It is almost exactly a year since we published our last blog on the New Zealand fertiliser industry ("Fertiliser prices on the nose" Dr Jon Hauser, Xcheque.com, 9 Dec 2009). Prompted by a new round of price adjustments ("Ballance adjusts its fertiliser prices", Radio New Zealand, 8 Dec 2010), we thought it was time for an update.

The latest US milk production data shows an increase of 2.9% when compared with October 09. We have been anxiously watching milk production trends with the general view that excessive production out of the US, Europe and Oceania will kill the commodity price recovery that we have seen in the past 6 months. At first glance the latest figures did nothing to allay our fears but in the true tradition of Xcheque.com Dr Hauser has turned conventional wisdom on its head.

A deeper analysis of the latest data shows that milk production has moved back towards the long term trend. That is good news for global export prices (if you are a farmer and dairy processor). It may well be that we are seeing the first signs that the brakes are being applied.

Dr Hauser flew across the Tasman to the IDF Dairy Summit this week and as promised revelations are revealed.

.. and it is all a bit of worry. We are ever the skeptics here at Xcheque.com (economic gravity and all that) but Dr Hauser seems to have been caught up in the fervour of dairy industry enthusiasm.

This is his headline, not ours, so let's hope it is fervour and not fever.

Troubled by lies, damned lies, and statistics, Neil Lane was stirred to write about the average age of Dairy Farmers in Australia ... or perhaps he is just feeling sensitive about his age.

Neil puts the case that the much publicised "aging dairy farmer population" is something of a myth. Whilst there is some indication of a marginal increase in the age of dairy farm owners, that increase is not the significant issue. There is a need to account for increasing life expectancy and to look at the average age of people living and working on farms.

Fired up by Dr Hauser's recent comments on milk production in southeast Australia, Neil Lane addresses the question of the trend to more offpeak milk in Australia.

Whereas Dr Hauser has linked increased offpeak milk production to price incentives, driven by the demands of domestic milk processors, Neil sees the trend as a natural response to changing climate conditions and an improvement in the cost and income side of dairy farm economics.

On the question of the future of northern Victoria, our esteemed Directors have agreed to disagree. Neil is more optimistic that a return to normal rainfall pattern will retrieve the situation and that production will return to a growth path for some time to come.

The strength of global dairy markets has put a smile on the face of Oceania dairy farmers ... but not for long. In the tradition of the normal farmer mindset we can already hear calls of anguish over the weak US economy and the effect this is having on the US dollar exchange rate.

In his blog this week Dr Hauser takes a look at the impact of exchange rates on the Xcheque milk price indices for Australia and New Zealand. There's no reason to panic yet but watch out for further downside in 2011.

This week Fonterra announced their final result for the 2009/10. There were no surprises there for farmers - the total cash payment of $6.37 / kg MS was as forecast back in April. The final distributable profit was a slightly higher than expected and Fonterra have taken the opportunity to use this to reduce their debt burden - moving their gearing ratio from 53% in the prior year down to a much healthier 45%.

The news that did take my eye was the reaffirmation of the forecast for 2010/11 at $7.00 - 7.10 / kg MS. I had to put my glasses on and read the press release twice to find out what Fonterra was really saying. That made things a little clearer but it does seem that a little bit of magic dust has been sprinkled on the New Zealand Dairy Industry. Here's a few thoughts on how the trick is done.