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Despite any attempts to diversify away from China, exports to China will be increasingly important in coming months as much of the world descends into turmoil, says Keith Woodford

Despite any attempts to diversify away from China, exports to China will be increasingly important in coming months as much of the world descends into turmoil, says Keith Woodford

With COVID-19 now dominating all of our lives, it was easy to decide that COVID-19 would determine the focus of my rural article this week. However, in choosing COVID-19 and agricultural trade, I want to focus primarily on the world beyond the current lockdown and explore where we might be heading in the months thereafter.

The starting point is that in times like these, export markets choose New Zealand, rather than New Zealand choosing its export markets. In this environment, all we can do is hang out our shingle, and help potential buyers to manage the logistics.

Within New Zealand, there has been an increasing belief in recent years that we have become too dependent on China. To those who have said ‘we must diversify so as to be less reliant on China’, my response has always been: ‘Specifically, where do you think we should focus?’ I have yet to get a specific answer that aligns with macro prospects. At the micro level there are always options, but at the macro level it is not so easy.

The reason that we have been exporting so much to China is that Chinese businesses are the ones who have come knocking at our door wanting our product, particularly as it relates to dairy, beef and sheep meats, but also more broadly for all of our land-based products.

Some of the keyboard warriors are currently unwilling to accept that China has to a large extent managed to stamp out COVID-19 and is opening up for business. My own Kiwi-China networks all confirm that China really is getting back to work, albeit not yet fully there.

There is also scepticism as to whether China can handle any rebound of the virus once its society gets fully back into action. My own judgement is very clear on this. They will manage any outbreaks with great rapidity and stamp hard before it gets a hold. They have all the mechanisms in place to do this.

In contrast, nowhere else in the World is showing evidence to date of having COVID-19 matters under control. For much of the world the journey is just starting. It is going to be a long journey.

Apart from China, and arguably some other North-Asian countries, we in New Zealand are in as good a position as any. Our current lockdown has come close to ten days too late, and that surely has increased the challenges we now face. But most places are in a much worse situation. I have been writing about the broader issues of COVID-19 for the last six weeks here at interest.co.nz

My expectation in light of the above is that, like it or not, China is going to become even more important as an export destination over the next few months. The movement is going to be major and not just at the margins.

The other overarching factor that will determine market demand for our land-based products in coming months is whether specific items are discretionary or essential. People do still have to eat but they don’t have to eat out at restaurants.

So, let’s first deal with the worst of the bad news.

Unfortunately, wine is going to struggle greatly.  Australia, the United States and the United Kingdom are all key markets and there won’t be many Sauvignon blanc parties there for quite some time. There are also going to be big constraints this year in managing the grape harvest. I see zero evidence of good news for wine beyond the benefit of a low exchange rate.

Kiwifruit is going to face similar challenges, but for many of us kiwifruit is now regarded as an essential. It comes at the top of the supermarket list in our family. Also, the Chinese regard it very highly and the kiwifruit market there has been growing rapidly. The Japanese market may also hopefully hold up. The two big questions are whether or not the crop can be fully harvested in the current environment, and whether North-Asian growth can balance the challenges from elsewhere in the Northern Hemisphere. 

Turning to pastoral products, we know that China has already become the most important market for NZ beef, followed by the USA.  We are also fortunate that for many Americans there is no culinary alternative to the burger.

Sheep meats are more complex. China is by far the largest market for mutton from older animals and I expect that market will continue to give good returns. China is also important for lamb, but so are Europe, the United Kingdom, and the United States. I see only bad news for lamb meat to the United States for at least the next six months.  For Europe and the UK, I also see very challenging times, but I hope to be surprised.

Our dairy products are exported widely to many parts of the World. Alas, I see only bad news for everywhere except China. Traditionally, there has always been a strong relationship between oil prices and dairy prices, with a lot of the demand for New Zealand milk products coming from oil-producing countries. That link is not as strong as in the past, but the crash of oil prices will leave some potential buyers with no money to pay.


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Conversely, I see China’s own milk production being adversely affected for multiple reasons, not all related to COVID-19, and so Chinese demand for milk powder is likely to increase. I could write a whole article on that local industry, and at some time may do so. My current expectation is that the combination of Chinese demand plus a weak New Zealand dollar will give a good milk price for the 2020/21 season based on whole-milk powder which the Chinese can then reconstitute.

