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Dairy prices keep dropping

Written By: - Date published: 9:44 am, July 2nd, 2014 - 90 comments
Categories: Economy, exports, farming - Tags:

Last night the GlobalDairyTrade auction gave more prices drops. Stuff reports

Dairy prices have resumed their slide, falling 4.9 per cent at the latest GlobalDairyTrade auction overnight.

The drop, the second-biggest of the year after an 8.9 per cent plunge at the April 1 auction, was the ninth fall out of the last 10 auctions, the only increase being at the previous auction two weeks ago when prices edged up by 0.9 per cent.

The average winning price at the latest auction was US$3595 per metric tonne, down 28.7 per cent from the recent peak of US$5042 on February 4.  The auction platform’s trade-weighted price index was down by an almost identical percentage.

Prices were put under pressure by a big increase in supply, with a maximum supply of 43,249 tonnes, up almost 33 per cent from the previous auction, with 41,513 tonnes sold.

Whole milk powder, the biggest category by volume, drove much of the overall decline with a 5.4 per cent drop in price.

The problem for NZ was that the rise in production probably largely wasn’t from NZ. If we go back to the comments on the 19th of last month

ASB rural economist Nathan Penny said markets were starting to take note of the more modest milk production outlook for next season.

“At the end of last month, Fonterra forecast 2014/15 season milk production growth of 2 per cent compared to the season just gone,” he said.

“In comparison, Fonterra reported that milk solids production for the completed season was up 8.3 per cent on the season prior.”

Global Dairy Price Index

As can be seen from the price index. We get quite a lot of variation in the overall pricing for dairy products. NZ are essentially filling in for whatever requirements exist over countries domestic or regional dairy production. We are literally filling in the few percent that are not covered by local or regional production. To give you an idea about how dominant we are in the international trade, see this pie chart from the Dutch Dairy Board in 2011. Then we were exporting as much as the whole of the European Union.

Key players in world dairy trade in 2011

Since 2008, NZ has massively increased its production of whole milk powder. The new production has largely gone to the massive new opening market of China.

NZ Whole milk powder production

However China is a country that is incrementally improving both quality and production for its domestic economy

China Whole milk powder production1

And of course we are not the only possible supplier. Other countries have been gearing up to take part of that trade as well. This has been leading to an overall increase in the amount of whole milk powder available for export.

Despite the blithe words of National and some rather silly bank economists. I’d say that the dairy boom is slowing and possibly over.  Expect steadily falling export prices for a number of years.

In the meantime, under National in its usual short term boom mode, much of the rest of our export tech and manufacturing economy has been stagnating. Once you strip the processing of dairy from our manufacturing sector, what you see is the continued decline of capacity. This feeds into the capacity of other areas like IT exports, which in NZ are often exporting hardware with software.

90 comments on “Dairy prices keep dropping ”

  1. Colonial Viper 1

    It appears that China has used us as a stop gap while getting their industry up to speed (and learning all our best farming and milk processing techniques).

    This price drop is going to push over leveraged parts of the industry to try and overstock further in order to meet debt repayments. That’s a bad spin to get stuck in.

    • Molly 1.1

      Yes, that was apparent years ago.

      When dairy consultants went to China to set up farms and advise on dairy farming – did none of them consider the long-term result? The failure of big business to be business thinkers continues to intrigue me.

      • Chooky 1.1.1

        +100 Molly ….they are all so short sighted and short term…and why would they( NACT) be selling off precious NZ dairy and viticulture land to foreigners as well as tourist land and sites and amenities /potentials…when WE could be selling the fruits/wines and milk/milk products and reaping in the tourist dollar ourselves?….NACT business is short sighted fuckwit business

        What is needed is money poured into R@D research/ideas/encouragement for NZ agricultural diversification/new markets away from China…maybe Arab nations and USSR

      • Draco T Bastard 1.1.2

        Even if they hadn’t done so China would still have upped their milk production – it would just have taken them a bit longer.

        • Molly 1.1.2.1

          Yes. But during that extra time, they should have been thinking about how to make farming in NZ sustainable, and what niche markets to corner. Instead they continued to “milk the cow dry” in terms of just continuing on without change.

