Latest / The SME Stream / The Country 02/12/25: Mike McIntyre talks to Hamish McKay

Transcript

The Country 02/12/25: Mike McIntyre talks to Hamish McKay · The SME Stream

• 0:00
  Speaker 1: Well, the GDT index has not moved well in a
• 0:03
  Speaker 1: positive way since early August, and the prices of dairy
• 0:06
  Speaker 1: products have dropped about thirteen percent. That will no doubt
• 0:10
  Speaker 1: be raising a little bit of concern for one or
• 0:13
  Speaker 1: two of You're around the ten dollar farm gate milk
• 0:17
  Speaker 1: price forecast to look at this in more depth. Mike McIntire,
• 0:22
  Speaker 1: head of Derivatives at Jardin, I love that word derivatives. Beautiful, beautiful,
• 0:26
  Speaker 1: beautiful Mike. How are you?
• 0:28
  Speaker 2: You have every good things famish on yourself?
• 0:30
  Speaker 1: Yeah, and I can't complain sunny day down in the
• 0:32
  Speaker 1: matter were two today beautiful? Look it'll be you know,
• 0:35
  Speaker 1: like anything that sort of you know benefits from sun,
• 0:38
  Speaker 1: which is the old grass and the water. Amazing what
• 0:40
  Speaker 1: the two of those come up with, isn't it? But
• 0:43
  Speaker 1: what is what's the main factor sort of playing out
• 0:45
  Speaker 1: here in terms of these well, what's happened with the
• 0:47
  Speaker 1: GDT since since August?
• 0:50
  Speaker 2: It's really a global issue really, so if we look
• 0:53
  Speaker 2: at it, Yep, New Zealand progressing very well in terms
• 0:56
  Speaker 2: of grass growth as you touched on there, So we're
• 0:58
  Speaker 2: up season to date three point four four percent in
• 1:00
  Speaker 2: terms of production, but so as the rest of the world.
• 1:03
  Speaker 2: So the EU in September that their milk was up
• 1:05
  Speaker 2: four percent. The US has probably been the standout in
• 1:09
  Speaker 2: terms of growth or up four percent in September and
• 1:11
  Speaker 2: then close to four percent again in October. And these
• 1:13
  Speaker 2: are big numbers on big numbers. So we produced twenty
• 1:17
  Speaker 2: two billion leaders of milk here in New Zealand. The
• 1:19
  Speaker 2: States is one hundred in Europe is a one hundred
• 1:22
  Speaker 2: and forty seven one hundred and fifty billion liters. So again,
• 1:26
  Speaker 2: once you start having big growth on big numbers, unless
• 1:30
  Speaker 2: you get that domestic population who's looking to acquire the milk,
• 1:33
  Speaker 2: then obviously it's got to go out into the export markets.
• 1:35
  Speaker 2: And you know why we might be small in terms
• 1:38
  Speaker 2: of global production, we're quite meaningful in terms of global trade.
• 1:41
  Speaker 2: And so where we see competitions from these behemoths, it
• 1:44
  Speaker 2: really starts impacting on our ability to in top returns.
• 1:47
  Speaker 1: Yeah, so what's driving the big lift in production in
• 1:50
  Speaker 1: the US, for example.
• 1:52
  Speaker 2: Just the price, Like initially we've seen a lot of
• 1:56
  Speaker 2: production go into the States. In terms of new processing facilities,
• 2:00
  Speaker 2: there's a real focus now in way which you would
• 2:01
  Speaker 2: see globally around the wood and it's not just a
• 2:04
  Speaker 2: dairy issue, it's it's you know, in any sort of
• 2:07
  Speaker 2: way producing product group. But there's been a real focus there.
• 2:12
  Speaker 2: There's been about nine billion spent in the last couple
• 2:14
  Speaker 2: of years in terms of new processing plants there, and
• 2:17
  Speaker 2: in way that's just finance way. You know, once just
• 2:19
  Speaker 2: a byproductive of dairy in terms of the fat, but
• 2:23
  Speaker 2: now it's in everything into snacking products and into nutrition,
• 2:26
  Speaker 2: into a nutrition so you know, it's really been ingratiated
• 2:30
  Speaker 2: into everything that we consume these days. And so the
• 2:33
  Speaker 2: milk has been demanded by these new processing plants, and
• 2:36
  Speaker 2: then as a result, you know, we've seen a bit
• 2:39
  Speaker 2: of an overflow in other products that where there isn't
• 2:41
  Speaker 2: the same sort of demand, so lesser proteins like lactose
• 2:45
  Speaker 2: and skimmel powder, and then also the facts as well,
• 2:47
  Speaker 2: so we're seeing a lot of butter come out of
• 2:48
  Speaker 2: that part of the world.
• 2:50
  Speaker 1: So what is your long term take, Mike on what's
• 2:54
  Speaker 1: happening in the US in terms of this increasing production
• 2:56
  Speaker 1: and in Europe and the likely effect it's like to
• 3:00
  Speaker 1: like you a had given theres been some remarkable amounts
• 3:03