Although I have some confidence about the milk price, I have less confidence about Fonterra’s profit which depends more on value-add products, together with overseas-based operations in China, Australia and Chile.  Fonterra has made some good progress in the last six months and has built somewhat of a cushion, but coming through the full year with a profit looks highly challenging.

There is an old saying that making predictions is tricky, particularly when they relate to the future. And right now, the future is more opaque than what it has ever been. Accordingly, all of the above comes with a big caveat that nothing is certain. Also, freight logistics have the potential to mess things up, particularly in the next few weeks. Nevertheless, this is the way I read the evidence and hence the indications as to how things are likely to pan out.

I also expect to see increasing but at times grudging acknowledgement over the next six months that agriculture and food are the fundamentals of the economy that provide the funds for most of the items we have to import. Further, within agriculture, it is our pastoral products that are the products with most reliable international demand.  Unfortunately, there will still be some who remain unwilling to acknowledge that reality.


*Keith Woodford was Professor of Farm Management and Agribusiness at Lincoln University for 15 years through to 2015. He is now Principal Consultant at AgriFood Systems Ltd. . He can be contacted at kbwoodford@gmail.com. Keith’s previous COVID-19 articles are available here.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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58 Comments

A well balance article with very sound points made - and in particular forward looking and positive when it is so easy to focus on the current doom and gloom.

14
up

I would argue that ignoring the doom and gloom is far more dangerous.

There is a smorgasbord of disasters lining up over the next decade or so including depleting cheap oil (on an EROEI basis) depleting fish stocks, top soil, changing climate, other pathogens etc.

We need to downscale and look after NZ. Both people and environment.

Wrecking our environment to be a mega producer to the world is insane.

10
up

Going back to BAU, get real.
Keith is like the guy who said "Apart from that what did you think of the play Mrs Lincoln?"

11
up

National self-sufficiency will start to become the way of many governments the world over.

Watched Donald Trump's press conference today. It's where he seems to be steering things in the US - like a war footing economy - mobilising/nationalising (call it what you like) the private sector to manufacture what is needed for local consumption. No focus whatsoever on exports, and seemingly dismissing any hope of getting what they don't manufacture in from overseas.

Just as Jacinda has appointed Rob Fife to mobilise/coordinate our private sector - Trump has appointed a similar person for their economy.

Bring Hemp online stat!

Great Britain 1939 - 1945 and on, had to grow self sufficiency, farm girls et al. Our farm in Canterbury kept going by the same while my father was fighting overseas. I remember them as great, tireless and efficient. This is a clarion call to nations to look after themselves, their people, as the first priority and always be prepared to enact that exactly.

11
up

I also expect to see increasing but at times grudging acknowledgement over the next six months that agriculture and food are the fundamentals of the economy that provide the funds for most of the items we have to import.

Exactly - this point can never be over emphasised in a continuous current A/C deficit enonomy.

And we know why we have a continuous current a/c deficit. We have sold off too much of this country to overseas interests, who lobby our government to keep their party going.

Effectively, we have been swopping their printed money for hard assets, that are producing hard cash they are how exporting. Have a look at the government stats, and buried in them (Tab 7) identifies exported profits of $20 billion. Way short of imported profits/dividends. This never gets talked about in main stream media, or by government.

Getting back to Fonterra; which is NZ's biggest company, best annual profit has been $800 million, but on average is $500 million. What $20 billion profit exported means there must be the equivalent of 40 fonterra's in NZ that are owned by overseas interests. This is hard to comprehend, and suspect abuse of pricing to achieve these profits is going on.

Time for our government to wake up and smell the rot. Time to encourage the more internalisation of our economic, and regulate monopolies.

D Warehouses are more than full. Full with product sold but not shifted.

"Due to month end shipment challenges we fell slightly below our guidance range. This is a timing issue," it said.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=123...

Keith. Where are the bottle necks in the supply chain to the Chinese consumer today (this week) ? Are there any bottlenecks? Do spare planes and cheap fuel help? Cray's presumably went air. Did chilled meat? Has the likely lower cost changed the game?