    • Saarbo 1.2

      Yes, maybe CV. I think this will bring the payout down to approx. $6.50 which is close to the long run average. With the exception of the really highly leveraged most should still breakeven.

      The upside is that this pay out will be good for the environment because the marginal benefit of producing each extra KG MS is near zero for most farmers so we will see a drop in the use of supplement and a drop off in production as farmers go back to grass, which is where we should stay.

    • Saarbo 1.3

      It was always going to head back to $6.50kg ms, as the attached article shows, large US dairy farms are breaking even at this so it was only a matter of time. http://www.stuff.co.nz/business/farming/dairy/10037881/Kiwis-warned-off-mega-dairy-farming-model

    • Draco T Bastard 1.4

      It appears that China has used us as a stop gap while getting their industry up to speed (and learning all our best farming and milk processing techniques).

      Yep. China is doing what all countries should be doing – diversifying their economy so that they’re not dependent upon imports while also being able to export a hell of a lot. The end result will be that China will be able to buy up other countries.

      • Chooky 1.4.1

        they already are…and the NACT fools let them

      • mikesh 1.4.2

        “Yep. China is doing what all countries should be doing – diversifying their economy so that they’re not dependent upon imports while also being able to export a hell of a lot. The end result will be that China will be able to buy up other countries.”

        Agreed. International trade should only exist where countries have needs which they can’t meet from their own resources. Countries should not be relying on exports to provide their people with jobs and income, but simply to pay for the imports they need, with exchange rates adjusting to equalize imports and exports.

  2. DH 2

    Been far too much white man’s arrogance in our dealings with China. All those pompous blowhards claiming we can export our knowhow, that we were somehow smarter than everyone else, were just blowing smoke out their arses.

    I read this article a while back…

    Chinese milk producer wins global top prize

    http://english.cntv.cn/2014/06/04/VIDE1401853920635559.shtml

    Pretty much affirms what CV says above. I can’t even blame China either, they’re doing for China what we expect our Government to do for us… look out for our interests.

  3. KJT 4

    I hate having to say I told you so, but I could see this coming. It has happened so many times.

    NZ has always had this boom/bust with the next big thing as long as I can remember.

    Mutton, deer, goats, The share market, timber, beef, dairying.

    Everyone piles in and borrows lots of money to invest in the latest “craze”.

    The we all get left sorting out the shit, as prices drop when other countries get in on it.
    The inevitable bust happens as the over-high prices paid for “investments” in the latest “craze”, excess borrowing and the lack of investment and support of alternative industry begins to bite.

    Didn’t take long for those who were talking up dairying to forget about the EU’s “butter mountains and milk lakes” that depressed dairy prices for years, or Mount St Helens and South American plantation forests that took the shine off forestry investments.

    Meanwhile the focus on export markets and the sacrifice of other industries and community to support, “the thing that is going to make us all rich” leave us with no alternatives but to try the same again, as we have sacrificed the rest of our economy for the chance of, almost wholly imaginary “free trade” access overseas for the “commodity de jour” Forgetting that by the time we get that access, everywhere else would have ramped up their production also.

    Why does anyone think that China can, or will, allow us to keep a trade surplus for any length of time. Only NZ is that stupid.

    • Draco T Bastard 4.1

      +1111

      Societies don’t specialise and that will always win out over the rather stupid assertion by economists and politicians that they do. Then there’s the fact that a locally produced item is always cheaper than an imported item simply because it uses less resources to get to market. And now that we’ve reached the point where resources are running out that use of resources will become paramount in the decision to export. In other words, exports will start to decrease as countries start to decide to keep their resources for themselves. We’ve already seen this happen when China decided to cut the amount of Rare Earths that it was exporting.

  4. Ad 5

    The New Zealand diary industry has seen this threat of the rise of South American and Chinese production for a decade now. In 2004 the Chairs and CE’s of Fonterra, DCANZ, AgResearch, and many others met with the Heads of TReasury, MED, MoRST, and their respective Ministers of Finance, Research, tertiary education, Crown Research Agencies, and economic development.

