Last year is no guide to 2011

Opinion: Weak 2010 is no guide to a stronger 2011 outlook

10th Jan 11, 3:59pm by Roger J Kerr

The local interest rate market commences a new year with very little change to outright rates and yield curve shape from the levels of late December.

The negative GDP number for the September 2010 quarter released just before Christmas was taken as further evidence by the doomsayers that the NZ economy was tanking and heading back to recession.

The subsequent commentary from economists was that the RBNZ would not have to increase official interest rates at all in 2011.

However, the marginally weaker economic performance in July, August and September last year was largely due to lower agriculture and manufacturing output for unrelated reasons.

I do not read too much into those weaker numbers and still contend that the super high export commodity prices will drive increased production, output and investment in the primary sectors this year.

Likewise the low NZD/AUD exchange rate will drive increased manufactured/food exports to Australia, increase Australian investment in NZ manufacturing and also lift the already stronger Australian tourism arrivals into New Zealand. The domestic retail and construction industry sectors were not markedly weaker as the doomsayers had been predicting.

It would be very unwise to extrapolate the flat GDP growth numbers experienced through the middle six months of 2010 and conclude that 2011 will be the same.

Apart from the current high NZD/USD exchange rate hurting exporters, all the stars are in alignment for stronger GDP growth in 2011. Add on the Canterbury earthquake rebuild and the Rugby World Cup positive influences and the stage is set for the doomsayers to be proved horribly wrong.

Activity levels in the domestic economy over the first half of 2011 will be determined by whether the extra income into rural pockets is utilised solely to repay debt (as the doomsayer economists and the RBNZ forecast) or whether some is spent on consumer and other items. I think the latter scenario is much more likely. Certainly the bargain prices for electronic gizmo’s (helped by a favourable 0.7600 NZD/USD exchange rate for importers) make it very attractive to upgrade and up-size!

Retail sales look like they will be up marginally 1% to 2% on the previous year with the positive early December numbers fading towards Christmas due to poor weather and the lack of a weekend for shopping immediately ahead of Christmas day.

The NZIER quarterly survey of business confidence (QSBO) is due out this week and should display improved confidence levels.

My view is that all the economic data releases over the first three months of 2011 will prove to be better than expected and gradually there will be a realisation that +3% growth does bring inflation risks later on and thus the current “super-loose” monetary policy settings with the OCR at 3.00% are just not appropriate for the economic outlook.

As stated last year, by the time the RBNZ have the hard economic evidence they need to remove the monetary stimulus, it will already be too late and thus force them to lift official rates rapidly from March/April onwards. In addition to the RBNZ’s expected U-turn on the NZ economy, the improved global economy in 2011, led by the US and Asia, will also be aiding a stronger NZ economic growth outlook.

Net result of the economic changes will be a sharp increase in the one to three year swap interest rates from March onwards. The four to ten year swap rates will continue to be determined by US Government Treasury Bond yield changes, and those rates are only heading upwards.

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* Roger J Kerr runs Asia Pacific Risk Management. He specialises in fixed interest securities and is a commentator on economics and markets. More commentary and useful information on fixed interest investing can be found at rogeradvice.com

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54 Comments

by SK | 10th Jan 11, 4:35pm 1294630545

A wave of inflation is approaching.

by Nicholas Arrand | 10th Jan 11, 5:20pm 1294633235

At some stage....absolutely! And we all know what that means for interest rates, don't we! And "lower", is not the answer to that question.... A bout of asset deflation is more probable first, ( get your borrowing requirements filled during that period), followed by the price inflation. That's bad news for asset holders first; then for those that survive, later on, as well..!!

by Elley | 11th Jan 11, 10:02am 1294693333

Haven't we had that already? Like, you know, food prices, petrol prices, electricity prices, house prices, in short, everything but salaries more or less doubling in the last few years?

by Matt S | 11th Jan 11, 10:29am 1294694955

We sure have Kate .. and cost price inflation will continue its relentless march upwards while wages lag further and further behind.. the "Middle-class squeeze" I call it. All the while the Govt will continue to publish manipulated statistics (like the CPI and inflation figures) convincing most of the voting public that they're keeping their heads above water when in fact they are slowly sinking.