Gatoperro,
Others will be better informed than me on this and it would be interesting to see some informed comments from those involved in the trade.
However, I am aware from some China trade that I was associated with several years ago that shipping services tended to have multiple embarkations and involve multiple countries. So rerouting will be necessary.
Also, I note that AirNZ has been planning for a flight to Shanghai every second day, but my understandng of new Chinese regulations is that they can only fly there once a week. So they would need to get special approval for freight-only flights.
Also, a lot of seamen may soon become reluctant travellers.
KeithW

Good points - Im the same - we get told we have to much reliance on China - well where do we all go to sell our goods? When the tirade of "to much China" started I smiled - in the next 6 months we will be saying we are so lucky to have this massive market wanting our goods. In the forestry business demand in China was just starting off again - slow volume but the excess inventory is getting used and as soon as the NZ Government announced the shutdown prices leaped again. In a bizarre way this 4 weeks "holiday" will use up the excess inventory - in fact the Chinese will be thankful they have it - the traders will/are getting the price up to reduce losses on stock and when we get back things will be going again. It will be tempered as all the world comes back on stream and things wont be straight forward. Who knows what all this stimulus will do across the world but I have a feeling we all know. For NZ this must be one of the most amazing branding opportunities for NZ. People will want safe, healthy food and fibre more than ever from reliable and sustainable sources. Lets hope we can all work to achieve this for NZ as a whole in the future.

11
up

No article on China is complete without mentioning the concentration camps in XinJiang so let's start with that.

The premise of the article is that NZ needs to keep exporting huge quantities of meat and produce whilst continuing to inflate local prices which are significantly higher than the UK/EU equivalents. What makes NZ farmers so special that they can hike up local prices whilst failing to deliver affordable produce to families on lower incomes.

I ask as this issue has been continuing for YEARS but we seem to believe that exporting huge quantities abroad is ok when local families can't afford a rack of lamb (or a fillet of snapper for that matter).

The CCP lied and covered up the Covid 19 virus to the extent it is now a global issue which will affect economies across the world. The CCP have millions in concentration camps.

We dont want to have a morally bankrupt nation as our primary trading partner and we dont want to be exporting produce which could feed local families at a reasonable price.

Glitzy,
One of the reasons NZ prices tend to be high is because we have a GST on food. Most countries exclude food from GST. Another reason is that we only have two significant supermarket chains and supermarket margins are high. A third issue with meat is that we prefer fresh to frozen meat and hence we have to pay the costs of out-of--season production. A fourth issue that affects chicken and pork is that we are high-cost producers of grain and hence we have higher cost of processed feed than many countries. This is why we do not have extensive exports of those products. None of the factors that cause our meat prices to be high are under the direct control of farmers. They are caused by insititutional factors (such as GST), consumer preferences (fresh versus frozen) and high ticket-clipping margins further down the chain.
KeithW

Yeah, whatever Keith but what about Glitzy's opening comment and the rest of his reference to how evil China is. ?

Study the boom in Nazi Germany in the 1930s and their relationship to suppliers to understand where we are at re China or are you that comprised by your Chinese "relationships"?

Smalltown,
I have no intention at this site of discussing the politics of China. I am simply laying out the market forces that exist and hence what I think is likely to happen.
KeithW

Keith, you do understand that I believe you are compromised by your Chinese "relationships" dont you. Politics? Last week you were praising China for their "firm handling" of the Wuhan Virus. This was after they have put the whole world in such a perilous position by sitting on it for a month.

Question- how many trips, days have you spent in China the last 12 years? Most presumably not self funded......

Smalltown,
I find your comments tirseome and so I plan to ignore them from now on.
But for the record, none of my trips have been funded by the Chinese Government
KeithW

Who mentioned the Chinese government? Classic misdirection anyone?

Chinese companies I presume paid for all your trips, it's all the same and for it to continue eyou are beholden to them ignoring the fact you are part of the Chinese soft propaganda program (whether you know it or not) that is waged tirelessly around the world, the soft power influence that NZ academic Anne Marie Brady talks about.

DP.

