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Keith Woodford explains how New Zealand exporters went to China because that was where the markets were. In many cases, it was the Chinese who came to us seeking our products

Keith Woodford explains how New Zealand exporters went to China because that was where the markets were. In many cases, it was the Chinese who came to us seeking our products
Going where the buyers are, where the consumers are

It is just four weeks since I wrote how China was going to become even more important as a market for New Zealand’s exports as we work our way through COVID-19. I subsequently took some flak from a few keyboard warriors, on the grounds that I was supposedly ignoring both human-rights issues and also the blame for COVID-19, both of which it was said, should preclude New Zealand trading with China.

My response is that I have not taken a public stance on those other matters and I do not intend to. Whether or not we should trade with China is something for others to debate. I prefer to focus on how it occurred that we have become so dependent on China, together with what the future might hold and where alternative markets might lie.

In this article, my focus is predominantly on how we got into our current situation. Detailed analysis of alternative markets and the future will have to wait for another time. However, I do observe here that New Zealand marketers went to China because it became the easiest place to sell food and fibre products. In many cases, that situation still applies.

 Alternatively stated, it was predominantly the Chinese who came searching to New Zealand wanting our products, rather than us developing markets in China. When we did go there and tried to engage in market-supply work closer to the consumers, we often messed up.

The evidence shows that in general we are very good at processing products and getting them on a ship, and most of the time we are reliable people with whom others like doing business. But we struggle greatly when we try and operate further down the supply chain in foreign business cultures.  That applies not only in China but elsewhere.

Two big exceptions are The a2 Milk Company (ATM) with its ‘a2 Platinum’ infant formula and Zespri. Both situations are where there is a differentiated product that others cannot easily replicate.  For most other products, we remain sellers of commodities and ingredients, with the final consumers unaware as to where the product components come from.

Things really started to happen for New Zealand in China with the signing of the Free Trade Agreement in 2008.  China chose New Zealand for its first developed-country free trade agreement for both pragmatic and ideological reasons. There was a synergy of trading interests.  Also, we had strong relationships with China going back to the Kirk Government that was elected in 1972, and even before that some might say with foundations built by Rewi Alley.

Since the signing of the Free Trade Agreement in 2008, we have seen a remarkable increase in exports to China. I recall in that same year of 2008, together with a colleague from Otago University, I spent three weeks in China with the CEO and Chair of the Board of a New Zealand meat processing and export company. Our aim was to introduce the company leaders to relevant Chinese companies, together with exposure to Chinese food-culture, so that this company would better understand the market opportunities.

At that time very little New Zealand meat was being exported to China. The company’s key markets were in Europe, including Britain, and the concern was that they needed to diversify.

The Chairman of the company had a five-year goal that China might be able to take 15 percent of the company’s product at prices equivalent to European prices. It wasn’t so much about wanting to make super-profits, but to reduce risk associated with high dependence on those European markets.

We travelled widely around China in those three weeks, from south to north, and east to west. At the conclusion of the visit, the company was convinced that there was potential to build markets in China. However, any notion that China would become the dominant market, with risk thereby moving from being Europe-dominant to China-dominant, was not even vaguely on the horizon.

It had been 15 years earlier in 1993 while living in Australia that I first led a meat-industry market research trip to China, accompanied by five undergraduate students from University of Queensland. I was a little nervous about letting these students loose, but it was remarkable how well they scrubbed up when given some responsibility.

We did have some excitement early on. We split into two groups while still in Hong Kong and travelled separately up to Shenzhen on the Pearl Delta mainland. We planned to meet again that night after completing some interviews. In the meantime, a typhoon struck and Shenzhen was under water. Much of the city was flooded. Eventually, after declining the offer of an entrepreneurial local person who offered a ride on an upturned wardrobe, which for a fee he would push through the waist-deep waters, we managed to hire a boat with an outboard motor to get to our hotel.

It was with relief that we eventually found the rest of our group, as these were the days when mobile phones were a rarity. Reporting back to my University that I had lost three of my students somewhere in China would not have been easy.

