Domestic manufacturing sales increase but downturn in dairy prices could begin to bite

The latest New Zealand Manufacturers  and Exporters Association (NZME) survey of business conditions in December showed a 9.02 per cent  increase in domestic sales almost made up for a 10.76 per cent drop in export sales.  

Chief executive Dieter Adam said despite net confidence falling to 18, down from 24 in November, manufacturing had been a "relatively good space" for the last 12 months.

The current performance, change and forecast indexes were all over 100 in December, indicating expansion.

"The forecast index, which indicates investment, sales, profit and staffing expectations, stayed high at 107.33, coming off the back of the most positive result recorded since 2004 in November, so there remains a fair chunk of optimism for the future."

"We find manufacturers are saying they have a bit of breathing room to employ more staff, but also to be able to invest. That's the critical thing because to survive in the medium to long term, manufacturers need to automate more, and to update their machinery."

Adam noted that last week's Overseas Merchandise Trade release by Statistics New Zealand showed even brighter results for exporters. 

"For example, export values for electrical machinery and equipment manufacturing  improved 9 per cent on the previous month and 11.5 per cent year on year, while logs, wood, and wood article manufacturing increased 25.1per cent on last month and 13.8per cent year on year."

The really big influences on manufacturing were the uncertain global economy and the value of the dollar, he said, and uncertainty in world markets tended to push down the New Zealand dollar which benefited exporters.

"Having said that, the underlying causes of the global uncertainty is not good news for exporters because people tend to hold back on purchasing our goods overseas."

Adam said exporters would love the US dollar to be closer to 60 cents but the really big problem was the relatively high value of the Australian dollar. 

"Forty per cent of our manufactured exports go to Australia and anything over 90 (cents) is really eating into our competitiveness. When it was 85 (cents) people were a lot happier. "

However, the strength of the domestic economy was helping make up for the loss of export sales. It was a little surprising that the drop in dairy prices, and the consequent  effect on the rural economy, had not had a bigger impact on manufacturing. 

In some instances sales of  products, such as hoses used to wash down dairy sheds, dropped quite quickly when farmers "shut their pockets."

If farming losses continued into the next milking season, Adam said, the consequences could be much more serious because farmers didn't have any cash reserves left. 

Fonterra and Beingmate Australian Joint Venture Formalised

The joint venture sees Beingmate take a 51 per cent stake in Australia's premier paediatric powder plant at Darnum, with Fonterra retaining a 49 per cent stake, and control of operations at the plant.

Subject to final regulatory approvals, the first product destined for Beingmate's Chinese customers is expected to roll off the Darnum line in the second half of 2016.

The Darnum joint is a key component of Fonterra's partnership with Beingmate to create a fully integrated global supply chain from the farm gate direct to China consumers, using Fonterra's milk pools and manufacturing sites in New Zealand, Australia and Europe

FSANZ responds to egg safety claims

Food Standards Australia New Zealand (FSANZ) has released a statement refuting an article published in The Sydney Morning Herald which claimed that supermarkets are the ‘missing link’ in egg-related Salmonella protection.

The FSANZ statement says there is no food safety reason to require whole eggs to be refrigerated at retail; however, retailers may choose to refrigerate eggs for their own reasons (for example, to maintain quality of the egg such as firmness of the yolk or reduce spoilage).

FSANZ further advises it undertook a thorough risk assessment of egg production and processing in Australia in 2011, involving consultation with industry, scientists, government agencies and the public, with the assistance of international and domestic experts. The assessments covered the entire supply chain, including factors on-farm that increase the likelihood of Salmonella contamination, through grading, washing, packing, retail storage and consumer preparation.

