Gareth Morgan gives 5 reasons why existing farmers should oppose more dairy conversions

Gareth Morgan gives 5 reasons why existing farmers should oppose more dairy conversions

By Gareth Morgan

Farmers are waking up to the idea that more conversions in their area will make it harder for them to farm in the future.

That is why we have seen agricultural experts and even the Waikato Fed Farmers president Chris Lewis call for a moratorium on converting forest land to dairy pasture in that region. While Chris Lewis has since back pedalled slightly under fire, other dairy leaders with an environmental focus have backed his call.

Despite some kickback from farmers about moratoria, the idea is not new, nor controversial, in fact within the Land and Water Forum farming groups and environmentalists agreed it might be a useful tool in some catchments. The Morgan Foundation also called for a moratorium when we launched the My River campaign a year ago.

This blog sets out five reasons why all farmers should be concerned and speak out against continuing conversions. We will focus on the issue of converting farms to dairy, but the same argument really applies for all intensification – putting more stock on a certain amount of land.

Catchments can only hold so many cows

Around the country we are starting to see limits imposed on the amount of degradation that we will allow on our fresh water – rivers, lakes and groundwater. These limits mean that only so much water can be taken for irrigation, and only so many cows can be in the catchment, because the nitrogen from their urine eventually ends up in waterways. That means that each new conversion that adds more cows, or uses more water is increasing the chance that existing farmers will have to change the way they farm when limits are imposed.

To put it bluntly, an area can only hold a limited number of cows. That limit depends on how clean the community wants their fresh water to be. If the number of cows in an area is already at or beyond that limit, then every cow added now by a new conversion will mean one has to be given up later on.

This is obvious – in fact if the Government were serious about maintaining or improving water quality when they released their National Objectives Framework last year, they would have put a moratorium on new conversions until water quality limits were set. A moratorium would be necessary until any new conversion can demonstrate that their overall impact on water quality will be neutral (for example, by funding improvements elsewhere).

More milk means a lower price

The second reason to oppose conversions is simple selfish economics, the law of demand and supply. This law states that the more of any good we produce, the lower the price will be. Any farmer in his right mind wouldn’t want more people making milk.

You could argue that New Zealand is a tiny player, and so we can’t really influence the world price of dairy. But you’d be wrong. The vast majority of dairy is consumed locally within borders. Because New Zealand makes so much milk and we drink so little of it (about 5%), New Zealand is actually a big global player. In fact we account for roughly a third of international dairy trade even though we only produce about 2% of the world’s milk supply. In that context, while individual farmers won’t budge the price, large-scale conversions over many years could.

More milk means higher costs for Fonterra

Fonterra is legally obliged to pick up and process all milk that is produced in the country. There are a few exceptions, but that was the basic thrust of the deal done when Fonterra was set up. The idea was to protect farmers in the face of a huge monopoly purchaser.

But this regulation has a nasty downside for Fonterra – and therefore for Fonterra’s shareholders, the farmers. New conversions tend to be in more distant locations (such as the McKenzie Country), so transport costs for picking up the milk are far higher. Fonterra is also obliged to process that extra milk, and has to build the manufacturing capacity to cope with it, regardless of whether that extra milk would improve the bottom line. Since all farmers get paid the same milk price by Fonterra, existing farmers are effectively losing out by new farmers entering and pushing up Fonterra’s costs. This is particularly the case for those farmers closer to factories -their milk has higher value because it is cheaper to pick up, but they are not rewarded for that – unless they switch to one of Fonterra’s competitors.

Many new conversions have higher costs

Conversions tend to happen on less suitable land for dairy farming, and so require greater investment; for example irrigation or housing for the cows. This increases the cost of production for these farms, and increases the risk faced by the new farmer. In a bad year with drought or low prices, there is a greater risk that new farm could fail.

Farmers may not traditionally be concerned about the risk taken on by others, but when bubbles burst the resulting contagion can affect everyone in the sector. Given that dairy debt levels have tripled in the past decade and are now above $30b, the Reserve Bank has recently expressed concern about the ability of some farmers to withstand a low payout. This risk could increase for farms in catchments that face nitrogen limits.

