AgriPulse

Thank you for all your feedback on the Agri Pulse updates. The updates have been very well received, and we will continue to adapt and improve the newsletter based on your thoughts.

The majority of the primary sector remains in very good heart, which is driving the ‘two stage economy’ as highlighted in the media. Long may this continue, although history will remind us that we continually have swings in commodity prices. On the farm, this is the time for building resilience in the farm business, whether that be increasing scale, decreasing debt, improving farm infrastructure or improving farm performance.

Talking of resilience, recent weather events have highlighted the need for ensuring resilience in our electricity supply on farm. We often think ‘it will never happen to us’, but it has. Some of our analysis suggests installation of a solar system plus battery backup may be a more worthwhile option than a generator.

Fonterra Capital Distribution

As you will be aware, Fonterra has agreed to sell its consumer brands Mainland & Anchor, which will result in a capital distribution to Fonterra shareholders of $2/kgMS. This is forecast to be paid out in the first half of 2026. This capital distribution will provide a significant boost to farmer balance sheets. If part of the reasoning for selling the brands business is to redistribute the capital to areas with a higher return, my challenge to dairy farmers is exactly that – direct that cash into areas of high return – I suggest targeting 10% or above.

James Allen, AgFirst

Despite slow spring pasture growth in many areas, total milk production for New Zealand season to date is up 3% compared to 2024. The high milk price remains a key production driver with the North Island 3.3% higher than this time in 2024 and the South Island up by 2.3%. This production trend is reflected internationally with the European Union and North America also both up by 2.7% and 3.3% respectively on this time last year.

A severe windstorm in October resulted in infrastructure damage in the lower North Island and down the South Island and will have lasting impacts for many affected for the rest of the season. States of emergency were declared in the hardest hit areas including Canterbury, Otago and Southland where downed power lines and trees caused unprecedented infrastructure damage. Back-up generators proved their value yet many herds missed a number of milkings and many farms have significant damage and clean-up costs. Maintaining production for Canterbury farms that have suffered significant irrigation infrastructure damage will be a challenge for the remainder of the season.

Despite this farmer sentiment overall remains positive, even though Fonterra has revised it’s forecast to $9.50/kgMS. International signs indicate falling demand for dairy produce with GDT results softening over the last 2 months and farmers will be watching future GDT events closely for the remainder of the season.

On a positive note, the Reserve Bank of New Zealand (RBNZ) announced a further cut to the Official Cash Rate (OCR) to 2.50% which puts the OCR at its lowest level in recent years, falling from a high of 5.25% in August 2024. The RBNZ has also signalled further cuts are possible still, all of which could help reduce inflationary pressure for dairy farm inputs and further lower borrowing costs.

On farm positivity is also matched with a lot going on within the New Zealand milk processor space. Fonterra farmer shareholders voted in support Fonterra’s sale of global consumer brands to French dairy Lactalis Groupe which will enable a substantial capital share tax-free return targeting $2 per share held. This major change in Fonterra structure signals the final shift away from the consumer brand focus to the raw ingredient focus, and whilst there is concern from some that selling brands like Anchor could hurt the Co-op in the future, shareholders showed a clear mandate to sell with 88.47% of the votes cast in favour.

Also making headlines was Open Country Dairy (OCD) making two significant strategic acquisitions with the purchase of the Mataura Valley Milk plant in Gore, and Miraka in Taupo both of which highlights OCD confidence in the sector.

Overall, the sector remains positive, and many farmers are utilising the high milk returns to pay down debt with total dairy sector debt continuing to fall, down approximately 12% from the high in 2018. This will place them in a better position to cope with volatility.

Guy Michaels – AgFirst Consultant

There is a fair bit of optimism in the sheep and beef industry. Both sheep and beef meat schedule prices have started the season at record highs with the lamb schedule at the time of writing around $11/kg and the prime beef schedule around $9.50/kg carcass (North Island). For both beef and lamb this is a 38% increase from prices 12 months ago and around 60% increase from prices 24 months ago. Even wool prices are high enough to get a bit back after paying the shearers.

The store markets are also at record highs. This is taking a bit of shine off the margins for those who are selling finished livestock and then having to replace, the high tide has lifted all boats. Weaner Friesian bull calves have been selling for somewhere around the $800 mark, a big increase from the $600+ 12 months ago. Though pricey for those buying them, it does ensure reasonable margins for calf rearers and encourage them to be around next year.

Looking forward, most commentators have a lot of faith in the international beef markets staying buoyant for an extended period. There is a bit more concern about the medium-term international lamb market, but not many are expecting a dramatic drop.

You never get all stars aligned at the same time. This sheep and beef income optimism needs to be tempered by the fact that farm operating expenses have increased significantly over recent years, around 30% since 2020. With a few financially challenging seasons behind us, a lot of farm maintenance has been deferred. For many farmers these better returns will focused on catching up.

Weather during spring has been challenging for many with storm damage in Southland, Clutha and Canterbury keeping insurance assessors busy. Hawkes Bay is also particularly dry for this time of year and farmers there are unloading livestock, fortunately there is plenty of grass in most other regions.

So, a fair bit of optimism around the industry at the moment. However, as always in international trade – anything could happen. At this time of year most farmers are just starting to think about selling stock and those who have seen a few ups and downs have learnt not to celebrate until the money is in the bank.

Chris Boom – AgFirst Consultant

Pipfruit markets have held well, with some positive outcomes from the 2025 season, giving growers a much-needed cashflow boost coming into the new season.

