This year is not going to be just any year for the food and fibre industries. On the prices front, things should go well for most products. However, on the policy front, it is the second year of the three-year political cycle, and that has implications.
This is the year when key implementation decisions must be made on multiple political issues. It is all about setting up the glide path for the next election.
For the food and fibre industries, and this includes carbon farming, these key decisions have potential to determine the path for the next decade. I reckon there is going to be quite some heat, and I am not referring here to the weather.
First of all, the good news.
There is no obvious reason why the current excellent prices for dairy, sheep and beef should not be retained. The next six months are going to be complex as Omicron works its way across the world, but pastoral agriculture has shown that it can prosper in COVID-dominated times.
The biggest COVID challenge this year for New Zealand at home is going to be having Omicron spread through the community. There is also a high likelihood that China will have an Omicron epidemic this year.
One way or another, I expect that the cows will still get milked in New Zealand despite whatever disruptions are upon us. But how Omicron will affect China is going to be of some importance. I consider it unlikely that the Chinese authorities will be able to keep Omicron at bay the way they have with other variants. Also, their existing vaccines are unlikely to be particularly effective. It is going to be a challenging year for our most important trading partner.
The food and fibre product with the greatest short-term risk is lumber. Remember, China is the dominant export market for New Zealand’s forestry products and most of that is unprocessed logs. Those logs are primarily used in construction, providing the formwork that holds wet concrete in place.
On the policy front, this is the year when the Government will have to be explicit as to what the long-term nitrogen-leaching rules are going to be. Last year’s requirement to reduce nitrogen applications to no more than 190 kg per hectare will not to be the last that we hear on that front.
When it comes to nitrogen leaching, the science tells us much of what has to be done. The big answers come from duration-controlled grazing, with cows off-paddock except when they are eating during winter and the second half of autumn. We know how to achieve that in a cow-friendly and economic way using ‘composting mootels’ and ‘composting shelters’. But a small number of farmers are having to lead the way, with the research, development, extension and education (RDE&E) elements of the industry yet to seriously engage.
Last year, with support from AGMARDT, I brought together in one document what we know and what we need to learn about these farming systems from an RDE&E perspective. Now we need some action. One of my challenges is to try and bring that about. Progress is not as fast as I had hoped.
Greenhouse gases are another key issue. There is no easy way around this. Given the politics, the greenhouse-gas issue will not go away.
The best way for agriculture to achieve science-based outcomes is for agricultural methane and nitrous oxide to remain outside of the Emission Trading Scheme (ETS). But let there be no doubt, one way or another there is going to be a charging system for agricultural methane and nitrous oxide.
The Government has indicated that it is open to a methane and nitrous oxide charging system whereby all charges are recycled within the industry so as to reward innovations and develop new emission-reduction technologies. That will not be the case if agriculture is inside the ETS. These decisions will have to be made this year, with He Waka Eke Noa playing the leading role on behalf of industry, but with support, albeit grudging, from farmers.
Carbon farming is another issue where big decisions will need to be made both by Government and farmers. There is talk that the Government might restrict who can and who cannot farm for carbon.
The National Party has yet to decide where it sits in relation to the specifics of carbon farming. I remain to be convinced that there is an appropriate level of expertise in any of the political parties, or within government departments.
There is no doubt that carbon farming is currently a more economic land-use than sheep and beef. The first worry is that it is an artificial market controlled by Government and so anything can happen.
Putting restrictions on carbon farming is not in the personal interests of many existing pastoral farmers, despite this apparently being advocated by Beef+Lamb. It is carbon farming that is driving pastoral land values. Also, there is a lot of land that could be better off in forest. Converting two million hectares of the harder hill country to permanent radiata pine forests would more than balance all of the emissions from pasture-based land uses for the next 80 years.
Once again, I see carbon farming as generating great heat within the community as the year progresses. I reckon I will be writing a lot more about it this year. All decisions are going to require trade-offs between competing objectives.
Despite all of these issues and challenges, food and fibre are where New Zealand’s future lies. Agri-food is the key sector where New Zealand has an international competitive advantage, particularly for pastoral agriculture but also some specific areas of horticulture. The latest figures from MPI are that food and fibre comprise 82.4 percent of physical exports, with this figure increasing over the last ten years.
