Fran O'Sullivan: Dismay at dairy decline spills over

New products are a drawcard at the Fieldays.

Where are Fonterra and the local dairy industry heading will be the key question for many farmers as they head to next week's National Fieldays for the agribusiness sector's annual showcase.

Judging by the various farmer message boards " and the tone of a couple of farmer supplier surveys doing the rounds " there is considerable disquiet brewing in the Fonterra shareholding camp.

The Fonterra executive and its high-powered (but possibly far too large) board can't be blamed for the lengthy dairy commodity slump which is crimping cashflows for the co-operative and its farmer members.

There's a raft of factors which stem from the build-up of inventories in China; the Russian supply ban and the over-production in Europe off the back of previous record prices, which have all combined to affect global prices.

Confirmation that a turnaround is not pending came yesterday with the sixth successive decline for the dairy commodity market on the GlobalDairyTrade auction platform.

Whole milk powder prices " which remain Fonterra's key commercial driver and also the major influencer of the co-op's farmgate milk price " fell by 3.1 per cent to an average price of US$2309 a tonne. This is well short of the long-term average of US$3500 a tonne which Fonterra has said is the benchmark for its 2015-2016 forecast payout of $5.25 kg/milk solids.

A sense of the broader environment in which dairy - and other key important agribusiness sectors - are operating will come with the release of one of the key business barometers at Fieldays.

KPMG will release its annual Agribusiness Agenda 2015 at a high-powered breakfast of agriculture leaders on Wednesday morning.

KPMG's Ian Proudfoot is expected to highlight some persistent themes such as the importance of the primary sector maintaining its "social licence" to operate and how to attract more young people into agribusiness careers to fill an additional 50,000 jobs by 2025.

These are perennial problems which are causing headaches for some farmers who are approaching retirement and would like to see a new generation of younger people come on to the land to ultimately take their places.

At Mystery Creek there will also be an Innovation Accelerator building on previous initiatives for businesses (and inventors) to present their innovations before moving towards market.

NZ Trade and Enterprise has ensured considerable outside interest with delegations expected from China, South Korea, Brazil, Ireland and Australia. For the South Koreans - who recently inked a free trade deal with New Zealand " it is also an opportunity for their companies to make connections here and drive two-way trade.

A major factor in the success of Fieldays is the exposure to new technical developments which can aid productivity and efficiency on farm. These range for the types of deals that the major banks provide " they will all be there en masse with their special tents, carefully tailored products and entertainment for customers; the telcos such as Vodafone and Spark with their rural communication offerings, through to targeted accounting products by Xero.

Then there are the politicians.

Expect to see a large turnout of National Cabinet ministers and also a contingent from Labour. In a relatively rocky environment " particularly for the dairy sector " this is a good networking opportunity for the politicians to take soundings and demonstrate they are listening to our prime export sector.

It's important to note that while dairy is currently facing the pinch, New Zealand's overall agribusiness sector remains a world leader.

The international interest which will be on display at Mystery Creek reflects that.