Fonterra cuts farmgate milk price to 27.8c/l
Fonterra has announced that it has reduced its forecast farmgate milk price and also issued a financial trading update.

Fonterra has announced it has reduced its forecast farmgate milk price for the 2017/18 season from $6.75 to $6.40/kgMS, the equivalent of 27.8c/l in Irish constituents.

It also updated the market on its financial results for the first three months of the 2018 financial year.

Chairman John Wilson said the lower forecast farmgate milk price reflects a “prudent approach to ongoing volatility in the global dairy market”.

The Global Dairy Trade price for whole milk powder (WMP) is a big influencer of the farmgate milk price and it has declined by almost 10% since 1 August 2017.

“While the result of the arbitration with Danone has impacted our earnings guidance for the season, it has no influence on our forecast farmgate milk price.

“What is driving this forecast is that despite demand for dairy remaining strong, particularly in China, other parts of Asia and Latin America, we are seeing strong production out of Europe and continued high levels of EU intervention stockpiles of skim milk powder.

“This downward pressure on global prices is being partly offset by the lower NZ-US dollar exchange rate,” Wilson said.

Confidence in demand

Wilson said that Fonterra’s strong financial position, customer order book at this point in the year, and confidence in demand means that the board is able to increase the payments made in January by 10c/kgMS and will hold the advance rate through to the payments in May.

“In effect, our farmers will receive equal or higher payments for their milk over this period than were scheduled under the previous $6.75 milk price.”

Fonterra has also updated its full season New Zealand milk collection forecast due to ongoing challenging weather conditions.

The co-op has reduced its forecast by 1% to 1.525m kgMS – the same volume as last season.

Financial results

Revenues in the first quarter at Fonterra were up 4% on the same period last year to NZ$4 billion.

Sales volumes are down 20% to 3.9 billion liquid milk equivalent (LME), while the gross margin of 16.7% is also down, it said in a trading update.

Chief Executive Theo Spierings says the first quarter financial results were generally as expected as the co-op started the year with record low inventory followed by the second year of low spring milk collections from New Zealand due to wet weather.

“This has challenged our Ingredients business where we had lower volumes to sell. As a result, sales were down 19% to 3.6 billion LMEs compared to the same time last year.

“The gross margin in ingredients was in line with the second half of last year.”

However, when we compare it to the same period last year it was down from 12.1% to 8.1%, mainly due to the rise in commodity prices.

“Our consumer and food service business continued with strong sales volumes in our key markets across both Greater China and Asia with, overall, just a 3% decline to 1.3 billion LMEs in total volume compared to the record levels at the same time last year.

“Gross margin in consumer and food service was 24%. While this is down on the 31% in the first quarter of 2017 when input costs were lower, it is up on the gross margin percentage in the last quarter of 2017.

“This positive trend demonstrates we can create more value in our Consumer and Foodservice business despite higher input costs and reflects the strength of our strategy of moving more volume into higher value.”

Spierings said Fonterra expected performance to be weighted to the second half of the year and remains confident in its full year forecasts following revisions after the recent Danone announcement.

“We are focused on continued tight operational and financial discipline and a keen eye on our customers’ needs to maximise sales opportunities.”

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‘€40/cow is a joke’ - frustrated farmers at crisis meeting
Beef farmers vented their frustration at the current beef price and new BEEP scheme introduced by the Department.

There was a seam of frustration rippling through a crowd of over 100 farmers at an IFA beef crisis meeting in Nenagh on 15 October, with farmers asking tough questions of the panel on beef prices and processor control.

It was also clear that many farmers felt failed by the recent budget announcement of a new Beef Environmental Efficiency Pilot scheme (BEEP).

“The €40/cow is a joke and I think it should be sent back to Minister Creed and tell him that we don’t want it,” Francis Burke, a farmer from Thurles said, a point that was met with a round of applause from the crowd.

“As a suckler farmer I am deeply disappointed and considering getting out of suckler farming in the next 12 months because we didn’t get the €200/cow that we needed,” he said.

Producer organisations

Valerie Woods from the Department of Agriculture gave a presentation on the potential of producer organisations (PO’s), and the potential bargaining power they could give farmers.

However, it was pointed out that many complications could arise from PO’s.

“To make an impact on the market place you’d need to have a big chunk of the cattle that need to be sold,” director general of the IFA Damien McDonald said.

“If you were to go down this route, farmers would have to make a very big commitment.”

“It is great in theory, how it will work in practice depends on the farmers.”

One of the main organisers of the newly formed beef plan group, Eamonn Corley, also requested that the language used to explain the PO legislation was made more farmer friendly, a suggestion that Woods said she would take back to the Department.

