Write Here,Right Now

She’s dry, but farmers will get through this challenge

A new year and a new set of – as well as many old – challenges face New Zealand’s agricultural sector.

Already with 2015 only just begun; we see Canterbury and other eastern parts of the country facing a long, dry summer. Meantime, Fonterra is struggling to meet its forecast payout of $4.70/kgMS and the red meat sector – especially sheep – is merely treading water.

As Waikato University’s Jacqueline Rowarth so eloquently puts it water is the burning issue for New Zealand.

While so-called environmentalists and other interest groups want stymie almost every proposed irrigation scheme mooted around the country. Take the on-going battle the proponents of the Ruataniwha dam in the Hawkes Bay continue to face in trying to get that scheme up and running.

It is easy to forget that the actual issue in New Zealand is not water – but water storage.

Again; as Professor Rowarth rightly points : ‘New Zealand receives 608 billion cubic metres of water annually, but uses only 1.8%. Just over half of that 1.8% is used in irrigation, 23% by industry, 17% in drinking water and 7% is used by stock. It is the 597 billion cubic metres of water that is currently running out to sea that is of concern’.

The challenge for the agri-sector – and those of us reliant on it – is to ensure that facts like these are seen and heard by the general population. Too often all the general public are served up with is the emotive agenda pushed by groups like Forest& Bird and/or Fish&Game – -where often the facts are not allowed to get in the way of their arguments.

There is little doubt dairy farmers will have a much tougher season this coming year than the past few. Yet, going by some of the ill-informed media reports thus far, one could be forgiven for thinking the entire dairy industry is on the brink of collapse and the country’s economy not far behind it.

History shows that all commodity sectors endure both highs and lows. Unfortunately, dairy is currently experiencing the latter – after a couple of stellar seasons of the former.

Meanwhile, to misquote Mark Twain: ‘Reports of sheep meat prices and the sector rising from the dead have been greatly exaggerated’. Sure there has been a lift in prices, but this was off an unsustainably low base and some sort of reform/rationalisation for the sector is badly needed.

I look forward to, again, sharing this journey with you.

Fonterra did not have the best of weeks with another drop in payout and highly critical WPC report

WITHOUT DOUBT last week was a bad one for Fonterra and its shareholders.

The cooperative, New Zealand’s largest company, was savaged by an independent inquiry into the handling of its infamous WPC80 false botulism scare last year.

In its 103-page report, the inquiry team, led by Miriam Dean, QC, confirmed what most people knew from August 2, 2014 – Fonterra’s response to the WPC80 case was woeful at best.

Also, last week the co-op’s directors announced a 60c/kgMS drop in this season’s forecast payout to its 10,500 farmers.

Normally, what 10,500 farmers get paid for their milk is irrelevant to townies. The 60c drop means a $6 billion reduction in potential earnings from the dairy industry this season, compared to last season’s record $8.30/kgMS payout; huge implications for the national economy.

So, how did Fonterra find itself on the ropes last week?

No one can point the finger at the co-op for the millions of litres of extra milk produced by happy farmers in the US and the EU. The extra milk is suppressing global milk prices. The question Fonterra farmers will ask is why the co-op’s management and board did not see the warning signs earlier.

The season started with an opening forecast payout of $7/kgMS, announced in May this year; slashing $2.30/kgMS from the payout within six months raises serious questions about the co-op’s forecasting ability.

The co-op says farmers expected and understand the sharp drop in prices; the writing has been on the wall for some time, but did Fonterra have to take its farmers on a roller coaster milk price ride this season?

The co-op says it will trim costs and defer capital expenditure, where possible, to generate more cash for farmers. Will it now defer major investment in global milk pools – championed by chief executive Theo Spierings – and touted as being crucial to Fonterra’s future? Short term payout pain for long term milk volume gain may not be every Fonterra farmer’s cup of tea.

What is most important to Fonterra’s future as a global player is getting its food safety credentials right.

The co-op says at the time of the recall of WPC80, it did “what was right based on the evidence we had”; Fonterra could use the same excuse for explaining how it got this season’s forecast payout so wrong.

However, the WPC80 inquiry report finds its response was far from satisfactory. Many farmers would come to the same conclusion as they milk cows over the festive season and rue the $6 billion they will never see.

YOU KNOW there is something seriously wrong with the priorities in the country’s education system when we have only 100 agricultural science graduates – compared with 120 in acupuncture – in one year.

If this wasn’t so serious it would be a joke.

