Muddying the Waters

Written By: - Date published: 10:43 am, February 13th, 2014 - 62 comments
Categories: Economy, Environment, farming, farming, Steven Joyce, sustainability, water - Tags: , , , , , , ,

We can go on subsidising the crippling pollution of the ag sector, argues Dave Hansford, or we could use that money instead to bring about urgently-needed change.

region-beziers-st-nazaire-pont-vieuxLast month, I was walking over the Pont Vieux – the old stone bridge that links the French city of Carcassonne to its mediaeval progenitor – when I noticed a flurry in the waters of the Aude River. A pair of otters was frolicking in plain view of the hundreds of tourists plying the bridge, and just a few hundred metres from the contemporary city centre. To see wildlife, especially aquatic wildlife, thriving so close to society and industry is not something New Zealanders are used to. Even if we had otters, I seriously doubt they’d be cavorting in the dull brown reaches of the Whanganui, or the squalid Manawatu.

I live five kilometres from the small Aveyronnaise village of Coupiac, through which a small stream flows. I can stand on its banks any weekday and watch bullies, trout and other fish chase a myriad of pond skaters, water striders and mayfly larvae through its clear waters. I don’t want to portray French water bodies as somehow unsullied – overall, they’re in better shape than New Zealand’s, but they still have their problems – but they have an integrity both reflected and protected by the surrounding countryside. In this corner of the world, rolling cultivated downs nestle within hill tracts of oak and chestnut woodland that offer habitat to roe deer, foxes and badgers.

Around here, farmers have specialised in milking sheep for a niche product: high-quality, high-value Roquefort cheese, a delicious blue that directly and otherwise employs some 4,500 people on an estimated 2100 farms. The regulations around its production are tight: all ingredients must be sourced locally, especially the tiny bacterium that supports the entire industry, Penicillium roqueforti, which must be cultured in just one natural cave complex in Roquefort-sur-Soulzon. All processing must similarly happen within the district.

Roquefort sheep must be grazed outdoors as often as weather permits, but spend the rest of their time indoors on supplementary feed, which the farmers are required to grow themselves. That means much of the land use round here is cropping, on spreads the European Commission estimates average around 53 hectares. Sheep flocks average 150 to 200 animals, and – I kid you not – when a farmer calls from the gate, they go running to him. I’ve watched it.

If all this sounds like some bucolic, pastoral planet away from the intensified New Zealand broadacre, high input, thousand-cow dairy herd approach to farming, you can bet that it is. New Zealand has instead banked its fortunes on trying to be the world’s biggest and cheapest producer of a distinctly low-value and fiercely-contested global commodity – milk powder – the price of which dances precariously at the whim an online auction system.

Whipped to the gallop in this race to the bottom, New Zealand farmers have enslaved themselves to frightening debt levels in pursuit of ever-greater production. The Reserve Bank says Kiwi farmers are among the most debt-laden in the world – three times higher than their Australian brothers of the soil. Average per-dairy farm debt has almost tripled in the last decade, to the point where New Zealand’s dairy sector alone owes some $30.5 billion.

cow in riverThis industrial-scale model of agriculture has had another crippling consequence: New Zealand’s lowland fresh water bodies are now in a parlous state, so polluted with effluent and nutrients that in 2012, the Ministry for the Environment reported that the quality of just over half of 210 monitored river swimming sites around the country was either ‘poor’ or ‘very poor’. Around the country, the National Institute of Water and Atmospheric Research has found nitrogen and phosphorus pollution to be climbing, in step with dairy cow numbers which now number more than 6.5 million, according to Statistics New Zealand.

Here in Aveyron, everyone accepts that Roquefort doesn’t always pay its way, so farmers are paid to sustain their benign land use practices. Under the contentious European Union (EU) Common Agricultural Policy (CAP), smallholders here receive an average of €208 (NZ$ 335) a year per hectare (and set to get more, after Francois Hollande recently promised to smooth out huge historical inequities that saw large-scale cereal croppers cream more than their share of subsidies).

The CAP has been the prime target of trade ministries, free-marketeers and even environmentalists since its inception in 1962, but Brussels has doggedly stuck with it, regularly drafting reforms aimed at solving inevitable imbalances and unintended consequences.

Subsidies, of course, are a dirty word in New Zealand. Kiwi farmers will proudly insist that they’ve successfully stood on their own two feet since they were abruptly cut adrift in 1984, when the repeal of subsidies here saw farmers promptly lose up to 40 per cent of their income. Internationally, free trade think tanks like to hold our farmers up as the poster boys of market reform. But few make mention of the crippling environmental cost those reforms have brought, the astronomical debt levels, and doubtless none will concede that in fact, the New Zealand taxpayer still spends a fortune supporting the industry and profits of the country’s producers in a variety of ways.

