1 00:00:00,040 --> 00:00:01,720 Speaker 1: Can you handle buckle up? Can you have even more 2 00:00:01,720 --> 00:00:05,200 Speaker 1: good news? The farming That is the story of the 3 00:00:05,280 --> 00:00:07,240 Speaker 1: year as far as I can work out, So Fonterra 4 00:00:07,680 --> 00:00:09,360 Speaker 1: coming to the party with an eight percent lift in 5 00:00:09,400 --> 00:00:11,680 Speaker 1: its first half net profit dividends of twenty two cents 6 00:00:11,720 --> 00:00:13,760 Speaker 1: per share, and that midpoint at the farm gate, of course, 7 00:00:13,880 --> 00:00:17,320 Speaker 1: is sitting around ten bucks. Dairy Insights consultant Steve Davison's 8 00:00:17,320 --> 00:00:18,640 Speaker 1: with us on this stut morning. 9 00:00:19,400 --> 00:00:21,079 Speaker 2: Good morning, Mike, how are you well? 10 00:00:21,200 --> 00:00:23,720 Speaker 1: You're fizzing well, mate, I. 11 00:00:23,680 --> 00:00:25,880 Speaker 2: Am fizzing and I think the entire industry is to 12 00:00:25,920 --> 00:00:28,440 Speaker 2: be honest, you know, it's a pretty uncommon results. See 13 00:00:28,440 --> 00:00:31,320 Speaker 2: strong milk rice and a strong dividend in the same. 14 00:00:31,160 --> 00:00:33,720 Speaker 1: Season, exactly, And we've got a forecast for the same 15 00:00:33,800 --> 00:00:35,600 Speaker 1: next year, which is highly unusual. 16 00:00:36,440 --> 00:00:39,040 Speaker 2: Yeah, exactly, Yeah, back and back. Good milk for rices 17 00:00:39,159 --> 00:00:42,440 Speaker 2: is not very common. We've send them in the futures markets. 18 00:00:42,560 --> 00:00:44,479 Speaker 2: How long it lasts up the question, but you know, 19 00:00:44,560 --> 00:00:45,880 Speaker 2: right the way, while we've got. 20 00:00:45,720 --> 00:00:48,879 Speaker 1: It, exactly, the money, just to put it into perspective 21 00:00:48,880 --> 00:00:51,879 Speaker 1: for people who don't follow the rural economy, this is 22 00:00:51,960 --> 00:00:54,840 Speaker 1: billions and it goes into the economy. It goes into 23 00:00:54,840 --> 00:00:57,480 Speaker 1: small town New Zealand, which goes into the whole economy. 24 00:00:57,480 --> 00:01:00,600 Speaker 1: A country this size cannot help but be affected by 25 00:01:00,680 --> 00:01:02,880 Speaker 1: billions of dollars from the farming community, can it. 26 00:01:03,640 --> 00:01:05,440 Speaker 2: No, You're exactly right, and that's you know, that's what 27 00:01:05,520 --> 00:01:07,520 Speaker 2: they say. Fifty cents of every dollar of the power 28 00:01:07,560 --> 00:01:10,800 Speaker 2: gets spent in communities, royal communities, all the New Zealand economy. 29 00:01:10,920 --> 00:01:14,679 Speaker 2: So New Zealand again rides the wave of the dairy 30 00:01:14,680 --> 00:01:17,840 Speaker 2: industry and the export channels that this opens up and 31 00:01:17,959 --> 00:01:19,640 Speaker 2: earns from the world is pretty impressive. 32 00:01:19,640 --> 00:01:22,600 Speaker 1: And this result aspects that without sucking up to him 33 00:01:22,640 --> 00:01:24,600 Speaker 1: too much, because he's on the program again next week, 34 00:01:24,720 --> 00:01:26,720 Speaker 1: how much of this do you put down to Hurrale? 