Home' Otago Southland Farmer : November 16th 2012 Contents 16.11.12 Farmer
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Alliance, Silver Fern Farms post losses
Dropoff in demand for sheepmeat cited as factor by both companies
By DIANE BISHOP
High dollar a factor: Alliance Group chairman Owen Poole. Demand slump: Silver Fern Farms chairman Eoin Garden.
Silver Fern Farms is the second
big meat processor to report a
major loss this year.
The Dunedin-based company
reported a net loss of $31.1 million
for the 12 months ended Sept-
ember 30, 2012, and the Alliance
Group had a loss of $50.8 million
for the same period.
Silver Fern Farms chairman Eoin
Garden said that despite the loss,
significant investments had been
made in 2012 to underpin future
growth which included new
market initiatives and the new Te
Both meat companies blamed a
major decline in export lamb
prices for their results.
Silver Fern Farms chief executive
Keith Cooper said the company
went into the 2011-2012 season
with ideal pasture growing con-
ditions which meant livestock
was held on farm.
This resulted in markets being
short of product which saw global
prices of lamb escalate to
unsustainable levels, which led to
a sharp fall in demand and a
significant decline in value.
Meanwhile, the restructuring
costs arising from the cessation of
sheep and lamb processing at the
Alliance Group's Mataura plant
cost the company $13.5 million.
Alliance Group chairman Owen
Poole said the ''very disappoint-
ing'' result reflected a substantial
change in export markets over the
past 12 months, in particular for
Export market prices for lamb
suffered a steep decline in key
markets due to the widespread
economic crisis with the increas-
ing value of the New Zealand
dollar exacerbating the situation.
''We accept that many exporters
and processors like ourselves did
not respond to the changing
economic environment fast
enough and continued to pay too
much for livestock for too long,''
Mr Poole said.
Alliance Group chief executive
Grant Cuff said that despite the
challenging economic environ-
ment, stability was now returning
to the market.
Environmental restraints likely to slow dairy growth
Production prediction: Rabobank senior research analyst Hayley Moynihan
talks to rural professionals in Gore.
By DIANE BISHOP
New Zealand dairy production is
tipped to grow at 2 per cent a year.
That increase is likely to come
from higher per-cow production
and the strategic use of supple-
ments on the shoulders of the
season rather than an increase in
the national dairy herd, said
Rabobank senior research analyst
Ms Moynihan told rural profes-
sionals at a meeting in Gore last
week that New Zealand dairy
production growth had been
about 5 per cent a year for the past
20 years but that would reduce to
about 2 per cent because of
increasing environmental con-
straints limiting the number of
cows that could be milked.
Ms Moynihan said the increase in
dairy production would help fill
key markets in North and
Southeast Asia which were
''hungry for additional product''.
However, New Zealand would
face stiff competition from the
United States which had joined
the dairy export market party
with considerable scale and
presence, she said.
''The strength of the US in Asia is
very noticeable and they are
competing strongly with our
Annual US milk production has
increased by 14 million litres over
the past decade, and exports have
more than trebled to exceed 8
billion litres in milk-equivalent
''We need to be aware of the
changes in the US markets and
compete on cost and quality of our
milk products,'' Ms Moynihan
Ms Moynihan said there was
room for both New Zealand and
the US in the Asian dairy market,
but New Zealand could expect
The US had built strong export
volumes into countries such as
Japan, Korea, Vietnam and
Though New Zealand had
retained the lion's share of big
powder markets in China and the
Philippines, the presence of US
product in these key destinations
continued to increase, she said.
Ms Moynihan said the medium-
term price range expectations
through to 2020 for whole milk
powder would average between
US$3300 and US$3800.
As for the dairy payout?
''It will have a six in front of it, but
we won't see a return to a $7.50 or
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