The social contract with the public is cracking

Farming brings economic benefits, but also it damages the environment. Through the democratic process the public ultimately decides how much pollution of their fresh water they will tolerate for the economic benefits that farming brings. But because the economic benefits accrue mostly to farmers and the environmental benefits are spread across all of society, the amount of dairy farming wanted by the public is likely to be less than the amount wanted by individual farmers themselves. The difficulty is that it can take decades to see the environmental impact of today’s activities, so there is a real risk that we could overshoot the amount of cows that are acceptable in a catchment.

The risk here is that eventually water quality would decline beyond an acceptable level for the public, and so all farmers (existing and new) become the subject of a backlash from the public. This would hurt everyone – not just the environment and the public but the farmers too, as they would face much tougher regulations over their farming practices (such as limits to cow numbers or water use). This could have wide ranging economic impacts – it is far better to halt conversions before we reach this critical level. Existing farmers should speak out against increased intensification before they face the risk of regulation from a disgruntled public.

----------------------------

This article was first published on his blog, Gareth's World. It is here with permission.

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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There is something in this. In our area they are starting talk about making hill country farmers fence off water ways ( virtually impossible for many and a waste of money because on hill country, only fences on good lines are effective). And yet they are pushing for water storage schemes which would bring about more dairy conversions. The fact is regional councils are contributing to the problem. if they  solve the problem they shrink their own business.

#6 Dairy is excluded in the TPPA - so what exactly is the point? 

http://www.theguardian.com/commentisfree/2015/mar/25/treating-soil-like-...
Another reason is the importance of top soil. Human life cannot exist without it. The volumes that have already been lost to the oceans thru deforestation is quite alarming. NZ is a leader in this area. There is no top soil creation on dairy farms, just huge amounts of top soil loss that is evident to most in the colour of our river & streams in the rainfall months. Whereas forestry at least produces top soil with plant material decomposing, the plant material on the ground slows up the movement of water which helps prevent the soil being transported to the streams, and also gives the water more time to soak in an hydrate the soils. Once you get your head around the fact that life on this planet cannot exist without top soil, you soon realise that it should be worshiped long before that of the sun..

While I agree that looking after the soil is paramount, the idea that forestry is  better than dairying is a sick joke. Seems fine while the trees are growing, then we proceed to clear fell exposing everything at ground level. Living downstream of such is not fun after a rain storm.
 Add to that that studies have shown grasslands to be the fastest creators of humus. Anecdotally I've been very surprised at the depth of topsoil added to pumice based soils in the last 30 years.

I agree with what you say. Clear felling is hideous, and I dont think my comments suggested otherwise. Though there are many types of forestry, like selective felling or even the growing of food forests (as in permaculture), where no trees are felled in order to gain production from the land. I was trying to point out the importance of top soil and its renewal. Nor am I arguing that forestry is better than dairying. NZ has some excellent dairy farms, What I'm suggesting is that the use of our environment in many areas could be better utilised in order to maintain and look after our soils.

There are farming practises in place that look after soil. Direct drilling is now more common than plowing. Direct drilling into crop stubble ( rather than burning) helps build up vegetable matter. likewise with spraying out old pasture and direct drilling. It is in farmers own interests to look after soil, not to over pug ground etc.

Cartel Behaviour
Interesting article
Look a little closer
 
By way of comparison, an event last week in Australia with interesting parallels
 
In the face of dramatically falling commodity prices, particularly the Price of Iron Ore. Andrew Forrest, the founder and major shareholder of Fortescue Metals Group called on the big Iron Ore producers to curb production
 
That captured the attention of the regulators ASIC and ACCC, who stomped on Forrest, deeming that to be cartel behaviour, so much so he is now being investigated
 
No difference
But listen to the response of the NZ regulators
Silence
 
And this coming out of the mouth's of people who should know better

Yes, this attitude is "Ive got my dairy farm, so stop others from doing the same and spoiling it for me"
 
Talk about selfish.
 
How about doing this
 
So everyone, who wants to have a dairy farm, can have one. Restrict the size of farms and the number of cows so everyone gets a fair share.
 

?? But there are plenty of dairy farms on the market if you want to buy.? Dairy price is'nt going up why convert more?

Have you heard of CANADA
have a look at their dairy system I am sure it would not work here.