    The scenario was played out before them of New Zealand being able to extend its boom perhaps for 8 years or 10, and then they would face a hard wind.

    Eventually, the Fast Forward Fund was the strategic response, which National killed.

    To me, only Labour has understood and engaged with the comprehensive strategic risk to New Zealand that the diary industry represents.

    • Draco T Bastard 5.1

      the comprehensive strategic risk to New Zealand that the diary industry represents.

      That’s about the best description of farming in NZ that I’ve ever seen.

    • One Anonymous Bloke 6.1

      “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!” said the Queen.

      • Poission 6.1.1

        Yes it is a cross effect of arbitrage(collateral damage).

        The questions is do we blame wheeler or Parliament?

        • One Anonymous Bloke 6.1.1.1

          Parliament sets Wheeler’s agenda.

          • Colonial Viper 6.1.1.1.1

            Parliament sets the Reserve Bank’s agenda? BS. The other way around. And has been for 30 years.

            • One Anonymous Bloke 6.1.1.1.1.1

              Reserve Bank of New Zealand Act 1989. Heard of it?

              • Colonial Viper

                lol are you serious.

                • One Anonymous Bloke

                  Obviously you are right, and Parliament is unable to alter the RB Act. Obviously.

                  • Colonial Viper

                    Jeezus. Parliament can alter the Act as it wants within the very tight conventional limits which are permitted. So why do the Left keep thinking that they can somehow control the institutions of the Deep State with fucking bits of paper, and that somehow, Parliament has both the first and final say in how our economy is run. Just look around you at the evidence.

                    • One Anonymous Bloke

                      So, this morning the RB set Parliament’s agenda, now it’s the “Deep State” running everything. Just one question: since Parliament is so powerless why are you so ambitious to win a seat in it?

    • lprent 6.2

      Exports are booming.

      The trick with an export based economy is not to just look at what is happening right now (which is what you appear to be doing). It is to look at what is happening next and over the coming decade.

      Our exports have been booming, but almost entirely in one area – whole milk powder going to a single market to China. It is the same with other commodity products but at a much smaller rate.They will probably keep booming in terms of volume, but at a reducing price. Other countries have been ramping up their export production to help fill the production void from demand and so has China.

      The falling prices are a symptom of that happening.

      It could be that we get another set of markets opening there or elsewhere. But it gets steadily harder for any one product. That is the nature of international commodity markets.

  5. Rob 7

    So what is your point of this post Lprent

    1.) commodity prices should just keep increasing and if they fall we should quickly give up… and / or

    2.) NZ’ers should not engage in any infant growth industries just in case they turn into a boom , ..and / or

    3.) international competition should not exist in anything NZ industry competes in, if someone else enters or develops their own capability then again we must exit… and / or

    4.) NZ’s involvement in any industry and endeavor can only be allowed under some central committee criteria …and / or

    • One Anonymous Bloke 7.1

      …or

      5) Right wing lackwit frames stupid options while ignoring the point of the post which is that strong economies rely on more than primary commodities.

      There’s a big clue in the sentence “…much of the rest of our export tech and manufacturing economy has been stagnating”, so perhaps the problem is English comprehension as well as economic illiteracy.

      • Rob 7.1.1

        You have some serious issues OAB , just because someone has a different view point than you, does not give you the right to aimlessly throw abuse.

        Where have I stated that we must be solely reliant on commodities. What I have stated is that we are in this industry (amongst other)s and that commodity pricing just does not keep increasing and that local competition will not stay away. Fairly basic business activities that most NZ businesses are aware of. It does not mean we just give up.

        So whilst you rubbish these industries, don’t forget that they actually employ people and earn export value for this economy

        You have a large time investment commenting on posts on this site , I wonder whether you are actually engaged in any productive outcomes or just exist to belt the keyboard keys in anger. You must live in a dream world where you think everything can be improved instantly with the signing of a Govt document / Act/ cheque by some some vacuous committee.

        So just because you froth at the key board about what is wrong with it all and how its all Nationals fault , the fact is you cannot instantly change an economy to largely be one of highly specialized unique industries built on home grown R&D protected by large levels of IP and collecting large rents off shore.