When I first travelled through the Pearl Delta in 1973, I recall Shenzhen as a sleepy fishing village of around 6000 people. By 1993, Shenzhen was a city of several million people, but the Pearl Delta still had broad expanses of rice fields. By 2008, the Pearl Delta was essentially an urban conurbation with around 50 million people.

On that 1993 trip with my Queensland students, we spent considerable shoe leather, visiting wet-markets at dawn and then meeting up with companies later in the day. The key message we brought back to the Australian company sponsoring the research was that we could immediately obtain markets for many thousands of tonnes of offal meats as long as the company could manage the logistics of market entry. However, they should for the foreseeable future forget about the so-called prime cuts. The markets were not ready for that. As for the offals, the Australian meat company responded back to us that the quantities of offal we were talking about were more than the total Australian supply.

I tell those stories here to depict something of the dynamic nature and excitement of Chinese markets.  Things change so quickly. As one Kiwi resident in Shanghai said to me more recently, I will come back to New Zealand when I have my first boring day here in China.

As for that New Zealand meat company, with its 2008 goal of 15 percent of product going to China within five years, that was easily surpassed. Then, in 2014 or thereabouts, the Board of the company became sufficiently worried at the remarkable success of their China endeavours that they placed a restriction on the CEO that, on the grounds of risk management, only 35 percent of product could be exported to China.

Soon thereafter the CEO had to go back to the Board and tell them that the China markets were sufficiently profitable relative to other markets, especially for mutton forequarters, that the company could not be competitive in farm-level procurement market under that constraint. And so, the constraint was removed.

To reinforce that message, we are now in a situation some 12 years since that New Zealand company made its first exploratory visit to China, that China is not only New Zealand’s dominant market for sheep products, but also for dairy, beef, seafood and timber (See Figure below).  Those exports continue to increase each year.

The latest concern, captured recently in commentary to the Wellington Chamber of Commerce on 11 March 2020 by Finance Minister Grant Robertson is that ‘some industries’ had probably become too reliant on China.

My rejoinder can be summarised in two sentences. First that was where new consumers with increased spending power were emerging, and they wanted animal-based foods that we could supply. Second, developing alternative markets will not be easy.


*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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73 Comments

13
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[ Fragment removed. Childish smears not needed. Tackle the core issues, leave the personal insults out of it. Also, I advise you to read the article first before commenting. Ed ]

Export and import is fine as with many other country - with some countries volume is less and with some more but not at the cost of souverignity.

China has corrupted the people and system with their money and muscle power. Conrona Virus has made many countries aware and has exposed China.

Corona Virus is a calamity but at the same time Big opportuny for countries to Reset their priority and economy and more important souvernighty of not be in a posistion to be dictate by other country.

I never saw the fragment but I'm happy for my thumbs up to be assigned to the editor. Is it permissible for the Ed to spell check what he leaves?

By 2035, China will account for more than 50% of global manufacturing GDP.

if you do not know what this implies, you better spend sometime look it up.

2035 is to 2020 what 2020 is to 2005. China currently accounts 28 percent of global mftg. So getting to 50 percent by 2035 is a HUGE leap. If anyone knows the 2005 proportion it might help for some perspective on the above.

The World Bank data shows that in 2005, China's factory output value was US$733 bln while the World total was $7.768 tln. So the answer is 9.4%.

It will mean the rest of the world will not be able to afford what is produced, therefore necessitating making production more localized so that local communities can earn from such production and thereby be able to afford to avail themselves of it.
Be careful of what you wish for

Reckon they might manage it if they invade Taiwan and Japan.

Can you please tell me what that implies xingmowang? (I'm not a mind reader and don't always trust economic forecasts as history is full of unexpected twists and turns!)

Bit like how the USSR is now the global superpower?

If you think pre-corona projections for China still mean anything you're dreaming.

12
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Trouble is, they also came to seek to own and control the means of production and distribution (vertical integration), and cut out the middle man (us).