In particular, New Zealand cannot afford to destroy its pastoral industries, with these alone earning $NZ30 billion of foreign exchange per annum. But strategies for emission reduction will be needed, and there are ways that this can be achieved.
I am hugely frustrated that most of the urban community, and many of the politicians, do not understand that it is food and fibre exports that provide the overseas funds that allow New Zealand to purchase the fuel, vehicles, machinery, computers, medical equipment and pharmaceuticals that make our lifestyles sustainable. They simply do not ‘get it’.
Just tonight, I heard for the umpteenth time on television how ‘agriculture has to pay its way’. The idea was that agriculture has to contract. I could only sigh and shake my head, because there was no point in screaming at the box that food and fibre is how all of New Zealand ‘pays it way’.
In recent weeks, I have written about the strategic issues that New Zealand faces. For the last 12-month period to September 2021, New Zealand ran a record deficit on its external current account with the rest of the world of $15.9 billion. This is in part because earnings from export services, largely tourism and the education of foreigners, have crashed. Conversely imports have ballooned to record levels.
This deficit has been financed by capital flows from overseas. At some stage the rest of the world is likely to question the economic sustainability of New Zealand. If that occurs then the exchange rate will crash.
If the exchange rate crashes, then that will be very bad for most New Zealanders. The exception will be for those New Zealanders who produce products for export.
A significant decline in the exchange rate may be what is needed to convince New Zealanders that export industries lie at the heart of our national well-being.
*Keith Woodford was Professor of Farm Management and Agribusiness at Lincoln University for 15 years through to 2015. He is now Principal Consultant at AgriFood Systems Ltd. You can contact him directly here.
125 Comments
China is the dominant export market for New Zealand’s forestry products and most of that is unprocessed logs. Those logs are primarily used in construction, providing the formwork that holds wet concrete in place.
This sounds like an extremely low value business, but I suppose it adds revenue and activity to the entire sector.
That export market sets domestic pricing for NZ. At wharf gate pricing is compared to at mill gate.
Radiata is one of the most versatile species of wood and is well suited to myriad of industrial uses… China chews through millions of cubes every year.
our industry can not compete with end use as industry in China is subsidised… key metrics of regional GDP matter.
This is the article i was referring to . No direct evidence, but a smoking gun .
https://www.stuff.co.nz/business/125400451/chinas-high-prices-leave-woo….
Hi solardb,
I find it an interesting article but it also contains lots of contradictions.
In essence, the NZ processors are calling for subsidies.
I don't see any 'smoking gun' at the China end.
At the China end, none of the importers pay a cent more than they have to get the supply they need.
The bottom line is that NZ processors are not competitive on the world market for their product.
KeithW
With things like meat and milk it's because consumers expect some quid pro quo for their wages being tapped for farmer welfare assistance when droughts, floods etc. happen, or when affordable financing is needed for irrigation, or they're expected to bear the social cost of pollution. In hard times they're told "we're all in this together" while at the supermarket they're told "it's just market prices".
Honestly, you sound old school, you got it right at the end though. That deficit comment sums it up, the rest of the country doesn't care and even rurally no one cares so long as you can still get debt. The country runs on debt, just look at the cccfa debacle.
Basically your idea, and mine, of paying your way is miles from the way most people think. Debt is King.
All well-stated. With planned government policies, NZ will be a third-world country in a few years. The severe economic shock will propel many Kiwis out of their complacency, but it will already be too late to turn things around. As well, it is a shame that most of our beef and sheep farms will have been replaced with Pinus radiata, (owned by overseas interests)--thanks to the Green Party's carbon policies that have been incorporated in legislation. Environmental policy based on theories and not fact will have severe consequences throughout the NZ economy, and reduce living standards markedly for almost everyone (politicians excepted--they will increase their salaries!).
So what's your plan to meet our Paris agreement obligations?.
The greens carbon policies were agreed to buy both major parties. Only act pretend s we don't have to do anything. Why farmers would vote for that cross between a used car salesman, and a life insurance Adman, I don't know.