See, we can't keep paying the serfs too much otherwise we won't be able to compete with the low wages in China and other developing nations. Minimum wage we call it, which ironically is the maximum wage many will ever receive. And guess what, the minimum wage is limited by the artificially low official "inflation figure" ..

by Wolly | 10th Jan 11, 4:44pm 1294631061

Roger's still finishing off his bottle of xmas cheer...he points to growth...and points to an ocr rise...then fails to see what an ocr rise would do to any growth...he sees a rural splurge and not a trend to repay debt and hunker down...I think Bolly is closer to the mark on that one.

The "improved global economy" is actually just more spin and BS. Already we have had reports out of the States re the foreclosure crisis worsening. The drop in unemployment is no more than the removal from the list of heaps of unemployed. The true rate is near 20%. Europe is on the edge of a second wave of debt trouble. China is slamming the door on inflation or trying to. Australia has a flood crisis and a property bubble that MUST implode.

Nowhere in all this does Roger see rates rising due to a bond war in Europe. Who will take the haircuts?. Bollard does not provide the billions used by the banks here as mortgage meat to be sold to brainless Kiwi.

Rates are going up and sharply and the ocr will follow and the economy is in recession and the farmers who are debt free or who have "lazy balance" sheets will be saving what they can...the rest will be creamed off by the banks as they seek to plug holes in balance sheets.

by anonentity | 10th Jan 11, 5:30pm 1294633844

Around March the debt load of America will become to much ,for their economy..The devaluation that has to ensue will make the double dip a reality.The millitary is planning for civil unrest. Over there they shoot first.Its gonna get nasty.

by Matt in Auck | 10th Jan 11, 5:34pm 1294634053

more nonsense from Kerr

2% (tops) growth for 2011

by walker janette | 10th Jan 11, 7:18pm 1294640311

what planet is Kerr on?

He thinks that the rural sector will be having a big splurge, what a joke! Banks are demanding that farmers repay debt and farmers are getting overdrafts called up this year some with only seven days notice. A lot of dairy farmers are on once a day milking and some are 30% down on production.Sheep and beef farmers are having to unload stock because of no grass in some areas and bank pressure to sell to reduce debt. Wrightsons are laying of staff and closing shops, yet the same banks are offering money to peopleto invest in another house, go figure

How lucky we are that the World Cup is in NZ and that there was a earthquake, maybe the solution to the country's economy is a series of natural disasters, maybe smile and wave could factor that into the next budget.

May the force be with you!

by Andrewj | 10th Jan 11, 8:20pm 1294644002

Janette, what do you know about Capehorn farming Ltd? How many farmers are having the lease payments terminated, sounds like a mess. How can the banks know so little about the businesses they lend to? Its going to be expensive for the farmers who have leased their farm to restock. I see some interesting Auctions, farmers who were lead to believe they had some time to sort their affairs appear to have been dropped.

Whats happening in Europe is interesting

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/824942…

On Friday, yields on Portugal's 10-year bonds rose to all-time highs above 7pc, dragging down European stock markets.

by Sheep Shagger | 10th Jan 11, 9:29pm 1294648182

Jannette, You have to remember that 20%of the farmers hold 80% of the debt so the balance will be doing fairly well. Theres been some ripper rains down here over the last three weeks and things are looking great so whilst its unfortunate for those having to unload stock the next guy will be in a position to finish the job so a net zero effect for NZinc .Ditto PGW, their marketshare is being picked up by competitors. I dont know how the dairy production is tracking down here but feed levels are good so I see no reason why they should be dramatically down. Having said all that I agree that we are unlikely to see a slurge in descretionary expenditure. Sureing up the balance sheet will be upmost priority I feel.

by walker janette | 10th Jan 11, 10:15pm 1294650958

Sheepshagger, Where do you get the figure 20% farmers have 80% of debt, just curious? The ones that are having to unload aren't going to make budget on an individual level so more bank pressure for them.Lambs in Feilding from Raetahi, Taupo and market back. Everyone has cut costs back to minimum so no room to move, farms aren't selling. Talking to land agent other day who has a large market share in rural property Tararuas and he said for the first time he posted zero income for gst return Only 3 sales in Tararuas last 3 months 57 acres,240 hct of scrub and 1 hct. So smile and wave had better come up with some ideas.

by Sheep Shagger | 10th Jan 11, 10:58pm 1294653537

The 20/80% was a stat picked up from this venerable site awhile back. Im sure it was a quote from your mate Charlie Graham. I know Casual Observer has thrown it out there abit so it must be true! When you have guys like Crafer oweing 200mill its probably not too surpriseing.

