I think that this is a huge factor that I haven't seen any bank or Treasury or RBNZ economist/official truly factor into their analysis. Diary financial statements normally balance up to May, so the first trickle of diary tax returns are only just starting to find their way to the Department now. For those who toughed out provisional tax payments over the last year, and didn't estimate out of them, in many cases all of their provisional tax paid will be getting refunded to them over this year, with no liability for payments from this year, nor need for estimates and voluntary payments given the the losses that will be generated. Thus the government may well find their taxes not only halting, but what is already spent by them, disappearing as provisional tax is refunded.

Further, I believe an argument can be made that in their minds, diary farmers still thought themselves pretty much bullet proof right up until the $4.55 payout announcement about two months ago - which is now getting worse as the prospects of that forecast are worsening - and it is only since that time that I have been noticing not only real concern from dairy farmers, but also bank managers becoming nervous about their clients in this sector, and actively starting to manage them.

[If the banks possibly made one mistake over the last twenty years, it was cost cutting by taking out all their older and middle management that had been through the 1980's, leaving them with no corporate history back to those times, and new managers who have only ever known good times and upward pointing graphs. That's a disastrous combination.]

Anyway, as I said, that payout announcement was just two months ago.

The last thing I want to be is a doomsayer - other than about the Big State, of course - but given the importance of this sector, in the South Island at least, the real pinch of serious recession starts now (not two years ago), as do the governments problems, and I am perplexed to see all the reports of recovery this prematurely.

(Having said that, though, talking to builders and building goods suppliers, that sector really is starting to come away again, with inquiries and business increasing noticeably. The conclusion this leads me to is that perhaps the dairy sector is not as crucial to the NZ economy as I have been thinking - I'd love to see some numbers.)

Interesting times.

Mark is right about the $4.55 payment and the delayed affects. The odds are on that a further reduction is in the pipeline. The downside impact on the economy will be very significant.

This backs up a posting of mine a day or two ago where I said house prices in the regions will fall another 5-10%
the "dairy effect" has been underestimated

We been thro' this.

NZD too north, protection up and demand down elsewhere, payout weak; potential of toxic-debt at scale manifesting; tourism down too (unless you like a sore a#se from all the cycling!); incomes where, house prices where - unless??? We know the story, but the props. will cave sooner or later, and if later, a bigger mess.

Someone needs to grasp that nettle:

http://www.interest.co.nz/ratesblog/index.php/2009/07/27/90-at-9-raise-t...

Some interesting comments above. What I have seen, which is not much; Dairy farms everywhere with yearling heifers in the front paddocks, a sight not seen for years. The question being how much less pasture is available for milk production. Yes I have heard inductions are full steam ahead. Notably some very yellow paddocks which suggests a reduction in fertilizer.
I dont know who is getting out of recession, it certainly doesnt seem like rural nz.

This is a sign of the times if ever i saw one:

Listings on www.realestate.co.nz

Pt Chevalier - 1 page - 11 listings in total

Whitianga - 23 pages - 451 listings in total

http://www.realestate.co.nz/residential/all/whitianga

"Thus the government may well find their taxes not only halting, but what is already spent by them, disappearing as provisional tax is refunded."

It isnt only dairy....its been a hard year for most of the IT contactors I know, some also expect a tax refund after over-paying provisional tax.

"...also bank managers becoming nervous about their clients in this sector, and actively starting to manage them." Ditto IT contractors...

The W shaped recession is what I would call a dead cat bounce...and yes I think so the awful Fontera payout heralds that.

"The real pinch of serious recession starts now (not two years ago), as do the governments problems, and I am perplexed to see all the reports of recovery this prematurely." This is because most main stream journalists are light weight and their publishers seem to be right leaning as this is where the advertising revenue is, so I think there is "some" bias in reporting in order to keep advertising up and support the right wing idealogy. Time and time again I read positive spin where I dont think its justified....but then Im a pessimist....(or so Im told) Hence why sites like this are very useful to me, the data is here and so is the disection of it.

