The real reason Fonterra & dairy farmers have a problem is competition..

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amiga500

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Topic # 240547 13-Sep-2018 10:14

Taken as a whole, and overlooking the strange structuring of the NZ milk industry, the real problem is competition and the amount of milk being produced & being sold into our key markets. Well, that was what I took from the expert on the AM Show this morning. Sure, Fonterra can have a restructure & maybe pay the new CEO less but it does not really alter the fundamentals. Is any of this really surprising? Is it not just another super competitive industry similar to say making cars, or flying passengers around the World?

itxtme

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Reply # 2089793 13-Sep-2018 10:25

Yep exactly. Apparently there has been a realisation that powder is powder, is powder. The real money in dairy is not commodities but in products, which are better suited to our branding attempts than milk powder in a bag. Cheeses, ice-creams etc.

Batman

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Reply # 2089802 13-Sep-2018 10:39

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Maybe one day we can make artificial milk without the cows. Surely can't be that hard! medicines and things used to be extracted from plants and animals, now we just make them in factories.

Why do we even need the cows to get milk? Some things I don't understand with science. Can land a rocket on an asteroid. Tick. But have to milk cows ...

*goes to hide under desks ... I'm sure I have just dug a hole for myself and about to be shot ...

Geektastic

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Reply # 2089803 13-Sep-2018 10:39

Another area is farming practices.

This is beginning to come out in the media: there has been a slow trickle of stories in recent weeks highlighting some things that have what politicians would call bad optics.

The regime in NZ with regard to things like animal husbandry, animal transport welfare, fertiliser use, stubble burning, water pollution and so on is a good deal less demanding and hence less costly than, say, the EU regime.

This amounts to a hidden subsidy. As the public begin to demand better traceability and better standards (for example when I was in the UK in June, Marks & Spencer were running a big advertising campaign on the fact that they could now trace the beef in every single product they sold down to the farm level) then NZ farming will find itself having to comply with similar standards or better.

That will have an effect on the cost of product for sure.

Aredwood

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Reply # 2089903 13-Sep-2018 11:30

Batman:
Maybe one day we can make artificial milk without the cows. Surely can't be that hard! medicines and things used to be extracted from plants and animals, now we just make them in factories.

Why do we even need the cows to get milk? Some things I don't understand with science. Can land a rocket on an asteroid. Tick. But have to milk cows ...

*goes to hide under desks ... I'm sure I have just dug a hole for myself and about to be shot ...

I'm sure that they could do it in the lab right now, if someone could be bothered.

Main thing with artificial milk, it can't be made out of nothing. In other words, there has to be some input products. Are those products available for low enough prices to compete with the input costs of a dairy farm?

At the basic level, sunlight and rain (both free) make grass grow, cows eat the grass, cows produce milk. If a farmer runs a lowish stocking rate (cows per hectare) You can run a dairy farm with very little external inputs.

But the cost of land (thanks RMA) encourages farmers to increase stocking rates, buy in more fertilizer, more supplementary feed etc, as a means of supporting more cows. Instead of buying more land. Then more problems with water pollution etc happen as a result.

Sure, lab produced milk might eventually push out some farmers on the margins. (those with a lot of debt, and on lower quality land) Farmers who are debt free, on good quality land, don't need to worry.

And there is also the billions spent on agriculture subsidies by both the US and EU. They will also suppress any moves to lab grown milk.