#2 the evidence for this is in the recent auctions and the one to come. And yet still Fonterra have more milk as part of their "3V" strategy. Completely mad.

Do you get the sinking feeling that they won't change strategy to fit changed circumstances, because that would mean having to give up their neat V.V.V. slogan?

Whats MAD is Fonterra is not following through.
Overpriced milk powder products in china mean that we suffer with a supply glut
Allowing wholesalers distributors wedge large margins between customers and supliers just hurts.
We need to tell Fonterra they need to get the product to the customers at a effective price  

I have no idea if the goss is correct. But I did just hear that another 21 dairy farms are in the making just south of Tokoroa on the exCHH land. Its really concerning every one around here climate wise. The summers get ever drier as more forest disappears.

re: social contract.

A contract is a TWO way deal, recognising remuneration from all parties.
Without both factors there is no "contract" let alone one that is consensual.  

The farmers have no such contract, as they are not being given consideration for their input/meeting of demands.   

customers (purchase contract) with farmers have been abusing the nature of their contract, the increase in alternative over-committed suppliers just contributes to that gumboot development.  all better for the corporate world to take over the land and production process and reduce farmers to slaves

I agree Cowboy. Regulate the little guy out of business, corporatise farming, then when can create more jobs for the regulators managing the mess. The govt. does'nt care about environment, only growing regulatory jobs.. And we can't do that without letting in cheap money to push up land prices and adding govt. compliance costs to force intensification, which leads to pollution and more regulation.

Our farming systems aint sustainanble on so many fronts, therefore they are temporary...
 
"Trucost’s third big finding is the coup de grace. Of the top 20 region-sectors ranked by environmental impacts, none would be profitable if environmental costs were fully integrated. Ponder that for a moment: None of the world’s top industrial sectors would be profitable if they were paying their full freight. Zero."
 
"As Paul Hawken likes to put it, we are stealing the future, selling it in the present, and calling it GDP."
 
http://grist.org/business-technology/none-of-the-worlds-top-industries-w...

i think if farming was restricted to owner operators it could be sustainable, but corporatisation, intensification, land speculation  shareholders demanding dividends, capital gain and jobs for regulators isn't sustainable.

exactly.  that's why primary production is different to factory industralisation.  But, many countries and farming industries use feed lots and cages for poultry and pigs, so dairy will be next.   It allows corporates to use massive collective equity to get volume of production, and then they use legislation to make low volume (and historically good and safe practice) inefficient.

Initially (like recently) it is only those with paid up asset ownership, usually from multi-generational inheritance or cross-subsidisation, to rely on cashflow to keep themselves liquid.

The next step is a continual increase of checks and balances.  Tracking feeds, doing constant machinery maintenance and recording, constant polishing of plant.
...All stuff that high volume, high employment has to do anyway to keep things co-ordinated; that is complete redundant in smaller operations.  eg perfect maintenance on a tractor is needed if you have several and you don't know who the driver is, and that there's 1milloin kg of product riding on this machinery working perfectly every day, and the backup in working order.    In a small 3 person or less team, a backup spare tractor isn't worthwhile and people adapt to the machinery that the guys in town can't fix (in high volume, they just get another tractor, it only adds 2c per unit of production)
 By introducing all these overheads, the small business loses it's efficiency advantage, as more often working people have to do bureaucratic work that they took jobs to avoid.  The larger volume based business, specialisation means each worker only learns a small portion of the job and so onlyu does small amount of overhead paperwork which they are familiar with.

However as seen from the levy "peasantry for the government"  Dairy NZ etc are there to help you be slaves to your own property for the government and ease you into an easy crossover when you're finally forced to sell up.  They certainly aren't working for the little guy.  (hence messages such as "Innovate" but no hint of intellectual property protection...the first concern of any professional innovator ! )

Thunderbirds are Go...
Fonterra chief financial officer Lukas Paravicini said the Kiwi dairy giant should be ready to launch a new equity fund providing patient third-party capital for farm investment by the end of the year.
The world's biggest dairy exporter said in September that it would begin talks with farmers and potential investors on the merits of a new Equity Partners Fund.
"It [the fund] is key for us in Australia and New Zealand. It is a very good tool to get equity to help farmers invest in dairy," Mr Paravicini told Fairfax Media on Wednesday.
http://www.afr.com/business/agriculture/fonterra-readies-for-new-equity-fund-launch-as-profits-fall-by-16pc-20150325-1m6sfd

Higher milk prices and "unfavourable product mix" in Australia contributed to a squeeze in gross margins in the country of $NZ84 million.