That unfortunately was inevitable because just about all the meat processors are under capitalised, returning scarcely enough profit to pay the suppliers and keep ongoing one season to the next. Hence enter the Chinese, think Silver Fern Farms, white knights with knapsacks full of cash. The meat industry started into China with commodity cuts while the higher end cuts continued to the traditional high return markets. But all markets always evolve and with the product flow already in place it was natural to test the Chinese market with higher valued H & R and ready retail. For a start there is a couple of weeks more shelf life grace in chilled sea freight to China as opposed to Europe. The disturbing feature though is that with the advent of a new market of vast potential in volume, the sheep meat industry continues to shrink, more plant closures, nothing new being constructed. Why then is it not growing volume if there is such untapped market out there.

Because farms are owned by old people. Old people arent so keen on farming sheep. That may change if China becomes more dependable. There are a few young fullas around the yards. At this point I think China has been looked at in disbelief in regards to what they pay for sheep meat.

Yes the price, and who will/can pay it. And of course the price has to cover the cost. If you look at the South Island a modest modern works at Nelson and then nothing at all until you get to Timaru. 7 works, 21 chains used to be in that section of prime Canterbury sheep farming, the heartland, the domain of what were once known as the wool barons. The unit cost of processing a say 17.5kg ideal carcass weight is high. The return for by products, tallow, slipe wool, pelts hardly buoyant and virtually have to pay the pet fooders to take what of the offal is still economical to save. Yes Belle well might you disbelieve the price the Chinese will pay. That says it all.

If only we could have the dignity to do the same

15
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Complexity theory applied to globalisation would be to acknowledge that we have an incredibly vulnerable and fragile system, not least of all because there are major powers/economies with conflicting ideologies and value systems. The globalised economy is experiencing a huge shock, a shock that we had not generally even accepted was possible, let alone likely, let alone prepared for.

Maybe China will become a more important market, we were certainly heading in that direction before the pandemic. However, anti-China sentiment and questions on the politics of trading with China had been mounting for some years, along with a general increase in nationalism and pull away from globalisation. Some of that is racism (on both sides) some of that is not.

I do not subscribe to a universal rational market theory and prefer to allow for the chaos, irrationality and unpredictability, especially when the current system has never been tested in this way before. Trading with China is becoming increasingly political, not less political. It could dissipate or it could escalate but the question about who we should trade with, is no longer simply about money. The money and profits of globalisation have not been evenly distributed, which is also adding pressure to the system.

I think the necessitating in trying to find alternative markets is not because China would not be a strong market if things continued as they have, its because the risks of things NOT continuing as they have, just increased massively. There is an inherent risk to being dependent on a single market, we experienced that after the UK joined the EU.

11
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Gingerninja,
I agree with all of what you are saying. This is the debate and the search for alternative strategies that we all need ot have. My hope remains that we can have this debate devoid of shouting at each other, but at times my optimism in relation to the nature of this debate does get somewhat blunted.
KeithW

Keith W. I'm not optimistic in the short term. I think the extent of the shock of all this has yet to be fully realised. Until the world has a better grasp of what we are dealing with and have a better understanding of the risks, there will probably be increased anxiety, blame and shouting. Longer term, we will find our way back to an equilibrium again, but if there are second waves, it will take much longer.

Gnj your last sentence in your above (11.17)post is absolutely pertinent, indeed it is. NZ producers must always maintain diversity otherwise you end up in a one way street ending up then in a cul de sac. That is what happened with the UK into the EEC and culminated with Muldoon and the Titanic saving SMPs and then inevitably the collapse of the traditional old freezing companies. China is only interested in China, they are not benevolent. Such is their totalitarian regime and basic self interest they could without warning simply give NZ the bird just to weaken NZ’s resolve, make NZ panic. What repercussions to that could possibly worry them.

NZ is one of the worse examples of "nationalised" type of countries, unless you are talking about a very rudimentary life style. NZ is resource poor, very small population with low density, remote and difficult to access, etc. NZ has never, ever been even a remotely successful closed border ran economy if it mean that closeness was to be applied to their export markets. The 50s to mid 70s golden time of NZ, NZ was in an exteremly lucky situation whereby it had its own exclusive market (the UK), with large enough demand to buy all what NZ was producing and at a very favorable price.

