Farmers get fertiliser profits
Ravensdown isn’t expecting a rush of farmers ordering fertiliser as a result of a 50c lift by Fonterra on the milk price.
That’s because there has already been an increase in sales this spring with one day’s result lately topping 10-year records for daily sales.
Rather, the fertiliser cooperative believes a more measured response is likely as dairy farmers put deferred maintenance back on the radar after the forecast farmgate milk price increased to $5.25 per kilogram of milksolids - and beyond the break even point of $5.05.
‘‘It’s encouraging,’’ said Ravensdown chief executive Greg Campbell. ‘‘I have been talking to big shareholders and it’s lifted their confidence and sentiment is almost everything in farming and we have had a strong spring already and we are tracking ahead of where we thought we would be in sales and farmers are going back to pasture . ... We are seeing that transferred in sales.’’
He said the sales spike had come on the back of increased sales and profitability during the financial year ending May as well as three to four years of restructuring the business and developing a new strategy matching staff with the needs of farmer customers.
Volatility had become part of the fertiliser business and Ravensdown’s longstanding relationships with suppliers would ensure it had enough product to supply farmers on the back of the 50c increase, he said. ’’We have really noticed the last few weeks that it’s been very busy and we had our biggest day for 10 years.’’
Ravensdown announced a pretax and pre-rebate profit of $62 million, which was up on last season’s $46m. Debt levels are well back with an equity ratio at 75 per cent after the rebate was paid and since shedding Australian assets the past few years. An interim rebate of $21 a tonne was introduced in May to get more money to farmers followed by $20/t at August.
The co-operative’s $660m turnover is down from $1 billion four years ago when milk prices were higher, but it was making more money and passing this onto shareholders through reducing fertiliser costs or via its rebate, said Campbell.
Ravensdown’’s shipping joint venture runs at a profit and allows it to secure transportation of fertiliser ingredients to New Zealand and sub-let cargo space on return shipments. Fertiliser ingredient prices are back with urea at a 10-year low, allowing Ravensdown to reduce its fertiliser prices four times last year.
Campbell said Ravensdown was committed to more innovations providing better environmental outcomes. He said world fertiliser production was increasing with more than 100 fertiliser development projects globally but demand was subdued.
‘‘We have probably seen the majority of forestry to dairying conversions which will probably occur, but not the big sweep we had. There will be products that come to market that will substitute products.’’
On the horizon are more sophisticated fertilisers with controlled releases to ensure the right amount of fertiliser goes on crops and pasture.
Ravensdown’s new $63m precision blending plant at its Hornby site can mix nine products and liquids in one batch at 180 tonnes an hour. Similar equipment is being built as part of its $30m New Plymouth development. The fertiliser co-operative with 25,000 farmer shareholders and 686 staff picked up more than 500 new shareholders the past few months.