Dairy prices surprisingly resilient in face of China's woes. Growing calls to heed the science of water storage to mitigate climate stress effects

Dairy prices surprisingly resilient in face of China's woes. Growing calls to heed the science of water storage to mitigate climate stress effects

With the release of the latest GDT auction results milk products are proving to be very resilient in the face of the COVID-19 impacts.

There was a fall in prices of -2.9% overall with Whole Milk Powder and Skim Milk Powder both down by -2.6%. Given the dropping production locally as a result of the growing drought conditions it is likely that a lack of supply might have created a lift in the market in more normal circumstances. However, given the falls other agricultural products and commodities have been experiencing the -2.9% does not seem such a bad outcome.

Despite the late stage in the season, production wise, Westpac have reduced their forecast from $7.40 to $7.20. They are still sticking to $7.30 for the following season, still believing the impacts of COVID-19 on food markets to be relatively short. The ASB Bank has reduced its forecast price for this season by -10c to $7.40. They have also reduced their milk production increase down to a -0.5% decline on last year.

Fonterra CEO Miles Hurrell talking on “The Country” is still sticking to their rather broad band of $7.00 - $7.60. Helping to mitigate the financial impacts is the reducing Kiwi dollar. Against the US$ it is now down to 64 USc from the six-month high of 67 USc. Imports of course will cost more but as an export nation a lower dollar will make us more competitive for ag products and as a tourist destination.

Perhaps a little surprising is the Kiwi$ decline against the Chinese Yuan. The Chinese Central Bank has relaxed the purse strings to try and help stimulate the local economy by reducing interest rates and making loan monies more available. However, most are picking it will have little effect until life returns to some sort of normality, and it’s anyone’s guess when that may be. It is with a touch of irony that sales of massage chairs in China are reported to have increased in sales by over 400% as people while away the days ‘locked’ in their apartments. In a somewhat contradictory report Chinaskinny states that with new infection numbers falling in China (beyond Hubei province), coupled with a general weariness of being cooped up, some cities are starting to reactivate and the streets in most Chinese cities are starting to come back to life. Not quite to their normal vibrancy, but there are some positive signs that consumers will loosen their 'survival' stance.

Chinaskinny also reports on more retail shutdowns as concern regarding the virus grows. So, while both can be occurring at the same time it does create a somewhat confused picture as to what the true situation in China is like. In the meantime, food prices are soaring with average increases in January at +5.4% lead by pork with a +116% increase as a result of the ASF compounded by COVID-19.

The only upside to all of this is the apparent drop in fuel consumption if the falls in oil prices are any thing to go by. While still having a way to go to match the falls of 2013 and 2008 the current drop is still quite dramatic and driven by China’s shutdown. A bit less carbon to fuel climate change for a while.

Government listens to partisans, not scientists

With the current drought holding much of New Zealand in it’s grasp, I do wonder if those critics of dams are having second thoughts. Some people seem to loose sight of the fact that while there can be negative consequences of erecting dams, especially if not done with an appreciation for the greater environment, they also provide a raft of positives and it’s not all about providing more land for dairy farmers. The Auditor General John Ryan has just released his report titled “Reflecting on our work about water management”. A comment in his introduction:

What we did not see was clear agreement across central and local government about the vision for New Zealand’s water resources – the issues, objectives, and priorities for water management over the long term that all organisations, public and private, should seek to address. For public organisations to manage water well, they need to know what they are trying to achieve and to monitor progress towards those goals.

This is a telling comment and is at the heart of much of the debate around water use in New Zealand with the Government appearing to listen to whoever shouts the loudest or appears to command the most votes. Local government also seems to be out of step with central Government. The report repeated a complaint made by the Commissioner for the Environment Simon Upton: Government departments and Councils are making decisions without adequate information or knowledge.

The current drought must be bringing the broader discussion around water to a head. It is not all about keeping hands off the resources but utilising them in a way that benefits all in the wider community. The report highlights

It is one thing to set objectives and priorities, to be clear on the outcomes being sought, and to establish targets. It is another to translate this into programmes of work in a way that co-ordinates that work within and between public organisations.

With scientists being proven largely accurate in their forecasts about climate change and its impacts with increased droughts, getting reliable sources of water is a critical matter in many parts of the country. IrrigationNZ CEO Elizabeth Soal has said in a release commenting on the report ““We would also like to see a more bipartisan, and inclusive, approach to freshwater water management in New Zealand - it is that important a resource that we can no longer afford to quibble about it.” Ms Soal said water is essential to ensuring a healthy and thriving Aotearoa.

