Roger Dickie



New Zealand dairy prices set to rise next year
International dairy prices are at a "particularly bad" part of the cycle, but are expected to improve substantially in the first half of next year, rural lending specialist Rabobank says.

New York-based Tim Hunt, who leads Rabobank's global dairy research team, said the market remained "fundamentally bearish".

Last week, prices fell by 7.9 per cent, at the latest GlobalDairyTrade auction - the third decline in row. Whole milk powder prices, the key product for determining Fonterra's farmgate milk price, fell by 11 per cent to US$2148 a tonne. Fonterra's farmgate milk sits at $4.60 a kg of milksolids - well short of the $5.30 kg required to break even. The forecast will be reviewed early next month.

Rabobank expects wholemilk power prices to recover to US$2500 a tonne by the first quarter of next year and to US$3000 by the middle of the year.

Hunt and other analysts have pointed the finger at the European Union, which has continued to raise production despite low prices, for the ongoing supply/demand imbalance that has depressed prices.

"Demand remains weakish," he said. "We are struggling to turn off the supply growth around the world and we have a significant inventory to deal with.

"The fundamental message here is that the market is still too weak to sustain ongoing recovery in prices this calendar year."

Hunt said the global supply/demand imbalance remained at the core of the problem.

"This is one of the problems and one of the particular characteristics of this downward cycle.

We believe we have seen a particularly bad cycle that is going to take at least another six months to come out of, but we don't believe we have seen a structural change in the medium term market place.
Rabobank rural specialist Tim Hunt.

"New Zealand is the only region where milk prices have fallen to extremely low levels, triggering those reductions in supply that we are looking for to rebalance this market. In Europe, the weak euro, the co-operative propping up of milk prices, and the quota systems removal, has meant that supply growth has been stronger there than it ordinarily would be."

In the US, production is still growing but only just. The milking herd declined slightly for the second straight month while prices begin to further decline. In the key state of California, production was off by 5.5 per cent compared with October last year.

Russia's ban on dairy imports from the rest of Europe had meant a lot of product was finding its way on the secondary markets of Southeast Asia, the Middle East and Africa. This, in turn, meant those regions were sitting on sizeable inventories and were less inclined to step back into the market.

But Hunt said the market's problems were cyclical and did not signify structural change.

"We believe we have seen a particularly bad cycle that is going to take at least another six months to come out of, but we don't believe we have seen a structural change in the medium term market place."

He said that as low prices found their way to the global farm gate the supply growth would be shut off. However, low prices would encourage demand and that in turn would lead to prices moving substantially up.

We still expect New Zealand to benefit from rising global trade. New Zealand may be entering a period of slower growth but the growth story is not over. This is still plenty of opportunity over the next five to 10 years.
Tim Hunt

"In the medium term, we still believe that economic growth in emerging markets will drive increased demand for dairy and will sustain a much higher trading range than we have seen."

In the US, larger scale farming has resulted in lower costs and lower feed costs have driven production higher over the past five years. He said the substantially stronger US dollar is expected to curtail US dairy exports. Dairying in New Zealand still faced a positive outlook.

"We still expect New Zealand to benefit from rising global trade. New Zealand may be entering a period of slower growth but the growth story is not over. This is still plenty of opportunity over the next five to 10 years."


source: NZ Herald

Chinas Black Monday is New Zealand's Green Tuesday
August 2015 Update
** Chinas Black Monday is New Zealand's Green Tuesday
** Why is Agriculture becoming so popular with investors


The news of Chinas Black Monday might have been more abrupt than most commentators had predicted - however it certainly wasn't something they didn't see coming. As the Chinese Stock exchange dropped 9% it sent reverberations around the world - nearly all markets were effected. Its seems in the most part that the markets recovered as the day went on, but it reiterated why Agricultural based investments are becoming so popular.

In the current investing climate, defined largely by economic uncertainty, low interest rates and volatile equity markets; investors are seeking out assets and sectors that display certain characteristics.

Of particular interest are assets supported by solid, long-term fundamentals. Assets that offer preservation of capital, low volatility and an opportunity to generate income, mark the highest. Throw in an investment performance that is not correlated to the performance of traditional financial markets and most boxes are easily ticked. From investing in shares to investing in farmland, agriculture investments tick many boxes for today’s investors looking to the future, and remain high on the agenda of both institutions and private individuals alike.

** Rising Demand and Diminishing Supply - the Basis for Agriculture Investments

If the goal is to acquire assets that are non-correlated and inflation-linked, and which retain value throughout all economic cycles, then the best bet is of course well-managed,productive agricultural land.
For many investors, the ‘Real Asset’ approach is preferred as it means the investment is secured by land ownership giving not only capital appreciation, but also capital preservation and income in perpetuity for generations to come. And by investing in productive farming in another country / economy e.g. New Zealand it gives further diversification to the portfolio.

Prospective forest farmland investors should understand however, that specific expertise is required during the acquisition and due diligence process in order to identify and manage suitable assets.

** New Zealand's Green Tuesday?

To find out how we can help you take advantage of our favourable exchange rate with land ownership in New Zealand please get in touch.

Agricultural assets have outperformed the vast majority of traditional asset classes over most timelines, delivering highly favourable risk-adjusted returns for those with well managed exposure to the asset class. Well managed agricultural land is an asset which remains productive in perpetuity.


Will Dickie


Forestry Investment

With the world population increasing at an alarming rate, global demand for timber products is also increasing. However the global supply of millable timber is falling. Investing in New Zealand forestry is a secure and sustainable way to grow your wealth.
New Zealand’s competitive advantage is we have some of the world’s fastest growth rates with forests growing 750 tonnes of harvestable logs per hectare in just 26 years.
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