Wally: "that aussie crowd spud into an oil pocket" If that happens the expectation is that the exchange rate would go from 0.6:1 to 1.2:1 as we would have an oil based economy...but the chances of that are tiny IMHO, ie a major find, say 100billion barrels which would give about 5million barrels a day, at say $100 a barrel....$500millionUS a day...

http://en.wikipedia.org/wiki/List_of_oil_fields

but the geology just isnt there....we'd be pretty much as rich as the Saudi's but the rest of our economy would be a basket case. We willl probably get some oil but not at any scale...

"This is because most main stream journalists are light weight and their publishers seem to be right leaning as this is where the advertising revenue is, so I think there is "some" bias in reporting in order to keep advertising up and support the right wing idealogy"

don't forget the so called "independant" bank economists who have obviously been (either consciously or unconciously) talking the market up as its in their paymaster's interests to do so

AndrewJ
thanks for the great Reich article
I like that one...an X recovery

Might be time for Alan to announce the start of money printing on Thursday. Get our currency down in a hurry.

Stephan - in the scheme of things this is a blip on the "\" .

HarryO
Keep in your m ind that the bad times dont last forever, as bad as this may get it will end and the $ will collapse and good times will return. I think dropping numbers to try and reduce costs is the best option out there at present. Im in the wine industry and its getting really ugly Im getting letters like this

Please forward to your Head Winemaker/Head Viticulturalist/Person in charge of Grape Supply

Hello,
My name is XXXX, along with my wife and our one year old we own a 24 Hectare vineyard at Korokipo in Hawke's Bay.
We grow Chardonnay (CL15 & Mendoza), Pinot Gris, and Sauvignon Blanc. All for still table wine.
I have been in the industry since 1996/97 when I completed the Wine Industry Certificate in Gisborne.
Since then I have worked in many various roles including Assistant winemaker and vineyard manager in several different regions, including Gisborne (Matawhero), Marlborough (Montana), Hawkes Bay (Church Road), North East Victoria (Boyntons), Waiheke Island (Stony Batter), and then decided to go for it ourselves here in Hawkes Bay.
We have been in possession of the vineyard since February 2008 and have enjoyed two successful harvests.
It now seems the future is in doubt as our contracts are being terminated on mass.
I am writing to let you know of our situation so that you are aware of what we have to offer.
This vineyard has been here since 1980 and has supplied one company or its successor its entire existence.
It is well established and replanting has been undertaken on a regular basis.
What we have to offer;

5 Hectares of Mendoza Chardonnay 10 year old vines, 4 cane, 10-12 T/Ha

10 Hectares of CL 15 Chardonnay 6-8 year old vines, 4 cane, 10-12T/Ha

4 Hectares of Pinot Gris 4 year old vines, 2 cane, 10-14T/Ha

4.7 Hectares of Sauvignon Blanc 2 year old vines, 1-2 canes, 5-8T/Ha EST.??

I am offering to you any of these grapes in 1 Ha lots.
If you want one hectare of CHD one of PGR one of SBL we will accommodate you.
Of course if you want more, or all this will be gladly received.
To be fair to all concerned this will be a first in first serve basis and prices will be the same for everyone unless long term options are negotiated or a majority of grapes to one buyer situation occurs.
Please do not hesitate in contacting me or my wife regarding your requirements or any queries you have.
Regards XXXXX

Roger J Kerr had this in his latest piece on the NZD/USD:

"Outside USD movements globally, the NZD currency leads to watch this week are the US sharemarket, announcements of a milksolids payout reduction by Fonterra (they have a Board meeting this week) and commodity prices."

I don't think the Fonterra board has the anatomical parts required to announce a payout reduction. That will be left as long as possible in case the currency drops or pigs fly and they can avoid it.

After reading all this I don't understand why the government doesn't drop the OCR.
How can the advantages of a higher cash rate outweigh the disadvantages to the export sector?

Dairy and wine is in a similar boat, overpriced land assets and falling demand and returns on the back of a persistently volatile and seemingly too high NZD.

Rob, whilst it's true that lowering the OCR would hurt savers (the few of us that are out there), having the dollar tied to the risk appetite of international investors is too volatile a situation to tolerate.

HarryO, I have stated previously here that family farms are the backbone of NZ, and moving to the corporate structure will be the ruin. Having the kids home will be a blessing, and hopefully make this downturn worthwhile!
I have heard product is moving well at present, it is very early in the season, you may yet get your $4.75.