With an election closing in much more clarity is sought around how much of the work to be done is going to be prioritised and then paid for. This is only one of a number of issues facing New Zealand and the agricultural sector is affected more than most. One thing ‘we’ can vouch for is that an interesting year is ahead of us.

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?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

60 Comments

Construct desalination plant. Shut down Tiwai.

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Desalination is massively energy intensive and pumps toxic saline back into the ocean.

If there was a surplus of renewable electricity, we should use it to replace fossil fuels in transport and industry.

NZ has plenty of water, it's just storage we lack.

Tiwai is massively energy intensive too.

On the water front, I think we have to first prioritize safe and sufficient drinking water, and hence concentrate on improvements to our stormwater and wastewater systems, as well as freshwater reticulation. There is untold millions in investment needed in this sector. Hopefully the new water regulator will sort that path/plan out reasonably quickly.

And then, yes, once we know the project schedule and associated costs for that work (some of which will involve improvements to water storage), we can then consider increased agricultural needs (i.e., irrigation).

The problem is we have to be focused and I think safe and secure drinking water supplies have to be the first priority. That does seem where the coalition is focusing presently.

Kate, why they cannot focus on both? with the drinking water the ultimate priority (if there are conflicts)? These are vital economic infrastructure. I would support targeted increase in government debt to specifically address the needs.
Government spends millions on social projects with dubious outcomes at best (e.g. free first year uni), why not a little bit on real infrastructure projects? Also, I totally agree with you that NZ needs an immediate and quality upgrade of its water system. Why then the government has committed to spent so much money on Auckland rail? there is money to do this if priorities are sorted

One has to focus on drinking water urgently in many catchments, for example;

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12306891

And yes, the government is taking on more debt in order to improve infrastructure across the board;

https://www.newshub.co.nz/home/politics/2020/01/government-announces-12-...

People need to drink water on a daily basis - just as people need to get to work on a daily basis - just as goods need to be moved around the country on a daily basis. Hence, there is a focus on public transport, goods transport and water infrastructure.

On the spend on first year free at university, the amount actually spent in that first year of introduction did not meet the budget (i.e., it was under-spent) and it (the expenditure allocation) is extremely small in comparison to, for example, the $12 billion recent injection into infrastructure. Younger generations are having enough trouble trying to accommodate themselves these days (i.e., save a deposit for a house) - so any debt relief by way of their education should be welcomed.

My general impression of the coalition's targeted expenditure and initiatives is pretty good. There will be waste in any system of governance and demand for government services will always outstrip supply - but a focus on society-wide improvements as a whole are, to my mind, much better than subsidizing private enterprise.

It's not necessarily an either/or scenario, as supplying some water for agricultural use can make dams more economically viable.

Using water for agriculture instead of power has far far higher economic benefits and should be prioritized. Build PV and wind and geothermal to fill the gap left.

This has to be first priority surely?
E. coli may be found in water sources, such as private wells, that have been contaminated with feces from infected humans or animals. Waste can enter the water through different ways, including sewage overflows, sewage systems that are not working properly, polluted storm water runoff, and agricultural runoff.
Wellington is a disaster at the moment..and Auckland?

Auckland (Watercare) has been upgrading water infrastructure for a good few years now, both wastewater and potable.

I know this is a dream, but it would be great if the politicians could create a bipartisan long term plan for infrastructure and then stick to it. Same with housing, apprenticeships/training/education. And I mean all the pollies, not one party in particular.

I saw on tv recently that the city of Reading in the UK draws its water supply from the River Thames. The water is purified; the populace drinks it, washes in it, flushes with it, local industry uses it, then what is left over is collected, re-purified and tipped back into the Thames. No doubt not cheap, but definitely imaginative.

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The entire west coast geography combined with the prevailing westerly arriving moisture laden off the Tasman sea is a natural rain making machine. In fact some parts of the west coast are rain forest. As a result we often have more freshwater than we know what to do with. We should be storing and reticulating as much as is sustainably possible.

Agree, though not very good catchments for water harvesting - lack of storage potential and a lot of rock and debris in the steep rivers. + enormous earthquake danger.
Diverting Rakaia flood flows into massive and unpopulated lake Coleridge would be hugely useful. As would sucking water up at Rakaia, Rangitata and and Waimakariri river mouths (to leave river untouched and appease greens) and pumping it up country for irrigation. Could irrigate whole of Canterbury increasing exports by 5-10 billion per year. and creating 10's of thousands of jobs.

