Is This The Boom We Wanted?

Written By: - Date published: 11:20 am, March 4th, 2022 - 65 comments
Categories: Economy, Environment, farming, Free Trade, Russia, trade - Tags:

New Zealand’s time as high end ingredients producer to the world has arrived. But it has big costs.

While we started off at just over $2 a kilo for milk solids a decade ago, by 2019 we were at $7, and even before the war started, this season was going for $9.60.

Fonterra lifts forecast farmgate milk price to record midpoint of $9.60 per kg milk solids.

Every dairy farmer will be motivated to produce hard if the price was heading for $10 – $11 a kilo.

Lamb is heading for 742 cents per kilo, which is up on the five year average.

Global foodservice sector recovery is strong, and China is losing its appetite for pigs since they’ve culled so many, and are continuing to develop more expensive tastes.

On the other side of the world, the Russian invasion of Ukraine will rock grain and fertiliser prices across the world.

Ukraine accounts for 12% of global wheat exports, and together Russia and Ukraine together make up nearly 33% of global wheat exports. Ukraine is also huge in Sunflower oil, barley, corn, and potatoes. Also fertiliser.

“Be in no doubt, this is a dangerous day for global food security and food prices too, with humanitarian risks that stretch far and wide,” tweeted James Withers, the Chief Executive of Scotland Food & Drink shortly after the Russian invasion of its neighbour began.

The Food and Drink Federation’s Chief Executive, Karen Betts, added: “Past experience tells us that disruption to Ukraine’s exports will have an impact on global food supplies and on the price of a range of key commodities, such as vegetable oils and maize, which are important in UK food production. This will be further compounded if there are sustained energy price rises, adding to an already troubling inflationary picture.

Obviously, a hungrier world is a more unstable world.

And let’s not forget the new Russian control of all the Ukrainian Black Sea ports making it nigh impossible to export coal. Any stress on ship access at the Bosphorous Strait or at the Black Sea ports will see those food and energy commodity supplies shrink fast. Then prices go up further, as does inflation.

A number of food and beverage manufacturers including Carlsberg, Coca-Cola, Mondelez, and Nestle are already reportedly suspending production or closing plants in the region (could we at least keep the Green & Black’s supply alive?).

As I’ve mentioned before, inflationary pressures in Europe may intensify should Russia decide to cut off or limit energy supplies to Europe, or the EU choose to impose restrictions on energy imports from Russia.

So: New Zealand’s export boom was forecast by the government in December, and this conflict piles it on.

This week the government finally opens the doors to vaccinated people to come from Australia, to complement workers from specific Pacific countries such as the Cook Islands. It’s all hands on deck for the fruit and grape harvests coming on stream now.

But with every step upwards in our agricultural boom, our emissions also boom.

We’ve had a government-supported economic boom driving unemployment down and down for two years, and even before this extra global price pressure, our prospects were forecast to be strong.

Two key political questions arise:

  1. Will the food boom accelerated by European war shift our focus away from diversification, Research and Development and the higher-paying careers and society that we need?
  2. Will the food boom accelerated by European war trap New Zealand into agricultural commodity production so we never achieve our Carbon Nationally Determined Contribution and our Zero Carbon Act target?

65 comments on “Is This The Boom We Wanted? ”

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  1. Byd0nz 1
    4 March 2022 at 11:44 am

    The World pretends to be democratic, but in reality the GENERALS and Military rule the world, they enjoy war, making and selling arms and WMD, they pollute the planet with their carbon immissions 24/7. Do they care a jot about Climate Change or ordinary citizens of the world, I think not.

    Resources are extracrted and wasted by this Military world by the well healed Generals and the well paid political leaders who do just as they are told, so in short, with the words of Dads Army's Private Frazer " We're A' Doomed.

  2. pat 2
    4 March 2022 at 11:49 am

    yes and yes (not trapped but chosen)

  3. Dennis Frank 3
    4 March 2022 at 11:50 am

    Yes and yes. The majority always go for the low-hanging fruit, whether they be politicians or consumers. So long as the market governs behaviour, this will continue.

  4. Hongi Ika 4
    4 March 2022 at 12:05 pm

    Big money on offer from the NZ Government to plant East Coast pasture in Pinus Radiata Weeds under the dodgy Emissions Trading Scheme.

