REINZ issues warning to rural sector about becoming over dependent on the Chinese market

Rural News

Farm sales down by 25% on a year ago but prices are up - REINZ says the drop in log prices highlights the risks of becoming too dependent on China

17th Jul 19, 2:39pm by Greg Ninness

Farm sales were down by a quarter in the three months to June compared to a year earlier, while prices were up for all farm types except dairy farms.

The Real Estate Institute of New Zealand recorded 322 farm sales in the second quarter of this year, down 24.6% compared to the same period of last year.

In the 12 months to June, sales were down 9.3% compared to the previous 12 months, with all farm types showing a decline.

Dairy farm sales were down 37.4% compared to the previous year, with arable farms sales down 18.8%, finishing farms down 14.2% and grazing farm sales down 5.9%.

However, prices headed in the opposite direction and remained in positive territory for the year.

The REINZ All Farms Price Index, which adjusts for differences in the mix of farm sales by type, size and location, was up 7.3% in the second quarter compared to the same period of last year.

But dairy farm prices appear to be almost flat, with the REINZ Dairy Farm Price Index, which adjusts for differences in the mix of farms sold by size and location, falling 1.1% in the three months to June compared to the same period of last year.

"The non-dairy sector is holding value more strongly than the dairy sector," REINZ rural spokesman Brian Peacocke said.

"Product prices for beef, lamb and horticultural products remain strong and are improving, and while indications for dairy seem reasonable, volatility in that sector remains constant," he said.

Peacocke also issued a warning about farmers becoming too dependent on the Chinese market.

"The recent drop in log prices of between 15% to 20%, predominantly related to the Chinese market, is a reminder of becoming too dependent on one market, particularly one that has taken approximately 42% of our lamb exports this year, plus a significant amount of our beef and horticultural production for the season," he said.

"The need for market diversity is also a constant."

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20 Comments

by Pragmatist | 17th Jul 19, 3:02pm 1563332550

Did anybody elses' Irony Meter explode as they read the headline?
Edit" The headline on the front page "REINZ issues warning to rural sector about becoming over dependent on the Chinese market", not the one on the actual article.

by blowjoy | 17th Jul 19, 10:10pm 1563358255

No one:

Some interest.co.nz readers:
Can we sell more products to Chinese but stop them from buying broke farms or dairy plants from us?
Can we just reap tourism export revenue without having loud Chinese tourists over here and causing traffic accidents?
Can we speed up our infrastructure and residential building but enough Chinese workers with special visas!
Can somebody fund us for infrastructure building but NO, we don't want PPP with Chinese!

by Foxglove. | 17th Jul 19, 5:07pm 1563340033

About 50 years ago it was ditto for the UK and the only export to China was Rewi Alley.

by Gummy Bear Hero | 17th Jul 19, 5:27pm 1563341270

... the great man is long gone , sadly .... ought we send them a replacement for Rewi ...

The job would be right down Winston Peter's alley ...

by Henry_Tull | 17th Jul 19, 7:00pm 1563346841

Who else from Springfield should we send?

by PocketAces | 17th Jul 19, 8:15pm 1563351319

Doh!

by Chris-M | 17th Jul 19, 5:45pm 1563342321

As I have been saying for years having more than 15-20% reliance on any one market is madness. The risk is that they "own" you and eventually will very likely really own you. 42% is stark staring crazy. I shudder to think what percentage of our dairy products go to China. Successive governments and all the idiots in Wellington government service have effectively handed our country over to the Chinese. I imagine that they cannot believe how stupid we have been and how to finally take full possession without causing too much upset in the population.

by PocketAces | 17th Jul 19, 5:52pm 1563342724

Who hasn't been saying this sort of thing for ages, among many others that finally are beginning to be understood. I am wondering if my cheque is in the mail, what about you?

by Foxglove. | 17th Jul 19, 6:10pm 1563343808

History never repeats? Up until the sixties the UK was virtually the only meat market. Shipping bills of lading were captioned Homeward Bound. The Brits owned & controlled everything. For instance Vesteys, (or here as W R Fletcher) 3 or 4 freezing works. Shipping, Blue Star Line. Insurance, Union. Heading full circle to the other side of the world, isn’t it.

by Glitzy | 17th Jul 19, 9:55pm 1563357302

The only difference I can see is that China has about 1.5mm people locked up in internment camps and savagely beats its own people who dare to question the word of the party.