All sounds great, but they would be 10s of 1000s of jobs that we would have to import the labour for. And I think most of the country has had enough of that. Time to aspire to something else for our children, perhaps?

With the coming down turn we will have enough labour.

Are you saying the downturn won't affect agriculture? That sector is highly indebted and is likely to downsize/go under quicker than most, I'd have thought.

Export earnings are really really good to have if you want your children to be able to buy all the nice toys and holidays they aspire to. We run a yearly balance of payments deficit of $10billion that is going to get several billion a year worse as our oil and gas dries up. That means every year $10billion worth of NZ is passing into foreign ownership - compounding the problem as the profits from those assets are remitted offshore.

Yes, they are. But, expand your mind... so many higher value exports out there we should be chasing... in industries that young people enjoy!

https://www.noted.co.nz/money/money-business/could-thoroughbred-horses-b...

rural canterbury jobs pay way better than McDonalds and Graduate comms, and are of far more value to the country.

But face the facts - the large majority of young NZers do not want to be tending to the ass end of a cow twice a day, miles from anywhere, often in the dark and with the cold and wind whistling up your back.

Farming, as an occupation, is a niche industry - and I'd say dairy farming is considered the dirtiest, smelliest, most objectionable farming niche around.

My family loves the outdoors - and both my kids educated themselves in non-office based professions. Neither of them ever aspired to milking cows though. Not many people do.

Exactly, but when they see farmers making money they get their knickers in a twist. They deserve to make a decent buck.

Have to import labour? That is frightening. For highly skilled engineers experienced in large scale projects then if we need them and they are foreign issue work visas promptly (get INZ to learn how to process an application promptly by watching our passport office) and pay them very well. That might be one or two immigrants. Then the thousands of labourers - why can they not be sourced in NZ? Is the fascination of Auckland such that Kiwis will work in fast food and retail but no money can ever persuade them to work in remote rural areas? If these remote places are so terrible why do tourists head for them? Surely it is just a matter of capitalism and therefore pay and housing.

Tourists don't flock to our dairy sheds and muddy pastures. I haven't yet seen anyone advertising an experience that puts tourists on the end of a hose and a broom after the milking is finished. Do you think it might take off - similar to jet boating or bungy jumping?

And yes, I'd rather work behind a counter in McDonald's - you get to engage with people who don't splatter you with faeces when you take their order. And as long as you are in a big city, it's easier to look/find better long-term employment (i.e., beyond fast food and retail) if that's what you want to do.

Ah Kate, how you show your ignorance of farming and prejudice against it, with your statement above. Young tourists, do come, in considerable numbers, especially in the South Island, to work on dairy farms in NZ. Some come for a year, some come seasonal. Some end up emigrating here. Some are doing their OE, some a Gap Year etc. These are 'tourists', no different to 'backpackers'.
There are farms that have a 'viewing room' built in to their cowshed and have coaches pull in to view the milking process. Some offer a hands on experience to those who are travelling through the Te Araroa Trail and happen to cross their farm as part of the trail. Then there are Farmstays. Why would you put anyone on the end of a broom after the milking is finished? For what purpose?
I know of no farms where people splatter each other with faeces.

I would never want to work as an academic in a University. But it is courses for horses. We are all different and have different interests. That you denigrate people who choose to work differently than you, says a lot about your lack of tolerance for those who work differently.

Yes, Casual Observer I know well about the young tourists working on farms in considerable number - working for free, like in this ad;

https://www.workaway.info/en/host/753866879787

And good on them - but I'm talking about paid work on farms for young New Zealanders as a career path/future.

My preferred accommodation when travelling locally are farmstays, as I like to get off the beaten track.

I re-read my above post and I didn't think I denigrated folks who choose to work the back end of a cow. To each his own (and it was the cows in the dairy shed doing the defecating, not the other people in the dairy shed).

I agree, we are all different. What I object to is when people (whether they be city or country folk) expect that given there are these agricultural jobs available, NZ youth ought to be flocking to them. And when NZ youth don't flock to them, I don't think NZ should be pressured to bring in foreigners to do the work. My thought is that, if a farmer can't get employees, then they need to downsize their holding and work the farm themselves. Or keep upping the rate of pay and improving the work conditions to create greater interest within the local population.

The thing is, a young person can't really aspire to become a farm owner someday. Not given current pay for farmhands, coupled with current land prices. So it's just not a viable career path for many these days.