        • One Anonymous Bloke 7.1.1.1

          Who “rubbished” what industry? Not me.

          Who claimed you can “instantly” change an economy? Not me.

          Perhaps if you spent less time twisting other people’s words you wouldn’t attract so much derision and contempt. Go on, give it a try.

          • srylands 7.1.1.1.1

            “You have some serious issues OAB , just because someone has a different view point than you, does not give you the right to aimlessly throw abuse.”

            Yes well good luck with that. He has serious anger management problems.

        • Lanthanide 7.1.1.2

          OAB is not “aimlessly throw[ing] abuse”. He’s throwing it at you. Deservedly so.

          • Nakiman 7.1.1.2.1

            OAB throws abuse at everyone with a different point of view. He is just an angry abusive tosser.

            • One Anonymous Bloke 7.1.1.2.1.1

              “OAB, what is the best thing in life?”

              “Driving wingnuts before me and hearing the lamentations of their parrots.”

          • Rob 7.1.1.2.2

            Good one Lanthanide , well you can be both satisfied that the “targeted” abuse was well thrown.

            So let me know how you would re-invigorate our “stagnating tech and manufacturing industries” and supposedly reduce the risk of an over reliance on dairy?

            • One Anonymous Bloke 7.1.1.2.2.1

              I think Labour & The Greens have detailed and costed plans knocking around somewhere. Where could they be? I’ve looked everywhere* and I just can’t find them. Perhaps you’ll have better luck than me, Rob.

              *except on their respective websites

            • Draco T Bastard 7.1.1.2.2.2

              The same way that the US does – massive government investment in blue sky R&D across multiple industries. I’d probably start with building the ability to process our resources to be used in high-tech manufacture and building the manufacturing capability. Said manufacturing capability to then be leased out to entrepreneurial types who dream up the devices to be manufactured.

              • Colonial Viper

                The same way that the US does – massive government investment in blue sky R&D across multiple industries.

                Some major strategic infrastructure investments (on the scale of tens of billions of dollars) should certainly be done – and delivered through a renewed Ministry of Works with only minor private sector involvement.

                Re: blue sky R&D – given approx 20 years until we are out of cheap fuel I don’t think that we can afford true blue sky R&D. I think we need to turn the knowledge and science we have now into truly useful, robust and inexpensive applications.

                I would ramp up a technical/technology ecosystem in NZ using lots of medium, small and start up companies, and 1,000 $100K investments. (money exchanged for publicly held equity).

                • Draco T Bastard

                  Blue sky R&D could be used to look for alternatives to cheap fuel. Electric transport options are probably the go so R&D into renewable forms of generation such as wind, solar and wave. We’d also want to look at better means of distribution such as this bus.

          • Tracey 7.1.1.2.3

            so much more honest than the passive aggressive pseudo superiority exhibited in 7.1.1 and 7.1.1.1.1

        • Mainlander 7.1.1.3

          Thats all he really offers on here Rob, and it just creates drama and off topic rants and abuse especially for those of us that mostly just read the threads, his constant disruptions to this site are more than annoying they usually detract from the purpose of this site especially with the election so close

          • One Anonymous Bloke 7.1.1.3.1

            And yet somehow, I’m here discussing the post, trying to draw Rob’s attention to the point after reading through his four multiple-choice intentionally provocative deliberate misunderstandings, and here you are, off topic, just like your last three or four offerings.

            Since you’ve chosen (with your personal responsibility) to be so rude and irritable, I see no reason not to carry on irritating you.

            • Mainlander 7.1.1.3.1.1

              Do as you wish, its not like most of your idiotic rants cant be scrolled past except for the fact you take up so much room on the threads inbetween the intelligent comments and rational (non abusive) debates

    • Ad 7.2

      LPrent is pointing out New Zealand’s growing narrow exporting reliance and vulnerability to the dairy industry – and clearly you don’t disagree with that. The botulism crisis required our Prime Minister to do a major apology tour to China – that’s the scale of risk he sees it representing.