When this market was gone, NZ started to struggle mighty to keep the status quo (i.e. super heavy tariffs on imports so it made sense to produce things locally: i.e. protected industries) as it could no longer afford to pay heavy markups on already unaffordable "raw materials" that it needed to import any way. They tried to become self sufficient with Oil, and THINK BIG was such a disaster that it become blindingly obvious that protectionist economy is poison for an NZ with no captured export market (as they produce some of the most basic, easy to produce and heavily subsidized products on earth).

Hence, both parties of NZ are in favour of "free trade". The inherent risk of being dependent on a single market, is very obvious, but what can you do about it? If now is a good proxy for future, the only way NZ can diversify its trade position is to move away from primary products (including the processed primary products) to something else. This is very obvious and anyone with a basic understanding with come up with such conclusion. The billion dollar question is: WHAT we will replace it with?

Looking at how our crown jewels such as Fonterra and Fletcher fared even before Covid-19, it's safe to say we can't even do monopolies right in this country.

I see Fonterra exports to China are down a little
https://www.thedairysite.com/news/55242/new-zealands-fonterra-reports-14...

Friends in the States are telling the meat markets ae in chaos and it's going be very bad for producers.

https://finance.yahoo.com/news/brazil-meat-supply-ready-cover-011030795....

“In China, more than 80 percent of beef is consumed in restaurants, so the restoration of the food service and catering industry is critical to the future demand for beef,” he said.

https://www.beefcentral.com/trade/china-sees-record-breaking-march-beef-...

Andrewj,
I think the apparent blip in Fonterra's exports is short term and a lagged effectof the Chinese lockdown in the first quarter.
Yes, plant-based meats are a threat that we need to take into account.
However, a lot of Kiwis do not understand that we have no competitive advantage in ourselves producing these fake meats because our climate and topography mitigate against efficient production of broad-acre soy and pea proteins.
Our competitive advantage lies in efficient prduction of pastoral products. I qualify that by adding that I think we alsohave considerable further potential with some specialist plant foods, including kiwifruit, where Southern Hemisphre producers have a unique position in global markets.
KeithW

What's the story with arable exports to EU/UK, seems odd that we can send commonly grown stuff to the other side of the world competitively. Is that a example of specialist plant products, we certainly can't compete on quantity/price.

My brother in law in Dorset used to buy NZ italian rye but the dam stuff was so roundup resistant, he no tills and just couldn't get rid of the stuff. Don't know what he is up to now but he loves no till.

Andrew when referring to "No till" do you mean "No Dig?" Which means not disturbing or tilling the soil, it's organic market gardening technique that is growing in popularity (Especially in the UK) since it helps to remove the need for carcinogenic pesticides like Roundup.

It's important because the public are more aware of farming techniques using pesticides and more actively boycotting products that involve large amounts of pesticides.
For more info Pyralid weedkillers in compost : https://www.youtube.com/watch?v=2D1idnMNKng

redcows
Much of this will be the multiplication of seed lines taking advantage of the Southern Hemisphere growing season.
KeithW

Hi Keith,great article-thanks again for your expertise on China gained from your contacts & years of experience. Could you please answer a burning question, that most Fonterra shareholders have on dealing with China-Why has Fonterra done so poorly on the investment made there over the years especially the Dairy farms we invested in which we where told at the time where world class & a game changing investment-only to find out that they continue to loose money,after all are we not in partnership with the Chinese Government. Regards.

Dairy farmer Joe
It is a big topic!
In summary , much of the infrastructure was good quality but they did make their share of mistakes with some aspects of infrastructure.
After messing things up on the first farm, the infrastructue and operational management were good on their second farm (>3000 cows) with a top person in control. (An American dairy specialist with 20 years experience of China.) But he left to work for Mengniu and thereafter they lacked the necessary expertise and guiding hand at the top. The reason he left was that he thought that Fonterra did not understand the challenges of scaling up, and he thought he was therefore better to go elsewhere to a company that would understand those things.
Fonterra has also had significant (indeed major) long term animal health issues about which they have not been explicit in public.
About seven years ago a colleague and I tried to set up a scheme for Fonterra to sponsor some young folk to get experience in the same type of farms in the USA, but although we had support from the necessary people in the US (these were people that we knew professionally) we could not get it over the line with Fonterra. Part of the problem was that the Fonterra staff kept changing and that made it too hard to progress things.
I guess the overall situation could be summed up as Fonterra lacking experience and expertise in these types of dairy systems which are vastly different to NZ dairy systems.
KeithW