 

Mr Paravicini said that Fonterra is improving its position in Australia through stronger relationships with supermarket heavyweights Coles and Woolworths.
"While the overall result is not what we would like it to be, it is a good business [in Australia] and there is a lot of progress," he said.
He said that Fonterra is now the number one supplier to Coles after being number 33 last year.
In April last year the co-operative made its foray into private label milk, winning a 10-year deal to process Woolworths' Select white milk in Victoria.
on the other hand....
http://www.farmingshow.com/on-demand/audio/andrew-hoggard-federated-farmers-dairy-chairperson-263/

Federated Farmers’ Dairy Chairperson questions Fonterra’s performance in the light of yesterday’s down-grading of its annual profit and dividend.
$6/kg on Tasmania.... 3:55 onwards etc.. 
 

Henry,
That equity fund would require some equity, which would require some profits? Is it the banks swapping debt for someone else's equity? I would not be keen to invest in Dairy without some security and I wouldn't like a bank with a first bite of the cake looking at my equity as part of its security.
 
All the buyers new that Fonterra's production figures were overly pessimistic and would need correcting, everyone except the NZ suppliers.
From California a few weeks back.
Using Fonterra’s collections as a proxy, it seems that New Zealand’s milk production ebbed in February, but the year-over-year decline was not as large as had been feared. Rains on the North Island brought welcome relief, although the South Island – home to 40% of the nation’s milk – remained dry. Undeterred by the better weather, Fonterra reiterated its outlook for a 3.3% deficit in collections for the 2014-15 season relative to 2013-14. This would require a year over-year decline of at least 25% in the remaining three months of the season. 
.
In Australia, I didn't know farmers were shareholders, I thought they were suppliers and Customers. Fonterra made a significant investment in Beingmate, I don't think they want to give up on that huge investment.
They will have to pay market rates or Australian farmers with options will look elsewhere.
In Tasmania I hear it is $6.00 a kg and 300k cash incentive to sign up. The other option is to lose the huge investment, made to supply milk powder from Aussie to China via Beingmate, and a lot of red faces.
Just to throw a spanner in the works, China was self sufficient in Dairy before the melamine scandel.
 
http://theglobaldairy.com/noticias/stock-takes-beingmate-buy-raises-ques...
 
http://www.abc.net.au/news/2014-08-27/fonterra-china-deal-milk-dairy-tra...
 
 
Even in the UK they are exporting record amounts of dairy product.
 
http://www.foodmanufacture.co.uk/Supply-Chain/Dairy-sector-needs-more-government-support?utm_source=RSS_videocast&utm_medium=RSS%2Bfeed&utm_campaign=RSS%2BVideocast
 
 
 
I think at the end of the day it's the auction system that's going to be their undoing. I wonder if they can extract themselves, the buyers must be loving it.
 
It's going to come down to the debt, its not going anywhere, hence the equity fund. The idea is to swap debt with large pension funds, whose managers are chasing yield and management bonuses, its where common sense and bad decisions go to die these days, hidden in the never never, of long term pension commitments which are never going to make it to the average Joe when he retires. 
 
The solution is to cut costs to producers, reduce regulatory compliance fees, road user taxes, Council rates and user pays fees, taxes on fuel and on and on. Costs for these poor dairy farmers are absurd, someone has forgotten that the world dairy market is a competitive one and it doesn't help if our costs are above our competitors in places like Australia, Chile, Brazil and even some of the higher cost producers who we could once,        ' blow out of the water', with our lower costs.
 
Half NZ appears to be trying to ride on the back of the farming sector, this is just the first warning shot
  The deeply embedded belief system ,is seriously flawed and going to need re evaluating, we are facing, 'systemic failure'.
Most of this so called 'wealth' was built on a debt just like housing and once that debt stops being added, its going to crash, once land values start to fall, equity vanishes, once equity starts to vanish you get forced sales, forced sales push farm prices lower = more equity destroyed, I think you know the rest of the story.
 