No silver bullet

The main focus of the meeting was to address the current perceived crisis facing the beef industry, with low prices prompting several beef protests over the past month.

Market control was repeatedly pointed out as an issue, with up to 70% of the Irish beef kill controlled by three processors, who supply five main supermarkets from a supply base of 80,000 beef farmers.

While PO’s were suggested as one option for increasing farmer bargaining power, Ray Doyle livestock director of ICOS said that it would be “small, incremental changes” that would pave the way for changes for Irish farmers.

He championed the role of the marts but said that it was clear that the direction of marts would also have to evolve.

However, continued farmer frustration came to the fore, with a feeling that more rapid change was needed and could be achieved if factories submitted to improved and transparent grading systems, and suckler farming was valued more by the government.

Valerie Woods, from the Department said she accepted that the BEEP scheme providing €40/cow was not what farmers had wanted, but that it was what they had been able to provide given budget constraints and they did recognise the value of the suckler herd.

There were a number of heated opinions voiced from farmers, with recurring seams of frustration appearing over the Beef Data and Genomics Scheme, processor control and the role of farm organisations.

The director general of the IFA Damien McDonald highlighted the power of displaying a united farmer stance by concluding: “While we can disagree, let’s thrash it out in the room and emerge united.”

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Bord Bia rejects ‘unjust’ animal welfare report

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Bord Bia rejects ‘unjust’ animal welfare report
Bord Bia has rejected a report by a Dutch NGO on Irish animal welfare standards on 13 Irish farms.

Bord Bia has rejected a new animal welfare report by Dutch animal rights NGO Wakker Dier which it conducted on 13 Irish beef farms last winter.

The NGO is calling on Dutch retailers to support beef products produced under Dutch brand Beter Leven (Better Life) conditions, as opposed to Irish beef with Sustainable Beef and Lamb Assurance Scheme (SBLAS) certification.

The report looked at issues such as castration and dehorning without anaesthesia, along with outdoor grazing not being mandatory under SBLAS. All of the farms had concrete slatted flooring in their sheds.

Outdoor grazing is not mandatory under SBLAS as Irish beef production is grass-based. Bord Bia figures show that on average animals from SBLAS farms are outdoors at grass for 223 days each year.

Wakker Dier alleges that six of the 13 farms were SBLAS farms, however this cannot be confirmed due to privacy rules. It also suggests that animal welfare is not important to Bord Bia or to SBLAS farmers.

Commenting on the report, Bord Bia CEO Tara McCarthy said: “The allegations made by Wakker Dier do not give an honest or factual representation of the high standards of Irish beef production.

“To judge, and seek to damage, the reputation of our entire nation’s beef production system based on an analysis of just 13 farms is unjust and wilfully malicious.

“Equally, to suggest animal welfare it is not important to Bord Bia’s SBLAS members is fundamentally and entirely inaccurate.

“SBLAS is an important guarantee for buyers of Irish beef throughout the world, and farmers who do not meet the strict criteria of the system, will not be certified,” she said.

In 2017, Bord Bia audited 33,000 farms. Of this number only seven farms or .00001% of all audited SBLAS farmers were housed indoors for the full year and these farms were specifically finishing cattle.

Cover story

In the report Wakker Dier states “The researchers were given access to the farms with a cover story. They pretended to be journalists from a Polish newspaper who were investigating the influence of Brexit on the Irish beef industry” (translated).

The publication also admitted that farmers did not know they were being filmed and recorded.

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The farmer's daily wrap: beef protest, Brexit and Jeep theft bust
Here is your news roundup of the five top farming stories and weather outlook for Tuesday.

Weather forecast

Met Éireann is forecasting outbreaks of rain and drizzle extending eastwards this Tuesday morning, but drier and brighter weather will follow from the Atlantic during the day with just isolated showers.

Showers will become more frequent along west and northwest coasts in the evening.

Top temperatures will range between 13°C and 16°C in moderate to fresh southerly winds, later veering southwest and easing.

In the news

  • The ICSA has blockaded Dawn Meats' factory in Ballyhaunis in the third beef protest so far this month.
  • UK prime minister Theresa May has called for "calm heads" on the Irish border as Brexit talks take a dramatic turn.
  • PSNI officers have made four arrests and recovered vehicle parts while investigating the thefts of multiple Jeeps from the Republic in recent months.
  • Kerry has held its September milk price.
  • The outlook was positive at the agri-tourism conference in Ballinasloe.
  • Coming up this Tuesday

  • We report from the Alltech One Ideas conference in Co Meath.
  • The latest from BETTER farm programme participants.
  • The latest trends on grain markets.
  • Update from the Journal vet.