      The dairy industry will in a few short years be more important than the whole of the public sector economy- and well beyond the influence of direct democracy. Every future government needs to develop a broad and enduring relationship with the dairy industry to manage the collective risk to New Zealand – across many policy fields – that it now represents.

      • srylands 7.2.1

        What on earth do you want the Government to do? What New Zealand companies produce and export is a function of markets.

        • One Anonymous Bloke 7.2.1.1

          Are you back on that tiresome dribble-fest again?

          If it’s all about the market why does Oravida need it’s own anonymous border official and why did the lying Prime Minister go to China to allay fears about botulism?

          • Rob 7.2.1.1.1

            So you want more of that OAB, is that a good thing?

            • One Anonymous Bloke 7.2.1.1.1.1

              Did you get the point Rob: that there are certain things that governments do that markets can’t (naturally the reverse is also true)?

              S Rylands knows this, we had the discussion last week, and yet it comes up with monotonous regularity, almost as though right wingers were suffering from an echo-chamber mentality where they mindlessly repeat received dogma rather than think for themselves or perform perfunctory reality checks from time to time.

          • Nakiman 7.2.1.1.2

            You are the one who is dribbling One Abusive Bloke. Are you really that thick

            • One Anonymous Bloke 7.2.1.1.2.1

              Did it sail right over your head Parrotman? Government behaviour has a profound effect upon ‘the market.’ If you don’t accept that I can recommend a detailed study of conditions in Somalia. Note in particular the positive changes that have occurred since the reestablishment of something approaching a government.

        • framu 7.2.1.2

          so its nothing to do with policy settings and signals coming from govt?

        • Draco T Bastard 7.2.1.3

          Due to your willing blindness you may not have noticed that markets don’t work to provide what a country needs.

        • Ad 7.2.1.4

          The dairy industry is to New Zealand what banks are to New York or London:
          too big to fail.
          And there I have described the limits of markets for you in a phrase you may understand.

          Let me tell you want I want the government to do. I want our government to engage with the dairy industry as if most of our export economy and international reputaiton is at stake – because it is. I am pretty confident the author of the post would as well.

          Imagine if this government was as prepared to intervene in the dairy industry or indeed the i.t. development sector with as much “market interference” as they have been into the gambling industry, film industry, housing industry, electricity industry, competitive yacht racing industry, and irrigation industry.

          Apart from the absurd hobby-horses listed above, National’s MBIE and Joyce in particular are utterly directionless.

    • Draco T Bastard 7.3

      The main point of the post, even if Lynn doesn’t realise it, is that international trade is dying and that we won’t be able to export ourselves to wealth and that we’ll have to fall back upon our own resources. Of course, that was always going to happen.

      • Rob 7.3.1

        Draco, I don’t want top comment on what is happening on international trade , however there is return to local fabrication and more discussions and opportunities are occuring in regards to why dont we do it here as opposed to just purchasing off shore.

        This is actually enhanced by having a high dollar. We still require a large level of base raw materials to be imported (ranges of steels, alloys, textiles and many others) but now conversations are about local fabrication than just bringing the whole finished item on shore.

        • Draco T Bastard 7.3.1.1

          We make some of the best steels in the world. I’m not sure but I suspect that the unique makeup of our iron sands means we have an excellent supply of titanium. Unfortunately, it’s presently being used to make what white paint. We also have many other metals available including at least one 20 million tonne deposit of bauxite in Northland.

          Textiles are interesting. We can obviously produce excellent wool and I understand that hemp fibres can be used to produce a finer and more durable thread than cotton. I believe that hemp grows well pretty much everywhere and is very easy to grow getting multiple harvests each year.

          Once you start looking at what resources NZ has available you start to realise that NZ doesn’t need to import at all and thus we don’t need to export either. We should have a general policy to import only until such time as we can produce the product here. And that should apply to all nations.