I have to admit the Greens have moved away from the rural part of their base.(Yeah, surprise the Greens did have quite a rural following , and some of their MPs came from rural backgrounds). But they are definetly not anti farming . They want a reduction of dairy , down to sustainable levels, or rather sustainable practices . i would say this inreality means a 20 -25 % reduction in cow numbers or inputs , not necessarrily that amount of reduction in production. Sheep and beef its more about protecting the more vulnerable land , most of which most people would agree should have more trees on it in one form or another.
The greens are anti animal farming and one of the clearest indicators of that, so far, is the nitrogen limits placed on animal farming while horticulture can apply as much as it wants even to the point that it is affecting aquifers. So horticulture gets a free pass for using multiples of the N per hectare that animal farming uses.
My favourite example of how anti animal farming the greens have become is the obsession with banning palm kernel. If you cared about getting rid of palm plantations, you would ban Palm OIL, and you wouldn't need to ban palm kernel because it's a waste product from the procession of palm oil, and wouldn't exist without the palm oil. But palm kernel is a cheap feed for livestock and the greens stance is anti animal farming, so for them banning palm kernel makes sense.
The only way the greens stance can be explained logically is if you accept that they are anti animal farming.
https://www.greens.org.nz/why-so-secret-palm-oil-minister
I do not know what has happend since then , possibly we do not use a lot of palm oil in NZ.
This is correct. Wherever you see 'vegetable oil' as an ingredient you can have considerable confidence that it is palm oil. I have seen claims that it is present in more than 50% of supermarket products but I cannot guarantee the veracity of that. But it is certainly a very considerable proportion, including items such as hair shampoo.
KeithW
There is palm oil that is sustainably produced , and efforts to certify what is and what isn't. Not easy in the producing countries. The issue is not with the oil (apart from it not been very good for you), it is with rain forest and peatland been burnt to make new fields.
https://www.greens.org.nz/govt_must_phase_out_synthetic_nitrogen_fertil…
Mentions both farmers and growers.
I have no doubt there are a lot of farmers doing very good things. They should be helped and encouraged. what I don't understand is why they are letting a vocal minority give the impression that nothing needs improving , and best to let things stay as they are . And turning a blind eye to the worst offenders , when it comes to waterways , and animal welfare.
Probably down to the level we don't need to import PKE and other food to feed them .
Its not the need for a blanket reduction , its a need to reduce the overall impact , probably by not encouraging the worst polluters/ resource users. Like dairy farms on the east coast of the Coromandel , that truck in a truck and trailer unit of silage daily, then tanker milk over to Te Rapa.
Changes in the market have killed sheep farming so I'm not sure we'll miss much there. Man made textiles have meant shearing is done at a loss, and lamb isn't as lucrative as it used to be when you can just pump a chicken with hormones and grow protein in 6 weeks.
Spose the rest of your position comes down to whether anthropogenic climate change is an actual thing of not.
If the carbon price keeps going up exponentially and more regulation gets piled on, carbon farming will outcompete food production.
The end result of that is in a few years we'll be having the same discussions we are now having about housing, but about food. I.e it will be unaffordable.
It's not unthinkable that some of the "cures" for climate change could be worse than the disease. Especially for us in NZ.
Food prices will become dearer as production costs go up regardless what happens. most of our grain is imported now as we can't produce enough to feed our small population. Our high producing areas are at capacity as far as meat and milk goes and our future depends on exports as we can not possibly eat and drink all that protein here. Also to pay for that level of production we need high prices otherwise we fall in to the subsistance faming category and that means third world.
The other issue is large areas of meat producing land is degrading and unsustainable in to the future. The only option is forest. Whether that be indigenous or exotic is irrelevant as the end result is the same ie out of meat production.
Carbon farming needs parameters set to avoid planting land which is suitable for long term meat production. This should be relatively simple. The best solution is for farmers themselves to incorporate forest in to their operation thereby subsidizing their farming by paying for fertilizer for example.
There is plenty of marginal land available to plant without affecting total meat production much at all.
Man made textile use is likely to reduce in future and natural fibres grow in share, I'd imagine. The problem of various microplastics and their accumulation in the food chain and human bodies is growing in profile, and fabrics are one of the biggest causes of this.