We could begin with the greatest rort of all: that Fonterra has successfully convinced New Zealand consumers that they must pay the going global rate for locally-produced dairy products, so that a working mother in Hamilton pays the same – and suffers the same spikes and hikes – as a businessman in Beijing. But let’s talk instead about all that polluted fresh water: to date, the Government has committed just under $14m to try to rehabilitate such fouled reaches as Lake Ellesmere, and the notorious Manawatu, found by the Cawthron Institute to be the filthiest river in the western world.

The bid to try and stem nutrient pollution of Lake Taupo was projected to cost at least $80m, but has needed extra funding. The Waikato River has so far had $210m of taxpayer money directed at its rehabilitation. The Rotorua Lakes cleanup will cost at least the same. Al these projects are funded by some mix of central and local Government funding. All up, according to Environment Minister Amy Adams, New Zealanders have already had more than $450m of their tax bill committed to cleaning up their own lakes and rivers after farmers have finished with them. That, in any language, is a subsidy.

Then there’s the successful bid by New Zealand farmers to avoid paying for their share of air pollution under the Emissions Trading Scheme, from which they have been serially exempted, most lately until 2014. Agriculture is directly responsible for nearly half of all our greenhouse gas emissions – which, if we can’t reduce them, will cost us under deals we’ve variously committed to (and more recently, reneged on, but may well rejoin).

But while farming produces by far the lion’s share of climate-changing pollution, farmers have convinced successive governments that they cannot afford to pay for it, as the Emissions Trading Scheme requires them to. Instead, we’ve seen the more benign forestry and energy sectors get nailed. Meanwhile, the rest of the eventual bill for all those greenhouse gases has been pushed again to the taxpayer – ironically, the same taxpayer that farmers turn to when climate change bites down, seeking emergency drought relief.

Earlier this year, the Government announced a $400m seeding fund – the Irrigation Acceleration Fund – to help farmers water a further 420,000 hectares of land. Much of that irrigation is tipped for Canterbury where, this month, the region’s medical officer of health, Alistair Humphrey, reported that nitrate levels in a third of tested Canterbury groundwater supplies were already so high they posed a risk to infant health.

We shouldn’t be surprised that farmers keep externalising their costs – depleted and polluted water, climate emissions and eroded soils – onto consumers and taxpayers: most businesses do. But can we at least be honest about the fact that all these programmes – along with the vast-scale appropriation of fresh water that actually, the public was using for its own enjoyment, thank you – represent state support for farmers? In other words, subsidies. The semantics we’ve heard from Federated Farmers and Fonterra over the years have successfully obfuscated this obvious truth, but we badly need to revert to plain, honest language before we can have the next vitally important conversation.

First; let’s acknowledge that if farmers continue to insist that they cannot afford to pay for the costs of their own environmental damage, they are ipso facto admitting that their businesses are neither environmentally nor truly economically sustainable – a point freshwater campaigner Mike Joy has repeatedly made. So, in truth, farmers are not standing on their own two feet, but leaning heavily against us, the taxpayers. That gives us moral representation around the boardroom table. Nobody wants to put farmers out of business, but we’re entitled to a say in what happens next.

Second, given that we’re subsidising farmers anyway, shouldn’t we just put the Friesian before the cart? In other words, seriously consider a version of the European CAP system which, detractors frequently prefer to forget, is in large part conceived to encourage environmental sustainability (it also seeks to encourage diversification and local employment, but those are whole other stories of direct relevance to New Zealand).

It has been repeatedly shown that it’s far cheaper to pay farmers upfront to adopt more environmentally sustainable business models and practices, than it is to clean up after them. By one estimate, it would cost $6000 to stop a tonne of nitrogen and/or phosphorus entering Lake Rotorua. It costs around $240,000 to try to get it out. That’s a lot of cash we could instead be using to promote change for the good, while liberating farmers from the intensification treadmill. We could call such payments anything we like: after all, we’ve come all this way without using the “s” word. Let’s call them incentives, so that we don’t run foul of the World Trade Organisation. Lets administer the payments through the Sustainable Farming Fund, which would need better resourcing to cope with all the demands of monitoring, compliance and diligence.

Let’s stop farmers blocking regional councils’ attempts to enforce water quality limits and nutrient caps. Let’s back incentives with tougher legislation to deal with premeditated polluters. Let’s develop a rigorous, standardised water quality assessment and monitoring regime, so that all farmers are bound by the same rules, and all governance is informed by the same values and thresholds. In other words, National Environmental Standards.

Meanwhile, let’s enforce water pricing, and levies for the demand management and allocation of water. And finally, should some farmers resist all overtures to clean up their act before the fact of pollution, can we please start charging them directly for the costs of cleaning up after it? It’s called polluter pays.

And then let’s have the really tough conversation: is a low-value, mass-market business model really the best we can do? Are cheap, anonymous, industrial commodities our finest work? And are they worth the hidden cost to farmers, taxpayers and the environment?

