Fonterra posts €110m loss
The largest dairy exporter in the world has released poor annual results amid declining profitability and leadership shake-ups.

New Zealand's largest milk processor, Fonterra, has published accounts showing a €110m net loss after tax for the 2018 financial year. According to local media reports, this is the first loss in the co-op's 17-year history.

The bad result results from a combination of falling profitability, with Fonterra's EBIT falling by 22% in the past year, and exceptional charges related to its overseas partners.

The co-op wrote €247m off the value of its Chinese subsidiary, Beingmate, and paid Danone €131m in compensation for a past food safety scare.

Rising costs

Chief executive Miles Hurrell reported rising costs across the business, from an increase in the farmgate milk price late in the last season – which he said was good to co-op members – to other ingredient, development and support costs.

"There are no two ways about it. These results are disappointing," he wrote in Fonterra's annual report.

The bad result are a consequence of falling profitability and exceptional charges

Chair John Monaghan added that "Beingmate's unacceptable performance over the year has been frustrating".

Fonterra also faced the departure of both its former chief executive Theo Spierings and chair John Wilson in the past financial year.

US agrees new Farm Bill
Politicians have struck a deal to pass delayed legislation that will maintain supports to US farmers.

European farmers already know that the CAP may face delays ahead of its 2020 renewal deadline, but US farmers have been without legislation to underpin their support schemes since September.

The impasse, prolonged by last month's legislative elections, could be about to end after Republican and Democratic members of the US House and Senate Agriculture Committee agreed on a new Farm Bill on Monday.

“America’s farmers and ranchers are weathering the fifth year of severe recession, so passing a farm bill this week that strengthens the farm safety net is vitally important,” said committee chair Mike Conaway.

Two years of discussions

The bill has been under discussion for the past two years and will continue insurance schemes and reference price levels available to US farmers for protection against market volatility. Analysis of the deal by US media shows that it will become easier for farmers to switch between different support schemes, while reference prices will increase by up to 15%.

"It also invests $300 million in the prevention and response for animal pests and disease," said committee member Collin Peterson. "More broadly, the bill invests in research, outreach to beginning and underserved producers, local and organic food production, bioenergy, and access to new markets. It also addresses broadband, farm stress and mental health issues, and the opioid epidemic in rural areas."

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Watch: US cow prices at their lowest in 20 years
The Irish Farmers Journal visitedCalifornia for the Turlock Livestock Auction Yard sale of dairy stock on Friday 30 November.

Livestock markets in the US are depressed at the moment, with prices at their lowest level in 20 years. The dairy and beef industries have increased cull cow slaughter by 107,000 head and 237,000 head respectively over the last year, figures from the Livestock Marketing Information Centre (LMIC) show. In total cull cow slaughter is up 7.3%.

The latest prices reported by the USDA’s National Agricultural Statistics Service show that prices are at their lowest since October 1998.

For the quarter ending 1 October, 2018, the average cow price in the US was $1,230, (€1,077) a drop from the prior quarter of $90 (down 7%), according to the USDA figures. Year-on-year decline was $380 per cow (a drop of 24%).

Weak milk prices

“That price adjustment reflects what producers see as the drop in the income earning potential of a purchased cow due to weak farm-level milk prices,” aLMIC statement said.

Prices have not improved in any state, with just Arizona and South Dakota reporting no change to third quarter prices.

“Year-over-year, two states had a drop of larger than 30%, Minnesota [33%] and Ohio [31%],” the statement added.

Prices at Turlock

Prices for freshly calved heifers at the Turlock sale last week ranged from €600 to €1,100. Any heifers that had already calved were sold separately to their calves. Calves typically sold for in the region of $30 to $50 per head (€25 to €45).

This 785kg springing heifer sold for $1,125 (€992).

This 670kg springing heifer sold for $1,200 (€1,058).

This 580kg springing heifer sold for $950 (€838).

This 535kg springing heifer sold for $700 (€617).

This 435kg Jersey cross bred springing heifer sold for $825 (€728).

This 608kg springing heifer sold for $1,000 (€882).

This 572kg springing heifer sold for $900 (€794).

Arla cuts milk price
One of the largest dairy co-ops in northern Europe has announced a price drop for the coming month.

Danish-based Arla Foods will cut its on-account price by 1c/l from 1 December, the co-op announced this Friday.

When applied to the UK manufacturing price, this equates to a reduction of 0.89p/l, taking the UK price to 31.57p/l at 4.2% fat and 3.4% protein.

“While seasonal demand is in part enabling prices to remain relatively stable, European milk volumes are holding up better than expected and global volumes continue to grow, which has resulted in reduced market prices overall,” said Arla director Johnnie Russell.

One exception is organic milk, where the co-op still needs to increase volumes to satisfy growing demand.

The organic price will remain unchanged for Arla's continental farmers and increase by 1.79p/l in the UK.

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