The first shot in the new Depression trade war. Does this mean the price of cheese will fall in NZ?

We are not lily white ourselves. We good as dumped a huge milk powder mountain on the Chinese. The side effect of this was to limit other countries milk powder sales. The USA has had a program to take unsold milk and sell it to schools as cheese and Yogurt,the mountain just got too big to handle. Trade barriers will become more common as Global trade continues to dry up,how we expected to be immune to this baffles me. We had a chance to value add, chose to take the money. Demand has fallen somebody has to reduce milk production,who's it going to be?
This is the final nail in the coffin for a way of thinking that has permeated agricultural for nearly 30 years(production orientated). Out of this will come hopefully a more level headed approach.

Thanks for the hat tip but to give credit where it's due, the cartoon originally came from the NZ Farmers Weekly.

I'm surprised anyone is surprised about this. US has some very powerful lobby groups and Obama was obviously on the protectionist side of the bench even before the election.

Yes i always thought OBAMA was big hat no cattle ,and bereft of looking back on history of the great depression of the 30s ,the decision of his Government at this time to introduce handouts to his farmers is a sign that maybe GW BUSH WAS NOT SO THICK AS SOME PEOPLE SAID,AND UNDERSTOOD WORLD ECONOMICS A LOT BETTER THAN YOU KNOW WHO.

Bernard I agree.....what gob smacks me though is with all the comprehensive and detrimental evidence on just how the US has acted in the past that our Pollies rush to do this....two points that do concern me is the outside the ones you mentioned (Pharmac etc etc) is medium and longer term....1) NZ soverign right to if necessary restrict exports to protect NZers....for instance once energy gets short we may choose to restrict our small oil production to NZ use only, a free trade agreement might prevent that (example canadian oil sands?)....2) RMA, polution, ie if our standards are higher than in America then a legal challenge from a US corp if they decide to set up a plant here....The saying is be careful what you wish for.....and IMHO the crazy thing is we dont need the US, in fact its arguable that the US is a basket case for the next decade....plus there are huge and growing markets this side of the pacific...

We better keep an eye on our USA beef allocation, if that gets cut back there will be hell to pay on the farm.
In reality the Dairy industry is in big trouble, this is a convenient scape goat,which the industry is trying to pin its woes on. The USA didn't create Fonterra's 14 $billion of liabilities, we did that on our own, they didn't force us to borrow to the hilt to buy farms and convert to dairy. They were not happy with Fonterra's auction system, we should have taken note. Fonterra was trying to be too big for its boots. These auctions were very successful at auctioning off bandwidth in Europe but the buyers of these are now no longer happy. The USA does not owe us a living, trade barriers are a fact of life. The collapse in Global trade is a worry, it makes one wonder if the whole idea of global trade is a bit of a myth built on debt in the western world.
If the USA decides to tax its citizens to help its farmers produce products, to sell of at below cost then there is not much we can do about it. We need to learn to build these risks into our businesses. The trend towards concentrating on exports to pay of foreign debt is one all indebted nations are going to have to focus on,unfortunately we are not in a good place to dictate the rules, we may end up at the bottom of the heap in a world dominated by self interest.

NZ needs to move away from commodity thinking.

The USA has a number of co-operatives that try to adjust production to demand and thus stabilise prices. But William is correct. Subsidies would not appear to support rational market thinking. BUT when the subsidy is set at a price at which most farmers would struggle to show a profitable return, the co-operative can agree to reduce production.
The problem is then that no co-op nor state nor country is now a closed market, so if someone else somewhere in the world auctions milk at a low price, all the dominos clack into each other with a consequence that Andrewj connects back to the first push?
The other problem is that large producers see added production as "marginal" cost production and therefore continue to add resources without actually realising the flaw in this thinking.
As Andrewj has noted, the NZ dairy farmers' answer to any question in NZ has been "more production".
This is characterised by the Industry push for "4 1/2% more (er...) productivity" just a few years ago so that Fonterra could expand to become globally stronger(??).
And now DairyNZ have admitted this did not work and aim for "Profit from Productivity increases by $110/ha/yr."
In USA terminology - "Go figure".
Land has a finite production limit that will be both economically and environmentally feasible. Most of NZ land has reached this under current cost structures. More growth in not a short or long term option.
So this (as I heard Roger Douglas point out?) as Nikki (above) say, is just a distraction from the bigger issues that require radical new options if NZ is to drag itself back to being solvent again.

The study by Porter in 1989 addressed all these issues and came up with (in hindsight now for many) very good reasons why NZ had to change and what could be done.
A Government even tried to implement some of these ideas which are now called "the failed policies of the 90"s" I guess.

The Northern Hemisphere's high priests in their survival effort obviously chose NZ (Fonterra) to be the sacrificial cow!

