Farmers Weekly NZ February 8 2021

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18 Zespri secures taste test labs Vol 19 No 5, February 8, 2021

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Exports remain strong Neal Wallace & Gerald Piddock

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ARM gate prices for New Zealand dairy and meat exports have defied economic fallout from the global pandemic and are trading at above long-term averages. Demand from China and Asian economies emerging from the covid-19 pandemic are underpinning the buoyant prices, but there are warnings a strengthening exchange rate and prolonged supply chain disruption will put pressure on returns. Fonterra this week lifted its farm gate milk price guidance range from $6.90 to $7.50kg/MS, up from $5.90 to $6.90 at the start of the season, potentially making this the second consecutive year of a $7-plus milk price. AgriHQ senior analyst Mel Croad says while farm gate meat prices have seasonally eased since October that reduction, especially for lamb, has been less than usual. “What we are hearing from exporters is that 2021 has started better than expected,” Croad said. With the key Chinese New Year orders filled, Croad says sales remain strong, but plenty of uncertainty remains with demand for prime beef cuts and with the peak lamb kill looming. Alliance Group sales manager Shane Kingston agrees, noting risks from ongoing covid-19 infection in the UK, Europe and the US, an appreciating exchange rate and supply disruption. A shortage of crane and truck drivers in China and the US is preventing shipping containers being delivered and emptied.

Subsequent port congestion has forced the Dalian port in China to close and 27 container vessels to sit off the Port of Key West in Florida waiting to discharge cargo. Kingston says prices are under pressure. “There will definitely be some downward pressure on price. There are a lot of market risks and challenges at the moment,” he said. Silver Fern Farms chief executive Simon Limmer says preChristmas price forecasts remain current, although risks from an appreciating exchange rate, shipping delays and container shortages have heightened. “Our current view is that it’s unlikely that global logistics will be normalised any time before the middle of the year, after our peak season for sheep and beef,” Limmer said. Fonterra chief financial officer Marc Rivers says it is encouraging demand for dairy products has held up. “The fact that we are built for this optionality with our manufacturing base, and the broad portfolio of markets that we have, sets us up well to manage that volatility on behalf of farmers,” Rivers said. A Fonterra spokesperson says partnership with logistical company Kotahi and shipping line Maersk means it is managing supply chain disruption. “It is hard yards, but together with Kotahi we have been managing the current situation for a number of months and continue to operate at close to 99% container availability with good access to vessel space,” they said. Rabobank senior dairy analyst Emma Higgins says a combination

READ MORE: P8 POSITIVE: Sheep farming newcomer Alex Keir, who bought a line of Perendale ewes at Temuka last week, is confident there are plenty of good times to come in sheep farming. Photo: Annette Scott

of government fiscal stimulus, central banks enabling more liquidity and consumers in lockdown increasing spending on food, meant the expected demand shock last year never eventuated. “In April we thought China would pull back and we anticipated dairy imports would fall 40%, which is where we got our $5.60kg/MS forecast for the season,” Higgins said. She says while China should remain buoyant, demand growth elsewhere depends on the

successful rollout of the covid-19 vaccine. A major concern for exporters is the recent 11% appreciation of the NZ dollar against the US dollar, which is the highest average NZD/ USD exchange for six years. Westpac senior agri-economist Nathan Penny says demand in Europe, the UK and the US should increase following the rollout of the covid-19 vaccine. The strengthening NZ-US exchange rate remains a risk, but reflects the strength of the NZ

economy and its attractiveness to investors. “Where we’re sitting at the moment, there is still likely to be further net gains, but we expect lifts in export prices will be greater than lifts in the NZ dollar exchange rate,” Penny said. ASB senior economist Chris Tennent-Brown says it is credit to the inventory management by dairy and meat exporters that they successfully shifted product from food service to retail without widespread discounting.

WHO’D HAVE THOUGHT SHOVING PLASTIC INTO A HOLE IN THE GROUND WAS PROGRESS. Turning plastic waste into fence posts is an ingenious idea. One that Jerome Wenzlick has turned into reality through dogged perseverance. Not only do his plastic posts outperform their wooden counterparts, they’re helping to solve a big environmental problem—each reusing around 400 plastic bottles and 1,500 plastic bags. When you do things differently, it’s great to know someone like FMG has got your back. To hear the full FuturePost story, go to fmg.co.nz/futurepost

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Farmers Weekly NZ February 8 2021 by AgriHQ - Issuu