Smalltown,
I find your comments tirseome and so I plan to ignore them from now on.
But for the record, none of my trips have been funded by the Chinese Government
KeithW

NZ has always had fresh meat, and rightly expected it to be so. That was the chain of local abbatoirs, Sockburn, Malvern, DMBA for instance. They supplied the butchers shops, MMM etc. Freezing Companies such as Hellaby & Borthwicks operated butchers shops to the public when in operation. One of the problems of over capacity was exacerbated by many abattoirs upgrading themselves into export licences meaning that they were then producing meat locally but to EEC standard. Very very expensive process. Pork has been an expensive meat in NZ for as long as I can remember, especially in comparison to just about every other country. And chicken, well once upon a time chicken was solely served as an old boiler at Xmas dinner. Tegel revolutionised that and that included frozen product which still sells readily at retail. Tks for the chance to vent though.

Keith, your arguement doesn't hold water.

Let me illustrate. The cost of milk in the UK is about NZD1/ per litre. Here its NZD1.50 excluding the GST element.

And yet Fonterra is the biggest single user of electric in NZ. So much so they need to produce their own power to produce milk powder exported predominantly to China. And yet they can't sell milk to domestic consumers at a fair affordable price.

How is this justified ?

Let me answer that for you. Because its OK that the NZ consumer is being raped. Raped every day of every week of every year and its OK that the majority of our milk gets boiled down and packaged off to China.

I note your profile states "Senior Research Fellow at the Contemporary China Research Centre at Victoria University" ~ what a surprise you are plugging China trade.

G.

Glitzy,
The latest published (January 2020) farmgate price for milk in the UK is 28.77ppl. This converts at current exchange rates to around NZ59cents per litre.
For comparison, in NZ, farmers are paid on the basis of milksolids (fat plus protein). In a litre of standard blue top milk there is approximately 38 grams of protein and 34 grams of fat. This total 72 grams of milksolids (fat plus protein). Farmers in NZ expect to receive approximately $7.30 per kg milksolids for the current season ending 31 May, but these payments to farmers will dribble in through to next October owing to payment lags whereas in the UK they get paid right away. Putting that timing issue aside, where NZ farmers are at a disadvantage, 72 grams of milk solids at $7.30 is just under 53 cents. Farmers supplying milk for local consumption during the winter (and only a small proportion of farmers do this) also receive an additional amount (depending on regions, and typically only for June and July), and this is as an incentive so as to get enough milk over this period. (There is almost no milk produced for export during winter, with most of the export factories shut.) When averaged over the year, this still leaves NZ farmers receiving less than their UK counterparts.
Accordingly, I can only repeat my earlier message, that to the extent that retail milk prices are more in NZ than the UK, this is due to post-farmgate supply-chain costs and charges (including supermarket markups) plus institutional factors such as GST.
KeithW

"We don't want to have a morally bankrupt nation as our primary trading partner and we don't want to be exporting produce which could feed local families at a reasonable price"..

Put more simply: We want to kiss away 70% of our certain export income, and somehow wear the massive reduction in imports that would imply. Well, get yerself a Party, run that as a major plank, and let's all Vote on it.....

In the words of the old blues standard:

"Ever'body wanna go ta Heaven, but Nobody wanna Die"........

No Waymad. We dont want a morally bankrupt country as our primary trading partner. We dont want their interference in NZ politics, we dont want the parking of illicit funds in NZ residential property and we certainly dont want their fake products from medicine to honey. And we dont want to support the CCP suppression of minorities.

Wake up and smell the coffee. This pro China trade article is written by someone working at a China funded academic institution peddling arguements that dont hold water.

Oh cry me a river. I fatten a lamb and off it goes to a processor. Hopefully I make a margin good enough to pay all my costs. The processor then either sells it to a local butcher or the processor is one of the two supermarket chains. I cant tell them what to charge their customers. I cant even tell them what to pay me. Stop blaming the blardy farmer if your meat is expensive. It really is not my fault. Duh

Right on, Belle. Keep on producing stuff that we can Eat.....or Export to pay for Imported stuff that's Useful - like fuel, machinery, parts, backup services - it's a very long list. Heaven forfend that we Drill, baby, Drill, or Mine anything, or consider Nuclear. Because Reasons....

For some reason we haven't recently heard James Shaw citing Green Party policy that NZ's dairy herd be cut by 50%. He was previously very vocal on this.

That's next week - cant have all the bad news in one week.

James007. Well that's reassuring. James has been very quiet so I had become fearful the greens might have developed selective morality and starting opposing things like the Kermadec marine reserve because of political expediency.