Don't beat about the bush, Wally. Tell us what you really think.....
PS: Lower the kiwi and let's just see how much petrol costs us all !

Even if the Reverse Bank dropped the OCR lower ( which they won't ) , it won't change sentiment towards the Kiwi Peso overseas. And it will send all the wrong signals to our real estate industry. Do we really want to re-ignite the property boom, the property seminars, and those appalling property advertorials on local radio !

We are back to the point of the limits of the Reverse Bank's powers. We still need a change of policy from Gumnut, to shift investing focus away from houses and into productive businesses........no more LAQC's, no more LAQC's........Key or English listening ?

William
Im skeptical as well. especially now the USA is increasing volumes for export subsidy. It has piles of milk powder, now its exports to China are back %86. The one thing for sure is that you cannot trust Fonterra. They are behind a lot of this mess,they paid over $7 a kg but borrowed 2 billion to do it. They doubled the price of your cows and created a bubble in dairy farming land by releasing overly optimistic predictions for future payouts. I talked to farmers who had attended shed meeting where the talk was of 10 years with payouts no lower than $7 and as high as $11. Now we find that every share has assets of .50 c and liabilities of $14 and banks wont lend anymore to buy shares as they are worthless. Fonterra's need for more capital resulted in an attempt to blackmail contract suppliers into having to buy shares, this has backfired as the banks will not lend against shares anymore. There was talk of Fonterra needing another bond issue in the spring,Im watching with interest how they raise more capital this year.

we now are dependent on China for our milk powder sales, these guy's?
http://www.creditwritedowns.com/2009/07/hugh-hendry-china-the-emperor-ha...

Rob - "or try to artifically reduce the exchange rate" - do you think the exchange rate is, not, artifically too high, and too volatile - in comparison to real trade flows? (See my comment July 27th, 2009 at 6:51 pm and drill the link.)

Roger - "Key or English listening ?" - I don't think so:

English defies the evidence on monetary policy, 20th Feb 2009, see here:

http://www.mea.org.nz/media/pressreleases.aspx

Get real, having boxed themselves in with ill thought through statements of policy, and having ears filled full of 'pride wax', spare a thought for the mental gymnastics they might be going through as they realise the obvious. Or, maybe they are blissfully unaware and on their bikes leading a bunch of tourists and foreign investors down 'The Yellow Brick' road to enjoy NZ's great capability (coffee) and to view the soon to be available, at fire-sale prices, great views and real estate. Everyone a winner...

When Fonterra was formed, a very successful older anti Fonterra farmer told me that all going well he would have enough time left in his life to see Fonterra collapse. He still farms as he has always done and is doing OK. No pouring urea on, no feed pads, no buying new big tractors all the time, no big feedout wagons, no buying the neighbours farm for stupid money, no buying in expensive feed, no spending lots of money on drug and chemical products etc etc. He milks 280 well fed, top conditioned cows on grass and maize that comes from paddocks that are being part of pasture renewal and always has his barns full of top quality hay, and calls the hay" money in the bank". I saw him the other week and he said things are down but he is going along OK. He has no DEBT. He still thinks Fonterra will collapse eariler than he thought. I am afraid a lot of Farmers have been conned and greed has played a big part of their downfall. The worst thing out of all this is the animals are the ones that really suffer from mankinds folly.

Double post, sorry

What about the drop in 20 million sheep? ie.20 million lambs not for sale! 20 million fleeces not produced @ 3kg ea.

I love your last post Andrewj.

Given there is now a peer reviewed scientific report out debunking man made global warming, and indicating all climate change taxes will achieve nothing as far as the environment is concerned, but replicate the last two years as far as the economy is concerned, plus close off any chance the third world has of getting itself out of poverty, as climate change policies will deny them cheap power, it behoves a responsible government to now put a halt to all thinking on climate change taxes, in view of scrapping all plans altogether.

(I shake my head at the incalculable damage Al Gore has done).

Regarding the sheep industry, you are right there also, and the decline in sheep numbers is alarming, and as big a threat to the future of the industry as anything else. One of my sheep shearing contractors is down 30,000 head this year, and he hasn't lost sheds to competitors, the sheep just aren't there. When numbers build up again, one wonders if the skills will still be there to grow the industry again.