I cant see cropping/arable agriculture becoming more environmentally sustainable than pastural farming - topsoil erosion, high fertiliser use, high carbon use re fuel for tractors etc, carbon depletion from topsoil etc etc all make any sort of cropping activities pretty destructive v's permanent pasture with a few ruminants grazing it!

Interesting article. The choice of "non- meat" alternatives does seem to be a growing trend, and the covid pandemic certainly seems to be acting as a catalyst on many aspects of life. Thing is, in your position, you are looking, reading learning, which is far better than not. Such open mindedness will help ensure a future, something a great many of us could take note of. Hope the rains are coming your way.

USA meat processors are killing a million less animals a week. Friends in the mid-west are sending me pictures of herds of up to 800 head of steers on crops, they would rather graze the cattle make some money, than lose on the present grain prices, these are cattle that should have been killed, lucky for them.
Apparently the meat companies are not starting due to risk of litigation. I wonder if Brazil beef will be sent to USA, farmers won't like that, lots of grumpy people, but you cannot have Mcdonalds running out of beef.
I have a contact who is going to give me a more detailed report next week.

http://endoftheamericandream.com/archives/why-the-meat-shortages-are-goi...

The real threat, the existential one is the newly emerging plant based, synthetic meats, call them what you will. The potential of that technology is undeniable and its big appeals will be cost and that it won't involve exploitation of animals. I think the meat industry greatly understimates just how bigger threat lays in that direction. I see it as an Kodak V digital cameras situation. It could well be that in just a few years Keith will be writing another article reflecting on the last 10 years of the NZ meat industry before it collapsed due to synth meat.

10
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In this new vulnerable world we live in now, I suspect we will only trust wholesome real foods from now on....................

Happy to eat cheaper NZ beef, land, and crayfish if synth takes off. Go for it.

Problem is that this will cause a huge trade deficit.
As an example Mr Average will never be able to buy a new car, it will be 2nd hand imported, lack of 'oversees funds'.
Remind you of Muldoon days?

It appears to me we are putting most of our eggs in one basket and at the same time losing our sovereignty and identity as a nation. One must measure the real cost when taking into account the financial benefits.

With Queen Elizabeth the 2nd as our head of state, I would suggest our sovereignty has yet to be clearly established. And the formation of our national identity goes hand in hand with that issue. As regards being compromised as a nation, you may want to consider how our intelligence connections are already well established, and not something that will be easily changed, or readily addressed.

Oh come now! How does Lizzie 2 exert any influence as a head of state on NZ? She barely does on the UK, let alone NZ. She is just a symbol, maintained for the sake of identity, shared culture and tradition.

The crown exerts enough influence to the point we do not have a constitution? That's a fair amount isn't it? The question I think, has more do with NZ as a nation not being confident enough to become a constitutional state, hence my doubts about our national identity being a forgone conclusion.

Maintained for identity, shared culture and tradition? I'd say just to avoid the hassle of changing and the many political issues that raise their head if you change. I am a monarchist but mainly because I have a partly French family and although they quite envy the royal family it sends them nuts having the queen as head of the church of England. Not sure the monarchy will survive Liz2 which is a pity since having a dumb person with minimal empathy as sovereign works (they don't even have to speak English or be sane) whereas similar as president is not good.

The monarchy is an illusion sustained only by the old world media that is rapidly collapsing taking with it the 'legitimacy' of the monarchy with it. Ask a person from Te Hokianga or Te Uruwera and they certainly won't acknowledge the monarchy and after all they have endured why should they? Best thing we could do here is 'chop' our ties and go our own way.

