DIRTY DAIRYING NEEDS TO CLEAN UP ITS CRAP

Half of all dairy farms inspected by Environment Southland are polluting rivers and waterways to such an extent that they are liable for prosecution.

Dairy Farmers seem to have grown in arrogance because of the important place the industry holds in our economy. Dairy farmers are making good money and there is no excuse, that in the race for bigger profits, the amenities the rest of the community own and enjoy are degraded in the process.

Tourism is also a vital income stream for this country and fishing is a big drawcard- in fact its a poster child for the tourism industry. But the arrogance of the dairy industry is squashing the face of tourism deep in a muddy green eutrophic mire.

Environment Southland has a obligation to get tough with dairy farmers. This level of non- compliance is not acceptable. If it is possible for half of all dairy farmers to comply then it is possible for all dairy farmers to comply.

HOW NOW BROWN COW?

We note that Ngai Tahu is wanting a piece of the Milky Way action. Thats great. Diversification is good. And the goal to own and operate a profitable environmentally friendly business is laudable and wise.

However, Ngai Tahu objected strongly to the proposal to build a mega dairy farm in the McKenzie basin. It could be seen that they use the the Resource management act to hobble other entrepreneurs so that they can get a running start on their own businesses.

Only a year ago they werent too fussed about dairying - and were all talk about " cultural values and sacred water"

Ngai Tahu supports water being made available to provide security of supply for landowners but is concerned at the possible conversion to dairying. Almost without exception, the conversion over recent years of dry land farms to dairying has brought with it a host of adverse environmental effects and has resulted in the significant degradation in the quality of our rivers, lakes, streams and wetlands. This has impacted seriously on the cultural health of waterways and has resulted in the further loss of access by tangata whenua to mahinga kai sites and resources. Needless to say, Ngai Tahu is strongly opposed to any repetition of this situation in the upper Waitaki/Te Manahuna/Mackenzie Basin Before Ngai Tahu will be prepared to depart from this position, it will need to be convinced that suitable measures can be implemented at both the on-farm and catchment level that will be capable of avoiding and/or mitigating the site-specific and cumulative adverse effects that will arise as a result of conversion to dairying.

How times have changed.

Ngai Tahu needs to be very careful. Yes it is a significant player in the South Island economy- mainly because of the smart white fellas they employed like Tony Sewell.

We wish them well with the Dairying venture. They have 35,000 ha forestry land that is probably not returning much in the way of value. So dairying is definitely a smart move. But what it is highlighting is that Ngai Tahu is in danger of looking hypocritical, chastising others about their methods then a few months later signalling that they are seriously looking at the same large scale operations.

We are also interested to know why they have not entered dairying with a joint venture partner. Its a complex business and it would seem to make sense to tap into the expertise NZ operators have built up rather than go it alone.

No doubt we will find out the answers to that in due course.

FONTERRA GETS DOWN AND DIRTY

So its an interesting song - but WTF - who cares??? Fonterra ad campaign sours after a smidgen of media attention over the lyrics of a song that no-one hears..

Can we have a real story please???

SCALDED MILK

We gave a column from Brent Wheeler an airing the other day and it has been fisked by No Minister..

The comments are worth a look. Heres the best.

Dumb analysis. Try reading it again. Brent is saying that the incentives on farmer suppliers are to maximise the return on supply - which is what they are good at.

They face very poor, in fact perverse incentives, to maximise the return from value add, because value add requires capital, and capital requires Fonterra to hold-back dividend returns.

You can't have both. Its logically inconsistent, and a cash starved, dumb, politically driven beast is the result.

Fonterra can't even get their PR straight, are they managing the redemption risk, or are they trying to capitalise the value-add business? Can anyone tell?

Nope. The model is doomed, if Fonterra can scrape together a couple of hundies from this they put off the day of reckoning another year or two. So keep kicking the can down the road there Sagenz!

The fact your rellies were dumb enough to invest in the financial services industry is a non-sequitor. Whats that got to do with whether a regulated monopoly is a doomed whale thrashing around? I should also remind you that Dairy Farmers of Britain is in receivership. A classic example of what happens when a Co-op over leverages itself - it hands itself to its creditors.

There is your future under the co-op model. Fonterra is a price taker, not a price-maker.

Look at saturday's Herald. Fonterra is down to 21% assets to debt, this is dangerous territory for a Co-op with a redemption clause and just while I am piling on, Fonterra is NOT a price maker. That is just dairy propaganda.

If they were price makers, why was everyone surprised when the price went down. D'oh! Was it some cunning plan to disguise Fonterra's market power? Or was it that they take the world price?

Nor is Fonterra the largest dairy trader in the world. It is the largest player in the freely traded global commodity market. These are not the same things.

Most milk is traded under regulated protections (the EU and US in particular).

Fonterra is probably the best producer of basic dairy ingredients in the world. Thats fine, but it means NZ dairy farmers are in the commodity supply business. That is a business with low returns, and all the value is captured at the other end of the food chain. NZ dairy farmers are already at the mercy of those evil commodity traders, and no amount of propagandising can hide the fact that Fonterra is over leveraged and in trouble.