35 00:01:26,959 --> 00:01:28,640 Speaker 1: I mean, he seems if you go back to the 36 00:01:28,680 --> 00:01:31,720 Speaker 1: Spearing years, to the Hurrale years, this is a completely 37 00:01:32,040 --> 00:01:34,520 Speaker 1: different story. Is it him or is it just luck? 38 00:01:35,680 --> 00:01:37,320 Speaker 2: I think it's him, but I think it's also the 39 00:01:37,440 --> 00:01:39,559 Speaker 2: whole team too. Like you know, to your point about 40 00:01:39,600 --> 00:01:41,560 Speaker 2: not stick up to Miles, he's done. He has done 41 00:01:41,600 --> 00:01:43,920 Speaker 2: very well. But and he'll say so himself that the 42 00:01:43,959 --> 00:01:46,000 Speaker 2: whole team is pointing in the same direction too, which 43 00:01:46,040 --> 00:01:48,320 Speaker 2: is pretty cool, you know, that there's some really interesting 44 00:01:48,400 --> 00:01:50,400 Speaker 2: insights coming out of the co op and they really 45 00:01:50,480 --> 00:01:52,680 Speaker 2: understand where they went wrong in the past, and they 46 00:01:52,840 --> 00:01:55,480 Speaker 2: really understand what they need to do right to keep 47 00:01:55,520 --> 00:01:58,640 Speaker 2: the sort of performance going forward into the future. Not 48 00:01:58,720 --> 00:02:00,760 Speaker 2: to mention, you know, keep their play in New Zealand 49 00:02:00,880 --> 00:02:02,480 Speaker 2: is the largest co op as well. You know, they've 50 00:02:02,480 --> 00:02:06,040 Speaker 2: got competition from alternative processes in New Zealander. Farmers can 51 00:02:06,640 --> 00:02:09,280 Speaker 2: can and are making the choices to change and so 52 00:02:09,320 --> 00:02:11,360 Speaker 2: that's really important when they think about their results in 53 00:02:11,400 --> 00:02:14,040 Speaker 2: milk prices, you know, to stop that EBB and flow 54 00:02:14,040 --> 00:02:15,880 Speaker 2: of milks leaving the cop. 55 00:02:15,880 --> 00:02:18,760 Speaker 1: Which brings me to my current conundrum, which if he 56 00:02:18,840 --> 00:02:21,400 Speaker 1: knows what he's doing, then I shouldn't be arguing against him. 57 00:02:21,440 --> 00:02:23,160 Speaker 1: But I think this consumer thing he's looking at the 58 00:02:23,160 --> 00:02:25,120 Speaker 1: IPO of the trade sale, I think is a mistake. 59 00:02:25,160 --> 00:02:26,000 Speaker 1: Do you have a view on that? 60 00:02:27,160 --> 00:02:29,680 Speaker 2: Yeah, I would have thought the same about a year 61 00:02:29,680 --> 00:02:32,480 Speaker 2: ago too, And having talked to the team at Fonterra 62 00:02:32,560 --> 00:02:34,560 Speaker 2: about the same topic over the last year, I kind 63 00:02:34,600 --> 00:02:38,440 Speaker 2: of see their point around why the viewers to remove it. 64 00:02:38,440 --> 00:02:40,760 Speaker 2: It does continue to earn the less in terms of 65 00:02:40,800 --> 00:02:43,640 Speaker 2: return on capital. It is a bit of a complicated 66 00:02:43,720 --> 00:02:47,080 Speaker 2: arm of the co op and having the power to 67 00:02:47,120 --> 00:02:49,120 Speaker 2: say you know what, actually we're maybe not the best 68 00:02:49,160 --> 00:02:51,480 Speaker 2: I think is a pretty brave call. But it kind 69 00:02:51,480 --> 00:02:53,160 Speaker 2: of makes sense at the same time when there are 70 00:02:53,240 --> 00:02:56,040 Speaker 2: so good at ingredients and food service. You know, New 71 00:02:56,160 --> 00:02:59,839 Speaker 2: Zealand is a commodity and large process, it makes sense 72 00:03:00,080 --> 00:03:01,720 Speaker 2: let someone else take the brunt of it. 73 00:03:02,000 --> 00:03:04,680 Speaker 1: So you've changed your mind, you think so, And I 74 00:03:04,680 --> 00:03:06,400 Speaker 1: I mean the trade sales didn't do an IPO and 75 00:03:06,480 --> 00:03:08,359 Speaker 1: IPO would be quite good for the market apart from 76 00:03:08,360 --> 00:03:10,280 Speaker 1: anything else. Would you ipo it or trade sale? 77 00:03:11,280 --> 00:03:13,960 Speaker 2: In my opinion on IPO and there's a reason for 78 00:03:14,000 --> 00:03:16,639 Speaker 2: that too. I think the big emotional attachment for kiwis 79 00:03:16,720 --> 00:03:20,280 Speaker 2: and farmers around the mainland and the brands and whatnot. 