Farming is not much fun, I know first hand. There is a parochialism in this country about farming being great, almost as much as there is regarding our national rugby team. Better to put your intelligence and energies into something that pays far greater dividends, what that is you have to find for yourself but there is plenty of life beyond the back paddocks. On water, one of the startling insights I gained from my internationalism years was that we reticulate potable water only and use that to water our lawns etc in the metro area. Not suprisingly at the onset of dry weather, restrictions are enforced. Why do we not have as often is the case overseas a parallel non potable water circuit in each metro area too? Could be a great way to take the strain off the domestic water treatment systems?

Non potable water circuits are the way to go. I think Kapiti District has a requirement for grey water collection on all new builds.

Global ag work worldwide has changed Kate. In the UK you will see large numbers of, particularly Eastern, Europeans working in ag there. In the USA it is Mexicans. You won't hear farmers saying that NZ youth should be flocking to on farm ag jobs - dairy farming straight from school is not something I would subscribe to if you haven't had any experience before hand, unless going in to an ag apprenticeship. The young agri staff I refer to above come here usually via word of mouth using working holiday visas. A competent farm manager on a larger farm as Wilco referred to recently will earn $120k. There is a career pathway if one chooses to follow it. It's not easy, but then the good things in life are not usually easy to come by for most. There will be a rise in corporate farming with the way regulation is going, so the family farm will become a somewhat distant memory - be careful what you wish for.
Interesting perspective of yours re if you can't get staff you should downsize to work it yourself - I am assuming you believe that for all business - manufacturing, rest homes etc. If not then what is the difference between a rest home needing nurse aids/nurses and an agribusiness requiring staff? Perhaps here in the south we have a 'better all round class of immigrant' than you do in the north. ;-)

Scroll down to the video, it will give you a perspective straight from a young kiwi who is on the way to a farming career. http://www.southlandyouthfutures.nz/#case-studies

Not so sure about those eastern europeans being a feature of the landscape on uk farms for much longer, boris has slammed the door on cheap staff from eastern europe just this week. Who knows how the UK farmers will adjust to that? Interesting regarding farm managers here on 120K they must be on a pretty big relatively debt free farm for that kind of package or are you telling me they are in reality being paid between 50 to 60k with the added value of a farm house and half a beast comprising the remainder ?

Recent ad locally. $70,000- total package.

redcows - if thats for a 1200+cow farm with 5 or more staff, and absentee/corporate owner I wouldn't touch it.

For a management position it would have to be a bloody cruisey small one person place. Even then $70,000 plus the house and beast.
But no, that's 300 plus cows sole charge, and there's wonderment at how "lazy" kiwis are.

Re dams. How about being up front about the costs and who pays? Seems once again that joe tax payer via provincial growth fund and joe rate payer via council spending are getting shafted to fund the big ag and hort users. Simply, most hort and ag cannot afford to pay for dams and infrastructure for water - the returns are too low. Public cost for private gain.

Waimea dam is a classic for this.

What about Maggie Barrie - allegedly Minister of Conservation trying to get the Ruataniwha Dam pushed thru on conservation land - talk about taking the piss. These dams that National push so much for their Fed Farmers voting base are just wrong. Massive public money making poor land immensely valuable almost overnight and the farmers pay very little in the way of water fees - add the fact that there is no CGT and this is so visibly wrong it is criminal yet it happens under our nose. All I can say is thank god Maggie got the message and is retiring to quiet senility amongst her roses at this election.

Yep and look at the headline comment “govt listens to partisans not scientists”. A more accurate reality is govt and councils listens to Fed farmers lobby groups and ignore the economics of these projects. Or rather expects the public to pay for private wealth creation.

Exactly.

So are you two saying that Guy has been bought off by the farming base and his pieces are just Fed Farming dross dressed up as impartial thoughtful insights? Bit like Country Calendar actually.

Not at all - what we're saying is the partisans referred to by Guy also include the land owner/irrigation lobby.

Yes, but we need to refer to it / distinguish the issue as the cost of irrigation. Prospective irrigation users like to "couple" their requirements with general public reticulated services (i.e., domestic water supply), as part of their argument for more water storage.

But you are right - all of our irrigation schemes were either built solely by government (early years, and still the majority of our present-day capacity) and more recently have required significant government funding (both local and central government funding), particularly in the project start-up phase. The on-going economic viability without additional government funding is also in doubt.

A good summary of the history of irrigation schemes is here;

https://www.irrigationnz.co.nz/Category?Action=View&Category_id=77

The gov't ended up donating those early schemes to the farmers.

