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flash4cash

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Posts posted by flash4cash


  1. 1 hour ago, M4tt said:

    You are spot on .

    However , I haven’t been part of Fonterra for over a decade . 

    That makes no difference though as their blundering mismanagement along with the equally poorly managed crowd I supply has killed dairy for the small time dairy farmer now . 

    I am about to dry off the last of our cows for the last time , in theory , but they are not sold and there is no market at all . 

    Very interesting situation to find oneself in .

     

    There is no doubt in my mind that DGC has a very good working model , but I would caution their ambition of growth 

    I am surprised about cow sales i would have thought with m bovis prices would go up. 

     

    Since joinig DGC 12 years ago quota has grown from 1260 to 5500 tons.  It is less risk now than then as we have more markets.  Back 12 years ago Taiwan made up 50% of total sales. DGC is back to being debt free so is in a very strong finincal postion going forward. The current driers has the capacity to take us to 9800. We do need another canning plant though. They have brought the land for the expansion, 12 ha out Te rapa.  Takes 7 years from start to go on a new drier so they start the process now. 


  2. The reduction in payout comes from wait for it....an oversupply of milk. Sooo they produce more but get less for it..

     

    What they should do is cut back on expensive concentrates feed and produce less and make more profit. 

     

    Interesting the rain is what is depressing prices, as this will result more milk.   Customers know this so stop trying to chase limited supply as it no long a problem.  What would fix that is if fonterra had quotas. 

     

    I think their assumption that prices will lift in the 2nd half is wrong.  Traditionally they are weaker due to demand falling from China as the fill their tariff free quota.   This artificially pump prices before xmas as chinesse companies rush to secure purchases. 

    • Like 1

  3. 4 minutes ago, yesbut said:

    It does seem strange. Selling off an added value product. Maybe that's the problem, they just can't do anything very well except ship milk powder.

    They said it is an abnormally in their business..yes a high profit margin valued added branded goldmine.  Making the other parts look poor. Best get rid of it so underpreforming parts look better. 


  4. @M4tt Alittle off topic.  Sorry to hear about the reduction forecast in payout.  I can not beleive fonterra is considering sell it icecream business to reduce debt.  That makes no sense, tiptop is a goldmine since it basically sells branded air. Just goes to show how dumb the strategy in fonterra really is.  I know they have to much debt, however sell what got you into debt not the crown jewels.  Just because they can get a good price for it.  This just futher weakens fonerra longterm. 

    • Agree 3

  5. So let me tease out the market lead controled supply concept abit futher.  On the face of it it sounds restrictive. It more librating and profitable than it sounds both in boom years and poor years.  

     

    Again from DGC. So we have been under supply restrictions for the past 3 years. That means that we can only produce 147,471 kg of milk solids in a year.  Our farm has been going well so we have been producing about 185,000 per year. What did we do with all the extra milk? 

     

    We leased supplier quota from farmers that could not meet their quota for whatever reason.  It is a win:win they get money to offset there lack of production we get to supply milk and cover our costs and make a little bit.  Last season we did this for 8 farms. Bankers love it to as it reduces the risk of underperformance in a farm.

     

    So how could this work for bees.  I recall a season or 2 ago @john berry and @frazzledfozzle were having tough season with next too no surplus honey.  @jamesc made the generous offer to put them on a a truck and ship them south to a flow.  However if quota was allocated they could have instead leased their quota to james who was having an unusually bumper season that would have resulted in him getting say 20 tons more than usual. Fazz and john get valuable cash flow and james would have a willing buyer for his surplus honey.  

     

    Quota would be a bigger blessing for bees than most other industries as it rare to have no production in any given year. A beekeeper would own the quota it would increase in value with time and could be brought and sold. 

     

    When supply is restricted at easier to sell the product profitably, resulting in a higher payout to producers. 

     

    A market lead approach does not mean no volume growth.  Look at zespri they plan to double volume in the next 10 years.  DGC hopes to do that in 5. The key is both develop the market profitably 1st before they take the produce.  This can be best summed up the the founding chairman of DGC, the late Russ Monery

     

    "New Zealands think the world is failing over themselves to buy our product, this is not the case. Markets are hard won, we must be mindful not to produce milk power that they simply do not want.   You do not want to be force to sell it cheap because customers talk.  If one gets it cheap they all want it cheap and we will all be broke."

     

    The goat industry started and failed twice from oversupply of milk.  It took a visionary and discipline to finally control themselves.  A market lead approach is the cornerstone to success. 

    • Like 5
    • Agree 2
    • Good Info 2

  6. 1 hour ago, Jas said:

    It would be interesting to see what the actual cost is per kg on the shelf , working backwards

    Say $18 kg supermarket price - gst ($2.38) - supermarket markup New world (45% or $4.86) countdown (35%) = $10.79

     

    So at $4kg wholesale honey. Brand owners revenue is $6.79 minus there non honey cost. 


  7. 54 minutes ago, Beefriendly said:

    DGC? As in Dairy Goat Cooperative, for those of us who don’t know but can google? 