Subsidies might be a dirty word at the WTO, but here in France, they’re targeted and administered with a view to promoting diversification, and supporting high-value, environmentally-responsible enterprises. The neoliberals hate them, but I bet the trout would have a different view…

Dave Hansford

62 comments on “Muddying the Waters ”

  • Comments are now closed

  1. Cnrjoe 1
    13 February 2014 at 11:02 am

    Thank You and brilliant.

  2. Chooky 2
    13 February 2014 at 11:19 am

    +100….tourists notice what is happening to New Zealand rivers, lakes ,waterways and they are not impressed

    …on purely economic terms alone the tourist dollar must be factored in

    ….and in the end NZ’s Clean Green brand image will be affected, which affects all products and produce from NZ

  3. Bill 3
    13 February 2014 at 12:11 pm

    I wonder what the average acreage is for a French farm compared to a NZ one.
    I wonder how many French farmers are in the slave like position of NZs share milkers.
    I wonder at what rate French farms are amalgamated and corporatised.
    I wonder how much the lack of subsidies pushes amalgamation/corporatisation.
    I wonder if most French farmers are locked into selling their produce to one buyer as in NZ.

    And I wonder how many French children go seriously hungry because the agricultural sector sells its produce overseas in the first instance and then only over priced sub-standard (from an export perspective) produce to the domestic population as a secondary afterthought.

    Anyone out there got a good reason as to why we should tolerate NZs corporatised agricultural sector?

    Finally, here’s one possible (arguably inevitable over the long term) real world effect of corporate agriculture pursuing export profits…

    Life a struggle for Pygmy family, Globe & Mail (Toronto), December 17, 1991, p. A15. “A diet consisting mainly of manioc flour, beans and rice has affected [northeastern Brazilian laborers’] mental development to the point that they have difficulty remembering or concentrating. Fully 30.7 per cent of children in the Northeast are born malnourished, according to Unicef and the Brazilian Ministry of Health. . . Brazilian medical experts have known of undernourishment in the country’s poorest region for more than two decades, but they confirmed only recently the existence of a much more startling problem — a severe lack of protein in their diet that is producing a population of Brazilian Pygmies known by some medical researchers in Brazil as homens nanicos. Their height at adulthood is far less than the average height recording by the World Health Organization and their brain capacity is 40 per cent less than average. . . . In the poorest states of the Northeast, such as Alagoas and Piaui, homens nanicos comprise about 30 per cent of the population. . . . Much of the Northeast comprises fertile farm land that is being taken up by large plantations for the production of cash crops such as sugar cane.”

    • Murray Olsen 3.1
      13 February 2014 at 9:02 pm

      Away from the coast, the people of the northeast of Brazil are noticeably short. I expect that this will become a problem along the coast as well, as many of the rivers and mangroves are being taken over for prawn farms. Sugar cane, soy beans, and now prawns have caused a huge increase in the number of landless peasants right through Brazil. The “colonels” who own the land these days are basically slave holders, with their own armed militias. It’s not hard for me to imagine Fonterra doing the same to Aotearoa. How long before we see homeless encampments under black polythene along the sides of country roads? Fonterra is our equivalent of the United Fruit Company.

      By the way, I saw trout in the canals in the middle of Ulm. The Germans have made huge strides in cleaning up their rivers. I also pay less for Mainland cheese in Brisbane than I would in Auckland.

      • Bill 3.1.1
        13 February 2014 at 9:09 pm

        It’s not hard for me to imagine Fonterra doing the same to Aotearoa

        Well, it’s not as though a different species runs Brazilian corporations…it’s the same people there as here.

    • Sean 3.2
      19 February 2014 at 3:04 pm

      Not sure where many of your points come from – I use the term “points” as the majority aren’t able to be called facts as they are incorrect. The only one worth discussing would seem to be child hunger – which, where it exists, no one can countenance. But thats not driven by the price of food products – its driven by a combination of poverty and bad decisions/prioritisation by parents.

      • One Anonymous Bloke 3.2.1
        19 February 2014 at 3:15 pm

        Let’s just drill down into that unsubstantiated assertion about “bad choices”. There are well established links between income inequality and a range of social ills, infant mortality, for example.

        You think this is about “bad choices”? Perhaps you mean bad choices made by blind ideologues who say things like “no sensible company owner would treat their employees badly, so we don’t need to regulate”. Who say things like “Minimum wage increases lead to unemployment”.

        Of course, you are welcome to provide citations that support your thesis that parents are responsible for employment law and economic policy.

        Good luck.

  4. fender 4
    13 February 2014 at 12:26 pm

    Excellent article on an increasingly serious set of problems we are making for ourselves. I hope Nathan Guy reads it, rather than his usual bending over for the people responsible for these crimes against the environment. But unfortunately there are too many National MP’s who own dairy farms for them to act in any ones interest but their own short-sighted ones.