The FSANZ statement declares that whole uncracked eggs aren’t required to be refrigerated at retail because:

  • Unlike many other countries (eg, the US and UK), the types of Salmonella that can contaminate the inside of eggs as they are formed in the bird are not present in Australian laying flocks;
  • Contamination of the surface of the egg with Salmonella can occur as it is laid, or via contamination from the farm environment. There are requirements in the Food Standards Code for egg producers to control this hazard, eg, minimising the contamination of feed with Salmonella so it is not introduced to the laying flock;
  • Salmonella must first cross the physical barriers of the shell and membranes, and tolerate the hostile conditions of the egg white before it can enter the yolk and grow;
  • The temperature along the whole supply chain affects the rate at which the protective membranes within the egg degrade. The time eggs spend on the retail shelf is often short compared with the time between the being laid through to consumption (ie, entire shelf life). Due to the nature of egg contamination in Australia, refrigeration of eggs at retail is considered to have a small impact on the overall risk of illness;
  • Evidence shows that food poisoning outbreaks associated with eggs in Australia have been mostly due to uncooked or lightly cooked foods containing contaminated raw egg, such as sauces and desserts. Factors that may have contributed to outbreaks included cross-contamination during food preparation (i.e., transfer of Salmonella from the surface of the egg to other surfaces and/or foods) and storage of the food containing raw egg at temperatures that would permit growth of Salmonella.

FSANZ recommends the following tips for consumers to minimise the risk of food poisoning:

  • Dishes containing raw eggs as an ingredient, that aren’t going to be cooked before being eaten, should not be served to small children, pregnant women, the elderly and people with compromised immune systems (as they are at greater risk from food poisoning). Egg meals should be cooked for these vulnerable people until the yolk in a boiled egg has started to become firm or eggs have become set in omelettes or scrambled eggs.
  • Check your eggs for visible cracks. If it is cracked, it is safest to discard it or cook thoroughly, for example in a baked cake.
  • If you accidentally drop pieces of shell into your egg mixture, it too could be contaminated and the mixture will need thorough cooking. Remove the shell pieces with a clean spoon or fork.
  • Wash your hands with soap and running water and dry thoroughly before handling any food including eggs and after handling eggs so you don’t contaminate other food.
  • If you are not going to cook the eggs further, don’t separate the yolk from the white using the shell as that could contaminate the raw egg. Invest in a plastic egg separator.
  • Prepare raw egg foods (such as mayonnaise or mousse containing raw eggs) just before you are going to eat them and refrigerate immediately at 5°C or below, so the bacteria cannot grow.

FSANZ said that to enhance the quality of eggs, consumers can keep eggs refrigerated in the cardboard box they are purchased in.

CHOICE spits the dummy over infant formula shortages

Consumer advocacy group CHOICE has provided a list of suggestions that the Federal Government could use to ensure Australian mums have access to infant formula for children under the age of one.

In addition to encouraging parents to report shortages at retailers or supermarkets across the country, CHOICE has called on the government to enforce rules that limit the number of tins that can be brought at one time.

CHOICE media spokesperson’s Kate Browne says the popularity of formula feeding in China has meant that health and quality problems become more commonplace as the middle class has continued to rise.

“Babies under one often need formula for nutrition and for some it’s their only reliable food source. Consumers need protections so they can ensure their babies receive enough nutrients.”

“It’s now time for the Federal Government to act to ensure access to a reliable baby formula supply to protect some of the nation’s youngest and most vulnerable consumers,” Browne said.

In discussing the food shortage with Food Magazine, Browne looked to solutions put forward in Hong Kong and New Zealand that addressed the problem with a range of options –including stockpiling formula in a similar fashion to normal medications. 

Fonterra remains positive despite global challenges

Fonterra Co-operative Group has announced a net profit after tax of $506 million for the financial year ended 31 July 2015 – up 183 per cent – after a stronger second half performance in difficult market conditions.

The Co-operative will pay a final Cash Payout of $4.65 for the 2015 season for a 100 per cent share-backed farmer, comprising a Farmgate Milk Price of $4.40 per kgMS and a dividend of 25 cents per share. 

