I am appalled at the WTO and EU talks. They both seem hell bent on trying to destroy not only third world farmers but EU farmers and particularly UK farmers as well. Reducing world  commodity prices is fine for the consumer but will destroy farming worldwide. These dark suited, well fed negotiators should remember that if farming is not profitable, nothing will be.

Gordon Ascroft

Having worked in the UK ag industry for 20 years, and then coming to settle  in New Zealand 4yrs ago,it is easy to see the benefits of a free market for world commodities.Goverment subsidies were wiped from the NZ slate in the mid 80's, and whilst a few went to the wall,the efficent ones remained, Further ,those who did remain became very efficient at running low input high output businesses. It is refreshing to come to NZ and not hear farmers moaning how hard done by they are-they get on with it.The statement that "if farming is not profitable-nothing will be" is both emontional and ill-informed. If you get your house in order and rear or grow a crop that has a market, and you produce at a level that allows a margin-you will survive. It's called business.If you can't- reduce your costs or add value to the end product-that's called ecconomics

Daniel,

How nice to hear from somebody who has left the UK and gone to probably the next finest country in the world. Yes New Zealand has changed since the 80's. Changed the labour laws deregulated and become less dependant on dairy meat and wool and expanded into horticulture forestry and fishing . but still dependant on profitable farming., which goes to prove my point. Although there are only 4 million of you, successful farming means a successful economy.

Gordon

I'm not sure that NZ is a fair comparison to the UK - here farming contributes less than 2% of GDP and employs less than 1% of the workforce. Agriculture is being thrown to the lions in exchange for increased market access for other European industries. The CAP is an easy target for those who use the WTO as a lever to sell to 457 million relatively affluent EU consumers.

The NZ government re-wrote the law to allow Fonterra to form & now NZ dairy farmers own one of the biggest food processors in the world. When farmers speak, the government listens. Mark Daniel - how much does agriculture contribute to the economy there?

New Zealand might give us some clues as to where EU agriculture will go - the best farm businessmen will thrive & continue some form of food production whilst the rest will either leave the land or become taxpayer-funded wardens for the green & pleasant land that we live in. The CAP has been propping up inefficient production for decades (and provided me with a job in farming, thank you very much). It is the survival of the fittest basically, not helped by over regulation increasing farmers' costs of production.

Unless food security/self sufficiency becomes an issue again through conflict or catastrophe (or even spiralling transport/energy costs...), farmers must accept that market forces are here to stay & adapt accordingly.

If EU agriculture is to survive, we must get together to form one of these multinational businesses that do so well in what some like to call "free trade." If Fonterra, Arla & Danish Crown can do it, why can't we? The world is getting more crowded & has to be fed somehow. 

there is no comparison whatsoever between the NZ situation and the UK one.

NZ progressed because of various reasons.

Most important one is the cost of production, fuel cost, and exchange rate. The NZ dollar went down to more than 3 dollars to the pound at one time.

Marketing monopolies were allowed in NZ, wheras they have been totally destroyed in the UK. In fact Arla a trading partner of  Fonterra is getting an even bigger hold in this country.

The NZ Government recognises that its dairy industry is its best asset. The UK government is devoted to the destruction of British farming, does not believe in food security and therefore is not backing Farming UK.

Please stop quoting NZ as a great example and accusing Brit farmers as being inefficient, there is no comparison.

I love NZ and have every admiration for them, I wish I was back there this winter.

Jack Caley.

Having farmed in England for 20 years and in New Zealand for the last 6 I can only agree with Marks comments on New Zealand farming.

 

 

The following artcle from the NZ Herald may be of interest and give you a NZ view of the WTO talks.

-European attacks on Fonterra, wrongly labelling it a state trading enterprise (STE), at the international trade talks in Hong Kong are simply delaying tactics, says Trade Negotiations Minister Jim Sutton.

"Delaying indefinitely over the issue of what will be the date by which export subsidies will be eliminated is a way of avoiding getting to the next item on the agenda," he said.

At the halfway point of the World Trade Organisation (WTO) talks in Hong Kong, there has been little movement on the key area of agriculture, with Europe still resisting demands from nations such as New Zealand and Australia to do more to open its protected farm markets to competition.