    • Cricklewood 4.1
      4 March 2022 at 12:10 pm

      Wairarapa as well, that will be a slow moving disaster.

      • Sanctuary 4.1.1
        4 March 2022 at 2:59 pm

        My biggest crystal ball prediction is there is going to be our equivalent of a Flint, Michigan scandal with a bowel cancer catastrophe caused by high nitrate levels in drinking water, especially in rural NZ, in the 2030s-40s. The subsequent Royal Commission will involve lots of hand wringing and opinion pieces on how we allowed it to happen, how come nothing was done and corporate big dairy spokesman Chris Bishop claiming it certainly isn't their fault it was all a result of the Zaporizhzhya nuclear meltdown of 2022.

        • ghostwhowalksnz 4.1.1.1
          4 March 2022 at 4:35 pm

          The Flint drinking water crisis was over lead from its pipes in the water supply ( they failed to add corrosion inhibitors, another additive when they changed the supply source)

          And it was a 'through the roof levels'

          The US rural areas have elevated nitrates as well no sign they are at very very critical levels to 'be like Flint'

        • Hongi Ika 4.1.1.2
          4 March 2022 at 7:43 pm

          The soddies in NZ have never given a shit about New Zealand's waterways.

  5. weka 5
    4 March 2022 at 12:15 pm

    another compelling reason to vote Green next year (and throw our weight behind them between now and then). Labour need pulling greenwards. We don't have to do extractive farming, we could do regenag and still have a decent economy. We need people with vision and the imagination on how to do that.

    • Hongi Ika 5.1
      4 March 2022 at 1:39 pm

      If you watch some documentaries on this topic these organic farming systems are actually more profitable than the high cost heavy input farming models.

      • weka 5.1.1
        4 March 2022 at 2:04 pm

        that's my understanding. They use more land and have lower stocking rates but need less inputs. They also increase biodiversity, protect water, and don't rely as much on fossil fuels or artificial fertiliser. Lots of compounding benefits beyond economics but that also support the economy.

        The problem is that Labour don't have the background for this to be a natural switch. The Greens too.

        • Hongi Ika 5.1.1.1
          4 March 2022 at 2:10 pm

          Most progressive environmentally conscious famers understand these concepts, whether they are National, Labour or Green, it is basic common sense, however the farming of the Canterbury Plains on light soil types relying on huge quantities of water and fertiliser is shear madness imo. The Canterbury Rivers such as the Selwyn River are being used as sewers by the Canterbury Dairy Industry.

          • weka 5.1.1.1.1
            4 March 2022 at 2:19 pm

            yes, there are good farmers out there. The problem is Fed Farmers, the banks, the farm advisors, and government.

            • Ad 5.1.1.1.1.1
              4 March 2022 at 7:05 pm

              You know it's a wee bit bigger than that.

              • Shanreagh …
                4 March 2022 at 7:07 pm

                Perhaps let's start with those ie Fed Farmers, the banks, the farm advisors, and government and if we have time before dinner we'll start on the rest.

                Actually no I favour the Chair in Regenag, then the rest. We’ll demonstrate our success with smiling, educated people on the ground.

              • weka …
                4 March 2022 at 7:09 pm

                I was meaning that those groups lack the will, values and imagination to make the shift to regenag (and in some cases actively block it). I don't underestimate the challenge, but I think having people who already get regenag in some of the positions of power is crucial.

                • Shanreagh …
                  4 March 2022 at 7:15 pm

                  Yes indeed. We need a Three Waters Advocate (at least one) with a side in Regenag on every Council.

    • Hunter Thompson II 5.2
      5 March 2022 at 9:15 am

      "Associate Minister for the Environment Kiri Allan is urging all New Zealanders to give feedback on proposed changes aimed at making drinking water safer.

      “The current regulations are not fit for purpose and don’t offer enough protection, particularly for those whose water comes from smaller supplies,” Kiri Allan said.

      “This was highlighted in the 2016 campylobacter outbreak in Havelock North when close to 60 people were hospitalised.

      “We are proposing improvements in three areas; standardising the way we define source water areas, strengthening regulation of activities around water sources, and adding more water suppliers to the register.

      "The consultation document and online consultation form are available on the Ministry for the Environment's website: https://consult.environment.govt.nz/freshwater/nes-drinking-water."

