Fonterra posts solid results
Fonterra has delivered a solid half-year result, thanks to higher margins and sales volumes across the co-op's diversified product and category mix.
An agribusiness consultant and former banker, David Jones, says the so-called ‘dairy crisis’ is not ‘armageddon’.
He told Rural News that in the light of this banks will take a pragmatic view of the industry. Jones says this is not the first time the dairy sector has had stress, but it is the first time it has run across two seasons.
“The banks will look at the cash requirement of each individual business, the equity position and the balance sheet and will make a decision on the holding cost of the business. It should be recognised there’s going to be a very limited buyer market,” he explains.
“The banks will take a holding position with those clients prepared to work with the bank. But for clients who see themselves as above having to work with the bank it will be quite a different story.”
Jones is starting to see a few of these relationships becoming stressed and says it is a matter of keeping the communications channels open and hopefully working through problems.
“But sometime these problems will mean a sale of the property at the end of the discussions and for some farmers the only light in the tunnel will be the train coming towards them,” he says.
“But no doubt the banks will take a pragmatic and considered view of how they support those industry participants [stressed about debt].”
Jones says the $8.40 payout gave a false sense of confidence to some dairy farmers. But a season with a sub-$5 payout and then potentially a sub-$4 payout was always going to be a problem; some of these farmers will have to exit the industry.
Jones doesn’t believe there will be a lot of mortgagee sales and that the banks will try to work things through with clients. He says the present situation will dampen capital gains in the agri sector.
“That is not a bad thing as the industry will focus on cash earnings to generate investment.”
Federated Farmers claims that the Otago Regional Council is charging ahead unnecessarily with piling more regulation on rural communities.
Dairy sheep and goat farmers are being told to reduce milk supply as processors face a slump in global demand for their products.
OPINION: We have good friends from way back who had lived in one of our major cities for many years.
Listed Canterbury milk processor Synlait’s shares have been placed in a trading halt.
OPINION: Even before the National-led coalition came into power, India was very much at the fore of its trade agenda.
A step-by-step guide helping farmers through the process of creating a Freshwater Farm Plan (FWFP) has been launched by FarmIQ.