,” said DairyNZ chief executive, Dr Tim Mackle. “In practice, that means having clear and achievable targets, pragmatic timeframes, and an appropriate level of Government investment in tools and technologies that will help us reduce our emissions. “Kiwi dairy farmers are already the most emission efficient producers of milk in the world, but we know that both our communities and our consumers expect us to continue to improve. “Unfortunately, we have already pulled many of the levers we have to reduce our footprint. Although we are always exploring new solutions through R&D, these take both time and money.” Dr Mackle said while Budget 2021 may have delivered significant investment that will help urban New Zealanders reduce their CO2 emissions, there was nowhere near the same level of support for rural communities. “The Commission were very clear in their draft advice that we will need to see a real focus on both R&D and digital connectivity for rural communities if we want to halt our contribution to further warming. “Investment in R&D is going to be critical if New Zealand is to meet our highly ambitious methane reduction targets without severe impacts for rural communities and the New Zealand economy. “The sector wants to work in partnership with the Government to deliver a clear long-term science strategy that will focus our joint efforts and ensure funding is directed to […]

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