Landcorp have made a major stuff up with their foray into dairy from pines, on long term leases, they don't even own the land and to think what we paid it's leadership to do it.
Like I said 'systemic failure', failed ideology and belief systems built on sand.

Yes the equity system seems to parallel the Californian Public Sector pension fiasco.  Huge pension fund, with "official records", that was used to bank roll unpopluar and unethical practices.  The huge pension fund was used to purchase shares and provide loans to anything that its bosses couldn't float in a normal market, relying on low volume of payouts to give them ponzi style "skim" pay outs, the purchases were constantly favours for politics or other interests in the careers of those involved in handling the scheme, not for the return to investors.

Once Fonterra seizes equity in a farm, it can use it's financial interest to force the farmer to supply at any price (otherwise be a conflicted interest) .  The farmer becomes a worker on Fonterras farm, and one party will certainly have more influence with law makers and be able to hire more expensive lawyers and legal/ specialists.   The farmer will end up using their small portion of equity to subsidise Fonterra's farm (since Fonterra is the beneficairy of the cheap assured milk supply).   

 Getting equity will be easy.  Those companies that brought  into Fonterra Shareholders Fund, would jump at the chance to be party to a "bircks and mortar" real asset holding fund...one that pays even better returns than other Asset Holding Portfolios.  As these will be (contextually) low value large expanses of land, all operating in an earning capacity - tied strategically to a value-adding company.  

And when times get tough, it won't be the Equity holders sweating to make a living.  They'll be waiting "first in cab rank" interested parties to buy out any struggling farmers driven to the wall by the companies own policies and demands.

If it wasn't exactly what the "servants of the US in Wellington" wanted, then there would be bright lights because of the inherent conflict of interest and possible "mid-west bank seizure" corruption occuring.   But they want corporation ownership, big business and subserviant work drones in the farm factories, paying taxes.  None of this own your own property/farm nonsense.   Got to look for the end game.   Why else would NZ even look at things like TPPA or dairy auctions

And the first thing you need to do is merge farms together , that they become so large that individual farmers don't get a, 'foot in the door',  its corporates only buddy.

You mean the way we just sold this farm I'm on to our neighbour?  finishing up 29 May.

That step has been going on for 20 years.  For detail just follow the "average herd size".

Next step is boom/bust cycles of cost and revenue to force the farmer to borrow away his share of the equity, exposing them to foreclosure and forcing them to seek outside equity rather than self-finance.

If things were working in the peoples' interest:  shelf prices of product would be dropping (they're not), processed product prices would be stable or dropping (they're not), health and enjoyment in general public and sector would be improving (it's falling), technology would be creating equipment and technology that is more stable and longer lasting (it's getting less stable and failing more often (My Massey Fergusson fert tractor is about 50 years old, but is in better condition than the 15 year Landini, which outlasted even newer machinery).

 The product that was actually very healthy 30 years ago should still be healthy, with a few adjustments such as the move to non-residual sanitisers.

Animals did not have access to huge amounts of vet care and anti-biotics, yet the majority of the herd did well and the product was safer than now.   Yet for most farms the cost of vet care has skyrocketed, rather than dropped which is what should be seen if animal health and care had improved.

page 33.
it starts with our farms..... 
https://www.nzx.com/files/attachments/210258.pdf
you can see the thinking going on and acceptance of leverage.
 

Mmm....Don't know that I want my farm to be part of the 'collective equity', especially as MyMilk is now in the mix and those farms will be safe from 'collective equity' if it all goes to custard.  Might look to other supply options.... I hear one competitor is offering $6/kg for up to 40% of 2015/16 early season milk.........

"_My_Milk"  it's all in the advertising.  "My"Milk because it isn't any more !

"Higher milk prices and "unfavourable product mix" in Australia contributed to a squeeze in gross margins in the country of $NZ84 million."

Then why did Australian suppliers receive more than NZ shareholder-supppliers .

It's the markets fault Cowboy, competition at it finest.
A place where a lumbering, inefficient ex Co-op, used to monopoly rents  should never venture.
 I mean Mrs/Miss/Ms Swales tells us the markets going to double in 3 years and people like her are never wrong, are they?
 It's money for jam
 
Managing director of Fonterra Australia, Judith Swales, says the value of the infant milk formula market in China will nearly double in the next three years.
"The market is $18 billion all up and we see that growing to $33 billion by 2017 so that's significant.

