Farmers are doing it tough. But if you live in a city, what is happening on the farms can seem remote – especially if you own a home in Auckland, where the average house price is rising by more than $900 a day (based on sales by real estate firm Barfoot & Thompson).
But there are 7 billion reasons it will affect all of us. Seven billion dollars is the amount that is set to be wiped from the New Zealand economy this year.
Fonterra is forecasting a total payout to farmers this season of $4.70 to $4.80 per kilogram of milk solids ($4.50 forecast payout plus a likely dividend of 20 to 30 cents per share). That compares to last year's record payout of $8.50 ($8.40 payout plus a cash dividend of 10 cents per share).
The average break-even point for farmers this year is $5.40, after you factor in both the cost of running the farm and the debt interest payments.
It is the reason farmers are cutting costs. That will be felt in towns and cities across New Zealand, from shops in rural towns to cities where manufacturers make equipment used on farms (like irrigation systems).
That will flow through to the taxes that the Government collects, making it even harder to put together this month's Budget.
Here is my chat today with Paul Henry about the downturn in dairy commodity prices.
The Global Dairy Trade auction
Here's the figures from this morning's Global Dairy Trade auction.
The index fell 3.5 percent - the fourth consecutive fall.
- Whole milk powder - US$2,386 per metric tonne -1.8 percent
- Skim milk powder - US$2,048 -7.5 percent
- Anhydrous milk fat - US $3,505 -6.3 percent
- Butter - US$3,005 -0.8 percent
- Butter milk powder - US$1,748 -14.0 percent
- Cheddar - US$3,012 +9.1 percent
- Rennet casein - US$6,094 -11.0 percent
The NZ dollar
The New Zealand dollar has lost ground against the Australian currency, despite the Reserve Bank of Australia cutting its benchmark interest rate.
The RBA cut its cash rate to 2 percent. That compares to New Zealand's official cash rate of 3.5 percent.
The Kiwi slipped slightly to AU$95.42c by 6pm yesterday.
It's lost a little more ground this morning following the GDT auction result and at 8am was trading at AU$95.22c.
The Kiwi was trading at 75.64 US cents, compared to 75.22c yesterday evening.
The Canterbury economy
Consumer confidence and population growth are continuing to lift the Canterbury economy. But the latest report from ASB suggests that construction activity could be nearing a peak.
The ASB Cantometer Index lifted 1.8 in early May, compared to 1.7 in late March.
ASB said that "overall, we are seeing a trend develop of a more gradual increase in the Cantometer Index over recent months".
"Leading the Cantometer Index higher this month was the lift in Canterbury consumer confidence. This lift coincides with a lift in consumer confidence on a nationwide basis.
"A buoyant labour market and rising disposable incomes are factors underpinning improved consumer confidence. Improved household finances, along with ongoing population growth, will continue to underpin Canterbury retail spending growth going forward."
Net migration directly into Canterbury appears to have stabilised at relatively high levels of around 550 net inflows per month. The Canterbury rebuild and associated job growth remains a key driver.
ASB found that residential consents were "a touch softer in recent months, having been knocked about by the timing of multi-unit dwelling consents (such as retirement villages, apartment buildings or terraced housing). Meanwhile, non-residential consents have surged, which is also likely to be timing related and not likely to be sustained at these levels in future months."
The report expresses surprise at the softer construction activity.
"Time will tell if we are starting to see the peak in construction activity or if we are still hitting a few speed bumps along the path of further growth."
ASB said that it is seeing "more uncertainty on Canterbury's economic outlook than previously. Activity indicators have been mixed in recent months and, while we are still cautious in interpreting these trends, the indicators suggest the level of Canterbury construction may be close to peaking. Nonetheless, we expect the level of activity to remain elevated for some time. In addition, we still see scope for further economic growth in Canterbury beyond the construction sector as incomes continue to lift and business capacity recovers."
The Force is with Disney
Disney has announced another blockbuster result and analysts are predicting even better things to come thanks to Marvel superheroes and Star Wars.
The Walt Disney Corporation yesterday announced quarterly earnings of US$1.23 per share, beating analysts' predictions to $1.11.
Revenue rose 7 percent to US$12.46 billion, again beating estimates of US$12.28 billion.
Analysts believe that the Star Wars and Marvel franchises will not only lift movie revenue but will also boost profits from the sale of merchandise.
Avengers: Age of Ultron has already earned US$650 million at cinemas globally since it was released two weeks ago.
Then there is the big one. Star Wars: Episode VII - The Force Awakens will be released on December 18. Already the second trailer has been watched 200 million times online in two weeks.
Disney Chief Executive Officer Bob Iger told analysts yesterday that "the excitement around this movie is unlike anything we have ever seen before".
If you are a parent of a Star Wars fan or a Star Wars fan yourself, then you had better mark September 4 in your calendar. That is the day that Disney is calling 'Force Friday' - the day it will unleash a massive Star Wars marketing blitz.
Disney's share price has risen 38 percent in the last year.
Here is the list of Disney's upcoming movies:
- July 17, 2015 - Ant-Man
- Dec. 18, 2015 - Star Wars: Episode VII - The Force Awakens
- 2016 - The Incredibles 2
- April 29, 2016 - Captain America: Civil War
- June 17, 2016 - Finding Dory
- Dec. 16, 2016 - Star Wars Anthology: Rogue One
- May 26, 2017 - Star Wars: Episode VIII
- June 16, 2017 - Toy Story 4
- Late 2017 - Thor: Ragnarok
- May 4, 2018 - Avengers: Infinity War - Part I
- 2018 - Untitled Star Wars Anthology Project
- May 3, 2019 - Avengers: Infinity War - Part II
- 2019 - Star Wars: Episode IX
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source: newshub archive