  5. Ad 5
    13 February 2014 at 12:32 pm

    Fully appreciate the well written comparisons, but dairy – unlike the well-diversified France – is the closest thing we have ever had to an industry that can get us rich beyond the standard boom-bust 20-year extractive horizon. There is as yet no alternative, and we’ve done well to alter our economy this far.

    Having said that, I like your practical directions at the end. I believe the “really tough conversation” about bulk commodities should be first. Farmers will take production where their dairy companies lead them.

    When the legislation was passed that enabled Fonterra to exist, there was supposed to be a focus on high-value products from the beginning.

    I believe the next government should review the legislation, and review Fonterra, to see if that is what they are doing.

    Right now, because they are following the route of infant formula demand from China and India, their business is driven by the massive production plants – and farms – needed to sustain them. Fonterra is becoming less and less a value-added business and more akin to a utility company that is driven by its Asset Management Plans. Whither depreciation and supply certainty go, goes Fonterra.

    Turn Fonterra towards requiring more complex inputs and less bulk, and you turn most of the dairy farmers. Review them first, and the water standards will be a logical next.

    • Saarbo 5.1
      13 February 2014 at 1:31 pm

      “When the legislation was passed that enabled Fonterra to exist, there was supposed to be a focus on high-value products from the beginning. ”

      I think with the huge growth in capacity in the South Island, Fonterra simply had to build capacity as quick and as cheaply as possible…hence the focus on powder…as things settle down I suspect they can focus on branding/higher value products. Milk Powder is a commodity and wont stay at the current $5k usd per tonne for ever.

      • Ad 5.1.1
        13 February 2014 at 1:39 pm

        It’s the reverse.
        Fonterra and other dairy companies respond to demand in the markets they operate, determine the kind of product they want, and the farmers supply it.

        • Saarbo 5.1.1.1
          13 February 2014 at 3:16 pm

          Ya reckon Ad? I don’t think so. Farmers convert as much farm land into Dairy then Fonterra builds capacity to process it into exportable product. Don’t forget, Fonterra is owned by the farmers that are converting farm land into Dairy. Fonterra is selling a commodity so they will sell everything that they can get their hands on…customers are coming to Fonterra via their auctions.

          • Ad 5.1.1.1.1
            13 February 2014 at 3:45 pm

            The auction isn’t for Mars Bars. It’s for milk powder. That milk power doesn’t go from from Mr Bob from Temuka direct to Kraft. It’s supplied to Kraft by the dairy company, who tell the market loud and clear it’s worth converting land. Change the waterways? Sure needs doing, but start with the retailer.

            • weka 5.1.1.1.1.1
              13 February 2014 at 3:51 pm

              It’s not just about water ways. You can’t have industrial dairying and an intact environment, it’s just not physically possible. Better to be honest about this.

              • Ad …
                13 February 2014 at 4:14 pm

                I was seeking to stick with the focus of the post – go ahead and widen if you like but it’s a big enough topic as is.

      • Mary 5.1.2
        15 February 2014 at 10:05 pm

        I think you will find the focus on powder is the fact that it is a product that can be stored for longer if there is less demand, as opposed to cheese and butter, which has a much more limited shelf life.

        • Sean 5.1.2.1
          19 February 2014 at 3:10 pm

          Correct Mary – and also worth people when commenting thinking about the milk supply curve (you need to have more processing capacity in Spring than the rest of the year as thats when the most milk (by far) is produced), the cost of transport (powder is cheaper to transport), what customers want to buy, and profitability (selling something for more $$ doesn’t mean more profit if the cost of processing, transport etc are higher or if the wastage levels are higher).

          And to other comments on this particular thread – Fonterra responds to supply when building processing capacity. farmers make the decision to convert to dairying if they want to.

    • weka 5.2
      13 February 2014 at 2:22 pm

      “Fully appreciate the well written comparisons, but dairy – unlike the well-diversified France – is the closest thing we have ever had to an industry that can get us rich beyond the standard boom-bust 20-year extractive horizon. There is as yet no alternative, and we’ve done well to alter our economy this far.”

      Sorry mate, but if dairy farmers like yourself want to get rich at the expense of everything else you can go fuck yourselves. Hansford is being generous when he suggests that we should spend so much time and effort supporting current industrial farmers to transition to something else. There is a window here for such farmers to change, but that window won’t always be there. In my life time farmers have gone from being the backbone of the country to becoming one of the most loathed professions, largely thanks to dairying. The really shit thing here is that it appears that industrial farmers will wait until they are forced to change, and by then hugely more damage will have been done.

      There are real alternatives. Why not educate yourself about what they are and then see if you can make the arguments you make.

      • Ad 5.2.1
        13 February 2014 at 3:41 pm

        No argument that things need to change.
        You can lay out the whole-industry alternatives thanks.