  Speaker 1: of money paid for dairy farms as they start to
• 3:06
  Speaker 1: turn over.
• 3:07
  Speaker 2: Inning Z, Well, it's just a commodity cycle. So we've
• 3:10
  Speaker 2: seen it a million times before them, we'll set it
• 3:12
  Speaker 2: a million times again. So you know, the cure for
• 3:14
  Speaker 2: high prices is high prices, and that's just the pain
• 3:17
  Speaker 2: we're wearing at the moment. You know, we got up
• 3:19
  Speaker 2: to what ten twenty ten to twenty five in the
• 3:21
  Speaker 2: futures for the currencies and down to nine fifty. But
• 3:24
  Speaker 2: if you look a season FOURD, you know, the futures
• 3:27
  Speaker 2: we're trading yesterday at eight fifty, which is below what
• 3:30
  Speaker 2: darien Z would say would be the cost of production.
• 3:33
  Speaker 2: And so I think we need some hopefully other parts
• 3:36
  Speaker 2: of the world to feel the pain first and reduce
• 3:38
  Speaker 2: their production as a result. You know, they've got more
• 3:40
  Speaker 2: levers they can pull in terms of you know, they
• 3:43
  Speaker 2: introduced feed onto the farm, so you know, hopefully their
• 3:47
  Speaker 2: requests less of the supplementary feed, be it through the
• 3:49
  Speaker 2: grains or we've even seen in terms of in the States,
• 3:53
  Speaker 2: the milk ratio of the cost of feed started to
• 3:55
  Speaker 2: fall quite quickly as well as grain prices recover. We
• 3:59
  Speaker 2: saw that big news about so we've been the trade
• 4:00
  Speaker 2: between the US and the States and corn and wheat
• 4:03
  Speaker 2: have followed along with it as well, So hopefully it's
• 4:06
  Speaker 2: the other parts of the world that feel the pain first.
• 4:08
  Speaker 2: But certainly I think it's as part of any healthy
• 4:11
  Speaker 2: commodity cycle that we've seen so many times before.
• 4:14
  Speaker 1: Right GDT auction overnight. What's your sort of feeling insight into.
• 4:20
  Speaker 2: That, well, I hope, and I know hope is not
• 4:22
  Speaker 2: a strategy. I hope we just continue what we've seen
• 4:25
  Speaker 2: previously with small negative increments. But I think probably what's
• 4:28
  Speaker 2: given us the greatest concern is just last week's pulse,
• 4:31
  Speaker 2: which fell three percent, which was bigger than what the
• 4:34
  Speaker 2: market was expecting, and as a result, the futures have
• 4:37
  Speaker 2: reacted to suggest that we're going to get a larger
• 4:39
  Speaker 2: fulls night now. As I said, I hope that's not
• 4:41
  Speaker 2: the case, and we really just need one or two
• 4:44
  Speaker 2: more GDTs to get through before on the downward slide
• 4:46
  Speaker 2: in terms of the amount of volume that's been placed
• 4:49
  Speaker 2: on the options. The things I keep an eye out for,
• 4:52
  Speaker 2: just for people watching is just the performance of the butter,
• 4:55
  Speaker 2: which has been the hero of the New Zealand commodity cycle.
• 4:59
  Speaker 2: We've stayed so much high than the rest of the
• 5:00
  Speaker 2: world in terms of the butter prices and also the
• 5:03
  Speaker 2: Chinese participation. So they've been very strong this year of
• 5:06
  Speaker 2: buying over half the options and so hopefully those two
• 5:09
  Speaker 2: things retain remain But if they don't, then you know,
• 5:12
  Speaker 2: I think there's some downward pressure to come in. They
• 5:16
  Speaker 2: coming a month or.
• 5:16
  Speaker 1: So, okay, and what one more option before Christmas isn't
• 5:20
  Speaker 1: here I think? Am I right saying that?
• 5:22
  Speaker 2: Yeah, that's right. Yeah, So you know, once we get
• 5:25
  Speaker 2: into that sort of Christmas period seasonally we're coming off
• 5:27
  Speaker 2: anyway in New Zealand and seasons have been saying to
• 5:30
  Speaker 2: so many people around the world, it's just got to
• 5:32
  Speaker 2: have it have been able to correct itself. Yet we're
• 5:34
  Speaker 2: not really strong at the moment three point four percent,
• 5:36
  Speaker 2: but actually wouldn't surprise me, but by the end of
• 5:39
  Speaker 2: the season that would sort of come into a smaller
• 5:41
  Speaker 2: growth profile. Obviously encouraged by the fact that we've seen
• 5:45
  Speaker 2: cheap supplementary feed and pique and also high milk prices.
• 5:49
  Speaker 2: But you know, the weather in New Zealand just has
• 5:51
  Speaker 2: a way of equalizing each year, so we have a
• 5:53
  Speaker 2: strong start. Perhaps we're a week in finow who knows
• 5:56
  Speaker 2: great stuff.
• 5:56
  Speaker 1: Mike McIntire and Jardon, thank you very much for joining
• 5:58
  Speaker 1: as much appreciated.
• 6:00
  Speaker 2: Thanks I mus