The Country 19/02/25: Emma Higgins talks to Jamie Mackay

We get Rabobank's Senior Ag Analyst's take on the GDT auction and cover a new Rabo report on milk production costs around the globe. Plus, she adds some good news comments about red meat.

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Episode Transcript

Speaker 1 (00:00):
Emma Higgins is a senior Rabobank Egg analyst. In fact,

(00:03):
I think she's the most senior of all agg analysts Rabobank.
What a title that is, Emma. I'm going to chat
chat to Andrew Murray shortly from Fonterra about last night's
GDT auction. I reckon it was a good, good result,
even though it was down slightly. I want to hear
your take on it. Good afternoon, Hi, Jamie.

Speaker 2 (00:20):
Yeah, Look, I think it was a good result too,
good news for farmers. So y, we did see a
small softening in the GDT index. And you know, when
we look at the powder complex, which is really important
for our New Zealand farmers because of the farm gate
milk price, we saw a decline come through for skim
milk powder, so a decline of two point five percent. Look,
it could have been worse based on where the futures

(00:41):
were pointing towards things. But I think you know, in
terms of the prices, UIs dollars twenty seven hundred and
fifty four bucks will take that. I think the big
winner really was Homemark powder and butter. So homewokpowder prices
saw a small decline in the inde and the average
price is still sitting above that US four thousand bucks

(01:03):
a ton mark, which is great news. And really I
think their lead story here, Jamie, really comes down to
the butter price. So a lift of over two percent
on an index basis, we're now looking at an average
price of US seven thousand, three hundred and seventy eight bucks,
which by my calculations is actually a new record. Bodes

(01:24):
well for farm gate milk prices. Not so good maybe
for butterlovers in the supermarket shelves.

Speaker 1 (01:29):
Not to mention the cheese lovers. Talk to me about
where Rabobank's sitting with its forecast milk price. Have you
hit the ten dollar mark yet.

Speaker 2 (01:37):
Emma, uh no, we haven't.

Speaker 1 (01:40):
Come on, stop dragging the chain.

Speaker 2 (01:43):
Look, I knew you were going to ask me about
this too, because look, as you know, Jamie, we forecast
on a quarterly basis. So last time when we popped
out our forecast, we were sitting above the current price
that Fonterra were forecasting. Obviously, the market's moved upwards since then.
It's a combination of effect of land is improving in
most regions, but also there's some challenges on the supply side,

(02:04):
particularly out of the United States. But ultimately we are
in the process of refecasting. Now we'll have that out
in the next week or so. But I think this
auction result still boats well for Fonterra's current ten bucks
and if anything, the latest dynamics over the last couple
of actions probably point to slightly more upside than that.

Speaker 1 (02:25):
Well, I can't wait for your eleven dollars price, Emma
when you announce it. You've just released also at rabobank,
and this is probably no surprise a report saying that
New Zealand is the lowest cost producer of milk in
the world.

Speaker 2 (02:40):
Yeah, we are, based on our calculation. So what we
did was we undertook a bit of an exercise to
try and compere production costs on a like for like basis.
It was no mean feat or no easy feat, sorry Jamie.
What we did was we tried to take the local
production costs from all the various data sources and take
them in a standardized way so that we could unpack it.

(03:03):
And you know, ultimately what happened based on our calculations
is that most regions in the exporting world have actually
seen costs lift across the course of twenty twenty one
in particular through to now. A lot of that, as
we know, is a similar story that our New Zealand's
farmer's been facing. Were pandemic issues, costs of living issues.

Speaker 1 (03:23):
Et cetera.

Speaker 2 (03:24):
But the long on the short of it is our
New Zealand care we farmers here have come out in
top place that you can say that in terms of
having the lowest milk production costs, we've been neck and
neck with Australia for the last several years, but we've
just piped them at the post based on our twenty
twenty four data by a couple of cents, So we'll
take that. But I think there's some real lessons in here, Jamie.

(03:47):
It's the fact that on a beverage basis, we've got
the ability on our production systems to strip out costs
in response to milk price volatility. In some of our
counterparts and other production system particularly in the Northern Hemisphere
don't necessarily have that lever to pull and that's been
most helpful in this analysis and.

Speaker 1 (04:07):
Our further good news a China is the most expensive
as the highest cost milk producer, so we're sending plenty
over there. That bodes well for us as well. Can
I just finish on another positive story, because we're full
of positives and farming at the moment after the farmer
confidence survey from Federated Farmers today, Emma, and that is
red meat. We know that beefs go in great guns

(04:28):
at the moment, record prices. But the surprise story in
a lot of ways this year or this farming season
has been lam it continues to hang in there.

Speaker 2 (04:38):
Look, it does continue to hang in there, and by goodness,
we'll absolutely take that right because our sheep farmers could
really use it. Look, I think in terms of what's
happening up there, we're still seeing that broad based demand
story take place in terms of our secondary market, providing
real optionality for exporters. In addition to that, we are
slightly seeing some more positive signals come out of China.

(05:00):
I think if we take a step back, Jamie, the
rhythmic complex is in a much better shape for twenty
twenty five. And if we think about our beef farmers
and also a dairy farmers right because it's a coproduct,
those signals bode well in terms of the supply side
at least coming out of the United States, or the
fact that they don't have a lot of extra supply.

(05:20):
So good news and long way that lasts for twenty
twenty five.

Speaker 1 (05:24):
On that positive note, we'll leave you Emma Higgins, always
good to chat on the country.

Speaker 2 (05:28):
Thanks Jamie,