      Submissions close tomorrow for proposals in this document. Don't know if it will make a difference as the government seems to want nitrate levels that exceed WHO recommended levels.

      • weka 5.2.1
        5 March 2022 at 10:01 am

        the mainstream response is to chlorinate drinking water, which leaves polluters free to keep putting shit in the flow. We need to start at the water end, make sure that our streams, rivers, lakes, wetlands and so on are suitable for aquatic life, and then the clear waters drinkable. Then we can look at the town supply usage end.

        And yes, we're stupid af about other kinds of pollution as well.

        • Hunter Thompson II 5.2.1.1
          5 March 2022 at 11:23 am

          Yes, the politicians are only worried about water coming from the voter's kitchen tap. As long as it looks OK, ie not murky brown, all is well.

          I see today's NZ Herald worries about how Tourism NZ will lure visitors back to this country. They'll do it by promoting the same "clean and green" BS as before, I guess.

    • Ad 5.3
      5 March 2022 at 10:02 am

      None of our political parties are addressing the massive national challenge of Fonterra.

      They are still 80%of our milk production, with suppliers that take about 33% of all of our irrigated water.

      They also have some of the most sophisticated environmental reporting systems of any major agriculture business in the world.

      They are also encouraging strong conversion to organic farming, and have a massive partnership with DoC. Perhaps only AirNZ comes close to this scale of approach in NZ.

      Embracing Sustainability (fonterra.com)

      Greenpeace occasionally has a good crack at them, but we've just had a review of their governing legislation which failed to address anything about climate change or water or environmental impact.

      They are by a long way our most powerful company, and it is they and other milk companies together with their suppliers who will do best out of this food boom.

  6. Sanctuary 6
    4 March 2022 at 1:29 pm

    If world wheat supplies come under critical pressure then NZ will be at the bottom of any list for supply. Australia may help, but I would expect the government would start to query if the Canterbury plains – until recently regarded as ideal for growing wheat – is really that suitable for all those expensive dairy conversions. After all, if you want your cheese on a cracker with your feijoa chutney you gotta have the wheat to make the crackers.

    • Hongi Ika 6.1
      4 March 2022 at 1:41 pm

      We could see wheat and bread prices go through the roof shortly and I think we import most of our wheat from Australia ?

    • pat 6.2
      4 March 2022 at 1:48 pm

      "Most of the wheat eaten in New Zealand comes from Australia where land is cheaper and greater volumes can be grown. It is also cheaper for importers to transport grain from Australia to Auckland than getting grain up from the South Island where most of it is grown, Stewart said."

      https://www.stuff.co.nz/business/farming/124700980/local-farmers-grow-quality-wheat-but-most-of-us-arent-eating-it-heres-why

      • Robert Guyton 6.2.1
        4 March 2022 at 3:15 pm

        Wheat's a curse on European consumer's health (intolerances) as corn curses/makes ill, Americans. Over-used, both. Conventional wheat-growing uses very high levels of nitrate fertiliser to achieve profitable crops. They threaten the aquifer/rivers more than dairy.

      • Ad 6.2.2
        4 March 2022 at 3:33 pm

        Immediate supply may not be an issue for New Zealand but price will be.

        Ukraine and Russian wheat often tends to go to developing countries.

        But it's the same global market.

        • pat 6.2.2.1
          4 March 2022 at 6:05 pm

          supply is an issue related to price….its why food poor populations dont buy our dairy and meat.

          With food inflation (and wider) the price of a loaf of bread is going to count…indeed it is more likely to impact an election outcome than most other issues.

          • Ad 6.2.2.1.1
            4 March 2022 at 6:57 pm

            OMG I just wrote a post about the relationship of the Ukraine war to New Zealand food prices. So thanks for just repeating my own point back to me, without any references.

            Inflation is barely an issue in any poll yet. Let's see if the Reserve Bank gets up to 5%. We're a long, long way from the late 1980s and 1990s.

    • weka 6.3
      4 March 2022 at 2:08 pm

      I would hope so. Not too hard for NZ to grow our own wheat if we need to. There's a fair amount of cropping land doing dairy support as well. We're not going to starve, the issue is more about how stupid we are thinking making a lot of money from dairy is better than food resiliency. Money's not much good if the international supply is fucked. Tricky bit is all that money invested in dairy infrastructure and how we would downscale it, especially if it wasn't a crisis. I can't imagine us doing it unless there is an actual crisis tbh, and I doubt rising bread prices will count as that.

