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Food Producers - not Farmers

Well the only thing for certain is it is going to be less certain. To look at our own rural fortunes, going forward, we need to firstly check out the international scene. We are a global economy and what happens overseas directly impacts on us in New Zealand.

New Zealand is a very small country at the bottom of the world and we need to remember this. New Zealand is one big farm with some tourism and a few other industries thrown in. We need to keep this in mind as the government is always trying to tell us otherwise.

Firstly, let's look at what's happening in the US. Mr Bush and his crew decided to push the biofuel production. They have given their farmers subsidies to grow corn for biofuel only to find that it is barely economic. It takes nearly as much resource and fuel to produce the stuff, therefore making it marginally economic. You can understand why they are producing it. They consume 25% of the world's oil and produce only 2%.

They have had droughts in Australia. This is creating a 'demand exceeds supply' situation and resulting in prices rising.

Again, I refer to corn and grain. This distortion has helped to push up all grain prices. Why? Because there are three competing factors for grain:
  • Grain for biofuel.
  • Grain for stock food: 95% of all world dairy production is from grain fed cows. This is New Zealand's competitive advantage because our stock is mainly grass fed although moving slowly towards higher input. Grain of course is also fed to pigs, poultry and so on.
  • Grain for human consumption. Poor nations tend to rely more on grain to feed their population. Bread comes from wheat and so on. The Mexicans are grumpy because they do not have enough corn coming out of the US to produce their staple food, tortilla. It takes the same amount of grain to feed a human for a year as it does to run an SUV for a week.
Put all this on top of a world food shortage and you are going to see some interesting models played out. The world has gone from up to 2 years of stored dried food down to 40 days and at times down as low as 17. This has resulted in the rapid increase in the price of all foods, but particularly dairy products. As food prices rise - and they will rise further - people look to other sources away from dairy products. Protein prices are expected to start rising and will flow on into our sheep and beef returns. Whether there will be more demand for kiwifruit and avocados will remain to be seen but I would expect those prices to rise as well.

Nations that are food producers with substantial export capacity will be the winners. New Zealand, Australia, Canada and the US are in a strong position with net food surpluses to sell and should rise relatively well on the back of this world food shortage.

The losers will be China, Middle East, Africa and Asia and the emerging winners will be South Africa, Argentina, Bolivia and Chile as they develop their agriculture production. In the NBR of 29 October 2007 an article by Mr Michael Cootes played out this issue very well. The food price boom is expected to run for between 5 – 6 years.

So what does that mean to us, down on the farm, back in New Zealand?
  • We need to keep our good food-producing land.
    We need to manage our resources carefully and try and keep our costs of production down.
  • We need to start calling ourselves "food producers" so that those in the cities and government offices realise what a huge impact we have on the New Zealand economy.
More than that, by calling ourselves "food producers" we may be able to get more political clout. This could ensure that the rest of the population is prepared to support us as we manage the resources to increase production and increase revenue.

In summary, there are a lot of people in the world who are eating all the time. The world is now facing a minimal resource of stored food reflecting an increase in prices across all sectors.

New Zealand is well poised to capitalise on this providing we can manage our costs and maintain our "Clean Green" image. Most importantly we need to be thinking about ourselves and talk about ourselves as "food producers" to improve our image and obtain better support from the urban and bureaucratic interests. We also need to think about minimising the urban sprawl of houses and lifestyle blocks to our good farming land so we can maintain our elite soils for agriculture production.


 

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