Yes, I know. And since then, every new scheme of any measure has required tax payer assistance.

Who will pay for more reservoirs ( which are just dams by another name ) if Auckland looks like running out of water?

That is a public good, so one would expect the public to all pay via taxes and rates. Irrigation of land is not a public good, when that land is in private ownership.

"With scientists being proven largely accurate in their forecasts about climate change and its impacts with increased droughts"
Some ones been reading to much msm. I call bollocks on this. The $ figure for loses from drought may be higher but there is no way droughts themselves have become more frequent or intense in NZ.

Yes, it is our constantly increasing demand from agriculture (and water bottlers) and the Environment Court's seeming inability to say no to any new consent application! Here's the story in Kaitaia, rinse and repeat for North Canterbury and everywhere else. More and more water take consents being granted and we have no real idea of the capacity of the aquifer/resource;

https://www.nzherald.co.nz/northland-age/news/article.cfm?c_id=1503402&o...

kate the problem is getting efficient end users. A couple of dairy farms around here have over 10 million M3 water takes each, going on grass with high evaporation and suffering rivers.
We underestimate just how much water there is in a 600-800 ml hectare, which a lot of crops need.
I talked to an irrigator down south last week he said at around $600 a ha he can make irrigation work on a specialist seed operation, most of these dams will be coming in at $1200 pr ha, the proposed Wairarapa dam is .40c an M3. So it's mostly bollocks.
Around here consents are treated as ownership and that's just not the case.

Yes. That perceived 'ownership' issue sickens me, and the way we are currently going policy-wise it looks like grandfathering is here to stay. With it, we will never adapt and modernize - the most inefficient land manager, end users get a free ride - while the good land managers are penalized. It's nuts. ABOLISH GRANDFATHERING NATIONWIDE. Let's start over with those prepared to change.

Gosh, you mean we've only got water for 4 million people, not 5? No one saw that coming.

Estimates are: 77% of freshwater use in NZ is for irrigation. 11% for manufacturing. 9% for public water supply. 3% for stock watering.

Estimates are a bit out, Kate. Manapouri takes about 50% of all freshwater consents - and it doesn't return the water back to the Waiau River, it dumps it in to a marine environment - Doubtful Sound. Irrigation is the next biggest consented user, but just because it is consented doesn't mean it is used. Some regional councils have been woefully negligent IMO in not requiring data from consent holders. Of all irrigation consents, around 50% is used for dairy.

Irrigation is needed to produce more food to sell so we can afford to buy petrol and medical supplies.

I'm not anti-immigration, I just think it is dangerous and that caution is warranted. I grew up in England with the IRA bombing campaign raging, based on the result of government sponsored immigration 3 centuries ago. Let alone the flood of volunteers to join ISIS from across Europe in more recent times. Some people just do not mix well. Northern Ireland is a good example, so is Israel, Iraq, Syria, Tibet and Xinjiang.

There be dragons, as well as lots of lovely people who fit in really well.

People not fitting in together is almost 100% due to religious differences, crazy eh?

Yes, those are estimates from Environment 2007. In the latest reporting, Environment 2019, they amended the methodology of reporting, creating an 'Other' category for consents for stock, frost protection, combined/mix, not specified, or other. So, updated water take consent figures (excluding hydroelectricity) are:

50% irrigation, 14% drinking, 13% industrial and 22% other.

http://archive.stats.govt.nz/browse_for_stats/environment/environmental-...

I preferred the earlier categorisations as having created an 'other' category of that size/proportion tends to make the data less useful when aggregated. I suspect most of 'other' is agricultural use, other than irrigation that is.

You can't exclude hydro consents, especially when it doesn't return water back to the river. When one such hydro consent is around 50% of all water consents it has to be counted.

It's Stats/MFE who don't count hydro in the national environmental reporting framework for freshwater, as hydro is not seen as consumption in use. But I get the point you are making.

Y'all have forgotten about the Iwi Angle. Until the status of fresh water under the Treaty is resolved, nothing can move forward. And no pollie is gonna make this an Election issue. So the current stasis will persist....

Having said that, in a recent tiki tour of the SI, including Doubtful Sound (highly recommended, btw) I do notice quite a few, clearly quite new, on-farm storage dams, so maybe part of the answer lies in more of 'em....

And to clarify, none of them dams was in the Sound....

Indeed. Shane had something to say on that matter;

https://www.nzherald.co.nz/northland-age/news/article.cfm?c_id=1503402&o...

Which I thought was good on him.