THE merger between First Milk and Milk Link, which would have created the biggest farmer-owned dairy company in the UK, has collapsed.
A joint statement issued yesterday said: "Despite extensive discussions, it has not been possible to agree terms for a merger that either party could recommend to their membership at the present time. Both boards believe that strong farmer-owned businesses are vital to the long-term future of the dairy industry."
Richard Greenhalgh, chairman of First Milk, which has about 2,700 members in Scotland, England and Wales, vented his disappointment in a letter to his members. He said: "We got a long way down the road to doing this merger, but in the latter stages there were a number of important issues to resolve – the critical issue being the valuation of the two businesses."
Due diligence is always an integral part of any proposed merger or takeover, and that is where the deal fell through, despite the fact that First Milk commissioned an independent valuation.
Greenhalgh said: "The expert stated that the value of the First Milk business was considerably in excess of Milk Link. This included discounting our valuation premium and presenting a mechanism that not only rewarded capital, but would also put the new operation on a very sound financial footing."
The real issue, apart from personality problems, is that Milk Link could not accept the fact that First Milk's holding in Robert Wiseman Dairies, which was bought in 2004 for £28 million, is now reckoned to be worth at least £60m – and almost certainly substantially more. The fear on the Milk Link board appears to have been that the merger could become a takeover.
Jim McLaren, president of NFU Scotland, who runs a dairy farm near Crieff, said: "I am not interested in hearing who is to blame for the talks collapsing: the fact is that a real chance to create a united, rather than a fragmented dairy sector, has been blown away, certainly in the short term.
"What is more frustra
ting is that, after a decade, we had finally got the competition authorities to back off.
"They had really taken a progressive approach to the merger and given the industry a chance to create a solid future."
The outcome is likely to be a new level of pressure on farmers, with the supermarkets and other major buyers seizing on the fact that the dairy industry remains dangerously divided. Milk prices have risen substantially in recent months, but there are already whispers in the trade that they may be planning to pay their suppliers less.
Greenhalgh remains the perennial optimist. He said: "In contrast to many commentators, we are positive about the future markets for our members' milk. Milk volumes in the market remain extremely tight and our sales teams continue to highlight farm input cost increases and push for further rises in all sectors in which we operate."
http://business.scotsman.com/fooddrinkagriculture/39Chance-for--united-dairy.3746839.jp
Friday, February 8, 2008
Drought cutting into dairy production
Fonterra's budget for a 3 percent rise in milk production this season has withered in the face of the La Nina drought now hitting even dairying regions such as the Waikato, and Southland.
Fonterra -- the world's biggest exporter of dairy products -- warned today that the big "dry" was not only eroding New Zealand's milk production but might restrict new export orders.
"At this stage, we are ... confident we can meet all our customers' contracted orders but supply is tight," said Fonterra chief executive Andrew Ferrier.
"We now find ourselves effectively booked up for the season. This is forcing us to advise customers that we may not be in a position to take all new orders for New Zealand supply."
The company had budgeted on a 3 percent rise in production this year to about 14.8 billion litres, but now expects the drought to cost its 10,000 farmers as much as $500 million by the time the season ends in May.
"The dry spell has already cost farmers about $60 million in milk payout, and on-farm losses would continue to mount unless there is significant rainfall," said company chairman Henry van der Heyden.
"Every day without rain is hurting farmers, and will have a flow-on impact for local communities and the broader economy."
"This has really taken the shine off what should have been a fantastic season for our farmers, with a record payout."
Fonterra said in December it was lifting its forecast for this season's milk payout to a record $6.90/kg milksolids -- a windfall which will pump a massive $3.25 billion into farmer incomes.
Mr van der Heyden said Fonterra was holding to its $6.90 payout forecast even though it was now facing "something of a double whammy" with a drop in milk production and exchange rate close to US80c.
"The record dry summer over much of the country means season-to-date milk production is now falling below last year," he said.
Fonterra last year collected 14.34 billion litres of milk.
Mr van der Heyden said the widespread dry spell was hitting farmers hard in most parts of the country.
On a daily basis compared to the past year, Waikato production was down 27 percent, Bay of Plenty milkflows were down 21 percent, Taranaki was down 9 percent, and Southland was down 1.5 percent.
The Waikato and the Bay of Plenty, together account for about 40 percent of the national dairy herd.
He said farmers in dry regions were facing up to challenges in terms of lost cash flows and also in managing their farms with very little feed available.
Fonterra had been looking at supplementary feed options and how it could support farmers, "but the stark reality is that there is a real feed shortage both in New Zealand and overseas."
In many parts of the country, January rainfalls were the lowest or second lowest on record, temperatures have been hotter than usual and soil moisture levels are falling.