Hence the need to manage the redemption risk, by encouraging farmers to invest even more of their equity in the business.

So which bit of Brent's analysis were you disagreeing with again?

SENSIBLE ANALYSIS ON FONTERRA

Finally, we get a good meaty piece on the Fonterra accounts and half year announcement from Fran O'Sullivan in the NZ Herald. She also reinforces the view of the NBR the the PR around the half year announcement was very badly handled.

Fran leads with the fact that there has been a drop in revenue. And she focused in on the large milk mountains that Fonterra has warehoused around the country . But overall her tone is cautiously optimistic - noting that Ferrier has managed a reduction in operating expenses and that despite all the payout to farmers has been maintained at $5.10.

FONTERRA

As we predicted - Fonterra has done a lovely job of dressing up their half yearly result and it is interesting how the main stream media has portrayed it.

The NZ Herald has reported an increase in revenue - here's the headline - no mention that the two reporting periods are different not any mention of the increase in debt ratios.

Stuff has it that revenue has risen - again no mention of the change in reporting periods which actually show that instead of a rise there has been a real time decline..

The real story is in the third paragraph

Adjusting for timing factors and including exchange hedging, Fonterra said total revenue would have been down by 7.6 percent reflecting the lower international dairy prices. Significantly Fonterra’s already high debt gearing has increased from 57.4 per cent to 61.5 per cent over the last six months.

And then the NBR has that Fonterra has revenue of $8billion in six months but debt is up then it doesn't shilly shally around and does a good precis of the issues.

While Fonterra has weathered the last six months better than many predicted we don't think that farmers will be overjoyed with todays announcement.

BIG DAY FOR FONTERRA

We wonder just what will be revealed today - as Fonterra does its half yearly results thing.

We think whatever they have to say it will be dressed up to look like a Sunday lamb roast when in reality it will be smelly old tough hunk of mutton.

NBR has been keeping a very close eye on what big issues are for Fonterra

It makes for very interesting reading.

We will keep you posted

FONTERRA FACING EXTRAORDINARY GENERAL MEETING

Fonterra looks likely to face an extraordinary general meeting as we predicted last week here

The story in the Farmers Weekly last week has struck a chord and the Marshes who started the ball rolling are seeking advice on the process to call the Extraordinary General Meeting after getting a very big response.


We will watch developments with interest.

FART PROUDLY EWE

POSTED BY LAMBCUT our new Roarprawn contributor

An article in the Wall Street Journal Mutton Methane: Reducing Flatulence to Reduce Global Warming, has left Americans belching derision and scorn upon us. The article concerns NZ scientist’s efforts to reduce sheep and cow flatulence.

Some of the comments:

“Congratulations enviro-nazis! We have reached a new level of insanity! Limiting flatulence of cows??? Are you serious????. I am fearful of the next progression of absurdity”, “Kudos for the article! It reminded me of the scene in the film Blazing Saddles where the cowhands sat around a campfire eating beans …Where is Mel Brooks when you need him?”. “Stop animals from farting? Enough! When is the media and the American people going to put a stop this nonsense??”, “The sheer arrogance and stupidity of the idiots who espouse the ridiculous nonsense is beyond description”.

Lambcut is not surprised by the reaction. We have been caught up in the Labour Government’s bubble of self important silly gas regarding our little contribution to climate change; behaving like the distasteful distant friend at a funeral belabouring her egocentric guilt over the death of the departed.

Jon Morgan commented on the US reaction in Saturday’s Dompost: “Though agriculture produced 9 percent of the US’s greenhouse emissions, its farm animals were responsible for 19 percent of the world’s emissions. NZ’s livestock produced 0.2 per cent of the world total.” What this really illustrates is that livestock, anywhere, are not the big end of the problem. To have any significant effect on climate change, the large emitters need to get on and address the large issues.

The Clark government’s cringing Kyoto piety has resulted in research funding, critically needed elsewhere in agriculture, being scurrilously squandered on flatulence.

Wall Street Journal Article Link: http://blogs.wsj.com/environmentalcapital/2009/02/26/mutton-methane-reducing-flatulence-to-reduce-global-warming/

WHEY LESS PROFIT FOR DAIRY INDUSTRY

This from The Herald - It was expected but hell can we have some good news please?

OUR HUMBLE APOLOGIES BILL

Ok we fess up - the red wine fairy hovered above us last night as a result of a big win on the Melbourne cup. We had another look at what Bill English said about Obama and well quite frankly its not all that bad. So we kneel at the feet of the Dipton dynamo and ask for forgiveness for calling him a dork. Beers on me Bill.

QUEEN BEE JOINS DOTS GETS RED LINE TO EU

Its been a great week for spook stories and while we here at Roarprawn have been concentrating on fish quota scandals, Queen Bee has been analysing a very interesting development. We think that it fits - the sad thing is that it means that those silly boys that Labour uses, have really been sucked in by someone playing a much bigger and more elegant game than they could ever dream of. But it could have devastating consequences for NZ.

Read what Queen Bee has to say here