Its almost like all of a sudden he's realised that the primary sector is somewhat important?

well we got some rain last night and a bit more now so 12mls should get us started but it's late enough.
I suspect the short term is going to be volatile, I'm just going to stay trading lambs, if there's a dollar in it.
In the States producers are getting hammered and low gas prices have the ethanol industry getting carried out the door .
'Ethanol plants are slowing output or closing their doors altogether, disrupting the feed markets throughout the Corn Belt. The corn basis had been sky-high since the rains became problematic last spring, but now the basis is close to zero in much of the Corn Belt. Cash corn values are down hard. Dairy producers and other livestock growers who fed distillers grains will have to adjust their rations, which likely means more soybean meal purchases. Unfortunately, soybean meal is one of the few commodities that has been rising in value.'

Milk & Dairy Markets
Red ink flooded LaSalle Street this week. The dairy markets were decimated. Every Class III and Class IV contract on the board scored new life-of-contract lows. The selloff was steep and widespread, but second-quarter contracts suffered most. May Class III plummeted $1.44 to a painfully low $13.87 per cwt. May Class IV fared even worse, falling $1.79 to an unbearable $12.28. At today’s prices, dairy producers in a region with roughly half of their milk check derived from Class III and half from Class IV will earn just $13.08 per cwt., and $13.83 on their Class I share.

Those numbers clearly won’t pay the bills, and after four painful years (and a couple good months) dairy producers are in no shape to weather this storm. Congress set aside billions of dollars for agricultural aid and for food purchases as part of its $2 trillion aid package, but the timing and structure of these payments are still unknown. The dairy safety net will provide a financial cushion for those who enrolled, but low participation in these programs reveals that many are vulnerable to the whims of an increasingly cruel market'

Andrewj,
I agree that it could be a real challenging time for US dairy farmers. But I think prices there might still come up as Americans are self-programmed to continue eating cheese. My reading of the tea leaves is that Americans have yet to realise the severity of the storm that is going to hit them and that they lack the institutional mechanism to get on top of the disease. I am glad that I am not there right now, as almost anything could happen over the next couple of months and their society is very poorly structured to face the storm.
KeithW

I see Mexico has stopped imported US dairy products, one of the problems is the Peso has dramatically fallen in value. Lots of unknowns out there.

I'm wondering if this rain has come too late, we will see green shoots in a week, into frost season soo and the trees are starting to change.

The simple truth is.
The CCP is a corrupt dictatorship. Chinese people are oppressed. We all know this.
NZ farmers don't mind turning a blind eye to that, because they make money by doing so.
No one believes the figures coming out of china, unless you are a farmer..... (pay's to turn a blind eye)
NZ and Australia have both been compromised by this corrupt regime, but the people making money from it turn a blind eye.
Everyone knows, don't put all your eggs in one basket.....
China has planed it this way over many years, and we have fallen for it.
Instead of containing this virus at the start they let it go to the rest of the world. Then they blame every one else....
Mass surveillance, 5G, threats, this is a trap, and NZ farmers are too self interested to bother to look closer......

We still arent getting enough rain here. We need a month of it really. Mushrooms everywhere.

The last sentence is the one that I 100% agree with - what is happening in the USA at the moment is frightening beyond belief. If the virus repeats what it has done in Italy and Spain it could be catastrophic. Same for Australia looking at photos of people still flocking to beaches and cafes - I hope Im wrong but expect to be locked on our islands for a long period of time.

This is commenting on Keiths reply

Tks Aj, nice read that.Once had to be up with those market indicators, many years ago now though.

Cousin of mine in Calgary said he paid CAN 0.56 cents a litre today. Not good, and they know it.