Ministry of Education data tell us that of the 25,000 domestic bachelor graduates in 2013, only 350 graduated in a primary sector-related discipline. Too few high-achieving school leavers take agriculture-related studies at bachelor degree level.

As a rural-economy nation, our primary sector should be the natural place for our best and brightest people. As Associate Primary Industries Minister Jo Goodhew recently said: “We need to do more to encourage and promote the sector as an attractive and fulfilling career option for our talented young people.”

The head of Massey University’s Institute of Agriculture and Environment, Professor Peter Kemp, believes rightly that careers advisors had better be told to think it out again, i.e. cease encouraging only less ‘able’ students towards the industry, and instead change the narrative to ‘only if you are bright enough is a career in agribusiness for you’.

Channelling bright, young people towards a career in the wider, primary sector is vital to our nation’s future. Currently there are 350,000 people employed in New Zealand’s primary sector, and by 2025 this number will be closer to 400,000.

To get anywhere near achieving the Government’s goal of doubling exports by 2025, the primary industry must have the right people with the right skills. Only the best and brightest will do.

Goodhew and Kemp agree the industry’s message must emphasise that ‘doing agriculture’ doesn’t mean just farming. There’s also banking, marketing, advisory, engineering and food, to name a few. Agricultural science, farm management and agribusiness are all key fields in the primary sector.

Promotion of primary sector industry has to start in our schools – the younger the better. Goodhew is 100% right when she says: “If we want to attract talented, young people into the primary sector we need to make them, and their parents, aware of the opportunities (and salaries!) available there.”

NEW ZEALAND’S farming future is not just black and white or – at least – just black and white dairy cows.

Improving red meat prices and lower dairy prices, combined with growing concerns about the environmental impacts of more and more cows, may give impetus to the resurgence of the all-important sheep and beef sectors.

There is no doubt the rural sector and the country’s wider economy have benefitted from the boom in dairy production over the last 10 or so years. The days of New Zealand living off the sheep’s back have well and truly gone; now we’re reliant on the cow’s udder.

But concerns have been expressed about our country’s growing dairy dependence – economically and environmentally.

Some commentators, somewhat facetiously have made claims that New Zealand’s ‘one-trick’ economy – due to the importance of the dairy sector – is a recipe for economic disaster. Many of these commentators now believe their claims are being vindicated with the recent drop in dairy prices. This is far too simplistic a diagnosis and ignores the fact that all markets go up and down.

More relevant, and likely to stunt continued explosion in the country’s dairy herd, is the growing worry about the environmental impacts of dairy farming.

More and more dairy cows cannot continue to be milked in New Zealand without the country reaching ‘peak cows’ at some stage. We may not be at that point yet, but growing public pressure will soon see this time come.

The dairy industry will always be an important and vital component of New Zealand’s economic story. However, as with all things in life, it is not healthy to have all our eggs in one basket.

This is why it is good to see more positive talk about the red meat sector, e.g. Professor Tony Bywater, of Lincoln University, who says “done right, sheep farms can compete with dairy”.

He made these comments at the official opening of Lincoln University’s sheep technology farm (LUSTF) earlier this month.  Sited on the 21ha former South Island Field Days site, the new unit will be used for student and farmer training, field days, demonstrations, and research.

News that both the major meat co-operatives Silver Fern Farms and Alliance Group have experienced better returns this year – although still pitiful – is also good reason for optimism.

Let’s hope these truly are signs that long-term profitability is returning to the red meat sector – that they’re not just a flash in the pan.

New Zealand needs a strong, vibrant and profitable sheep and beef sector just as it needs a strong, vibrant and profitable dairy sector.

NEW ZEALAND wool growers have again firmly rejected the idea of a levy-paid industry-good wool organisation.

In a referendum that closed on October 10 farmers declined the opportunity for a new wool commodity levy order. The previous levy was dropped in August 2009.

The new levy promoters and advocates, the Wool Levy Group, concede the fight is lost.

Chairwoman Sandra Faulkner describes the outcome as “disappointing”. She and fellow levy group supporters have a right to be disappointed: they worked hard to get the industry-good wool organisation reinstated. But they should not be disappointed about the voter turnout.

Some 47% of eligible woolgrowers voted – still pitiful – but high compared with most commodity levy referendums that struggle to get more than a 35% turnout.

Now however, the higher-than-normal voter turnout signals that the rejection of the wool levy should be finally accepted.

The vote: 57% of farmers rejected the levy, only 43% favoured it. Meanwhile, the weighted vote from larger enterprises was even more strongly against the proposal: almost 60% rejected the levy.