Seriously though , it seems you have far more important things to deal with at the moment on your home front. Im with AJ below,whilst you have possesion of the cattle you have to leverage off that somehow with the other cockies involved. If you can prove that they have purposely milked you for free grazing whilst knowing all along the guy was insolvent you surely have a case against the financiers for full payment.. They,ll surely pay up as risk their brand get dragged through the media. Whatever it sounds a bloody mess!

Good luck.

by Casual Observer | 10th Jan 11, 11:52pm 1294656756

I have used it in relation to dairy debt. I have read it in various articles

The Reserve Bank (2008) reported on the distribution of agricultural debt in the year 2005-

2006, as illustrated in Table 3 and Figure 6. This indicates that 20% of farms have 73 % of the total

debt. This curve is the same shape for New Zealand sheep and beef farms (MWNZ, 2010).

http://www.side.org.nz/IM_Custom/ContentStore/Assets/10/61/58fe862834a3…

The danger posed by excessive debt loading is concentrated disproportionately in the hands of just 20% of farmers with only 2600 farms each likely to be in debt to the tune of $7.6m on average.

http://www.nzagri-business.co.nz/home/free-articles/farm-debt-levels-po…

I believe I have seen it in a MAF publication but don't have it bookmarked :-(

by Number 6 | 11th Jan 11, 9:33am 1294691636

So this 20/80 'rule' applied to figures some 5 years old, now (2005/6). Do we think that it's improved, given that the bulk of the borrow~and~spend mania was still in full swing at about that time?

by iconoclast | 10th Jan 11, 11:39pm 1294655948

80/20 Rule. Commonly used. Similar use of the same stats used in regard to BBs today on the other thread. Pareto's rule states that a small number of causes is responsible for a large percentage of the effect, in a ratio of 20:80. In 1906, Vilfredo Pareto (1848-1923) an Italian economist, observed twenty percent of the people owned eighty percent of the country's accumulated wealth. The Pareto Principle states a small subset ("vital few") affecting a common outcome tends to occur more frequently than the remainder ("useful many").

by ian in rototuna | 10th Jan 11, 7:26pm 1294640804

This will be one page I will re-visit at the end of the year!

by speckles | 10th Jan 11, 7:31pm 1294641113

when people say inflation is coming...usually it has already arrived!!!

by Andrewj | 10th Jan 11, 9:24pm 1294647863

steve30362 Today 01:48 AM

"Would Franklin Roosevelt have tolerated such a lamentable state of affairs, or would he have ripped up and reshaped the global system until it answered the needs of his citizens?"

No, of course not, he would have done something about it. But that was then, and this is now.

According to 2010 census figures, the number of Americans falling below the poverty line has swollen to one in every seven. But it is growing quickly. During the Great Depression it was one in three. One third of households receives some form of federal assistance, and 42 million Americans are on Food Stamps. Areas of the US are being de-industrialised, and some, like the centre of Detroit, are reverting to farming.

The west does not realise that an economic war was declared some 15 years ago. Only now, do some people seem to be able to start to understand what that means for people living in the west. There are no short term, or easy solutions, and held within our own free market blinkers, we fail to realise the rest of the world is moving on without us. Our ideology is what enables banks and investors to cream off savings in Europe and US and invest that money in the Far East, where workers are 70% cheaper, and therefore margins so much higher than in countries with very high social and taxation costs.

It seems to me we are following the route of classical economics; a convergence of wage rates induced by capital investment flows. Unfortunately, for those living in the west, this means that to become competitive they will have to suffer very significant reductions in real wages and wealth.