80 00:03:20,600 --> 00:03:23,440 Speaker 2: An IPO will attract a lot of attention from New 81 00:03:23,520 --> 00:03:27,720 Speaker 2: Zealanders and right across the spectrum. And obviously it gives 82 00:03:27,760 --> 00:03:30,600 Speaker 2: the chance for current shyholders of Fonterra to use the 83 00:03:30,639 --> 00:03:32,800 Speaker 2: capital their return from that consumer sales to go and 84 00:03:32,840 --> 00:03:34,519 Speaker 2: invest in that IPO. So if you want to be 85 00:03:34,560 --> 00:03:37,520 Speaker 2: in there you can, and if not, then do something 86 00:03:37,520 --> 00:03:39,720 Speaker 2: on your own farm with your own capital. But I 87 00:03:39,720 --> 00:03:41,720 Speaker 2: think it's a big opportunity for New Zealand to grow. 88 00:03:41,720 --> 00:03:44,839 Speaker 2: And if Fonterra can get the milk supply agreements they've 89 00:03:44,840 --> 00:03:48,520 Speaker 2: talked about with these consumer businesses, that's a big win 90 00:03:48,680 --> 00:03:50,600 Speaker 2: for them as well. But I think a lot of 91 00:03:50,600 --> 00:03:52,880 Speaker 2: that all. The other side of that consumer business conversation 92 00:03:53,000 --> 00:03:54,640 Speaker 2: is that, you know, we don't see a lot of 93 00:03:54,640 --> 00:03:58,000 Speaker 2: the businesses in the world that are under the consumer headline. 94 00:03:58,280 --> 00:04:00,920 Speaker 2: In Sri Lanka, Australia. You asked the average farmer in 95 00:04:00,960 --> 00:04:03,080 Speaker 2: New zeal And, they wouldn't realize how much milk Fonterra 96 00:04:03,120 --> 00:04:06,440 Speaker 2: collected and processed in Australia or Shri Lanka, for example. 97 00:04:06,640 --> 00:04:08,480 Speaker 1: No good point. Do you follow the IF one or 98 00:04:08,520 --> 00:04:09,200 Speaker 1: the Warriors? 99 00:04:10,320 --> 00:04:11,920 Speaker 2: IF one? Love IF one, so you'll. 100 00:04:11,800 --> 00:04:13,680 Speaker 1: Be watching the IF one tonight over the Warriors. 101 00:04:15,400 --> 00:04:16,880 Speaker 2: I mean, I'd love to say I've got both on 102 00:04:16,920 --> 00:04:19,159 Speaker 2: the screen, but it'll probably the Chinese GP first. 103 00:04:19,560 --> 00:04:21,360 Speaker 1: Yeah, okay, all right, it'stu nice to talk to you. 104 00:04:21,400 --> 00:04:23,480 Speaker 1: Appreciate it very much. I apparently I've got a television 105 00:04:23,480 --> 00:04:25,800 Speaker 1: that can split screens. Sam tells me this. I don't 106 00:04:25,800 --> 00:04:27,640 Speaker 1: know how to do that, but tonight it's going to 107 00:04:27,680 --> 00:04:28,760 Speaker 1: be the night I'm going to have to look at 108 00:04:28,760 --> 00:04:30,600 Speaker 1: doing that, so that's my problem. I just wanted to 109 00:04:30,640 --> 00:04:32,920 Speaker 1: share that with Stu there for a moment. Steve Davison, 110 00:04:32,920 --> 00:04:36,000 Speaker 1: I like his style. Diary Insights consultant. For more from 111 00:04:36,000 --> 00:04:38,880 Speaker 1: the Mic Asking Breakfast, listen live to news talks. 112 00:04:38,920 --> 00:04:42,120 Speaker 2: It'd be from six am weekdays, or follow the podcast 113 00:04:42,160 --> 00:04:42,960 Speaker 2: on iHeartRadio.