Faulkner says the promoters faced a twin challenge: to ensure wool growers understood the proposal to introduce a levy under the Commodities Levy Act, and to get a strong voter turnout.

This poll result shows that both of these objectives have been met.

While some proponents of an industry-good wool organisation will be disappointed that their fellow woolgrowers have elected to reject a levy, they must now accept this is the will of a sizeable majority of growers.

Thankfully, Faulkner has conceded there is no chance of a repeat effort to force another vote.

“Growers have had their say and that’s where we are at,” she says.

It is now time to move on for the sake of all involved in the country’s $700 million wool industry.

Landcorp chief executive Steven Carden

LANDCORP CHIEF executive Steven Carden is right on the money in pointing out that the farming sector has effectively lost the confidence of the public. The ‘man in the street’ is now more inclined to believe ‘dirty dairying’ slander than the more balanced messages from NZ’s farmer lobby groups. He is also right in saying the ag sector is ineffective in telling its good news, making it unevenly matched against the few shoddy farmers who give ‘catch and kill’ – aka Fish & Game – the ammunition to create the ‘dirty dairying’ messaging. What Fish & Game, the Greens and other environmental groups – obsessed with their negative perceptions of farming – have done is insidious. They have painted a picture showing farming as a dirty, harmful activity and by implication not a good career choice. Thus it gets even harder to encourage young people to make a career in farming and the wider agribusiness sector. Plenty is going on nationwide to promote agriculture to youngsters as a career of first choice. Sadly, city folk see little of this in the mainstream media. Carden is right: farming needs to smarten up its image fast. At the same time, the perpetual knockers of farming need to reflect on the consequences of their short-sighted self-interest campaigns seemingly designed to drive up membership. The future of agriculture is too important to NZ to be manipulated by lopsided lobby groups for their own petty political interests. Is it asking too much that farmers clean up their act and that environmentalists stop whingeing every time they see a cow? Kiwi common sense must prevail where farming is shabby, then generosity might be expected from the knockers.

IN JUST a few days the 2014 election campaign will be over and then will start the process of forming a new government. Depending on which parties get what number of votes this could be a simple or a drawn-out process.

This has been the most bizarre election campaign in 50 years, memorable for lacking serious debate on issues of real importance to New Zealanders. Instead, day after day, our television screens and newspapers have been full of the latest silly little scandals, while issues of substance were ignored.

Hopes were for true debate on serious issues such as science funding for agriculture, for meaningful rather than trivial debate on environmental issues, and for voters to get good information on which to base their decision on election day.

For farmers there are some choices: to live with National’s essentially status quo model with some minor changes around the fringes. Labour’s capital gains tax has implications for the sector and could be a match winner or loser. The Greens predictably have never deviated from their stance to impose more restrictions and costs on farmers. For them the cow is the cause of the problem, not the saviour of the economy.

In the past, the differences between National and Labour from a farmer’s perspective have been minor. But Labour cuddling up to the Greens represents a complete paradigm shift and has rightly or wrongly made many people in the agribusiness sector nervous. It’s also fair to say that over the years, agriculture’s power base has declined as New Zealand becomes a much more urbanised society and the general understanding of farming in the cities has diminished.

Whichever parties get into power, it’s important they don’t erect unnecessary and unrealistic roadblocks in the way of agriculture. While things might not be perfect now, there is huge potential for things to get a lot worse. It’s hard enough for farmers to battle the vagaries and volatility of global markets without having to battle their own political masters to make a crust and keep the New Zealand economy viable and vibrant.

FONTERRA’S PLANS to team up with Chinese infant food manufacturer Beingmate and form a global partnership to chase China’s ever-growing demand for infant formula is a smart move.

China truly is an Asian tiger whose hunger for dairy produce is unlikely ever to be sated. It is a clever strategic move by the co-op to team up with a Chinese partner to tackle this lucrative market.
The partnership will create an integrated global supply chain from the farmgate direct to China’s consumers, using Fonterra’s milk pools and plants in New Zealand, Australia, and Europe.
Fonterra claims this partnership will increase the volume and value of its ingredients and branded products exported to China.  The proposal will see Fonterra and Beingmate set up a joint venture to buy Fonterra’s Darnum plant in Australia and make a distribution agreement to sell Fonterra’s Anmum brand in China.

Fonterra chief executive Theo Spierings describes the new partnership as a “game changer” that will provide a direct line into the infant formula market in China – the world’s biggest growth story in paediatric nutrition.