And we want to let those guys own our land and our farms ? It's insane. You don't want ANYONE owning Kiwi farms let alone these people.

by RickStrauss | 18th Jul 19, 8:54am 1563396850

With food security set to be a major issue in coming decades, have to absolutely agree. It's not a good idea for NZ's food supply chain to be owned by any foreign power (via state-corporate cooperation). China, USA, whoever.

We could not keep two French terrorists in jail in the face of trade threats. We will lose the ability to legislate over our own land.

by mikekirk29 | 18th Jul 19, 9:15am 1563398144

Farm analogy? The horse is well off from the barn mate

by Belle | 18th Jul 19, 9:29am 1563398946

Perhaps you guys should have a convo with the sheep farmer who was regularly getting about $60 for a store lamb, $95 for a finished lamb till the chinese came along.
Now that store lamb is worth $90 to 100.
A finished lamb in summer is circa $150
Winter $180 to $200
We are looking at $9 plus per kilo for winter lambs and last time I looked mutton was $5.45
Coarse wool is worth nothing.
You dont look a gift horse in the mouth. Take the money and run guys. Sheep farmers arent stupid. They make a living from a product that has some pretty massive swings from year to year.
This is a good thing. Its time to do some maintenance on farm. Pay back some debt. Prepare for the next downturn.
If and when China shit on us, hell we have money in the bank. Its good guys. Relax

by Belle | 18th Jul 19, 9:40am 1563399615

I should have added store lambs now are more in the $130 to $150 range. But because sheep farming has been so tough there arent a lot around. Ewe numbers have dropped dramatically over the last few years. For such a low impact animal on the land compared to cattle to discover we will be charged 3 times as much for lamb as beef for our emissions seems crazy.
Interesting if it goes back to $95 for a finished lamb and we have to give away another .60c a head in climate change tax. While the opposition in the likes of the UK winter and lamb their ewes indoors. Bringing all the food to them. Hmmm lots of emmisions in that.

by Glitzy | 18th Jul 19, 9:46am 1563399989

I'd agree with you that the government needs to have a serious look at consumer pricing here and farm subsidies.

A rack of lamb in Ferro is priced at about 60 bucks. A pint of milk here is twice what it costs in the UK and about the same as it costs in Hong Kong. Where is all that money going ? It's not to the farmers and not in the consumers pockets either.

But selling the most prized food generating assets in NZ to foreign state sponsored bodies who are sourcing their own food security ? There must be a better solution.

by RickStrauss | 18th Jul 19, 10:01am 1563400879

There's a difference between selling products to export markets and selling off NZ's supply chain though, right?

by Foxglove. | 18th Jul 19, 10:28am 1563402484

Don’t quite agree Belle. Here I go into the history books again. Yes make hay while the sun shines. That is what was happening until the UK joined the EEC. Sheep flock got to 75mill eventually. If I recall correctly a bale of fine wool was worth a new Jaguar 3.8. But that market changed radically. Yes you may have funds in the bank and that is exactly what the veteran farming families had done. And they are still there, lots of them in fact. But think back to the mid 1980’s when Roger Douglas dismantled Muldoon’s ill advised and counterproductive SMPs. Farmers were flying of the land as good as in any Steinbeck novel.

by Belle | 18th Jul 19, 4:06pm 1563422811

I remember Muldoon and Douglas well. I was responding to the comments saying sending 42% of our product to China is nuts. What would be nuts is not taking the best money while we can before the shit hits the fan again.
There is nothing wrong with a gentle reminder that China or any market can flip at any point. But some of the comments above make us seem like novices.
Why not cut that few hectares of logs down while the prices are stratospheric. So what that its over for now. Loads of people I know made a killing in the last 3 years.
Not everything is dramatic and dire. Every now and then there will be a purge of the foolish. I just hope its not me at some point ;-)

by Foxglove. | 18th Jul 19, 5:23pm 1563427417

Good for you Belle. Have always enjoyed your pragmatism. Keep on trucking!

by CJ099 | 18th Jul 19, 10:17am 1563401872

At most we should only be allowing foreign owners to have a 'short hold lease' on farm land. Letting them make acquisitions on arable land seems madness, only what an irresponsible Government would allow.

Take a look at China’s Global Food Print in the article link below.
Bloomberg article: Farming the World: China’s Epic Race to Avoid a Food Crisis
https://www.bloomberg.com/graphics/2017-feeding-china/