The Nelson Spring though October has led to sub-optimal bee activity conditions for several apple flowering windows, this has resulted in lower fruit set than previous seasons. Secondary thinning applications have been less aggressive as clusters have naturally thinned down to single and doubles in some blocks.

Sungold Kiwifruit budbreak was 10 days later than past years, however growing degree days from the 1st of September are 50% higher than the past two years so SunGold is now only 4-5 days late. Bees have been put into all SunGold blocks and flower thinning is coming to an end. Bird damage has been more severe this year, possibly due to the later start to the season. Overall, Nelson’s crop is progressing well after the late start with minimal frost events. Zespri’s final charter shipment of the 2025 New Zealand kiwifruit season has departed the Port of Tauranga, this year’s crop of around 215 million trays, or more than 770,000 tonnes, has been the largest yet.

In the Hawkes Bay, Late Winter/spring had quite low rainfall, meaning it was drier than normal going into flowering. Growers (and farmers) are now on rainfall watch and carefully considering soil moisture against crop demand with the ongoing dry conditions and warm winds.

Pipfruit chemical thinning is completed with growers reporting generally good results from primary and secondary applications. Hand thinning is now underway in early blocks. Early fruit size conditions have been good, with optimal solar radiation, good growing degree days (GDDs) to date and good diurnal variation.

David Perry – AgFirst Consultant

Reviewing the latest market update, two clear themes have emerged for agri marketers this month.

Theme 1: How can you prove your value against the bank? With the dairy payout sitting at a comfortable $10/kg MS and sheep and beef schedules hitting record highs ($11/kg for lamb), there is liquidity in the market. However the competitor for your product this season isn’t necessarily another brand, it’s debt repayment.

The AgFirst report highlights a critical shift in mindset. While cash is available, the priority for many farmers is building balance sheet resilience. James explicitly challenges farmers to target a 10% return on investment for any new spending, otherwise the advice is to pay down debt. For marketers, this means the “nice to haves” will struggle. Your marketing math needs to be sharp. We suggest shifting your messaging away from general upgrades to specific, hard-nosed ROI messaging. If you cannot demonstrate a clear financial return superior to the safety of debt reduction, you may find wallets remain closed despite the high commodity prices.

There is however, a distinct opportunity in deferred maintenance. The report notes that sheep and beef farmers are finally seeing a lift in schedule prices after lean years and are looking to catch up on repairs. This isn’t about expansion, it’s about restoration. Campaigns focused on fencing, fertiliser, and getting the farm back to 100% are likely to perform better than those pushing significant new capital expansion.

Theme 2: Balancing broad brand presence with hyper segmented product tactics. Under the usual two speed targeting strategy, the case for acquisition focused activity is the strongest it has been in the last four to five years. However, agriculture has a few additional dimensions that need worthy consideration before marketers start pouring their marketing budget into acquisition activity, specifically weather.

Recent weather events have exposed a polarised landscape across the country. Hawke’s Bay is unusually dry and farmers are destocking, while Canterbury and Southland are in recovery mode from wind damage.

This dictates a split strategy. We believe there is still a strong case for broad, national brand campaigns. The overarching narrative of resilience (building systems that can withstand shocks whether market or weather related), will resonate with every farmer regardless of their region. Brand level messaging about partnership, reliability and long term support should remain consistent and wide reaching to maintain share of mind.

However, when it comes to product campaigns and converting sales, you should not run a one size fits all strategy right now. To maximise your marketing budget, product activity should utilise geographic segmentation at the very least. Promoting drought feed solutions to a storm damaged Southland market is wasted spend, just as marketing moisture reliant inputs to a drying Hawke’s Bay is unlikely to land.

We recommend tightening your geo targeting for tactical spend immediately. Ensure your product creative acknowledges the specific reality of the region, offering infrastructure repair solutions to the south while offering efficiency and feed support to the drying north. The brands that can hold a consistent national posture while delivering regionally specific solutions will be the ones that build trust this quarter.

Kurt Sandtmann – Managing Partner, Tracta

Solar energy is becoming an increasingly practical and cost-effective option for New Zealand farmers who want to strengthen long-term resilience, manage operating costs and support on-farm sustainability. With energy prices rising and technology improving, more farms are now in a position to generate a significant portion of their electricity needs from their own land.

The financial environment is also helping make solar more accessible. With interest rates easing and banks offering supportive lending for renewable projects, farmers are able to invest with more confidence. Many operations are now offsetting around 50 to 75 percent of their annual electricity use, reducing exposure to volatile energy markets and improving cost predictability.

Solar generation naturally peaks from spring through to autumn, which lines up well with seasonal farming energy demands. During the lower-output winter period, grid connection provides the backup needed to keep things running smoothly. Excess power generated in the high-production months can be exported back to the grid, adding value and supporting New Zealand’s wider Net Zero goals.

One system gaining strong interest is the FarmGen solar setup, designed specifically for New Zealand farming environments. It uses a modular rod-in-ground structure that avoids earthworks, concrete or heavy steel. This keeps installation costs down, reduces disruption on farm and allows the system to be shifted or repurposed if farm layouts or land use change. Because the system is owned rather than leased, farmers keep control of how it is used and the long-term value stays on farm.

AgFirst Waikato has spent the past year working with FarmGen to understand how the system performs across different farm types and how solar fits into long-term business planning. Through this collaboration, AgFirst can support farmers through the full process, from feasibility and design through to installation and ongoing assessment