Mainstream brands are now picking up on this, e.g. Icebreaker's campaign "Are you still wearing plastic?" while plastic clothing brands seem to be trying to adapt by moving more natural fibre options into their ranges.
There is a lot of coverage of this problem in media younger (20s, 30s) folk consume online.
Spose the rest of your position comes down to whether anthropogenic climate change is an actual thing of not.
Does anyone seriously dispute that outside the odd talkback caller, Facebook ranter, or conspiracy theorist, though? Seems like the mainstream debate has moved from that to "ok it's real, but we can't do anything that can inconvenience us or reduce our profits right now".
solardb,
Farmers already pay for carbon dioxide on the same basis as everyone else.
Very roughly ,and depending on the specifics of the farming system, and using the CO2e equivalence figures (which are themselves highly problematic) then production of 1kg Milksolids leads to on-farm GHG emissions of about 10 kg CO2e. At the current prices of carbon of approximately $72 this equates to an emission cost of about 72c per kg MS. But you asked as to the 2025 cost, and this could initially be as low as 5% of the full figure and then increasing over time.
The figures for NZ beef are approximately 21kg per kg carcass weight (meat plus bone) which on the same basis gives a figure of approximately $1.45 per kg carcass. This figure would reduce to about $1 per kg carcass if all beef animals came from the dairy herd and there were no beef breeding cows.
Sheep would be about $1 per kg carcass (full cost for on-farm emissions).
These numbers are approximate and there are various caveats, but an important message is that sheep and beef are actually threatened by emissions charges more than dairy. Very few people understand this.
We also should not forget that all industries classed as 'trade exposed' - including aluminium, steel and about 85 other NZ companies - get large scale free emission quotas adding to about 8 million tonnes of CO2e per annum. These free quotas largely relate to CO2 itself, for which farmers do not get any free quota. Not all trade exposed companies are exporters; some are servicing the NZ market but would be blown away by imports if they had to pay for their emissions
This is just an overview, and sometime I should write a much more detailed article on this. But it all takes time!
KeithW
We used to believe that rural NZ kept the regional towns alive by trickle down but when the farm incomes were low the money kept the bank alive or was spent outside the district, the town retailers starved.
Im not sure rural NZ obviously contributes to the towns or cities, maybe they just contribute to the banks
Officebound,
Just read the article again-slowly this time-and you will find the answer. We have to sell stuff to have anything like a first world economy and what we sell most of is-have a guess- .
How do you reach your office? Answer, on roads which have to be paid for. Where did you learn the basic knowledge which enables you to be employable? Answer, at schools which again have to be paid for. I could go on, but perhaps you are starting to get the picture.
Services are currently running seriously negative.
'Many ways' would seem an exaggeration. We can pay for imports via :
1) export of goods
2) export of services
3) sale of assets
We also need to pay the interest on historical debt owned by foreigners ,and this has to come from the same three sources.
KeithW
The average New Zealander has little to do with imports or exports.They are lucky to live in a thirty year old home, mostly NZ materials, own a couple of reliable second hand vehicles and are saddled with a mortgage in NZ dollars.it’s true the family have personal devices but they only represent a few thousand US Dollars.
Overseas trading and debt isn’t their problem
It is their problem, they just don’t realise it because present generations have never had to take import restrictions into account.
Those old enough will recall when the only way to purchase a new car was with “overseas funds”—and how well maintained the average car was! And how many people squirrelled away English Postal Notes! As exports increased so did the availability of those overseas funds and restrictions on imports decreased.
Keith
Any comments on the following:
I saw an interesting documentary the other night postulating that one of the main regulators of global temperatures are those surface currents of the oceans that are heated at the hot equator and then flow on up to the Arctic where in normal times they are cooled, sink to a greater depth, and return to the equator. A similar action to an escalator I suppose. So, if the temperatures in the Arctic can no longer cool these currents then no cooled water can return to the equator with the result that global temperatures are further raised....achieving a sort of temperature compounding effect.
The documentary also theorised that, ironically, higher global temperatures could lead to a mini ice age such as swept Northern Europe in the early 14th century; this situation led to famine and had reduced the health of the population to the extent that they were easy pickings for the Black Death when it raged through Europe from 1347 to 1351. The documentary did explain the mechanism by which the mini ice age came about but I have forgotten.