Have been following these guys on You Tube for years to get insight into how China works. Eye opening stuff all round.

https://www.youtube.com/watch?v=b6PI91n2f9o

NZ needs to sell to the world so that we can pay for what we need to import. So does China. China also needs to import the raw materials that it manufactures into goods for sale to the world. Will the world be in any shape to buy what China has to sell? Will that impact on the price China is prepared to offer us? We have a son who works at Tom Price in WA. He tells us the situation there is chaotic with layoffs happening and no one knowing what is going on. I understand that iron ore from that region goes to both India and China. If China stops buying iron ore it is because they believe that the market for its products has shrunk/disappeared. We are fortunate to have China as an outlet for what we produce, but they will only be as good as their economy in the " new normal " allows them to be.

wee willy winkie
I agree that China's inability to sell its own goods to the world is going to be a big issue. However, they do have big foreign reserves, held both in USD and euros, that is there for a rainy day such as this. Fortunately, dairy and meat will be a priority for them. So will iron ore, but I think iron ore will be one category down from dairy and meat.
KeithW

Wine sales will in fact go up through all of this, whether it can be got to market is a different story. But harvest is happening now, who knows if the whole crop will be harvested.

Lamb turns into mutton... But the beef kill is months behind already.

Wirehunt,
I don't think wine sales will go up because the buyers have disappeared.
Yes, lamb does turn to mutton but most farmers do not have the feed to carry additional lambs through over the winter. That would create major animal welfare issues and hence the importance of keeping the meat works open.
KeithW

From what I am hearing if the chains arent operating to near capacity we are in trouble. 4 day weeks ahead. Reduced kill capacity on the days worked. Little rain. Dropping temperatures. A lot of winter supplement fed out. Many have held stock either because they couldnt get space or were hoping to get better pricing. (dreams are free) Its going to be a tough winter.

Hi Belle, we had some rain, 12ml here but others got 20ml.but now the warmth has gone, trees starting to change, vineyard finished for the year. 6º this morning when I got up,friends in Midwest are planting.
I have got into gear and oversown 50 hectares with all sorts of seed but in the last week Winter Star/ italian hybrid along with oats, as I think it's the only thing that has a chance now. I have never done this before but the drill performed well and my light flats stay warm in winter ,now I have springtails, so need to spray, going to try Sparta ,anything but Losban.
I'm getting stock killed but obviously things are not the same. The back country here is still brown, winter is going to next to impossible for them. I'm still brown but in the next week will start to go green but slowly this late in season. All I can do is stop spending and keep my ear to the ground.

I still have this horrible feeling in the pit of my stomach that 'They don't know what they are doing'. The 'Overnight Indexed Spread' ( OIS) on Libor is telling us that somewhere out there someone is in a lot of pain. I remember my grandparents talking about the great depression, I really don't want to go there and I don't think anyone else does either, but after this crazy run up in debt and the housing focused economy I'm not sure there is a choice but tightening credit across the board.

https://www.investopedia.com/articles/active-trading/061114/what-ois-lib...

Snider on problem
https://alhambrapartners.com/2020/03/25/not-good-eurodollar-futures-curv...

UK housing

https://www.zerohedge.com/geopolitical/britains-housing-market-freezes-w...

I know of one farm sale around here that has seriously gone bad and fallen over. I thought the price was absolutely crazy, dairy conversion prices, buyers somehow dropped it like a hot potato. Our world has changed and chaotic times look to bee in the future.

Good article thanks Keith - I don't always agree with your views but I always appreciate them. On the wine front, my friends at Villa Maria - who have been through many recessions - say that the buying behaviours do change but the losses on-premise are often made up with increasing off-premise sales. A couple might stop at two glasses of wine at a restaurant because they have to drive home yet will consume the whole bottle over a cooked dinner at home. Margins might not be the same but the sales do occur. From my information both on-line and supermarket sales have taken a big step up. This is an interesting perspective although admittedly more in the prediction than the analysis mode https://wineeconomist.com/2008/10/25/trading-down/

Andrew,
I think the big challenge will be finding the export markets.
But I dont have at hand the percentage of wine that we export.
China largely drinks red wine and most of our wine is white.
KeithW

Looking around here it's a good year to have a mechanical wine harvester. As for the the steeper stuff that is handpicked - the layoffs in Queenstown seem to have provided quite a lot of pickers.

Hello Keith
Thank you very much for an outstanding series of articles. As far as I am concerned, you are the number one reason to check the interest.co.nz website on a regular basis. Like you, I wish the NZ government had moved a lot faster: as a temporarily foreign observer, the carefree attitude towards the virus by so many in authority for so long amazes me.