How will people react, when they start to understand this is really what is happening?

preator Today 03:08 AM Recommended by

13 people I think Steve30362 has got it right and long before any final spiral into China level wages citizens in the West will demand a revision of the world trade system. To survive economically, the West (Europe, US and other democratic nations with free elections) must protect themselves against a raging mercantilist and authoritarian China which will, in the absence of protectionist measures, drive our wages down to levels seen only in slave societies of the past. Those riding high on the back of free trade - financiers, re-sellers and the like, will resist this to the point of subversion but the alternative is the total loss of our freedoms. The struggle will be to maintain living standards at something like the 1950s level - we can all survive that - but not the level of the 1850s which is what our free trade and free market ideologues that lead us into this crisis want.http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/82491…

by walker janette | 10th Jan 11, 10:05pm 1294650304

Andrew, I am one of the farmers affected by the receivership of Peter Nitsche. Had 279 bulls on my place since March last year. I am uncertain the exact number of bulls he had in total, have been told 30,000 between BNZ,Riverlands and Stock Co.I was paid on a weight gain and grazing contract combo. I got my one and only payment in June and no more since, The Bulls averaged 415 kg and now they are nudging 600 kg. Every month I would ring NItsche and or Stock Co. Both assured me that things were a bit tight but it was a matter of supporting Nitsche and seeing the process through. As late as 18th of DEC I was talking to Stock Co arranging killing times, they never said a word about receivership. They said that bank,etc were supporting him. Bullshitting bastards. On the following Monday I get a phone call from Stock co to say he was in receivership, and by the way you won't be paid for the weight gain and I was offered $5 a week for grazing from Dec 22nd. Apparently that was the good news.

Needless to say I went ballistic, spoke to BNZ Head of Strategic Banking who happen to be my bank and he said that Nitsche chose to go into receivership. Crap don't believe that for one minute, They all knew he was in deep doodoo and didn't want to deal with that many bulls in the middle of Winter and they kept us farmers believing they would see it through. What does that mean for me? I am out of pocket roughly $70,000. The bank, receivers, riverlands and stock co will benefit. As an unsecured creditor I get sfa.

The biggest joke is that I had been doing a cash flow for my bank BNZ at the same time and the manager I deal with knew about pending outcomes and never said a word. All the farmers that grazed or leased land have been rorted, so that is the sorry sagaof Capehorn Farms.

I asked the head of BNZ Strategic Banking how did such a business plan get through credit given the nature of farming and bank lending and what Nitsche was doing was such high risk, his response not all business plans work as expected. Heads should roll for this.

by Kate | 10th Jan 11, 10:47pm 1294652838

It seems to me that regardless of whether you are a secured or unsecured creditor - ownership of the weight mass added during the grazing period must be a question in law - not contract law (as non-payment of the grazing contract is a clear cut matter) but perhaps there is something in property law which could be leveraged.

I agree with Andrewj and would work with other affected parties to seek an injunction which would stop cattle from being repossessed (removed) by the receivers until a case is heard on that question. It doesn't really matter how 'thin' the case arguing that question might be - the idea is to frustrate the receivership process.

by Andrewj | 10th Jan 11, 10:57pm 1294653468

Thanks Kate, id even go so far as to recommend they start hiding cattle and frustrating any attempt to recover animals, you have more power than you think. Tell them those bulls are not theirs but yours and you can prove it, tell them the bulls in question escaped, make it impossible for them, get media attention dont get ripped off, fight, I and many others are standing quietly behind you and will support you, just because you cannot see us doesn't mean we are not there and ready and willing to stand beside you and give support.

by Casual Observer | 10th Jan 11, 11:19pm 1294654753

Bravo Kate and Andrewj. I agree entirely. It is time we stood up to these sorts of practices. As Andrewj said, you have support out in the wider community Janette. Perhaps if enough of you are Feds members it might be an option to see if they will consider the costs of getting an injunction to be paid out of the 'Farmers Fighting Fund'. Good luck!

by iconoclast | 11th Jan 11, 12:00am 1294657248

Interesting case law. Agreed. Shift them somewhere else if you can. Argue the toss later. Unless "title" passed it will be contract law and not property law. The best you can do will be to register a lien. But as receivership often implies insolvency the test will be the date of insolvency and not the date of receivership. If that is the case, then, if the date of insolvency pre-dates your claim you will not be able to defeat the receivers.

by Miggle | 11th Jan 11, 7:03am 1294682611

Crank up the barby !

by Andrewj | 10th Jan 11, 10:23pm 1294651438

Get all the farmers together, refuse to let cattle leave the farms demand payment. Make a lot of noise, ring your MP, I hear rumors that stockco are in trouble anyway. Make it so its easier to pay farmers than deal with the trouble. 30,000 bulls this is the second time Riverlands have been burnt, they must have shit for brains. I see Pederson got the nod earlier, ask how he new and got out before the rest of you. I find this type of thing disturbing, as I say ring your Mp it works.

by Chris_J | 10th Jan 11, 10:48pm 1294652932

Sorry Roger, the economy is tanking and (almost certainly) already in recession.