        • weka 5.2.1.1
          13 February 2014 at 3:49 pm

          I’m not interested in the industry. If saving the industry is your agenda, that’s up to you to find solutions, ones that don’t included fucking the country. Also, I seem to remember the convo we had about this recently where various ideas were put out and you came back with TINA, so I’m not yet convinced you’re interest is genuine.

          Farming should be about producing food for NZers. It should be done sustainably (in the true sense of that word), and it should make the farmer and their family a decent living as well as the other people that work there (note, I don’t meant make them rich). All those things are possible, and there are farmers in NZ already doing them to varying extents. Industrial dairying isn’t, it’s just making a big mess of the environment and tying NZ even further into the oil and global finance economies. Both those things make us much more vulnerable as well as reducing quality of life considerably.

          • Ad 5.2.1.1.1
            13 February 2014 at 4:12 pm

            Your position is too far removed from New Zealand’s reality to be real.

            New Zealand’s economy will not survive without exporting. New Zealand’s exporting economy is almost exclusively built on natural resources whether they be minerals, agriculture, or tourism. Even the key ingredient to value-adding to reources – electricity – is in New Zealand based on natural resources.

            New Zealand’s food economy will never be reduced to servicing the tiny local market.

            We base our exports on agriculture. To start with farmers as the origin of changing the land for good has never worked here, and will never work here. They are and will remain highly conservative in practise and in demeanour. Start with the companies who respond to international standards and tastes. They above all drive the kind of production New Zealand’s farmer produce.

            • Draco T Bastard 5.2.1.1.1.1
              13 February 2014 at 4:42 pm

              New Zealand’s economy will not survive without exporting.

              It’d survive fine without exporting. IMO, we’d be far better off if we minimised exports and so would the rest of the world.

              New Zealand’s food economy will never be reduced to servicing the tiny local market.

              Yes it will. It’s just a question of how that comes about – by choice or by force. That’s what depleting resources means.

              • Ad …
                13 February 2014 at 5:06 pm

                Perhaps you could write a post about your economy without exports.
                Some other time.

                We have been going for 150 years depleting resources, no argument. And every time we expect the loggers, gold miners, farmers to change. Rarely does. the power is with the retailers and processors ESP in dairy.
                By the way, compare this debate to be Countdown one.
                Different farmers, but the power centre is same and writ large.

                • Flip …
                  13 February 2014 at 7:08 pm

                  The problem with primary production exports is that the markets are a long way from NZ. When oil prices go up so will our export prices. Production then must become more efficient to be competitive and thus more industrialised, not to mention attempts to manipulate currency to stay competitive. This is not going to be good for our future. Everybody can see the train coming. Question is are we smart enough to get off the tracks?

                  • weka …
                    13 February 2014 at 9:00 pm

                    Exactly.

                    Ad, I’m curious how you see Peak Oil, AGW and the GFC fitting into your picture. You seem to be saying that we have no choice therefore we will just continue polluting until NZ can’t support export farming any more. Then what? Or do you think we can do this indefinitely.

                  • dave …
                    6 March 2014 at 4:12 am

                    the train is turning the bend and the oligarchy will grab as much as possible before it hits then blame the public with propaganda like bad choices. and if the their caught they run just like bandits.

                    lets not forget that a lot of farmers run there farms at a lose to avoid paying taxes they take the capital gain. So they rape the the environment ,constantly demand corporate welfare ,push loses and costs on future generations and when busted run for the hills with there plunder.

          • Sean 5.2.1.1.2
            19 February 2014 at 3:00 pm

            If it were just supplying food for NZers then 1) we’d only need approx 5% of what we currently produce (so majority of farmers are out of work) 2) we can’t produce many of the products we would still want and 3) we wouldn’t have the funds to buy the things we want but can’t supply (you do realise we struggle to produce the appropriate wheat for bread making?? – little things like that). Not sure what thigns we buy with overseas funds we aren’t going to going forward – medicines perhaps.

            I get the feeling yours is an emotive position rather than one well thought through.

            • weka 5.2.1.1.2.1
              19 February 2014 at 6:05 pm

              Do you have some backup for the 5% statement? I’m bound to disagree with your point (I think there are many ways for farmers to make a living from their land, so long as the debt issue is resolved), but I would be interested to see how that number was arrived at before I respond.

              What you say makes a kind of sense within the current economic model. But it’s not the only model that exists (Draco would be the one to ask about how NZ would manage with a greatly reduced export economy).

              However, what you say is also predicated entirely on the idea that we have a choice in the matter. If you take Peak Oil, AGW and the GFC into account, then the choice is around timing and whether we use the resources we have now to transition or wait until we have no choice and face a much harder power down. Industrial farming for export is only possible because we use farm inputs that are completely dependent on cheap oil. Once that’s gone, you can’t farm like that any more. What do you think will happen then?