Somehow the public even in the most remote place seems to need celebrity. I'd dump the monarchy if I could be assured that Kardashians, etc would never be mentioned again.
NZ getting rid of the crown would make the Treaty of Waitangi interesting - we already have the fiction that Maori signed it as if there was a single united group who used that name and then there would be the other party as now defunct. Might keep the constitution lawyers busy but the probability would be our current elite will end up even more entrenched, remote and glorying in the baubles of power.
If we had chopped our ties 5 years ago then we certainly would have President John Key now and the coalition would have been founded on the promise of President Winston Peters to replace him. I prefer Charles and Camilla although I accept mine is a minority opinion.

15
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Chinese people want food produce in a clean green natural way. Add in the size of their population and newly minted middle class, they could probably take as much as we can produce.

They want to own that production and we should continue to legislate to keep NZ land and production in NZ hands.

Yes, in an ideal world, NZ produces and China can fill her boots. However, NZ has sold much to overseas interests.

The Averageman on the average wage could produce Bat Soup and a whole lot of other wonderful, green and delicious items for consumption all around the World. May have to be tested and pick your own species, until that is done, but we could start an aluminium Smelter of our own as a Co-operative to tin and plate the smatterings produced, here. Maybe China has been doing the same... I have no doubt that it is touch and go with many items produced and I certainly feel that the quality and quantity might need a quick test, before we import/export products from infected Countries. (All of em)..
This is a warning shout about all hands to the pumps both here and the rest the World, as many hands many need a quick scrub, daily, nay, every few seconds as this Bat s---t and other Production lines, may not be as immune as one would Hope!?.

Maybe this is why Animal Farm and Green Field produce, may take the path that GreenPeace would for the foresee-able futures.....

Clean and Green, may be our way ahead of all the rest of the World....We could start right now...I am a Green Peace fan....No wars necessary, but food for all.....Might make a change for the better and the Average Man and Woman.

What is wrong with foreigners owning NZ businesses if we can tax the hell out of them and then give that tax to NZ citizens?

Is it not about control of the goods produced? Everything is exported to fill the demand in China and nothing left for kiwis, unless of course you want to pay top dollar. Even then you may not have the opportunity.
They control production, wages and supply, Kiwis become peasants in their own country.

OK rephrase the 'everything' as 90%. Push the taxes on foreign owned businesses as a UBI to citizens and Kiwis become wealthy peasants in their own country.

If we've learnt anything from OBOR, it's that Chinese companies don't stop at repatriating profits from their investments. They gradually begin awarding supply contracts to Chinese entities, bring cheaper contract labour from their own country and meddle in foreign affairs with corruption and veiled threats.
Due to the abnormally large contribution of agriculture to the NZ economy, foreign investors gaining greater control of critical companies in these sectors could come with their undesired influence on our national interest (whatever is left of it).

Because they control where the food goes. That's not good. Have a read about the Irish potato famine.

A recent McKinsey report analyzes whether the "next normal" will emerge from Asia, and some of its conclusions are inevitable:

In 2019, we observed that the Future of Asia is now, and we still anticipate a strong long-term growth trajectory in the region. By 2040, Asia is expected to represent 40 percent of global consumption and 52 percent of GDP. 25 We may look back on this pandemic as the tipping point when the Asian Century truly began.

It's a growing Asia vs a shrinking Western world. The problem for us is that many countries are now very good at growing food and Brazil and Russia probably top that list.

Andrewj
And both of these countries - Brazil and Russia - are increasingly important to China. Both of these countries are authoritarian, and as such China finds them easier to understand than the western democracies. Brazil still has considerable potential to increase its food production. However, it is still probably Russia and extending through into the black soils of the Ukraine where the greatest potential lies. The challenges for Brazil, Russia and the Ukraine lie in their institutional structures, which are different but constraining in all cases.
KeithW