      • Sanctuary 6.3.1
        4 March 2022 at 2:22 pm

        If you think a lot of rural communities are half way down the rabbit hole already wait and see what the reaction will be to the Economic Rationalisation (Farming) act of 2024 when the government starts a) centrally controlling at least some of the land use in the country for security of supply of basic foodstuffs and b) regulating price and distribution to make sure the squatocracy of Canterbury doesn't export all our wheat while we starve just to get a better price overseas.

        It'll be a crazed swooning of farmers where making sure New Zealanders have bread to eat will be parsed into a forced collectivisation comparable to the Homodor.

        • Robert Guyton 6.3.1.1
          4 March 2022 at 2:50 pm

          Which Government?

          The word "squatocracy" so elicits the image of the huge Nick Smith "dropping his kids off at the pool" statue!

      • Patricia Bremner 6.3.2
        4 March 2022 at 3:20 pm

        Most bakers would prefer the Australian flour for its stronger crumb. New Zealand flour tends to have a wet crumb, and have to be blended with quality flour. Our product is good otherwise.

  7. PsyclingLeft.Always 7
    4 March 2022 at 2:44 pm

    https://www.odt.co.nz/rural-life/rural-life-other/water-battle-won-%E2%80%98sour-taste%E2%80%99-remains

    https://www.odt.co.nz/regions/central-otago/accusation-outside-interests-hold-sway-orc

    In my Opinion : Farmers/ORC are happy to see irrigation reducing River…to 8% of its flow…..because their grandfathers did. Theres the problem. Dinosaurs.

    • Robert Guyton 7.1
      4 March 2022 at 2:52 pm

      "Grand-parenting" is a term heard often around regional council offices.

      There are other expressions that describe that thinking, but hey, family show.

    • Ad 7.2
      4 March 2022 at 7:03 pm

      Hence the 3-Waters programme to rip it out of regional and TLA hands.

      Parker is from Dunedin and is well across the ORC.

  8. PsyclingLeft.Always 8
    4 March 2022 at 2:52 pm

    He had consumed oat milk overseas and the product was the fastest growing dairy-free milk available, he said.

    The global non-dairy milk market was expected to reach revenues of more than $US38billion ($NZ58billion) by 2024.

    While there were many plant-based alternatives, such as soy, almond, coconut and rice milk, none were grown locally.

    https://www.odt.co.nz/business/local-business/entrepreneur-aiming-take-oat-milk-world

    Not Dinosaur

    • Robert Guyton 8.1
      4 March 2022 at 2:55 pm

      A livestock farmer struggles mightily to discard the work and philosophy of his father and his father's father; livestock farmers before him..all that effort and sacrifice, chucked away, to grow… effing oats!!

      • PsyclingLeft.Always 8.1.1
        4 March 2022 at 3:07 pm

        Even kicking and screaming…… : )

      • weka 8.1.2
        4 March 2022 at 4:26 pm

        my grandfather was a sheep farmer. We all grew up eating oats. He would have understood the value.

        Not the idea that oat gruel is a milk though, that's just weird.

        Oats, dairy, wheat, veg, we should be growing it all locally as much as possible.

        • weka 8.1.2.1
          4 March 2022 at 4:29 pm

          Just make the oat drink at home and save all that packaging, waste and transport

          https://en.wikipedia.org/wiki/Brose

          In the 16th century, a mixture of oatmeal and water was carried by shepherds; brose resulted from the agitation of the mixture as they climbed the hills.[1]

          Put it in the kids’ drink bottles, builds strong bones and nerves.

    • Ad 8.2
      4 March 2022 at 7:02 pm

      All we need to do is …

      … roll back 3 decades of state and private investment in irrigation across the entire South Island, together with multiple milk companies, covering hundreds of thousands of hectares, and several billion of bank debt.

      Still, go with the oats thing.

  9. PsyclingLeft.Always 9
    4 March 2022 at 3:05 pm

    Farmers who have not yet made plans for the drying climate would be wise to do so says ruminant animal nutrition expert Professor Tom Barry of Massey University.

    https://thisnzlife.co.nz/6-pasture-plants-will-make-drought/

    And the Chicory sounds interesting? Is possible ?