MAF have released their Situation and Outlook for griculture:

http://www.maf.govt.nz/mafnet/rural-nz/statistics-and-forecasts/sonzaf/2...

I haven't read it all, but it appears to paint a rosy picture as usual. Missing this year are the projections on profitability of agriculture present in the 2008 Situation and Outlook.

From 2002, this story gives an idea of what is behind the whole global warming/carbon tax thing:

http://cei.org/gencon/019,02898.cfm

I agree with the notion of treating our environment carefully and with a view to sustainability, but it makes no sense to bankrupt our country.

PeterR
Well its great to see those employed by the Govt know how to use their imagination. I find mine helpful when I do my cash flow. If I squint when my wife gets undressed she looks like she's 20 again,however I have to squint harder every year and I think she's noticing but just thinks Im odd.

PS a carbon tax wont happen. We are about to be beggared by a lack of cheap oil. Cheap fertilizer, cheap pesticides and insecticides and drenches. All gone. Carbon tax is the least of our problems I reckon. All our generation has known is going. Unless some smart bugger finds an alternative fuel.
My pessimism even offends me.

i was talking to local cow cocky ,calves worth bugger all
Wait tell mid august shouldnt have to pay much

There talking 10 bucks

Trust me, William. Once a politician has his hands on the money he doesn't give it back.

George, so you are saying Bills gonna kill the goose that lays the golden egg. I just dont believe it. Farmers are up against the wall as it is. Read what AndrewJ says, he would rather retire his farm. So would I. I will not pay tax because my stock fart. It is a natural process. It is moronic. I do not believe the government will kill NewZealands biggest export earner. Its their income too.

Your probably right. I asked what they were worth on the truck not what he would sell them to me for

Thanks William.

I suspect Fonterra has moved to include viral marketing into its message. To me your bullswool translates into Fonterra's "managed message". The stats in terms of today's trade figures, and dairy commodity spot prices, don't support the message.

Fonterra has sold - as it normally does, product in advance - till at least March 2010 through its Global Dairy Auction at USD 1,840 per tonne for WMP. I am sure they are still supplying that product - but mostly by sea.

William.

GDA sets the price for the market. Fonterra sells forward several months, and that works to its advantage in a falling market. The market is now flat. If there is a pick up in prices, having sold forward will work aganst Fonterra. There is a production season left, but a reasonable proportion of Fonterra's production has already been sold. That may be advantageous or disadvantageous, but it has already taken place.

Farmers look despondent and expect a slow road to recovery,maf tries some more spin

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1058...

William, you are, in fact, Going Galt. (John Galt, revolt of the producing class, Ayn Rand, yada, yada.)

Very interesting read all told. Wouldn't like to be in charge of getting in tax receipts this year - could be a very nasty shock in store.

And the Bruiser Bennett saga is building up to a Tea Party, no? Revolt of the Tax Payers....

If sheep numbers were to increase this would reduce the short term export supply, which may promote a spike in the price, which, no doubt, some will point to as a long term trend, and away we go again.

I was talking to a bloke that is working on a dairy conversion about to have its first season. He said that the next job for the engineers that were building the shed was going to be in China! I wonder if the Chinese are on a fact finding mission rather than a farm buying spree.

Some (most) dairy farmers I have talked to will be shooting most of their calves, as they are not worth feeding for 4 days for the bobby truck or the sale yards. Just keeping minimal replacements.

Stevel
Im just back from the lambing beat,the thought of shooting calves sends shivers down my spine how do dairy farmers do it?
The rebuilding of the sheep flock requires ewe lambs to be held back takes time has a significant effect on kill numbers. Im watching the pound closely we are back to .40 and heading over .46 to the Euro. Stephen Hulme reported we where at risk of becoming caught up in a new carry trade with the US$ and we couldnt do much about it. He thought it could drive our $ through the roof, borrowing out of the USA at Zero and lending here at up to%6. Solution stop borrowing. Debt figures out tomorrow.

Les
We have imported a lot of people in the last few years, all driving cars etc.