          [lprent: Corrected a glaring typo. I presume you meant Titanium dioxide, a main ingredient in many white paints. ]

    • lprent 7.4

      So what is your point of this post Lprent

      We as a country shouldn’t get too excited and pile all of our internal investments into a single commodity product that is based on mining a scarce resource (and farming fertility is a scarce resource) for a short-term international shortage. In the case of dairy milk powder that is land and water. What we get out of that is a lot of investment pushing up the resource prices (eg rural land prices), or damaging the resource like water (which then damages other industries) in a tragedy of the commons, and relatively few jobs.

      That is pretty easy to see in such basics as the continuing shortfall in tax estimates. Growing a capital intensive commodity industry like dairy makes a few people rich, but doesn’t translate well into making the economy grow in a profitable way. Most of the value goes directly offshore in the form of interest payments and dividends.

      The governments almost sole focus on dairy over the last few years has meant that they haven’t been concentrating on things that are in our long term interests. Like being able to upskill our other export industries and provide taxable jobs.

      • Colonial Viper 7.4.1

        We’re basically exporting the real wealth of nitrogen and phosphorus from our soils in exchange for digitally created electronic currency. And in many places, the nitrogen and phosphorus which was in our soils is already all gone, so we’re having to import it from Asia, in order to send it back to Asia. Nuts.

      • lprent 7.4.2

        Looks like Phil Goff gave a excellent speech on much the same issues. Have a read of that. I posted it

      • Draco T Bastard 7.4.3

        in a tragedy of the commons,

        Goddamn it, it’s not a Tragedy of the Commons but a Tragedy of Privatisation. Privatisation and enclosure removed the rules that the commons would normally be operated under allowing the new land owners to do whatever they liked because the government has been too scared and/or ideological to put in place rules telling the farmers what standards that they need to maintain which has resulted in the poisoning of our waterways.

  6. Enough is Enough 8

    Bring on the crash.

    This could be the game changer the left needs. Fingers crossed for the next auction.

  7. Once was Tim 9

    Given that there’s a very obvious trend in prices downward (and I’m just now listening to RNZ’s sage – Jenny Ruth), and given that we’re told we’re subject to ‘intaneshnool proicizz in the global virunmint), just when can we expect that will be reflected in the price of milk in the hypermarket?
    Not anytime soon I bet! No no no – instead, the NZ consumer (economic unit) will be used as much as ‘the market’ can withstand, to prop things up.
    As you were …. buzzniss ez USE u all

  8. dave 10

    All nationals cards were put in one industry one market
    There signs China’s property bubble has popped as well the log prices have plummeted slippery will dismiss of course nats will carry on the denialism all is well with the world blame the poor for being poor

  9. Kevin Welsh 11

    How long before we get dairy based products imported from China? Cheaper butter, cheese, milk etc.

    • srylands 11.1

      Which is why it is stupid to impose a Carbon Tax on our dairy industry. It simply pushes production to a country with higher emissions.

      • KMB 11.1.1

        You mean which is why it’s stupid to put all our eggs in one basket.

        • Nakiman 11.1.1.1

          “You mean which is why it’s stupid to put all our eggs in one basket.”
          It sounds like you are blaming the government for Fonterra being the back bone of New Zealand. The Lefty extremists dont want growth or new industry.

          • One Anonymous Bloke 11.1.1.1.1

            You see: a classic example of the mindless repetition of rote-learned slogans.

            Never mind that per capita GDP is always higher when the left is in power, just make up some slur and repeat ad nauseam.

            It makes you appear profoundly stupid and what does it say about the Left? Nothing.

          • One Anonymous Bloke 11.1.1.1.2

            When the PR guy from Federated Farmers agrees that the time has come to consider capping the dairy herd, is he a Lefty extremist too?

          • framu 11.1.1.1.3

            wrong again – its not about what fonterra does or doesnt do per se – its about the way the govt views fonterra in relation to its economic agenda and vision

            The govt treating fonterra as their one and only economic angle isnt fonterras fault is it

            • Nakiman 11.1.1.1.3.1

              “The govt treating fonterra as their one and only economic angle isnt fonterras fault is it”
              The government don’t treat Fonterra as their one and only economic angle. They promote other lucrative industry like oil , mining and even recovering millions$ worth of dead native timber but the lefty extremist economic vandals would prefer to let it rot and import this hard wood.