The term ‘game changer’ is used too often these days in referring to political announcements, sporting analogies, business and so on. But in this case it is appropriate, especially if the joint venture succeeds in promoting NZ dairy products as leading in quality and safety standards in China.

The lesson from last year’s botulism botch-up, and the San Lu disaster in 2008, is that Fonterra and New Zealand cannot afford damage to its reputation for providing high-quality, world-leading infant formula to the Chinese market. Hard-fought markets and value can be destroyed overnight.

China is our number-one market and this venture with Beingmate will be important in helping Fonterra drive volume and value and in stepping forward as a globally relevant co-operative.

As Spierings says, “The partnership with Beingmate will show the benefits of an integrated and secure supply chain where we are fast-tracking investment in milk processing capacity to meet global demand.”

It is time for a proper register of foreign-owned land to take the nasty sting out of the debate.

IT MUST be election season: foreign land ownership is supposedly the hottest political issue for New Zealand voters. Forget the economy, jobs, health, education, spies, the environment or even Nicky Hager’s latest conspiracy theories.It seems evil foreigners coming here and taking over our farms is the big issue. And right on cue Winston Peters has awoken from his three-year slumber to beat his familiar xenophobe drum – though it was the Conservatives’ Colin Craig who beat him to the punch on the possible sale of Lochinver Station to Shanghai Pengxin Group. Soon the me-too brigade – Labour, Greens, Maori Party – was stepping up with further anti-foreign land sales policy. (No word from Internet/Mana on the issue, perhaps because of their foreign ownership.) This is a pitch to voters that scratches the economic nationalism itch and is not unpopular, especially given Asian buyers’ activities in the marketplace. Though loathe to admit it publicly, New Zealanders are uncomfortable with ‘different looking’ people owning farms and houses in our country. We dress this up as being not about race but ‘concerns’ over economic control of ‘our’ assets. Fact is many of our assets are in Australian hands. The US, Switzerland and Australia own more of our farmland than do the Chinese, but that doesn’t grab the same headlines as Asian buy-ups. China is now our largest trading partner. We are happy to sell them logs, lamb and milkpowder, but prefer them to lay off ‘our’ farms. Hang on, Fonterra owns farms in China, and many New Zealand farmers own land in Australia, the US, South America and Europe. Also disregarded in this spurious argument is the matter of individual property rights – the right to sell one’s own house or a farm to whoever, foreign or local. Lack of knowledge about foreign ownership of New Zealand seems to fuel much of the debate. How about we organise an easily accessible register of how many foreigners are buying farms and city properties? (Three Auckland CBD office towers this week went to Hong Kong owners.) Surely such a log, as suggested recently by Federated Farmers, would help blunt the nastier edge to this angst.

Fish & Game is acting more and more like a radical NGO than a lobby for fishers and hunters 

FISH & Game NZ’s use in March of dubious survey results to justify slagging dairy farming prompted Rural News  to urge farmers to ‘lock the gate’ to F&G members until the parent body shut up.

The newspaper reasoned that since Fish & Game’s governing body had such low regard for farming, it might want members even to forgo any association with farmers – by declining to hunt or fish on the properties of such scoundrels.

A serious call, yes. But we demanded, and we still demand, an end to Fish & Game’s incessant anti-farming carping.

Conservation Minister Nick Smith recently fell foul of the lobby; it demanded Smith resign, accusing him of threatening the group’s future. The minister reportedly told the F&G council “Fish and Game sometimes behaves like a rabid NGO,” which it does.

But Smith rejects accusations that he told Fish & Game members, at a tense meeting in July, essentially to pull back on campaigning or risk its council being stripped of its statutory powers.

In fact he wants Fish & Game to engage more with agriculture and irrigation so as to achieve the highest possible freshwater quality.

“While it is right for them to advocate for freshwater, they sometimes get into being anti New Zealand’s most important industry, the dairy industry.”

Smith in his defence released a DOC official’s notes of the meeting, including, “F&G needs to work out what it wants to be: a statutory body [with] legislation and a relationship with Government, or an NGO.”

Fish & Game is supposed to be an independent body with statutory authority to protect rivers, lakes and streams and the sole agency issuing hunting and fishing licences.

Rural News agrees with the Taxpayers’ Union which says, “The Fish and Game council’s campaigning is a gross breach of faith by a statutory body.”

Enough is enough! If Fish & Game wants to be in politics, the Government should abolish compulsory licences for trout fishing and hunting, by which the lobby funds its political grandstanding.