The lack of feed was causing sheep farmers to sell stock early and dairy farmers were recording lower production as many were forced to dry-off their milking herds.
Waikato was yesterday declared a drought zone after its driest January in more than 100 years.
A combination of low rainfall, near record high temperatures, extremely dry soils and falling river levels prompted what is reported to be the region's first drought declaration.
"People can't count on the rain coming anytime soon ... with drought conditions predicted to continue to the end of autumn, Waikato regional council chairman Peter Buckley warned.
Even if rain fell it was unlikely to put enough moisture into the soil to boost pasture growth to normal levels.
Agriculture Minister Jim Anderton -- who will stage a national drought meeting of government officials and sector leaders at 4.30pm on Tuesday at 4.30pm -- said if the dry weather persisted, the situation would become very serious in some areas.
* In the capital, Wellington regional council chairwoman Fran Wilde warned that low levels in storage lakes mean urban residents are likely to face a sprinkler ban and possibly more severe water restrictions.
High water demand and continuing sunny weather have seen the level of the water supply lakes drop by 10 percent," Ms Wilde said. Water levels in the Wainuiomata catchment are so low that the water treatment plant there may have to close.
http://www.nbr.co.nz/home/column_article.asp?id=20112&cid=4&cname=Business+Today
Fonterra -- the world's biggest exporter of dairy products -- warned today that the big "dry" was not only eroding New Zealand's milk production but might restrict new export orders.
"At this stage, we are ... confident we can meet all our customers' contracted orders but supply is tight," said Fonterra chief executive Andrew Ferrier.
"We now find ourselves effectively booked up for the season. This is forcing us to advise customers that we may not be in a position to take all new orders for New Zealand supply."
The company had budgeted on a 3 percent rise in production this year to about 14.8 billion litres, but now expects the drought to cost its 10,000 farmers as much as $500 million by the time the season ends in May.
"The dry spell has already cost farmers about $60 million in milk payout, and on-farm losses would continue to mount unless there is significant rainfall," said company chairman Henry van der Heyden.
"Every day without rain is hurting farmers, and will have a flow-on impact for local communities and the broader economy."
"This has really taken the shine off what should have been a fantastic season for our farmers, with a record payout."
Fonterra said in December it was lifting its forecast for this season's milk payout to a record $6.90/kg milksolids -- a windfall which will pump a massive $3.25 billion into farmer incomes.
Mr van der Heyden said Fonterra was holding to its $6.90 payout forecast even though it was now facing "something of a double whammy" with a drop in milk production and exchange rate close to US80c.
"The record dry summer over much of the country means season-to-date milk production is now falling below last year," he said.
Fonterra last year collected 14.34 billion litres of milk.
Mr van der Heyden said the widespread dry spell was hitting farmers hard in most parts of the country.
On a daily basis compared to the past year, Waikato production was down 27 percent, Bay of Plenty milkflows were down 21 percent, Taranaki was down 9 percent, and Southland was down 1.5 percent.
The Waikato and the Bay of Plenty, together account for about 40 percent of the national dairy herd.
He said farmers in dry regions were facing up to challenges in terms of lost cash flows and also in managing their farms with very little feed available.
Fonterra had been looking at supplementary feed options and how it could support farmers, "but the stark reality is that there is a real feed shortage both in New Zealand and overseas."
In many parts of the country, January rainfalls were the lowest or second lowest on record, temperatures have been hotter than usual and soil moisture levels are falling.
The lack of feed was causing sheep farmers to sell stock early and dairy farmers were recording lower production as many were forced to dry-off their milking herds.
Waikato was yesterday declared a drought zone after its driest January in more than 100 years.
A combination of low rainfall, near record high temperatures, extremely dry soils and falling river levels prompted what is reported to be the region's first drought declaration.
"People can't count on the rain coming anytime soon ... with drought conditions predicted to continue to the end of autumn, Waikato regional council chairman Peter Buckley warned.
Even if rain fell it was unlikely to put enough moisture into the soil to boost pasture growth to normal levels.
Agriculture Minister Jim Anderton -- who will stage a national drought meeting of government officials and sector leaders at 4.30pm on Tuesday at 4.30pm -- said if the dry weather persisted, the situation would become very serious in some areas.
* In the capital, Wellington regional council chairwoman Fran Wilde warned that low levels in storage lakes mean urban residents are likely to face a sprinkler ban and possibly more severe water restrictions.
High water demand and continuing sunny weather have seen the level of the water supply lakes drop by 10 percent," Ms Wilde said. Water levels in the Wainuiomata catchment are so low that the water treatment plant there may have to close.
http://www.nbr.co.nz/home/column_article.asp?id=20112&cid=4&cname=Business+Today
Subscribe to:
Posts (Atom)