GDT 188: Weak but good

The last auction result (+3.6%) was right at the top end of my expectations (+/-3%) and WMP was +5.2% but there has been limited follow through since in the futures market.

The result reinforced expectations for a final price for the current season slightly above $6.00 (the 2016/17 futures have strengthened from $6.05/kgMS to $6.11/kgMS) but since the last auction the 2017/18 futures price has weakened from $6.25/kgMS to trade at a discount to the current season at $6.00/kgMS.

2016/17 nearly over

The 2016/17 season is coming to a close and although there have been a  few surprises (March production data), the emphasis is now really on 2017/18.  It is worth noting that the year has been better than expected from a revenue and profitability perspective, notwithstanding the climatic challenges that farmers have been through. At the start of the season a $6+ milk price and a 40 cent dividend was something we would have all accepted without too much thought!

Where are the opportunities?

Most people have ambition for themselves, their career and ultimately for their family. People that make a difference generally want to engage in fulfilling work or endeavour within an industry that they love. Ambition means that they either want more important roles, increasing responsibility and the increasing [salary] rewards which go with this, or that they want to access a high growth opportunity so that they can rapidly build their wealth and participate in the rewards of asset ownership.

China Dairy situation update

The USDA GAIN report (available here) gives some insight in to what is going on in China - and it is basically pretty good news.

Under the bonnet with due diligence

Subject: 166 canopy hectare Vineyard development

Location: 1980 North Bank Road, Marlborough

Does earning 7.5% req a risky portfolio?

There have been several pieces of information over past weeks discussing the challenge for investors getting acceptable levels of returns with low levels of risk.

In a research brief by Callan, a real assets consulting practice based in the USA, they looked at rates of returns for (US) investors over the decades. Back in the 1990's, an investor could earn 7.5% from a simple portfolio of fixed income investments. Much the same could have been earned in NZ at the time.

Why wine makers are looking to investors to secure supply

The story behind the Patriarch Investment makes for some interesting reading.  New models emerging make agricultural investment an interesting alternative to commercial property.

Segmenting NZ dairy farmers

I have written a series of posts about NZ dairy wearing a ‘gloomy hat’. Unfortunately, nothing that has happened over the past few months has changed much. Global milk supply growth appears to be moderating, but it is still growth. Meanwhile the outlook for the world economy has deteriorated (EU growth, the latest concerns re: China, more QE from Japan etc) and the NZD looks to be stubbornly strong, despite recent RBNZ action.

Dairy cashflow challenges

I’m thinking (and perhaps hoping) that this is my last bad news post on the NZ dairy industry.  My following writing will be about the positive ways that farmers are responding to this recession, about the opportunities to restructure businesses to be viable at lower prices, and about new ideas that could take the industry forward.

Dairy re-set # 3

At the recent Dairy Summit held at Massey University we were treated to presentations from the Netherlands, Ireland, we had several speakers from the USA and finally talked to a gentleman based in China.  The discussion point was dairy products supply and demand; most of the discussion was about the supply side and farmer behaviour in the face of falling prices (they don’t necessarily look to farm out of cashflow tightness by reducing production).