I guess after being wrong all 2010, Roger is heading for a repeat 2011. Does anyone actually buy rogeradvice?

by Realtor in France | 10th Jan 11, 10:53pm 1294653184

I live on the outskirts of a moderately poor country town in southern France. I am witnessing business closures due to lack of sales, real estate sales slowed to a dribble, the pressure of price increases imposed by local and state authorities and banks on the community are now biting. The over riding feeling is that this depression that we are in, has been brought upon us by excessive greed and exploitation by these self same banks. There is a feeling that the Euro is in trouble and that the Sarkosy government does not have the answers, in fact we will be seeing more civil unrest, protests, something that the French are famous for, as they show their displeasure directly. Perhaps this will be a year where the general populace may force some accountability upon the national leaders, though I am not holding my breath on that score. By and large we humans have sheep mentality, we bleat alot and run in ever diminishing circles, herded on to the truck to be sent to the works to face the final solution. Ah well what the heck, get up, shuffle outside, break wind, have a spit, kick the dog, and blindly carry on, who cares anyway.

by Rob of the North | 10th Jan 11, 11:06pm 1294653992

Wait till the Euro collapses midway this year...then they'll all resort back to their own geographic tribes and all hell will break loose when the glue is gone !

by David B | 10th Jan 11, 11:27pm 1294655237

@ walker janette

Just seize the bulls for God's sake in lieu of the unpaid debts. They can't just come and take them without committing an act of Trespass on your property. Tell them that and tell the receivers that you have seized the bulls and they won't be released until such time as you have come to a satisfactory agreement with them as to the amount of money you will be paid. That may mean that you get to keep some of them to pay what you are owed. Use your imagination dude, and negotiate. And in the future, might I suggest that when you allow your land to be used to fatten another farmers stock, in the contract you have a clear clause that in the event of that farmer going into receivership or otherwise defaulting on his payments to you, you get to keep whatever amount of his stock that you have to cover what he owes you.

by Casual Observer | 10th Jan 11, 11:57pm 1294657022

Roger is seriously disillusioned if he thinks farmers will splurge on electronics. Heck, why buy a new tv when we could have a trip to a tropical paradise instead.

Gummy, I hope you have got that extra accommodation sorted for all the xtra cockies wanting to come to your paradise for a well earned rest and relaxation!

by Gummy Bear Hero | 11th Jan 11, 1:43am 1294663422

Yup , we've already had glumpsters from the Land-of-the-Long-White-Face . And they left , looking suitably refreshed and re-invigorated to resume the glorious life that NZ has to offer .............. cough cough , ahem !

Beach / Warm blue water / Sashaying girls / Mango slushies / Coconut palms ............ Geeeeeeeeeeez , I can't wait to leave all this deprivation , and come back to Godzone , too .

by Miggle | 11th Jan 11, 6:59am 1294682352

Book me in. I'm not fussy. Hammock under a palm will do. Are we able to watch the world cup on Telly?

by Gummy Bear Hero | 11th Jan 11, 1:57am 1294664242

Usually , Rogie , the stars are in alignment and I agree with your assessments .......... But I'll take you to task on the Canterbury earthquake re-build .

That adds absolutely nothing to the nation's GDP . It simply takes munny that would've been utilised else-where , and plonks it into Canterbury .

Either / or , it's the same amount of munny ....... obviously , so how does spending it in Canterbury make it more productive than any other usage ?

............. By your reckoning we could stimulate the NZ economy by deliberately bull-dozing the nation's housing stock each year , and re-building it ............. Nonsensical argument , that .

by dogma | 11th Jan 11, 9:13am 1294690419

Gummie it does add to GDP if the repairs are paid for by insurance. The money comes back from out of the country and into the pocket of the contractor fixing the mess who would otherwise have been doing nothing. Fingers crossed we get another one soon to get that growth we all desire. Wellington i hope.

by Wolly | 11th Jan 11, 9:21am 1294690871

Utter rubbish Dogma....the school fire in Auckland yesterday brings comments that the community cannot afford such loss especially in these times...yet a school wrecked in the Christchurch quake brings the comment that the rebuilding is GDP positive.....doh

What you refuse to understand is that insurance losses are passed directly to premiums. That is the most obvious loss since that capital will no longer be available for investment in a productive manner.