AndrewJ as you say there might be more for NZ to beef about soon with USA beef allocation (altercation!) . Remember, USA beef only went back into the Japan market mid 08. Aust may get the elbow too as "Aussie" beef replaced the USA's lost JP market. Bet the USA lobby in JP is in full swing .......keredomo...the Japanese still love their Kobe beef....and are fiercely patriot.

PS. Japan buys a lot of Danish bacon bet NZ's bacon has lost all fraber and tainted the dairy product too! Anchor loosing flavour in the UK is not just coincidence either!)

Les asks: "Our aim must be to develop other industry sectors and, in the process, become more resilient." How? Any ideas?"
With a budget coming up how about something like this?

http://www.theaustralian.news.com.au/story/0,25197,25471162-12332,00.html

Or looking at it differently, if we don't do anything how long before the best of our R&D capacity relocates across the Tasman?

BTW this guy from the American national milk producers' federation is worth listening to "“ Groser/Key et al. might as well save their breath.

http://www.radionz.co.nz/__data/assets/audio_item/0007/1958470/mnr-20090...

Neil c - that is exactly what NZ needs to do. Better education, better thinking.

PeterR - the market is not providing this, so a subsidy to get science working again in universities may be the answer.

neil c - hard to imagine at this stage I'm sorry to say, but who knows?

Trev - agreed. However, .....

PeterR - you raise a good point about strategy and quality of public R&D spend. Private I'm less concerned about, in general people will only R&D what the market looks like it will 'pull'. So a way that would improve 'public' is closer and the right links with industry and commerce, so as to avoid chasing the 'blue sky' that won't sell.

Subsidies are more usually associated with supporting losing sectors, firms. Given the imbalance between the un-productive/productive sector in NZ, R&D credits are incentives for one necessary 'winning behaviour' in a productive enterprise.

Interesting that the radio commentator thinks NZ farming hasn't had subsidies since 1984. I found that quite strange.

William.

Not sure what the nontradeables are

These could be described as those costs where you don't have any any competing suppliers. Rates and ACC would be two good examples.

Les Rudd.
Agree with you regards subsidies.

PeterR - you raise a good point about strategy and quality of public R&D spend. Private I'm less concerned about, in general people will only R&D what the market looks like it will "˜pull'. So a way that would improve "˜public' is closer and the right links with industry and commerce, so as to avoid chasing the "˜blue sky' that won't sell.

Private and Public R&D are poles apart. The public instituations have fully captured the supposedly competitive funding model and use a fair chunk of their money to defend that position.

Trev.

PeterR - the market is not providing this

Can you be more explicit about what "this" is?

From PeterR -
"Private and Public R&D are poles apart. The public instituations have fully captured the supposedly competitive funding model and use a fair chunk of their money to defend that position"
who seems to have read the older (2001) but still relevant Treasury report
http://www.treasury.govt.nz/publications/research-policy/wp/2006/06-01
(esp. pages 12-14 and 28-33) which makes some comment on private vs. publicly funded R&D.
All I can say is that I agree.
Australia's R&D reward system beckons and the reasons why NZ has not made headway start to become clearer.

Perhaps the decline that William observes came about as farmers capitalised the gross income less costs (in 1980's costs -before finance- were about 35% of gross income; now commonly 80% in a good year) into land value and when that was no longer a "goer" were encouraged to include the certainty (??) of capital gain into the same equation.
Philipinos vs. NZ labour? One works for $14 per hour and the other I have heard state "would not get out of bed for less than $20/hr" (Not that I blame them either!)

William.

Rates and ACC eh, add electricity to that. This government has to help us out and reduce or at least get control of these overheads"¦.

You have nailed it. Otherwise costs will get to the point where even if the farm is free it won't be able to make a profit. Try doubling rates over the next 10 years as have been proposed by some councils.

StephenR.
Read between the lines:
a) Everybody is subsidising in one form or another so on that level it applies to no-one
b) Disrupt our export markets and we will retaliate. Think about how you might like less measured responses.

We should not be surprised when Mike Moore, the first muppet appointed by the financial oligharchs to head the WTO states on pg 68 of his book -A Breif History Of The Future;
"What is lacking is public understanding, which would build supprt for them. Parliaments, peoples and pressure groups around the world talk of faceless bureaucrats in Geneva, or at the UN, IMF AND WTO. In reality, these organisations are the servants of governments represented by ambassadors or directors, answerable in various ways to their governments, who in turn are accountable to their taxepayers. The only powers thay have are powers given to them by sovereign governments.
There has to be more transparancy, openness and accountability. Diplomacy is frequently best done in secret, but the demands of the 1990s, with the death of the cold war and the explosion of NGOs and the internet must give new life to the democratic impulse.
Ministers will have to have more control, as will governments and taxpayers, as the impact of globilisation reaches into every facet of domestic life."