Roger Thompson /Les Rudd - We should be commiting to a 40% reduction in GG's... Responsibility begins with Ourselves... We need to overcome the inertia, be practical and get on with the Business of making the changes needed... This is an opportunity not a threat.

Problem is, Mouse, the science is unsettled, the temps are falling, growing-degree-days are lower than most food producers would like, and in general Old Sol just doesn't seem to be in any hurry to commence Solar Cycle 24.

Why, perhaps the Sun, and not so much the carbon cycle, have a major influence on climate.. whodathunk?

So in the face of That perfect storm, you'll find few takers for a self-imposed lead-the-world tax. Bit like Lotto, famously described as a self-imposed tax on the poor and stupid.

Les - "How about we add in some "˜whole system' factoring say, that reflects the fact that production we lose off-shore, has less reducing effect on emissions in less developed countries, who take that production from us, and who typically are not as keen on reducing their many %'s of GG's, in comparison to us being keen to reduce our fractions of % GG's?"

I agree - It's Not a level Playing Field... the Answer... even it up with Trade Barriers. These would be more effectively implemented from the Moral high ground (40% reduction GG's), than being Piss takers with the proposed 15%.

I also agree R&D is essential... as is Leadership.

mouse - "Trade Barriers" - seems a little extreme. On that point though, again moving to get another perspective, it's not as though we can sit on our hands either, because if we don't keep up with the clean green brand, that could well be used against us, ie. eco-trade barriers, veiled or otherwise. But do we have to be so ahead of the pack and unnecessarily warping the commercial environment for ourselves - especially when we are minnows in this space? The leadership we give needs to be thought through more IMO.

Andrewj, its better economics to shoot the calves, you get to save on the labour and stress of feeding them and you can sell your colostrum to fonterra (if you are set up). One cockie told me that he had cleaned out his animal health remidies and replaced them with a rifle.

Les : Well done ! Our PRESS is the widest circulated and read paper in CHCH........oops, sorry Big H. .......not allowed to plug ! And yes, we don't want to be dirty birds and poop in our own nests. But neither is it fair to allow off-shore agencies to dream up arbitrary standards, to remedy non-proven problems, and to foist that little lot in a blanket across the entire globe, as if there is absolutely no difference in population/industry/or geography in any individual country.

Les - Thanks for the article... I think this proves the point I was trying to Make... NZ's Carbon emmisions have grown worse relative to other countries, i.e. We are suckie Greenies...

It'ts not about the absolute number relative to other countries... It's about how we are doing relative to ourselves.

Q: How can NZ expect India,China & Brazil to shriink their proportionatly megre lifestyles, When we in NZ think we can continue to live beyond our Planets means because we live iina less populated country?

If Eurpoe can comit to a 30% reduction in GHG emmissions... and Scotland [home of the brave can commit] to 40%... I'm thinking NZ's commitment looks like an insult to other countries.

Mouse

mouse.

Wouldn't a 40% reduction look even more flaccid than a 15% reduction?

Les - So personal responsibility is only for people in other Countries?

mouse - nope, as I said we don't want to live in a toilet and we have to do our bit. It's just that in doing our bit I don't want to see our industries in pieces, especially as a bit is all we can do. Cheers, Les.

Les : Based on your calculations, if we achieve our 40 % decrease in emissions, and in the process destroy our economy and our way of life ; the 0.068 % emissions saved will assist a nest of the lessor-spotted-stinky-barn owls, in Idaho, to breathe easier...........Knowing that, makes it all worthwhile. I feel all warm and fuzzy, now !!!

mouse : I don't see climate change ; ergo, that is not the threat. The threat is the mumbo jumbo spewing forth from uninformed hidden agenda groups, which the populance are conned into thinking is real, and is science, when it ain't. Al Gore springs to mind, and the Greens, and Socialists ( i.e. the U.N. ). And the threat is that these bozos are demanding that we totally over-haul our way of life, to suit them, and it won't alter the climate one iota. Not a jot !!!!!

Roger - Facts do not cease to exist because they are ignored.

tagrossbilly:

It's not about whether there is a global warming, it is about whether it is anthropogenic. The first is not conclusive, the second even less so, and if this is not man made, then no tax is going to change anything other than diminish our quality of life in the West, and such policies will also permanently deny the third world cheap power, and hence any chance of escaping poverty.