Chairman John Wilson said extremely challenging trading conditions globally had affected all parts of the Co-operative’s business.
 
“Falling global dairy prices due to a supply and demand imbalance impacted the Milk Price, while the dividend reflected higher funding costs following significant investment in capacity to support milk growth in New Zealand, essential investments in the key strategic market of China, and the costs of maintaining a higher Advance Rate through the season.
 
“The strengthening of performance in the second half resulted in normalised earnings before interest and tax almost doubling, with good growth in our consumer and foodservice businesses and the results of a major push in our ingredients business to offset low milk prices with improved margins.”
 
Mr Wilson said that despite drought in some regions and floods late in the season, milk collection across New Zealand for the 2014/15 season to 31 May 2015 was 1,614 million kgMS, up two per cent on the previous season.

Fonterra pushes efficiencies and cuts 750 jobs

Fonterra Co-operative Group today provided a further update on its business review.

Fonterra Chief Executive Theo Spierings said the purpose of the review was to ensure that Fonterra remains well positioned to compete in a rapidly changing global dairy market.
 
One-off savings generated by changes the Co-operative is making during the business review, such as improving working capital, have already enabled the Co-operative to support our farmers during challenging market conditions.
 
The review is an on-going process that looks at the entire business to identify potential areas where the Co-operative can find more efficiencies and improve future performance. This has included a reduction of roles across the Co-operative which to date totals 750 roles.
 
“We have great people, but we have to make tough decisions to ensure Fonterra remains competitive in this environment. We will continue to fine-tune our organisation to ensure we best support the initiatives identified by our business review,” Mr Spierings said.
 
“Our business is looking to the future with the momentum, energy and solid plans needed to keep improving performance.”

Fonterra opens new manufacturing facility in Indonesia

Fonterra Co-operative Group has officially opened its new blending and packing plant in Indonesia – its first manufacturing facility in the country. 

 Chairman John Wilson said the plant is Fonterra’s largest investment in ASEAN in the last decade and will support the growth of Fonterra’s brands – Anmum, Anlene and Anchor Boneeto – in Indonesia. 
 
“Fonterra has been supplying high quality dairy nutrition to Indonesia for more than 30 years and today it is one of our most important global markets. The opening of our new plant is an exciting step forward in our relationship with the country and local dairy industry,” he said.
 
Fonterra Managing Director Asia, Middle-East, Africa (AsiaMEA) Johan Priem said the investment strategically positions Fonterra to help meet Indonesia’s continuous growing demand for dairy nutrition.
 
“The country’s large and increasingly affluent population is looking for highly nutritious foods for all ages. This is fuelling dairy demand growth, which is expected to increase by five per cent every year to 2020.
 
“Our new plant has the capacity to pack around 16,000 MT of dairy ingredients a year – that’s a pack of Anlene, Anmum and Anchor Boneeto every second, or 87,000 packs every day, which will go a long way in helping Fonterra meet this growing demand for dairy.” 
 
Mr Priem said the plant located in Cikarang, West Java is already having a positive impact on the local community. 
 
“We used local partners for the construction and, when running at full capacity, our new site will employ a team of 160 local employees meaning the investment will continue to flow through the local community.
 
“The site also utilises Cikarang’s dry port, allowing us to ensure all of our operations are located in one area. This will help us drive logistical efficiencies,” he said.
 
New Zealand Minister of Local Government, Social Housing and State Services Paula Bennett said this new facility reflects the strength of the relationship between New Zealand and Indonesia. 
 
“On behalf of the New Zealand government, I wish to congratulate Fonterra on today’s official opening – it reflects the increasingly interconnected nature of global value chains, and more closely links our economies together.
 
“Our governments have set a target to grow two-way trade to NZD4 billion by 2024 and dairy continues to be a critical part of this relationship,” Ms Bennett said. 
 
The plant received an A grade rating from regulators during its final stages of testing and commissioning, and has been in commercial operation since June 2015.
 

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