              • One Anonymous Bloke

                “Promote” – you mean subsidise at everyone else’s expense.

                Measuring the (ephemeral as it turned out) benefits and ignoring the costs is not good business, but I don’t expect you to grasp that, blinded as you are by dogma.

              • McFlock

                lol

                fascinating how your list only includes extractive and polluting processes. Nothing sustainable in that list, nothing that involves NZers adding brain value.

                And everything in your list added together is a tiny fraction of fonterra’s revenue.

          • KMB 11.1.1.1.4

            Don’t be a ning nong nakiman. I’m blaming the government for concentrating on one industry and ignoring others which are (or could be) productive e.g. funding expensive irrigation schemes for dairy farmers but not wanting to spend a relatively paltry amount to restore the railway line to Gisborne for the benefit of the growers in that area. Or giving away lucrative contracts to China instead of supporting local engineering businesses (Hillside railway workshop). There are probably heaps of other examples of the obsessively narrow focus and short term thinking of this government.

      • One Anonymous Bloke 11.1.2

        Bollocks. Companies adapt to the regulatory environment they’re presented with. If you can’t conceive of a profitable dairy operation with a reduced carbon footprint that’s your problem, so please, leave the country, we have enough dead wood as it is.

    • Colonial Viper 11.2

      If they can do it for Watties tomato sauce why not.

  10. Seti 12

    Yes, but China still faces hurdles in large scale dairy, particularly with disease, water and arable land –

    …For a sector, which is still plagued by biosecurity threats including foot and mouth disease, that is a definite need.

    There was a major outbreak in 2005 as the disease spread through eastern China, including to Beijing and Hebei where Fonterra’s first farming hub has recently been completed.

    Dairy herd numbers collapsed last year, as the population dropped from a high of 8-10 million in 2012, down to 6-8 million in 2013.

    The plunge in livestock numbers has been attributed to high feed prices and further outbreaks of foot and mouth and has caused a 20 per cent drop in domestic milk production.

    The need for cattle feed as industrial scale farming ramps up will continue to escalate. The Chinese Government is aiming for 95 per cent self-sufficiency in overall grain production but output is struggling to catch up and China continues to look overseas to meet the shortfall.

    In 2012, more than 460,000 tonnes of alfalfa was imported to China – 95 per cent from the United States at a cost of $200 billion.

    For a sense of scale, China’s largest dairy feed company Wellhope Ruminant produces 96,000 tonnes per year. There is a shortage of arable land suitable for growing crops and a looming water crisis further compounds matters.

    Four hundred cities in China face water shortages, 100 of which are facing serious scarcity. Rampant economic growth has driven water requirements, with agriculture accounting for 62 per cent of demand for water resources.

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11238070

    • One Anonymous Bloke 12.1

      Are you implying it is a huge risk to put so many of our eggs in this unstable and poisonous basket?

      • Seti 12.1.1

        Not necessarily.

        Water scarcity in big food-producing nations like China is worsening, and many farmers are increasingly tempted to shift production from food to bioenergy, a popular option to cut emissions of climate-changing greenhouse gases.

        Climate change is worsening the situation, as more frequent extreme weather events devastate crops.

        In the past three years, Australia, Canada, China, Russia and the United States have all suffered big harvest losses from floods and droughts.

        http://www.stuff.co.nz/world/9811953/Food-shortage-a-risk-to-world-security-UN

        Perhaps we need to diversify within the industry to maximise opportunities when climate change presents them.

        • One Anonymous Bloke 12.1.1.1

          We also need to be aware that the political instability that is one of the expected consequences of AGW will potentially destroy our export markets altogether. Not that the demand will cease, more that the social and physical infrastructure will fail.

          As you say, we can plan to make hay while the sun shines, but there has to be a plan b, and c, d, and e for that matter; the diversification planning you mentioned must include negative as well as positive scenarios.

  11. Graham 13

    So now all that’s left is to pray for an economic downturn to give l

    • lprent 13.1

      Always nice to see someone with such myopic vision. Perhaps you should read Phil Goff’s speech which goes into more detail about the strategic economic risks

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