Lastly, either that documentary or another one I watched recently said that it has now been established that the Black Death pandemic was spread by aerosol human-to-human transmission and not by rats and fleas as was previously assumed; this finding was based on the analysis of the teeth of some of the Black Death's victims who were unearthed during recent excavations for an underground train tunnel near Smithfields Markets in London.
Always enjoy KW's musings. He brings credibility to this site. And he has form, which is more than many can claim. He is also dead right about our primary industries, without which we would be third world. He is also right about the shit that appears on our screens every night in the form of opinion dressed as news. The ultra-liberal urban elite who think they know everything, are so far off centre they're being left behind. The problem is they're taking the rest of us with them.
Dare I say it but by all accounts the South Island east coast hinterland forests were stripped of trees by Maori to flush out Moa. The question then arises as to whether or not New Zealand, if it had not been discovered by Europeans for another hundred years or so, would have met the same fate as Easter Island and become completely denuded of trees.
I'm aware that this is a sensitive topic but in the interests of scientific enquiry I feel it should be asked.
The east would burn. Try burning the west coast forest - burning every single tree - quite impossible. The Māori accidentally introduced the rat and that is what will have been the big killer - species lost that we will never know of - Moa had big bones so we know they existed but NZ was inhabited by soft bodied creatures that left no skeletons.
Easter Island is one of many islands discovered and colonised by Polynesians. You can judge the effect the Polynesians had by the handful of places they didn't discover - eg Lord Howe Island.
Don't blame the Maori nor the early Europeans for what they did out of ignorance. However the pollution and extinctions taking place today cannot be excused.
Yeah, I don't think the current predicament has much to do with needing to plant trees? It's more a symptom of 200 years of digging and burning geologically stored carbon and the exponential growth in population and consumption that activity allowed! I wouldn't worry though, it's impossible to plant enough trees to mitigate the damage already done :-)
If carbon farming is more lucrative than beef and sheep, how about the farmers converting all these to carbon farming?
Given the industry managed to generate NZ$30b through the current pastoral farming but that carbon farming is more valuable and controlled by the crown; we could lead the world to become a leader in carbon credits exports which will benefit both its farmers, crown balance sheet and natural ecology.
Maybe another side benefit would be cheaper (imported) meat at the shelves for all Kiwis due to the comparative advantage.
Carbon farming has a limited economic life, after the first harvest the income is drastically reduced because the cumulative amount of stored carbon does not really increase by much. After 30y you are pretty much just doing forestry and you can't do anything else with that land ever again. Not to mention how bad pine forests are for soils and it's effectively modern day slash and burn without even the benefit of returning the ash to the soils, you just strip the land of nutrients.
You should really check your science there Jack, as farming depletes nutrients also. We just have to keep putting on fertilizer. Pine plantations once replanted after harvest grow just as well as the first crop with no added fertilizer. So long as there is a profitable land use why should that be a problem to anyone else.
The UN are predicting a 4 fold demand for wood products by 2050. So what if there is no carbon market then. Carbon now is an opportunity for many hard pressed farmers to diversify their future income streams with no cost to their current business.
Totally agree, as a current urban dweller:
I am hugely frustrated that most of the urban community, and many of the politicians, do not understand that it is food and fibre exports that provide the overseas funds that allow New Zealand to purchase the fuel, vehicles, machinery, computers, medical equipment and pharmaceuticals that make our lifestyles sustainable. They simply do not ‘get it’.
Just tonight, I heard for the umpteenth time on television how ‘agriculture has to pay its way’. The idea was that agriculture has to contract. I could only sigh and shake my head, because there was no point in screaming at the box that food and fibre is how all of New Zealand ‘pays it way’.
The acute phase may only last a couple of months (hopefully slowly enough that our hospitals can cope) but the long term effects may be around for a while https://www.stuff.co.nz/national/health/coronavirus/127493464/the-narrative-of-omicron-as-a-milder-variant-is-dangerous-given-what-we-know-about-long-covid-experts-warn
Family friend of ours in Brisbane has had Omicron through their household. All fully vaxxed, parents (in their 50s) boosted. Wife had fairly mild symptoms, but the husband has been in and out of hospital multiple times and still not fully recovered. I'm sorry, but Omicron is not just a cold and everyone out there calling to just "let it rip" don't know how it will devastate our country for at least 6 months. Our hospitals will be full, supermarket shelves empty, people unable to work. The country will grind to a halt. We are far better throwing everything and the kitchen sink at MIQ keeping Omicron out of the country full stop.