Anyway a link for you, with a quotation first about what it is about (and this list, note, doesn't include the peer review study released last week which slated the notion of a man made climate change). This whole issue is being pushed by politics, especially the left - it's about control of the individual by the State (this whole thing has been like a wet dream for a politician). Ultimately, the issue of anthropogenic global warming, and with it Al Gore, will come to be seen as the biggest fraud of the turn of the century - and incidentally, with last weeks peer reviewed study, any responsible government now will retract from all planned punitive/tax measures aimed at this issue, and completely reassess their stance.

Anyway, quote:

Peer-Reviewed Articles Skeptical Of Man-Caused Global Warming
Here are many "Peer-Reviewed" articles that should end the belief that "the debate is over" about global warming. It should also destroy the illusion that there is a "consensus" amongst scientists about the causes of global warming. Those propagating the myth of man-caused global warming are simply distorting reality and the facts.....and that is putting it politely.

And the link to the peer reviewed articles is here:

http://petesplace-peter.blogspot.com/2008/04/peer-reviewed-articles-skep...

(I don't have time to search for a link on the study released last week, so feel free anyone else).

thanks for that blog link, mark. i hope the sceptics are right. wouldn't want my lifestyle altered. that'd be a nuisance. bummer if they're not right, though. the stakes are quite high.

Selfish people?

Smoking didn't cause cancer, asbestos was just fine as was agent orange so let's not start quoting science when we have so much vested interest money floating around protecting the status quo.

Are people really that selfish that they are happy to do nothing as they won't have to endure the future problems so who cares. Please tell me that's not what is being said above.

If you get it wrong, do nothing, we have no planet. So on a risk reward basis alone it says take every possible action to ensure the survival of the planet as the down side is just too big to ignore.

Selwyn : Unfair to call us selfish ! A balanced approach to the debate would be good. And industrys being consulted, rather than just dictated to. We had 9 years of Nanny Helen giving it to us, whether "it" was needed/ the remedy/ or not. As I said before, we gotta keep our nest clean. But up until now, alot of the proposals have merely shifted carbon credits and money around the globe. Unless there is dialogue with India/China/Russia/USA, bugger all will be achieved. And a pyrrhic victory to NZ that we led the world ( why ? ), and achieved the 40 % reduction ( why 40 % ? ), and knackered our struggling primary sector : meanwhile the really big polluters sit back and carry on regardless.

Whether GG's cause g.warming or not, so what, we need to exhibit appropriate stewardship of where we live and what sustains us, have a read of the book mentioned here:

http://en.wikipedia.org/wiki/Small_Is_Beautiful

If we were to treat the world as a capital asset, rather than a revenue asset, how would we behave toward it, and ourselves? We'd not abuse it, as we have and we do, but we'd also not get carried away with thinking that would hamstring us from using what we have, to sensibly sustain us.

Cheers, Les.

Well looks like farm debt is up nearly 600 million for the last month. More than double housing. In one year farmers are borrowing more than Fonterra sells in a year.Interest payments leaving the country to offshore banks are increasing at 60 million a month. This is becoming a major problem,there are no new conversions this is pure organic debt to cover losses. Borrowed to pay the interest and its compounding.
I talked with a bank manager this afternoon, many of his dairy clients have costs in excess of $5.60 a kg milk solids. I was bold and went for the kill, stating my belief that the Aussie banks which included his were broke, he agreed. Farm debt growth is happening because the alternatives are frightening especially to firms Like SCF which is rumored to carry a lot of short term dairy conversion debt from North Canterbury and National bank which is heavily exposed to high risk conversions.

Selfish might be strong guys but I ask one simple question.

How do you get this planet to last another 1000 years. Not a million just a humble 1000. Regardless of what ever science you want to use do you really think we can sustain what we are doing for another 1000 years.

If not which generations pays the price to change it.

The science can be read any way you want (as the debate proves) but the risk reward leaves only one possible answer in my oppinion, do what you can as quickly as you can to reduce our impact on the planet.

No but I will. Thanks.

bjr - many on these blogs will agree with you, but how can change happen?