Sadly the co-ops existed because there was no way government would represent private or commercial interests , they would always play loose with any perceived advantage for their own gain.

Same was said of private corporations (as seen in the early cotton industry, or areas like the cinnamon or cocoa trades).  A private or public owned company would always put it's own wage earners and shareholders before the farm owners - it wasn't guaranteed that everyone was a money grubber just out their own self-interest but it would be inevitable that someone like that would end up in management...and hire others to further their empirebuilding.

Which left farmer co-ops.  "The envy of the world", and what developing nations are doing to bootstrap themselves.   But.  The co-op is now only a co-op in name and governed by corporate interests....who follow corporate interests.

Government has pretty much always been like bad customer service anyway.  The problem when they've got guaranteed paychecks.  
  It was identified on this site not so long ago:  staff and customers come and go but "The System is Forever".  People adapting to that norm have no reason to treat people properly or to recognise or value individual freedom or development or ownership - such things are the anti-thesis of their life.   The _system_ is forever - it is all that matters.  Everything else, is like customers, just an inconvience to staff doing their job.

With a bit of thought you should have been able to answer that question yourself
 
The Australian industry is not held in the hands of one giant monopoly processor. It is fragmented with a number of small to medium sized participants competing for market share and suppliers. Suppliers are loyal but only up to a point.
 
Fonterra is not the largest player, and is buying market share
 
So what price are you paying for the comfort of one major security blanket in NZ?
 
As AndrewJ says - competition at its finest

We aren't paying for a security blanket.

Fonterra are the de facto price settors for NZ pricing.  the others normally wait for Fonterra to announce it's rates before adjust their own to be "in the market space".

Yes they're buying market share.  But it's not about security blanket, it's about corporate mentality rather than co-op mentality.   Similar effect to how corporate banks constantly chase new customers but don't give a damn about their existing ones.

The Chinese economy isn't the big danger.  Chinese officials will not let their government fail, it's the biggest of the too big to fail.   And the heads of State realise that a hungry restless China likes throwing troops at targets as a measure of social control, and since the Chinese have the productive factories, and the technology, "too big too fail" is a real danger when it's the biggest guy on the block.

What is more dangerous is should China pull a Russia.  Simply decide that a local supplier either needs protection or is out of favour, and the ports close.    China will happily tell it's people that dairy rationing is now in progress and only purchase Euro or local milk products, especially if a Chinese company will guarantee supply through the "crisis".
Heck companies like Woolworths used to do that to people all the time....and they weren't even a soverign nation.

In fact, fruit and vege growers constantly face the prospect every year.  The distribution company/co-op has orders for 10million cartons.... the big processors finally have a good year, fill the contracts...so they tell the small growers "sorry we have no processing room for your product"  we can take 20% of your crop, or you can pay us to process/hold the rest.

Chinese government (unlike NZ) has a duty to see to it's people first.

Aye the fund is only available in Aussie not NZ
 

Crikey these comments make depressing reading. I have adult children who are in their prime. They have no understanding of why things are so tough. But both are a bit demoralised at how difficult it is to get ahead. The vast amount of debt required to purchase land has rightly scared the bejesus out of them. We need this great bubble to pop so the young can get in and get the security of decent equity in homes and farms. I fervently hope for the sake of our beloved children and grandchildren us older buggers all take a serious hiding and this monstrous thing blows up. Soon.

It is not a bubble

Explain your thoughts cowboy. Mine were encompassing the whole money printing,excessive debt, debauchery of the past 20 years or so. Although I consider the race to produce mega milk a folly too. The overhang of overcapitalising the nations farms will hang like a millstone around our necks for many years to come. Those that preached only nz farmers could do it so cheap were dreaming. Its like Think Big but just bigger. So now our farms are riddled with debt that couldnt be dealt with in the good times.

Looks like a bubble to me, tastes like one, smells like one.