18 months away politicians and commentators were saying "We can't wait for a vaccine that could be years away, we have to open up the borders. What's the exit plan?"
We are very clearly all across the world trying to adapt and react in real time to a pandemic. No easy answers no matter how much we'd like there to be.
It seems at the moment the MoH and govt believe it's better to delay the saturation of the healthcare system and having more problems with supply chains while they watch what unfolds in Australia? The UK and USA are clearly in "accentuate the positive" mode as they lost the option to do anything else yonks ago.
From https://tradingeconomics.com/new-zealand/exports-by-category
Dairy products, eggs, honey, edible products $10.62B
Meat and edible meat offal $5.26B
Wood and articles of wood, wood charcoal $2.93B
Edible fruits, nuts, peel of citrus fruit, melons $2.55B
Cereal, flour, starch, milk preparations and products $1.62B
Beverages, spirits and vinegar $1.50B
Machinery, nuclear reactors, boilers $1.07B
Fish, crustaceans, molluscs, aquatics invertebrates $1.05B
Optical, photo, technical, medical apparatus $993.74M
Albuminoids, modified starches, glues, enzymes $948.61M
Commodities not specified according to kind $926.63M
Miscellaneous edible preparations $838.92M
I never realised the significance of nuclear reactors to our exports.
Good to hear! With you on commercial fishing. Inshore and all bottom trawling should have been banned 40 years ago! I was raised in a north island fishing village, lost count of the number of times fisherman told me they were "farmers of the sea". LOL! Rapers and pilligers more like! Recreational fishing limits need to be much stricter as well!
No argument here. However selling productive and even non productive farmland to overseas investors to plant monoculture weeds (pine) so they can siphon off carbon credit income is just down right stupidity! Retiring land is not the be all to end all either. A large amount of high country grazing has been retired and now administered by DOC. What an unmitigated disaster that is. Just a government controlled breeding ground for weeds and pests.
Keith,
Rod Oram wrote a long piece for Newsroom, based on the shortcomings of our Climate Commission.
He particularly noted the climate strategies of the leading food producers; Nestle, Unilever, Danone and general Mills, all of which are putting regenerative agricultural practices at the heart of their strategy. Nestle for example, is committed to halving its greenhouse gas emissions by 2030 and to net zero by 2050. It aims to invest some $1.50 billion in regen ag. by 2025, buying 14 billion tonnes of ingredients from regen farmers by 2030.
What are your views on this issue? Do we risk being left behind?
The spin from Nestle and others will be referring to the emissions they generate in processing and marketing, not to the emissions in the food ingredients that they purchase from farmers. NZ companies are on the same journey to reduce their emissions.
I have written about regenerative agriculture in the past. Here is a link.
https://keithwoodford.wordpress.com/2020/12/02/regenerative-agriculture…
Once again, there is a fair bit of spin in what gets written. Journalists often repeat the spin and build arguments based on that spin without realising that it is spin.
I am all for sustainable agriculture, led by real science.
KeithW
NZ has huge quantities of waste wood left in forests after they have been felled. As we have seen this can cause significant environmental problems when it washes into rivers and out to sea. Has there been any research or analysis into the proposition that this be converted to charcoal or even activated charcoal, and plowed into farmland? Would this help with the retention of nitrates and phosphates so that they are prevented from polluting the water systems. Similarly, would this help retain soil moisture and reduce the dependence on irrigation. If the idea has merit, it seems to me that somewhere on the Canterbury plains may be a good place to conduct a trial. If useful a carrot and stick approach from government could be useful pushing our systems in this direction.
2-3 birds; one stone.
Jeanette Fitzsimons did a lot of research and advocating of using forest waste to replace coal . some of it published under the coal action network , though seems to be in a bit of disarray after her passing.
woodpellets are exported from the Usa to Europe. The cost of transport must be higher in NZ.