Get with the understanding...destruction is not GDP positive.

by dogma | 11th Jan 11, 10:03am 1294693421

Wolly last time I checked GDP wasn't a measure of community spirit.

Of course premiums will rise in the ChCh area, thats only fair. If mine go up i will question it and shop around as no-one is holding a gun to my head.

sometimes destruction is GDP positive. If you bust something down and replace it with something more efficient how could that not be positive.

by Wolly | 11th Jan 11, 10:18am 1294694330

It's not positive dogma because the inputs needed to do the fix are being diverted from elsewhere. The premiums rise for all households not just those in Christchurch and the reinsurance companies that will fork out hundreds of millions, will raise their premiums when the EQC goes hunting for reinsurance and that gets passed on to all of us...expect it to show up in your insurance very soon.

You need to stop seeing destruction as a positive. The aussies sure as hell will not tolerate silly media statements that their current flood problems will be GDP positive.

If that is not enough for you...consider the situation of a business south of Christchurch planning before the quake to employ more and do some building work to expand production...now they find labour costs more, materials cost more if they can get them and on top of that their premiums are rising. Don't forget the quake has been the straw breaking the back of many small companies.

by dogma | 11th Jan 11, 10:42am 1294695728

Im saying its positive to GDP as the inputs are coming back into the country from overseas, this means more money in our economy.

consider the situation of the young builder who was going to leave for oz as there was no work for him, now he can stay in nz and contribute positively to society because of the quake.

every cloud has a silver lining.

by Wolly | 11th Jan 11, 10:51am 1294696286

For how long can he do that dogma....or do you expect an ongoing series of disaster events! Once the CHCH rebuild with inclusive rorts is at an end...where will the workforce go?

The finance from overseas is balanced by outgoing payments for reinsurance and likely as not the out will be greater than the in.

The young builder will do better going to aus where there will be more scope to move from one growth zone to another. Tell me the miners on the Coast would be better staying and waiting for a govt funded whatever for miners.

by dogma | 11th Jan 11, 11:07am 1294697247

The point is he is here for longer, and who knows, when the quake rebuild is finished we may have come out of recession and there may be more natural opportunities. So the timing is actually fortunate.

Wolly the influx of the insurance money is many times greater than whats going out making it GDP positive.

by Wolly | 11th Jan 11, 11:18am 1294697920

You are clutching at straws dogma. By your argument the economies on the east coast across the ditch will benefit from these floods...

by dogma | 11th Jan 11, 11:27am 1294698440

Not if the money is coming from insurance companies that are based in Oz as there is no inflow.

by Gummy Bear Hero | 11th Jan 11, 12:01pm 1294700511

So instead of paying their investors a dividend , the insurance companies are forced to pay out that money to flood victims . ........... Someone missed out , the investors ....... There is no " free lunch " .

Or alternatively , the insurance companies will be forced to raise premiums to all clients next year , to cover their losses in the floods . Someone's gain is someone else's loss . No gain .

by Wolly | 11th Jan 11, 12:07pm 1294700873

Give it up dogma...just accept that Gummy and Wolly are right all along...

by Grant A | 11th Jan 11, 8:22am 1294687324

Realtor in France - one of the big parts of the problem with the world situation is highlighted by your posting. Everyone is looking for govt's or banks to blame for the greed. However, these organisations were not alone in this, as the greed started with the general population who until recently benefited greatly from the credit growth that has facilitated the greed

We can't begin to solve this crisis until people start looking at themselves and accepting responsibilty for their actions - no one foreced you to borrow !

by Realtor in France | 11th Jan 11, 8:50am 1294689044

Spot on Grant, many of the over leveraged may well pay the ultimate price.

by Basel Brush III | 11th Jan 11, 9:22am 1294690958

What happens when China and india reduce their food imports?

What happens as other competing agriculture producers increase their supply?

Those both run counter to the positive outlook.

by Sheep Shagger | 11th Jan 11, 11:55am 1294700115

Dont think China's giving up on buying food just yet!