    • Robert Guyton 9.1
      4 March 2022 at 3:12 pm

      Chicory's tricky. Reseeding requires letting it get very tall and stalky. Seed has to be bought fresh, unless chicory's grown as strips alongside of the paddock. Or something along those lines. Plantains the easiest, but has already been commodified/industrialised/commercialized. It's regarded by many conventional farmers as "as far as I'll go!" No sunflowers and phacelia for them!

    • Patricia Bremner 9.2
      4 March 2022 at 3:28 pm

      Mixed farming will be in "vogue"

      Some crops do better in wet/dry conditions than others, and a variety providing differing income streams and regenerative practices will become more popular than the monoculture version, where transport becomes a big component in costs.
      Planting hedges of Lavender sunflowers and crops for stock lupins to plough back in…

      Adapt or die.

      • weka 9.2.1
        4 March 2022 at 4:31 pm

        I love the regenerative takeover of this post.

      • Shanreagh 9.2.2
        4 March 2022 at 6:20 pm

        Mixed farming used to be in vogue against the idea of putting all your eggs, as it were, in one $$$$ basket. Many farmers were envious of others who had a mix of land that allowed this. We have new crops and different crops can be grown on land.

        Of course you don't get the big $$$$ highs as when you go all out dairying etc. Some farmers still have niche parts such as seed raising. Some do things like large-ish scale niche bee keeping or allow specialist beekeepers to do it on their properties with a return a bit bigger than a supply of honey or comb throughout the year.

        I'm all for regenag. Perhaps we can get a Chair or Faculty in Regenag at Lincoln or Massey?

        I shook my piggy bank just recently to see if it would stretch for some honoraria for TS authors so I know it only has 10c in it. I need to win Lotto. smiley

        • Ad 9.2.2.1
          4 March 2022 at 7:00 pm

          Massey Palmerston North is functionally a client of Dairy NZ and Fonterra.

          Lincoln is well and truly a partner of AgResearch.

          • Shanreagh 9.2.2.1.1
            4 March 2022 at 7:05 pm

            Yes I had done a quick scan of Massey and found nothing there, rather sterile i thought and status quo…….Lincoln though influenced by Ag Research seemed to have a potential for a Chair when I win lotto.

            Or perhaps take over Telford….

            I favour moving in plain sight though.

  10. Shanreagh 10
    4 March 2022 at 6:42 pm

    There are a couple of level 2/3 units at Lincoln

    Agroecology 309 from an ecosystem point of view, which is a start.

    1. Explain the role of biodiversity and ecosystem structure and function in production systems.
    2. Describe the opportunities, benefits and advantages of incorporating ecological knowledge into modern agricultural practices.
    3. Assess the economic and environmental value of ecosystem service suppliers, their role and status.
    4. Understand the implementation of rigorous experimental designs in a practical argoecology study.
    5. Collect data, analyse results and interpret the findings from an experimental agroecology study.
    6. Communicate coherent, justifiable arguments of agroecology, their values, benefits and limitations.

    Land water atmosphere PHSC211

    https://www.lincoln.ac.nz/study/courses-2/course-search/land-water-and-atmosphere/

    Plant health Bios 022

    https://www.lincoln.ac.nz/study/courses-2/course-search/plant-health/

    This one and the tutor look promising.

    The Economics of Food markets and Policy

    Landscape Ecology

    https://www.lincoln.ac.nz/study/courses-2/course-search/landscape-ecology/

    We will need people who can do this

    https://www.lincoln.ac.nz/study/courses-2/course-search/special-topic-in-social-entrepreneurship/

    and these

    https://www.lincoln.ac.nz/study/courses-2/course-search/risk-and-resilience-2/

    https://www.lincoln.ac.nz/study/courses-2/course-search/the-economics-of-food-markets-and-policy/

    But nothing that I can see that really teases out regenag. Some of the courses I have highlighted would be useful, as they are in many conventional ag courses.

  12. Stuart Munro 12
    4 March 2022 at 10:13 pm

    I wonder who is experiencing this as a boom. Butter has gone up $2 a pound where I live – and I don't see a wage bump to cover it.