Great article Keith, informative, and entertaining. ( I might have opted for the ride on the wardrobe).
Trade with China, development of new markets etc, are of course pressing issues, and to seek diversification of markets is only prudent, and yet as you point out, not straightforward. Developing an economic safety net is simply good thinking, and as you say, a knee jerk reaction resulting from politics is simply not required.
I am interested in the idea of "localisation" (if there is such a concept), whereby economies move to ensure a minimum capacity of essential production is within national boundaries to guard against the effects of pandemic, such as we are currently experiencing. Do you think such a thing is feasible/possible, or is this something that will be forgotten about as the covid situation becomes resolved, in some way?
I ask, as if this is deemed as an appropriate response to the pandemic, then this is something that can be addressed now. Just in time market production is fine, until something goes wrong, and warehouse storage is an outdated way of thinking. In other words, exploring what we may need, where, when, how and who, is going to take some research, with a great deal of work to follow.
I see Russia has a quota on it's wheat exports, a measure taken to ensure protection of national supply, surely such measures would be part of a nationwide plan. Such a plan would also mean incurring a degree of inefficiencies , yet surely the massive costs already incurred by the govt go a long way to justifying such a plan?
Anyway, thanks for the article.

Good article. Do the Chinese have similar concern about a growing reliance on imported Oceanian products? It would be interesting to understand how they perceive being tied to trade relationships with democracies where government change once a decade so have a low level of guaranteed continuity.

Squishy,
This is a great question and one that I wish Kiwis would think more about. Just as Kiwis are asking whether or not they want to trade with China, the Chinese will also be asking themselves whether or not they can trust New Zealand or indeed any Western countries as a supplier of food products.
China will always retain capacity to grow enough of the staple crops to feed themselves - that is a fundemental pillar of their land-use polices. However, they don't have the capacity to supply the higher protein products that come from animals, which their consumers now expect to purchase.
Alongside this, the Chinese Government understands the importance of 'social harmony' and the risks to that situation if there are food shortages.
China also has to address as to where it can get the necesaary natural resources, and in particular energy, to underpin their economy, given the hostility that much of the world has towards them.
It is in that context - energy and animal feeds - that China is relying increasingly on Russia as a key economic partner. The idea is that Russia will supply the natural resources and animal feed plus some of the basic sciences where Russia remains ahead of China. In return, China will supply the applied technology and consumer goods. Of course, China and Russia also have to figure out if they can trust each other - it is not necessarily a natural alliance. However, there is an old saying about the enemy of my enemy, and this does draw them together.
KeithW

Keith I enjoyed this on the problems of short term thinking by Eric Weinstein
https://www.youtube.com/watch?v=MpTb2ybqfPU&t=238s

Andrewj
It is a nice analogy. But I don;t think it is the complete story.
In relation to biological selection, I was thinking just today about how, as a species, nature has selected for human genomes that survive to the point where we reproduce, but has not selected at all for traits that show up after reproductive activities have finished. For example, early onset dementia has not been selected against.
What Weinstein is talking about can also be captured by other concepts, including the economic concepts of time preference and utility. Or simply that future generations do not get a voice.
One of the interesting outcomes of the dreadful COVID-19 is that it does provide a new perspective on the short verus long term benefits of globalisation. However, once we get through all of this I think that the New World will still advocate for global perspectives because we are all still in the one biosphere.
KeithW

I had the pleasure of sitting in front of a scientist that had done a PhD in longevity. All participants in his study had to have full mental and physical faculties and be free of disease. People, in small pockets around the world where conditions were favourable, have lived to 120 in perfect health. Dementia is thus preventable, it is a lifestyle disease. To explain how disease runs in families he used the term "chew factor".

Hi Aj,very interesting articles-perhaps NZ meat companys could benefit unfortunately from the US farmers misery.How is the drought conditions in the Hawkes Bay- are you getting some decent rain over the next 48 hours {as forecast}-would some much needed investment in a so called irrigation scheme in your area be of any help,if so maybe the Prince of the Provinces needs to pay a visit,It is Election Year .Hope the rain you get is a drought breaker,Regards.

The forecast 17 to 20mm but cut us back to seven which i'll take. The problem is those schemes are expensive, the Wairarapa dam is looking at .40c a M3. A that price it's too much for what I do. Alos this year no dams would have water around here unless they pumped out of the rivers.
I suspect meat companies are doing nicely supply grinding beef to USA at present, they are just not passing on the love to farmers.