I see in the UK and Europe there are calls to ban wood burning due to PM 2.5 emissions. In the UK domestic wood burners produce 3 times more Particulate matter pollution than road vehicles. Even the eco stoves are exceeding EU clean air guidelines. This is at a time of high energy prices in Europe and Fuel insecurity so wood is a good option if you have your own supply.
‘The National Party has yet to decide where it sits in relation to the specifics of carbon farming. I remain to be convinced that there is an appropriate level of expertise in any of the political parties, or within government departments.’
I couldn’t agree more Keith - brilliant article.
This is a little off topic but comes down to Labour and the Greens screwing the farmers and the biggest screw is climate change policies. ACT would sell their mothers if they got the right price. The Labour/Greens through their carbon trading policy have also sold their "mother" via allowing overseas investors(speculators?) buying land for carbon farming. I understand James Shaw had a large input to the ETS scheme.
Whether Labour/Greens or ACT/National the NZ economy in the future is screwed.
While I generally agree with much of what you write Keith and where I don't agree I respect the quality of your analysis but I think you have slipped badly in trotting out the hory old platitude that the primary industries 'underpin' our lifestyle. Certainly the end products of the primary industries earn a significant proportion of the foreign currencies we need but the primary industries are in turn 'underpinned' by a multitude of urban based industries. The rural economy does not stand by itself, it is dependent on others. Comments that the urban community does not understand the rural sector only serves to push these parts of the community apart. Also many urban people do understand the rural sector but simply do not accept the rural communities' positions on issues that effect us all.
I Agree. I’m in the primary industry and the only noise I see is from the primary sector complaining about urban NZ. Sure there are some groups completely anti farming etc but they are a minority – bit like anti vaxers who are small but get 95% of the airtime. If we had said 30 years ago wool would be worthless you would have been listed as mad. It still earns export income in sales but produces no profit for the producer. This is the problem we face. For some farm products we earn overseas income but its all taken up in costs to produce (a lot via imports of chemicals and fertilizer) and is virtually a zero-sum game or subsistence living. (To be fair a lot of farm products, especially dairy, produce good profits).
No one industry is the “backbone” of the country and markets will adjust as new options come along. In the end the market will drive change. Looking at the hard data of climate warming we are going to have to change some things radically or else it will be radically changed for us in a nasty messy way with a lot of bewildered people in the middle.
Jack,
Some of us did understand a very long time ago that wool was in trouble but no-one was listening.
I recall way back in 1976 listening to industry leaders saying that when people wanted quality, they would always return to wool. At that time, I was putting together a mountaineering expedition to the Himalayas and to the extent that our budget would allow I was purchasing the new synthetic-fibre products from Norway. When the budget got tight, I returned to wool. At the time I was also working as an agricultural economist on wool industry matters and I knew very clearly the troubles that lay ahead.
About 20 years ago, I was in conversation with a wool industry leader who had just returned from an overseas trip where he had visited factories producing wool products and other factories producing synthetics. He had been stunned to see the synthetic factories which were fully automated, whereas the woolen products required lots of labour. Why could we not do the same with wool? I explained that one of the great challenges with wool is that it is a biological product with inherent internal variability and that this adds great complexity to the processing.
Sometimes I get criticised for my statements about wool and told it is a marvelous product. If it is a face-to-face discussion, then my response is to point to one or more garments that I am wearing. For example, my socks and undergarments are always wool. And so I don't need to be told about the quality of wool. But I have also known for close on 50 years as to the challenges of wool. Unfortunately, the wool industry has always suffered by believing its own propaganda. I see similar behaviours across other primary industries. And therein lie unnecessary pathways to failure.
KeithW
Thanks Keith
I wasn’t picking on wool but the points you make apply to anything we produce – my industry included. The world is rapidly changing with technology, demographics (my hobby horse) and the reality of a warming climate. We are experiencing changes in cost structures bought on not just by governments but really by customers, availability of resources and technology. Governments in democracies are just a reflection of the populace as they get elected, and unelected by them.
Are we, the masses right in wanting all these things changed? – emissions, nutrients, water, soil etc etc – based upon history some will be right and some wrong.