  6. adam 6
    13 February 2014 at 12:37 pm

    Our dairy farmers are all welfare capitalists – who have there very own form of vulgar communism, albeit a strange world were they get to keep the land, profits, and we pay the costs.

    Maybe we should be involved in co-operative’s more – Maybe the whole country should start join co-ops more and more. I know my banking is now done with a co-op. I buy at farmers markets – as the majority of farmers I deal with are great.

    So I just have a problem with an economic system which defers the real costs of dairy farming onto the rest of the population. I suppose you do to.

  7. Saarbo 7
    13 February 2014 at 1:16 pm

    Fascinating article Dave. I am amazed at the number of farmers (not only corporates but generational farming families) who request debt from their banks to buy more and more farmland. These farmers are buying for ONE reason: Capital Gain. Amazingly these farmers no longer go to their Accountants to assess whether they can afford to purchase another farm, they go to their Banks. The Banks don’t look at the feasibility of the Farm being purchased but simply whether there is enough equity in the overall Group…so the banks effectively set the price of affordability at the point where total costs = total revenue for the target farm being purchased. So what this means is most farmers cant afford to put money into mitigation of adverse environmental practices because they simply don’t make financial surpluses. And then even worse, to pay for their farms, farmers OVERSTOCK their farms, feed additional supplemental feed (Buying in PKE, Maize, Spread Urea, whatever…)…many farmers are really in the shit at the moment because of their DEBT. Rabobank recently did a presentation which clearly showed that the cost to produce Dairy Produce in NZ is reaching parity with the US and other high cost nations; the main driver is, surprise, surprise…INTEREST costs.

    I don’t know what the answer to our massive dairy farm driven environmental degradation is but I know that the BANKS are in part to blame, our obsession with Capital Gains is also to blame and of course Greed…Dairy farmers are one of the most greedy groups of people I have ever known.

    • Draco T Bastard 7.1
      13 February 2014 at 1:52 pm

      The Banks don’t look at the feasibility of the Farm being purchased but simply whether there is enough equity in the overall Group…so the banks effectively set the price of affordability at the point where total costs = total revenue for the target farm being purchased. So what this means is most farmers cant afford to put money into mitigation of adverse environmental practices because they simply don’t make financial surpluses.

      As Steve Keen proved – when you run a business on the margins you go broke. The banks are doing well out of it though.

      • Saarbo 7.1.1
        13 February 2014 at 3:19 pm

        Yep…and why they will do anything to ensure we don’t get a Labour/Green govt later this year introducing a CGT. The banks are relying on capital gains for growth in their loan portfolio…

    • dave 7.2
      6 March 2014 at 4:25 am

      the last thing these farmers want is a labour greens government there dirty little game would be up !
      CAPITAL GAINS TAX

  8. scotty 8
    13 February 2014 at 1:23 pm

    Excellent post.

    Federated Farmers ,Dairy nz , irrigation Nz, latest co-ordinated defence strategy is to highlight degraded Urban waterways in an attempt to frame ‘townies” and Regional Councils as the ‘real’ polluters.
    Straight from the Joyce / Key playbook, imo

  9. Flip 9
    13 February 2014 at 2:04 pm

    + Nitrogen tonnage going into waterways.

    Well said.

  10. greywarbler 10
    13 February 2014 at 2:52 pm

    Questions. And another – Am I right in thinking that NZs tend to go for the low hanging fruit most of the time? The practical man or woman’s approach rather than the advanced, careful, researched and environmentally sound way.

    The only theories that get accepted are ones connected with neo lib management of money and any that seem to favour the near or already wealthy.

  11. xtasy 11
    13 February 2014 at 5:14 pm

    Quote:
    “New Zealand has instead banked its fortunes on trying to be the world’s biggest and cheapest producer of a distinctly low-value and fiercely-contested global commodity – milk powder – the price of which dances precariously at the whim an online auction system.”

    “This industrial-scale model of agriculture has had another crippling consequence: New Zealand’s lowland fresh water bodies are now in a parlous state, so polluted with effluent and nutrients that in 2012, the Ministry for the Environment reported that the quality of just over half of 210 monitored river swimming sites around the country was either ‘poor’ or ‘very poor’.”

    NOW we are TALKING!

    Yes, while I would not recommend the EU model for farming as the perfect solution for New Zealand to follow, farmers and society as a whole here could learn a lot from the more sustainable practices described in this post here! In many EU countries they are years ahead of New Zealand, not just in environmentally friendlier farming practices, but also in value added production.

    There is much to learn, and Fonterra and others should start to focus on producing cheeses and more, made from milk here, also developing unique New Zealand products, that could be patented, copy righted and found nowhere else, earning more dollars than bulk milk powder. Bring it on, that is if the industry “wants” to bother!