As the economic benefits of irrigation lakes don't stop at the farm gate, the State needs to take the initiative for building these long lived community assets (like it did with hydro dams). Fear of farming, just like fear of China, will not lead this Country to a growing prosperity.

If you can find me something to grow please tell me. There must be other areas of the economy that could use the money better. Irrigation is not a cure all. This year any dams in the drought footprint, would have been dry before the season started, that would have resulted in losses and a lot of pain.
Perhaps the future is very intensive Agriculture in areas with suitable climate, like Tauranga, Northland.
Here we can get frosts at any time of year, we also can get very strong winds, strong enough to roll up center pivots. We get intense sun and some years hail and thunderstorms with huge dumps of rain. I have lost summer forage crops to hail more than once, all I had left was stalks. I have gone from dry to mud in a few weeks, my soil don't all drain well ,clay soils have issues.
This year I tried to grow some expensive seed crops but I failed due to a very cold spring, not lack of water although rain would have been nice. I have had frosts in November as high as -6.5 degrees.

Other countries are really getting their act together, it's no use taxpayer funding developments that cannot compete with overseas producers, if you are intending to export. The dairy industry in NZ doubled cow numbers but that didn't really help profitability. In much of the USA farmers are struggling to find profitable crops, look at the amount of Almonds being grown in Australia trying to catch the money being made in California. Inevitably they arrive late to the party.

Developments by central planners often lead to catastrophic failure, Im a strong believer in free markets and private investment.

The Sun in their eyes...staring us in the Face. Obvious really. I spy with my little eye....

https://www.thesun.co.uk/news/11532002/china-lied-coronavirus-dossier-spy/

Certainly China has done a wonderful job of "stamping out" the truth and quite a robust job of "stamping out" any whistleblowers.

https://www.dailymail.co.uk/news/article-8279859/Bombshell-intelligence-...

They now seem to be stamping out any evidence of the origin of the virus ...

Huang Yan Ling, a researcher at the Wuhan Institute of Virology and thought to be patient zero for the global pandemic, mysteriously disappeared and her biography was deleted from the lab's website.

https://youtu.be/bpQFCcSI0pU

https://www.npr.org/sections/goatsandsoda/2019/11/15/779526827/china-rep...

November last year. They tried to cover up an outbreak of LITERAL BLACK DEATH.

Exactly Keith I agree with your article. If you are offered good opportunities with risk, but also a risk premium you may decide to accept the opportunity and apply the premium to offset the risk. If the risk doesn't emerge
you are better off. If the risk does eventuate you are prepared. Just common sense really. No time for xenophobia.

US pork processor talks about industry problems, well worth listening to this guy. Houston we have a problem, or two
https://www.youtube.com/watch?v=CAgo5cQFk0U&feature=youtu.be

Another excellent article, thank you, Keith. My view is NZ is mainly a raw material exporter from the global supply chain perspective. Hence our export revenue largely relies on the volume. The Chinese market (specifically, the middle-class consumers) provides us with that volume. And I don't think we will have an alternative in next 5 to 10 years in that manner. I went to New Deli and Hanoi two years ago, part of them looked like my hometown (a small city in Northwest China) in the early 1990s. If we expect countries like India or Vietnam to replace China, we will have to wait.

NZ only produces enough food to feed 44 million of the 7.8 billion people in the world. About 0.5% of the world population. We have one of the most sustainable, progressive and trustworthy primary industries in the world. The answer to the problem isn't to wait for India or Vietnam to take over from China as a bulk importer of our produce. The answer is to get the premium product we produce to the premium market - the wealthiest 1% of the world population.

Currently a number of things are holding us back from achieving this including; market access, lack of ability to clearly articulate and capitalize on our points of difference, lack of focus and funding from central govt.

The article basically says China is are largest export market because they are currently the easiest market to send our produce to. Two likely trends to come off the back off the Covid-19 Pandemic are; increased demand for healthy, sustainabley produced food and an increasing lack of trust in China.

The world wont go back to the way it was once the Pandemic is over. If New Zealand wants a better future we need to take this opportunity to reposition ourselves in the global market

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