William
Lets face it, if the Aussie Sovereign Wealth fund(Aussie saver) withdrew their billions from the Aussie banks, we would hear the implosion from here and would be sucked in, in nano- seconds. The major Aussie banks are getting by thanks to this and the deposit guarantee. Its bad, about as bad as it gets.
Back to farm debt.BJR, Im keeping to subject. The farm debt figures for June are hiding a monster in the bedroom, this is the huge amount of unpaid bills that the rural community is carrying for these farmers many grazers and contractors are owed hundreds of thousands of dollars. The true borrowings are probably closer to the billion $ mark.
When we hear business people talk of the need for farming to go up market add value they need to realise that in Agriculture up market is FRESH and we are a long way from markets and its expensive getting it there fresh,especially milk.
When we realise that the total exports from Fonterra wont even pay the interest bill but continue adding 60 million a month onto that figure, after farm costs have been paid the only solution is to borrow to pay interest and it compounds. This is why farm borrowing cannot slow down without massive bankruptcy and the destruction of debt. We have not got to the stage of acceptance and are stuck in denial.
I have no idea how long we can stay in denial it has already exceeded my wildest expectations. When she blows its going to be a beauty.Atomic beauty.
Andrew

This link I think gives adds to the the discussion on two points.
One on the shambles of any proposed carbon tax system (which I oppose, from an ecology degree background). But it raises the question on just how clean is some of N.Z. farming where supplementary feed is coming in at the expense of other nations' environments. I wonder on a $ basis, what the conversion factor is of their land being planted in palm to a return on a litre of milk basis is??
Secondly, where is the floor on price and ceiling on available volume and what levels would be modelled into dairy farms here 'overstocked' and even on reduced debt, when will they be unsustainable from a $ point of view. I guess this is what the agroprod site questions so well with it's articles on marginal cows etc.

http://www.stuff.co.nz/taranaki-daily-news/farming/2665342/A-kernel-of-t...

408t of palm kernel imported to N.Z. in 1999, now 1,104,187t in 2008 and climbing it would seem?

p.s. I like the story early in this thread re the dairy farmer managed within it's confines so to speak.

bjr - many on these blogs will agree with you, but how can change happen?
As you will appreciate Les Rudd, not a difficult question to answer unless you are restricted to one finger typing as I am.
The layers that have been pasted over shaky structures need to all be disentangled to reveal the real core problems. (PeterR and Andrewj seem to be dealing to agriculture for a start. Mmm. Doubt they are invited to many dinner tables or road shows however).
This will require a complete reappraisal of how NZ functions.
Too big of course for a single bite but let's start where our future hope lies - in innovative R&D. We have some major problems immediately with a lack of depth in sciences but many ex-pats could be on their way home if a future beckoned.
Set aside the current tax and levy funded agencies that seem to pander to a limited client pool (CRI's, industry bodies and quasi Govt. agencies) and get guys like Stephen Jennings and Paul Callaghan to map out a better focused program where duplicity and vested interest is better managed.
I know of a few small R&D firms in NZ who have given up on Agriculture because of the wasteful "politics" involved and the active undermining of smaller, but more innovative contenders. These are the people that can provide the spark for NZ's future but the system currently does a very efficient job of shutting them out of any part of the process. In my discussions I find this is a common thread. "How do we actually go about getting recognized when we are cut out of the process from the start?"
If we make a start here, it would create a template of success and make the next bite, although bigger, easier to swallow.
And this type of R&D will ensure our GHG totals become more in line with expectations as well.
Don"¦.. DON"¦ can you hear me??
Oooops. Earmuffs still firmly attached.

Hey folks... I know there are no Silver Bullets for the GHG issue... but check this, this is inovation...>

http://archives.subscribermail.com/msg/d436c8f06c5c4d5984aef53c33025f7a.htm

How much were those monsterous Ugly Pylons through the Waikato costing?

mouse - great idea but how would you get resource consents through (take note John, $1,000 resource consent fee x how many households???).

Can you imagine the cityscape with thousands of wind turbines on every roof? The solar is a great idea, all new houses should have solar water heating.