    The government can set the needed framework, but this one we have will certainly not do so, as they rather carry on as usual, and take the easy solution, producing ever more quantity of the same, instead of top of the shelf, and unique quality products.

  12. Ashton Lovell 12
    13 February 2014 at 5:47 pm

    I think it is greatly unfair to criticize New Zealand farmers on not investing in value added products. This is not a farmers job in the slightest, it’s Fonterra’s job and it is something that they have invested hundreds of millions of dollars into already and will no doubt continue to do so because it’s in their best interests to diversify their income sources.
    The fact that the vast majority of dairy exports are milk powder has more to do with the fact that we produce such huge quantities of milk, more than we can add value to.

    I think however that the gist of the environmental portion of the article is right, there is too much nitrogen being applied at obviously diminishing returns.
    Subsidizing the cleanup is obviously also just dumb. Farmers already have strict compliance requirements, why not have a code of compliance in regard to nutrient usage?
    Limit the per acre amount that farmers can apply and we will limit the pollution.

    I agree that methane emissions are a huge issue and farming could be added to the E.T.S. Perhaps there are other more specific ways to compensate for the huge emissions of farming though?
    Seemed pretty unpopular when Helen Clark tried that however.

    • Flip 12.1
      13 February 2014 at 7:17 pm

      “…more than we can add value to.”

      Then Fonterra should do a better job at marketing high value products. The execs are paid enough.

      • Bill 12.1.1
        13 February 2014 at 9:41 pm

        Execs are there to ensure a constant return to shareholders. Nothing more. Milk solids work just fine. There’s a steady return. Value added products would involve investment and a loosening of the vice like grip over farmers and their product. That would result in a dip in short term returns.

        Not happening.

      • dave 12.1.2
        6 March 2014 at 4:41 am

        if have chance go to one rod orams presentations “value added will not be fonterra there just a commodity producer supplying the big boys where the real value added is the likes of nestley

    • xtasy 12.2
      13 February 2014 at 7:27 pm

      Fonterra though is OWNED by farmers, so farmers have a say, or should have at least! As owners they can tell Fonterra what they should develop and do with the milk they produce.

      See:
      “The Fonterra Shareholders’ Council is an elected national body of farmer shareholders”

      http://www.fonterra.com/nz/en/About/Our+Governance/Fonterra+Shareholders+Council

      “Representing Farmers

      The Council represents the views of Fonterra farmer shareholders. The Council consults frequently with farmers, and meets regularly with the Board to ensure Shareholders’ voices are heard and considered. This is particularly important when major change is proposed or significant issues are being addressed. The Council also provides a Shareholder perspective when new policy is being developed.”

      • Bill 12.2.1
        13 February 2014 at 9:45 pm

        One farmer one vote, is it? The farmer with 20 heads has the same voice as the corporatised entity with 1000s of heads spread over multiple properties? I doubt it.

    • Colonial Viper 12.3
      13 February 2014 at 7:33 pm

      has more to do with the fact that we produce such huge quantities of milk, more than we can add value to.

      This really is a bit of a cop out.

      Who decided to keep encouraging farmers in the production of bulk volume, undifferentiated milk?

      Who decided to keep building milk powder factory capacity to take on more and more bulk volume undifferentiated milk?

      Who decided to keep shipping milk in the form of products from the 1960s and 1970s?

      Seemed pretty unpopular when Helen Clark tried that however.

      That’s the fucking out of touch Feds for you.

    • Bill 12.4
      13 February 2014 at 8:12 pm

      “more than we can add value to…

      Erm…Bollox. But here’s the thing, Fonterra is a co-operative in name only – in reality it’s an iron fist. Dairy farmers have no option but to pass their product through ‘the co-operative’. What the fuck do you think the reaction would be, should a farmer decide to hold on to some of their product and develop a ‘value added’ enterprise? They’d be fucked over and cut out of the market or ‘their’ farm taken under management..

      Am I wrong? Then someone will easily show me the clauses in the agreements/contracts that allows a farmer to hold onto, or pass their product through any other avenue apart from ‘the co-op’.

      And I say the above on the naive premise, a premise I don’t actually believe, that there is some conglomeration of small farmers rather than a sprawling industrial/corporate unit marked by a reality of ‘farmers’ as employees.

      • Ashton Lovell 12.4.1
        13 February 2014 at 9:08 pm

        You are right about the fact that many farmers are essentially forced to be a part of Fonterra, though in many areas(such as the Waikato) there is alternatives.
        That said Fonterra is still largely supplied by small farms, I heard(and this was from a farmer with no supporting evidence so I’m sorry if it’s untrue) that Fonterra is still over 50% supplied by farms with under 300 cows, this essentially means that the majority of Fonterra voting rights are still held by family farmers. Unfortunately they often do not chose to use them.