China - Lookling at future food supplies

10 Jan 2011

Land degradation in China poses a challenge to the country's future food supply, a U.N. envoy said. China has lost 20.2 million acres of arable land because of urbanization or industrialization, forest replanting programs and damage caused by natural disasters, said Olivier De Schutter an independent U.N. human rights expert. Currently, 37 percent of China's territory suffers from land degradation and its per capita available land is 40 percent of the world average. "This shrinking of arable land represents a major threat to the ability of China to maintain its current self-sufficiency in grain and it fuels competition over land and land evictions," De Schutter stated in a news release after completing a trip to China last week. Although China has 21 percent of the world's population, it has only 8.5 percent of the world's total arable land and 6.5 percent of the world's water reserves. Earlier this month China announced that its consumer price index rose 5.1 percent on an annual basis in November, with food prices climbing 11.7 percent. An increasingly carnivorous diet among the Chinese also means more grain is needed to feed livestock. In the past year, rice costs have gone up 13 percent, wheat 9 percent, chicken 17 percent, pork 13 percent and eggs 30 percent. De Schutter warned that the food price hikes were a "harbinger of what may be lying ahead" for China, which represents one-fifth of the world's total population...

Source: newsroom - meattradenewsdaily.co.uk

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by Grant A | 11th Jan 11, 9:31am 1294691489

Basel - what happens when NZ explodes in one gigantic volcanic eruption ? Lets not get silly with this. Yes short term things can happen, but if you look at the demographics and water situation etc, there's no way that China and Indian will be reducing their imports of food over time.

Yes, others will produce more, but water is a major issue globally. One of the biggest issues for the world is how are we going to feed everyone..fact.

by Number 6 | 11th Jan 11, 9:36am 1294691796

Water can be a double edged sword; as Queensland is finding out. Let's hope it doesn't push trhough to the Canterbury Plains, like '73, or the earthquake costs will be the least of their problems.

by Wolly | 11th Jan 11, 9:44am 1294692262

Funny you should ask that Grant A....Taupo was once something like Egmont...until about 8000 years ago...then kaboooom...we live in a butterfly space of time GA....Taupo will see the rebirth of the lava mountain and no bugger knows how fast that takes..but Krakatoa points to no more than decades...and then....kaaboooom. Already hot springs are being measured at the bottom of the 'lake'. One good burp and it's goodbye to the lakeside human settlements.

by Nicholas Arrand | 11th Jan 11, 9:53am 1294692795

How reassuring, Wolly!

"(The Taupo explosion of 135 AD) bombed and buried forests and left much of the North Island a dusty desert...Airborne ash rained down darkly as far north as present-day Auckland, and south as far as present-day Wellington. Rivers changed course...The statistics are staggering...Enough material was emitted from this giant crater to bury all of New Zealand to a depth of forty-five metres, although most fell within the volcanic region itself...It was a far greater eruption than that of the Mediterranean's Santorini, or Indonesia's Krakatoa...."

by Wolly | 11th Jan 11, 10:06am 1294693573

I thought it was much earlier than that NA....thing is we never fully prepare do we....all those Taupo homes built on the edge of the 'lake'. I suspect we need to move to evolve the armed forces into a better civil defence organisation. But it will take a massive disaster before anything is ever changed. Same as the economy isn't it....no change from 'normal' until the awful takes place.

by walker janette | 11th Jan 11, 10:43pm 1294738991

Thanks for advice etc about Nitsche. I will have a story published next week in Farmers Weekly and Straight Furrow, to try and get people to come out of woodwork. Stock co state the bulls are theirs.The only good thing is the bulls would be pretty hard to uplift 2000 acres of hills largest paddock 320 acres. Not an easy farm to muster randomly. I will be doing something about this and to whoever said a grazing contract has to include receivership defaulting etc I guess it is a sign of the times these days.

Regarding the 80/20 figures have been trying to get clarification, those figures are available only to NZRB staff that have clearance. So trying MAF

Have some figures

2005 2007 2008 2009 2010 (millions $)

1,816 2,413 2,802 3,195 3,394 HORT

7,207 9,214 10,085 10,800 11,195 Grain, Sheep,Beef

13,837 18,457 23,790 28548 29329 Dairy

23,676 31,037 37,825 43,577 45,145 Total Ag debt

I haven't included deer , vineyards etc, but the total figures represents all ag debt