My Weekly Commentary: A Progressively Maladjusted “Economic Sphere”

 

March 27 – Bloomberg (by Christopher CondonIan Katz): “Federal Reserve officials, fresh from the latest round of tests designed to ensure the safety of the biggest banks, are now peering into the darker corners of the financial system as they assess the risks of another crisis. One source of concern: tighter regulation of banks is prompting more borrowers to seek funding through the $25 trillion shadow banking system -- money-market mutual funds, hedge funds, brokerages and other entities that face fewer restrictions. ‘These institutions are a significant and growing source of credit in the economy,’ Dennis Lockhart, president of the Atlanta Fed, said… ‘They are part of an interconnected financial system that, in extreme circumstances, is prone to contagion.’ …Worldwide, shadow banking assets have grown, while banking assets stagnated, according to a report by the Financial Stability Board, a global group of regulators. Non-bank financial intermediation grew almost 7% to $75 trillion in 2013, the latest year for which figures are available, while banking assets declined less than 1% to $139 trillion. In the U.S., shadow banking -- also known as market finance -- grew almost 9% to $25.2 trillion in 2013, while banking assets increased almost 5% to $20.2 trillion. ‘One of the oft-cited examples regarding the prowess of the U.S. financial system is our reliance on market finance,’ said Lawrence Goodman, president of the… Center for Financial Stability… ‘It helps grease the wheels of the financial system.’ The grease can also magnify risks.”

So-called “shadow banking” will undoubtedly play a paramount role in the next global financial crisis. It was at the heart of the 2008 crisis. Yet somehow “shadow banking” has been allowed to inflate unchecked over recent years – at home and abroad (especially in China). How could this be?

 

http://creditbubblebulletin.blogspot.com/2015/03/my-weekly-commentary-pr...

 

I also think the world economy is a bubble, controled by governments printing money. The real question is how is it going to end? Markets crashing? It's too big to fail. Will governments keep printing money until there is hyperinflation? Will someone start a war? Sounds a bit doom and gloom, but somethings got to give.

If you have any, cherish your memories of the once-pristine Mackenzie high country because it's been converted into a massive pile of shit.
 
Polluted water table, lakes, ponds and rivers. Cows wading in the streams is a common sight. The magnificent tussock has been ploughed under and replaced by gigantic billiard table top vistas. The stench of dairy effluent pervades the area, as do clouds of blowflies and swarms of mosquitoes.
 
All of this is propped up via mega irrigation, because the place is so unsuited to dairying the pasture would soon dry up and blow away in the warm dry Fohn wind the moment the taps are closed.
 
But hey, so long as the farmers are even richer, what more can the nation ask or expect?
 
Roll on artificial "factory" milk production. It can't happen soon enough.
 
 

Not the farmers.

Their corporate landlords.
get it right.

 
 The irrigation boy's are losing a lot of money at present. $2.00 a Kg has to hurt.
 
DairyNZ chief executive Tim Mackle said the challenge for farmers would be working through their cashflow position for the coming season after Fonterra announced its half-year results this week.
Low retrospective payments by Fonterra this winter would likely be about a third of that received last year, with many farmers dipping "into the red" this spring, he said.
"For many, they may not pop back up into the black for some time. Banks are telling us that many farmers will hit $1.50/kg to $2/kg in overdraft this September."
 
http://www.stuff.co.nz/business/farming/agribusiness/67538736/big-dry-a-...

If it was a co-op of NZ farmers they would be concentrating on getting basic returns to point of supply, rather than building corporate equity pools for lending to overstretched asset owners.

https://www.youtube.com/watch?v=AdWGPhP2GeE&feature=player_detailpage
There's been some interesting discussion on here, BUT I feel like throwing the cat in amongst the pigeons .. Click on the link above to see a different type of farm (45 min video). Farming is all about producing food or a resourse. This place is on about 74 acres, it produces about 25,000 - 30,000 meals per yr to paying students (1-2 wk courses are usually $1000 plus). I'll let you do the maths but I doubt they carry the same mortgage as the avg dairy farmer. Yes they have dairy cows, they also produce more fish than the avg farmer would catch in a lifetime. There river & streams run crystal clear. Near extinct wildlife is returning. I used to love milk as a kid, there was something nice about the female breast, but I have since been weaned off the stuff. For me it was time to look outside the box as opposed to following the herd. Maybe this type of farm is something one would be proud to leave for the next generation ..

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