        • Bill 12.4.1.1
          13 February 2014 at 9:15 pm

          So, let’s go with the line that small farmers…even family farmers… supply Fontera (50%). What alternatives exist for them? I’m punting that it’s a monopolistic buyers market. They, Fonterra, own, operate and control all the distribution networks/infrastructure, and have locked down supply agreements/contracts, no?

      • weka 12.4.2
        13 February 2014 at 9:25 pm

        I’m not sure how this works re the ‘co-op’ but afaik there are farmers in NZ who are doing the value added thing and selling excess milk to Fonterra. Mostly they’re selling within NZ. The value-added businesses operate outside of Fonterra afaik, and we know that Fonterra is not supporting organics in NZ. Fonterra is about making money not supporting creative initiatives, and it does this with an iron fist.

        But I think that big hurdles for more farmers getting out of that are: knowledge and experience; lack of support from govt agencies relative to what conventional farmers get (including R and D); lack of support from the farm advisors; and debt. I reckon it’s the last one that is the hardest to overcome, because once they are tied into that above a certain level there is probably no way out other than to play the game as you are told. That doesn’t explain the numbers taking on that debt in the first place though.

        • Bill 12.4.2.1
          13 February 2014 at 9:32 pm

          Maybe ‘convention’ and ‘received wisdom’ goes a way to explain your last point – ‘it’s the way *this* is…’ always been this way’ etc. That, and that we’re all geared to ‘make a buck’ – sadly.

    • Tracey 12.5
      14 February 2014 at 11:13 am

      Do farmers have no choice who they sell to?

      • Bill 12.5.1
        14 February 2014 at 1:54 pm

        Let’s say I’m a farmer with x output. Do I have access to a distribution network to reach customers? If I don’t, and my output is beyond what I can sell at ‘the farm gate’, then I guess I’m signing a supply contract with Fonterra. So sure. There’s choice.

        • Tracey 12.5.1.1
          14 February 2014 at 2:01 pm

          Is Fonterr the only plyer, or is the “competition” only regional, nd not Nationwide?

          I’m sking cos it seems like farmers have hobson’s choice, which is the same for, say, average employee “negotiating” directly with their boss?

          • weka 12.5.1.1.1
            14 February 2014 at 3:57 pm

            afaik Fonterra is the only nationwide player for selling milk in the mainstream. There are alternatives in some regions.

            Bill, the companies I linked to above use non-Fonterra distribution networks. Have a look at Clearwater’s retail list, they’re definitely getting their product out there.

            • Sean 12.5.1.1.1.1
              19 February 2014 at 2:56 pm

              There are alternatives in: Westland (WMP), Canterbury (Synlait, WMP, CMP and others), Otago (OCC), Southland (OCC), Manawatu/Wanganui, South Taranaki (OCC), Waikato (Tatua, OCC, Miraka)…… No one HAS to supply to Fonterra – in some regions they are the only processor that will pick up milk as other players don’t find it economic to do so. On the other hand Fonterra HAs to collect supply from those who want to supply them within some very generous (to the suppliers) criteria. Even when Fonterra may not want to collect the milk (economics, because they don’t support dairying occurring in certain places etc).

              And Fonterra suppliers can supply a significant volume of their supply to others (was up to 20% at one point – not sure what it is now).

  13. Philj 13
    14 February 2014 at 10:56 am

    Xox
    And when interest rates rise and milk powder price falls?

  14. nodtheplod 14
    14 February 2014 at 11:33 am

    Hang a minute all you well educated twits. None of you have answered the question of how are we going to clean up our polluted waterways. maybe all of you can take me to a factory manufacturing fresh water. Just remember that there is no substitute for fresh water. It is our only life surviving force on this planet. We cannot survive without fresh water and we are sysematicly destroying this life giving force. Maybe just one of you could give me the answer or do we have to watch while the dairy industry increase their output and pollute our remaining waterways and yes cattle will be absorbing the pollutants via drinking contaminated water. What effect could that have on our children?

  15. captain hook 15
    14 February 2014 at 1:46 pm

    this country is overpopulated and ramped up to the max.
    every farmer wants to have enough surplus cash to go to the Super Rugby final, buy a hotrod, or a hardly davison or some other toy or buy another proeprty and ramp up their debt level and do the same thing over again.
    Anything that gets in the way will be swept aside by fed farmers and the national party.
    This country has gone mad and that is the long and short of it and the great fat dotcom of it.

  16. aerobubble 16
    14 February 2014 at 1:47 pm

    A business needs passing traffic. So often I see a business retail start up in the wrong place and disappears after a few years. And its because they need a core consumer base that will carry them
    (and that means a unassailable market niche).

    The problem with NZ is unlike France, where restaurants are low taxed, and food culture naturally grows out of that, hates the idea that any common citizen should also get fraternity. NZ has imported the class snobbery of the British, or maybe some insipid left over racism toward the Maori… ..or imported apartheid… or whatever divisive views that rich are show how the Randian betters.

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