As I read from articles from around the world the same discussions are happening everywhere and the issues are much the same – I don’t see all of these being unsolvable or intractable – they do involve a lot of change which is hard, messy and scary for many.
Your point about 2 million ha of land being available to plant trees in NZ is true based upon the science of soil and water outcomes etc that have been known for decades but not acted upon because the people who own that land don’t see it that way – I can see their point as well if I stand in their shoes on their land.
Democracy is a messy business, inefficient and cumbersome but still better than dictatorship, unless you are the dictator!!
Its going to be an interesting decade.
Kevin,
When I talk about primary industries I am talking about the whole value chain. You will note that I seldom use the word 'farm' when I am talking about economic contribution, but rather I refer to the sector
That is also reflected in my current honorary (non-salaried) position at Lincoln Uni as Professor of AgriFood Systems, and my previous title when I was a salaried staff member as Professor of Farm Management and Agribusiness.
Indeed, when I was first approached a little over 20 years ago about the possibility of returning to NZ as Professor of Farm Management, I was very explicit that I would only be interested if the position included agribusiness.
One of the crazy things in NZ is that when the Stats Department calculates agricultural GDP, the cost of purchased inputs is deducted as a cost. That not only includes seeds and fertiliser as costs to be deducted from agricultural GDP, but also includes the same deductions for shearing and all other contractors. Those costs are assumed to come from outside the sector! As a consequence, the agricultural GDP figures published in NZ are totally worthless. Actually they are worse than useless because they lead people, including even many of the politicians, down totally false pathways.
This is one of the key reasons why when I am talking about our primary industries I focus on the export contribution as a starting point for understanding the importance of the sector.
KeithW
Keith,
Your comments about the calculation of agricultural GDP apply equally well to every other sector of the economy. The upshot of it all is to demonstrate how intertwined all the sectors of the economy are and how we depend on each other. While export income is one measure of a sector's worth, value added (contribution to GDP) is an equally valid measure. People decried the tourism industry when it was in it's hayday 3 years ago because of its low productivity and poor value added, even though it was NZ's biggest foreign exchange earner. And also for its poor environmental record. A rounded view of all these aspects is necessary.
Cheers, Kevin
Kevin,
I don't think they do apply equally to other sectors. The way it works in manufacturing, for example, is that all NZ-based inputs to a product remain within the manufacturing sector. Whereas in agriculture they jump out of the sector. As for tourism, it is not defined as a sector by the Stats Dept and so officially it has no GDP. Rather, any GDP figures are constructed by the industry itself using its own methodology. I say that not to decry in any way the importance of tourism. Rather the message is to be careful of statistics and how they are calculated. The tourism industry was indeed NZ's biggest foreign exchange earner for a short time, but only if for comparative purposes we divided agriculture into its individual components such as dairy, meat, arable etc.
KeithW
The European Union are clearly confused Holland has just allocated 25 Billion Euros to deintensifying their agriculture because of pollution
They need your advice that agriculture is primary so doesnt need support
https://www.theguardian.com/environment/2021/dec/15/netherlands-announc…
Hi Keith, (if you're still following the comments on your article) I came across a climate scientist Walter Jehne who claims the formation of hydroxlyl (which removes methane from the atmosphere) from the interaction of water vapour and UV light on grazed pastures is sufficient to cancel out any methane the animals emit, and more.
Is this at all plausible?
https://northlandclimatechange.org/2021/11/02/methane-sources-sinks-and…
Sparrow,
Alas, almost certainly that particular conclusion is implausible.
Note that this is appears to be a self-published paper and has not gone through a normal journal process of independent peer review. If I was a reviewer, I would be pointing out some important weaknesses in that part of the argument. The hydroxyl radical is not the same as the hydroxyl ion. it has a very short lie (less than a second) and it does not hang around searching for a methane molecule to breakdown. There are big uncertainties relating to the average residence time of a methane molecule but to then get to a point of suggesting that methane from livestock does not get into the atmosphere and remain there (on average ) for quite some years is not tenable. As a starting point, the authors do not seem to understand that residence time and half life are two different albeit aligned concepts. This suggests they are working beyond their current competence.
KeithW
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