Gymnasiums could hook up the bikes and treadmills to a generator and feed power back into the grid. Solves the obesity problem, lowers the cost of healthcare, being fitter means we can work harder for longer......

bjr - know what you mean on the typing, hence my recycling approach with my comments, the one below shows agreement with your sentiments, plus for those interested there is a link to a vid. of Paul Callaghan's excellent "˜Beyond the Farm and the Theme Park' R.Soc lecture:

http://www.interest.co.nz/ratesblog/index.php/2009/04/15/opinion-how-tou...

neil c - yep, I don't think NZ has been serious about science and tech. for a long time, certainly didn't seem so with last gov. and it seems to have got worse since the change of gov.

mouse - I think we'll get told off soon, so apologies in advance folks, but an aspect of my response to mouse is significant in terms of the 'status quo problem' as a whole.

So mouse, like your thinking, why stop there, how about salt and sugar too?

However, put your ear plugs in or you'll get deafened by all the squealing from ....... the vested interests - who know that fss is what keeps people hooked on junk - and sells.

You might like to come back with a parry on carbon, but let's not go there, or we'll just create 'blog fog' and obscure the very important debate and disclosures going on here about the main topic.

Apologies again, and let's here some more farming stories. Aside from my NZMEA involvement, part of my interest in farming'ag. is having friends and family in it and I've been involved in ag. engineering. Cheers, Les.

Les - I also am passionate about Farming... My livelyhood depends upon it.

The point I have been trying to make, whether that be around Carbon (GHG's) or Fat (in a somewhat obtuse way)is this...

Farming does'nt end with watching the Truck drive off down the road with your Crop, and praying for the Cheque...

It begins and ends with "the end Consumer" and their more importantly their "perception" of our product. We need to understand, manage and react to that perception...

NZ Inc. has done a fantastic job of Building the Brand by by plugging into the Clean and Green image...Be that Kiwifruit, Wine, Dairy, Beef and Lamd, Tourism etc.. I just think we risk doing irrepairable damage to that Goodwill if we don't continue to walk the talk.

So come December in Copenhagen, I'm just praying our Customers don't look at the facts around NZ's GHG emmissions and our 15% (Reduction by 2020 against 2000 levels target)... And start thinking "Lurpak"... cause I can't afford to loose the business.

PS. that's my last post on the subject.

Marcf I will take the bait along with PeterR and totally agree with him.
This September/October will see the world again diving into oblivion. The commercial property and credit card debt will implode. The farmers will limp along. The sheer number of rural properties on the market will boggle the mind.
Not a lot of property will sell. The banks will be unwilling to lend a lot, sellers will be reluctant, buyers will be scared.
Early winter the crunch hits as overdrafts are not capitalised anymore.
The dollar is wildly high against a languishing USD.
El Nino has been and gone, once again hurting the eastern side of New Zealand and sending many sheep and beef farms to the wall too.
A large meat processing firm cant source stock and goes belly up
Fonterra loses its cooperative status.
Large tracts of land are under bank management.
Discussion on forgiving loans is high in the media.
Banks are quietly doing it already.
The rural regions are going downhill fast, Auckland and Wellington are still sipping lattes and have no idea what the commotion is all about. They are still competing for the best 3 bedroom renter.
By the end of winter 2010 interest rates suddenly and surprisingly rise, and Joe Blow is looking at paying 9%pa floating, fixed 3 year rates are 12.5%.
Farmers need to find 16%pa for their OD.
Oil is still sitting at $65US per barrel. The world economy is still crook, the stimulus hasnt really brought the inflation that was expected. Yet.
Spring 2010 sees huge Govt deficits, tax receipts are shockingly low, John Keys ratings are at bottom as Auckland and Wgtn finally realise we are a nation of cow cockies, and the bucket is empty.
Residential property sales fall off the edge.
Tourism is knocked for six as the swine flu comes back with a vengeance and the death rate is ramped up.
The payout is $3.80/ms for 2010/2011
But as milk production dropped with the drop in payout, prices begin to rise. Those farmers that kept their heads back in the early to mid 00s pick up land at extroadinarily low prices.....
My imagination has gone poof and disappeared, I welcome anyone to continue the story.....

mouse - thanks for that, I'll respond next week sometime, here, a more natural thread to carry on the discussion:

http://www.interest.co.nz/ratesblog/index.php/2009/07/31/opinion-nz-need...

Cheers, Les.