    Yes. They not the only one that does controled supply and quotas.  So does Zespri.  Both models are what the honey industry needs to think about if they want to make real change.  Over supply is crippling to any industry

    • Like 1
    • Agree 1

  8. 9 minutes ago, Philbee said:

    Yes Flash you are right, however advice is subject to a 90/10 rule so 10% of Beeks will stockpile and 90 % will not
    There are all sorts of  problems with leaving 50-60kg or more of Honey on.
    Once the Crooks figure it out there will be a run on free Honey

    There is definitely merit is doing the exact opposite.  Boxing clever.  I not so sure people are not stockpiling though.  After taking to Rob from NZbeeswax it sounds like people are pulling the honey and putting it in drums. 


  9. 9 minutes ago, M4tt said:

    So how do you apply that theory back to Fonterra , which is apparently a farmer owned co operative ( hasn’t been for years, although the farmer owners are bled dry funding it ) , has its own brands and while it looks big , vibrant and successful , isn’t .

    DGC is an anomaly amongst dairy producers and sellers because of its closed door policy , exactly like Tatua 

    DGC is successful for 4 reasons 

     

    1. They own all the brands. 

    2. They only produce milk they can sell.  If we do not need the milk then we do not produce it. We have a quota system. 

    3. They have identified a high profitable product to produce that they have a competitive advanatge in. 

    4.  They do not get sidetracked making anything but that 1 product. 

     

    Fonterra is largely commodity business it share of branded products as a % of revenue is less than when it was formed. 

    • Agree 1

  10. 14 minutes ago, Philbee said:

    Or start stockpiling the stuff because when demand comes back you cannot just run the Hives on an extra shift to catch up

    I agree with Jas here.  Stockpiling just creates an overhang the depresses prices for longer.  It also ties up valuable cash in inventory.  @jamesc had the right idea the best thing for nz beekeepers to do if maintan the hives and do not pull honey crop. 

    • Agree 1

  11. 16 minutes ago, M4tt said:

    Fail for the beekeepers . 

     

    Im not referring to the elite few catering to the top 10% of the worlds wealthy consumers 

    But the beekeepers has not yet figure out that owning the brand is 90% of the requirements to a successful and sustainable profit.  

     

    Until they do they will continue to be divided and conquered. 

     

    • Like 1

  12. 44 minutes ago, M4tt said:

    good’ sustainable price that keeps both the consumer interested and the supplier out of product ?

    What price point are you thinking? 

     

    I am with you on the market lead supply approach.  Flooding the market with honey only halves the price and increases the costs per kg. 


  13. 3 minutes ago, M4tt said:

    If he was, do you think his bees would still be alive , and would you take notice 

    He would likely condemn the bees since they are Italian, being inferior to American worker bees.  While at the same time employing their services since they are cheap labour. 

    • Agree 2
    • Haha 3

  14. 8 minutes ago, Philbee said:

    North Korea has done Trump the good service of demonstrating that these types are not good for their word so when trump meets Xi at the G20 it will be a much different deal making model than what we have seen to date.

    I think trump will hold the line on north korea.  He has already claimed victory so backtrack will be embarrassing. It is one of his key foreign policy wins.  As long as there is no new nuke and ICBM testing he will be happy with that. 

     

    Trump is USA first, however most large US companies draw over half their earning abroad so it is a balancing act. 

     

    There will no doubt be turbance in the future however predicting when and what is difficult.  On balance growth is a more likey outcome than contraction so optimisms is a better mindset than negativity/or delayed while trying to acheive perfect timing. 

    • Like 1
    • Agree 1

  15. 9 hours ago, Philbee said:

    What if rich Chinese become rarer also

    To further the point lets look at the infant formula game. DGC which we supply sell the worlds most expensive infant formula. The Chinese are big buyers.  We have companies in NZ that see what we do and want a piece of the action. So they go to the market and undercut us on price.  They consumers do not buy it and they go broke why?...

     

    Because people want the best and the 'best' cost the most. No one want to think they are 2nd rate so they pay up. Research shows that the more people spend on something the better they think it is/taste.  The mind plays tricks.  It has a higher feel good factor. 

     

    In our case who wants to think their one and only newborn child will start life 2nd..? No way their child is a winner, Number 1, and only the best for their baby..the more we charge the more they buy it. 

     

    As a side note out biggest market is Russia.  Their economy tanks it all the time including their currency , it does not affect sales one bit.  The rich just keep trucking. 


  16. 8 hours ago, Philbee said:

    What if rich Chinese become rarer also

    The top 10% have 90% of the discretionary income spend.  If the economy tanks it is the bottom 90% that feel it first and the hardest. 

     

    The 10% at the top will want to make a point that is it not affecting them so will keep buying to save face. 


  17. On 29/11/2018 at 11:54 AM, Philbee said:

    He told me he thought it was going to Chinese who purchased it as a status symbol in front of their friends and associates.
    If this is the case then the Manuka industry is about to collapse IMO.

    Status symbols are always in vogue.  I would not be concerned with that.  Only if Manuka lost it status. Which i doubt as it has now become rarer. 

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