Prediction about the future is difficult. If one goes back to 1920, when the country (and the western world) had suffered an unprecedented loss of life from World War 1 and the Spanish Flu, and was in the midst of a world wide commodity price recession, few would have foreseen the astonishing boom we now call the roaring twenties. In the US, at least, the twenties were a decade of technological and commercial breakthroughs - widespread use of electricity and cars, refrigeration, rayon, and consumer finance to enable an increasing fraction of the economy to afford unthinkable luxuries. Even when the economy subsequently collapsed, the 1930s laid the foundation for the boom of the 1950s, as firms (and government researchers) developed breakthrough technologies. (Alexander Field has documented many of these breakthrough in a series of articles and books. It appears that a lot of large firms redirected their efforts to research and development when they found they couldn't sell much during the Depression.)

The Corona Virus is proving a huge challenge to a world economy that has increasingly pursued the efficiency gains that stem from specialisation, for it has exposed the fragility of international networks to extraordinary shocks. One wonders if the combination of technological advance in new types of food (new forms of factory produced plant-based proteins "incredibly tasty mushrooms") and a demand for greater local production of essential commodities may undermine NZ's agricultural sector in the medium-to-long term. If a combination of concern about global warming and increasingly stringent health restrictions undermine the medium term prospects of the tourism industry, and technological breakthroughs change the international pattern of food demand and production, prediction about the NZ economy may be quite difficult indeed.

Please keep up your writing

Andrew

And a couple of other things. Oil. WW1 saw the dawn of the mechanised military, trucks, tanks, planes, U Boats. Couple that to the burgeoning private motor industry, diesel trains and you have the like of Standard Oil and a lot of sudden interest in the Middle East. The mobility of virtually the whole inhabited world was revolutionised and grew like topsy. Debt. The credit card didn’t begin in earnest until the late 1950’s. As far as NZ was concerned not in widespread availability until the 1980s. Up until then there was little personal lending, small overdrafts here and there and some finance companies Marac, AGC, General. Most household relied on lay by and HP. In comparison credit cards have simply strapped borrowing to a rocket to the point that many cannot distinguish the difference between money earned and money borrowed. As you say it has been a hundred years of momentous change.

Interesting wider picture perspective on the food sector;

https://www.theguardian.com/world/2020/mar/28/is-factory-farming-to-blam...

Another good article, thank you, Keith. Beside saying NZ is dependent on China too much, I'd also say we depend on our primary industries too much in international trades. We export things like logs, beef and lamb, etc., in exchange for complex artefacts like cars and smartphones. We need to think about how we can move ourselves up on the global supply chain. What other options do we have in the knowledge economy?

NZChinese,
One of the problems with value-adding is that it is easier to ask the questions than to find the answers.
Probably the outstandiing example at scale in NZ has been a2 Milk Company and their move into a differentiated infant formula. As you may know, I have been associated with that endeavour for more than 15 years.
As a general statement, it is very challenging to create brands when you are so far from your customer.
One of the aims of the FAME program - a horrible name but it stood for "Food and Agribusinesss Market Experience Program' and it took about 100 youngish mid-level managers around the world in various groups to try and introduce them to the markets of the world. There were four different cohorts involved over a period of about 6-8 years. I had some involvement as a leader in that. But that program came to an end about eight years ago.
Once we move away from the land-based industries, for example to things like smart-phones, it is hard to find a competitve advantage for NZ. But there are electronic and robot applications that can be applied within land-based industries. Unfortunately, our NZ universities are not well connected to those applications.
KeithW

Yes, most of us will agree to that Keith, the world economic turmoil shall be stabilised by the sole might of Chinese economic power, with combined lowered price of oil between Saudi & Russia, the engine will roar again, ferociously with doubling, tripling, quadrupling capacity since the resource are there cheaply waiting at the ports for them. China might of population size power is now gear up for full productions, to produce things for the world, this is the time for China to shine - Vast opportunity to provide their world customer based with produce, and when the world can't afford it? - it shall be given in credit, the return is just simple various piece of neglected land area, which previously owned by the deceased citizens that succumbs to the Covid-19. The answer to world wealth uncertainty, will happen in couple months. China has prepared massive funding reserve to bring up the RE market price/valuation worldwide. Very unprecedented anticipation.

."..Our current lockdown has come close to ten days too late"

Oh you Monday morning quarterback. Who was it who wrote the article "Jadinda goes hard and Jacinda goes EARLY"?

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