The European Commission negotiators had not come up with a good offer on cutting farm subsidies because they did not have a mandate for it from the European Union, Mr Sutton said.

EU Agriculture Commissioner Mariann Fischer-Boel said yesterday New Zealand, as well as Canada and Australia backed the continued use of what she called state trading enterprises (STEs) and this practice had to end.

Ms Fischer-Boel said the EU wanted exporters such as Fonterra, as well as the Australian wheat company AWB and the Canadian Wheat Board, out of business because as "monopolies" they were not transparent.

But the claim was just a stunt, said Mr Sutton.

The EU was embarrassed because "it can't put an offer on the table on market access that any way lives up to the commitments they made at Doha and again last year in Geneva".

"There are some things that the big economies need to do at the moment (that) they're finding extremely difficult to do politically."

Mr Sutton said today EU Trade Commissioner Peter Mandelson had "totally implausibly" accused New Zealand of delaying the trade talks because New Zealand refused to acknowledge it was subsidising dairy farmers through Fonterra.

When New Zealand offered to stop any subsidies that the EU could identify, "Mr Mandelson turned around and said: 'Your true agenda is to deny that you're doing what you're doing, we can't trust and therefore our offers are off the table'," Mr Sutton said.

"None of the other countries in the Green Room take this seriously for a single moment," Mr Sutton said.

Mr Mandelson also said he was sick of nations such as Canada, Australia and New Zealand being sanctimonious about export subsidies used by the EU.

Fonterra's director of strategy, government and trade, Philip Turner, also said that the attacks were diversionary.

"The EU appears to be seeking to distract attention away from the main issue in the agriculture negotiation, which is the commitment to substantial improvement of market access."

Fonterra was not an STE or enjoying subsidised support, and any company could collect, make and export dairy products.

Fonterra did manage access to New Zealand-only quotas in some lucrative markets such as the EU, in an arrangement due to expire from 2007, but Mr Sutton said this was a competition issue which the Europeans were trying to sneak on to the agenda.

Fonterra, a dairy cooperative owned by about 12,000 farmers, controls more than a third of all the world's milk traded internationally.

Fonterra's investments in United States operations have also made it the largest US dairy exporter and it has argued that even without subsidies, US farmers can compete with those in Australia, New Zealand, Brazil or Europe.

Dairy producers are the only US farmers paid subsidies to encourage exports and US trade representative Rob Portman has offered his WTO counterparts in Hong Kong a 60 per cent cut in US subsidies.

Mr Turner said ending those subsidies would probably force an immediate jump in world dairy prices and then build up milk production in areas outside of Europe.

The Minneapolis Star-Tribune, in the dairying state of Minnesota, reported that dairy farmers, one of the largest recipients of government farm aid on that side of the Atlantic, were jettisoning their protectionist past and cautiously embracing plans to reduce their price supports.

A system of government payments, purchases and import quotas that date to the Great Depression makes milk one of the most protected products in the US, with government support reaching US$4.5 billion ($6.55 billion) a year, more than any other agricultural product.

Mr Sutton said negotiators at the WTO had time remaining -- if they could push through an agreement in the next 12 months, President George Bush would have six months left of his mandate to sign binding treaties.

"The Americans have put a good offer on the table in respect of cutting farm subsidies -- and they will further improve it -- but I think though the EU have put a very low-quality offer on the table for market access, they will come up with something better with more time and more pressure."

It always amazes me that the most quoted statistics about UK agriculture are regarding its direct contribution to GDP and employment. What about its largest and most obvious contribution - that at least 70% of the UK's land area is managed for agricultural purposes!? The indirect contribution it makes to GDP and employment through providing 'fertile ground' for the tourism industry (for one) is clearly much greater than that of agriculture itself but equally would not exist if the 'patchwork' landscape created by traditional UK farming practices (granted it has been forced to become detrimental to this in some areas in recent years) were not so admirably created by UK farmers. The greatest danger I can see is for land to come out of agricultural production (as housing development - clearly what the Government want to prop up the failing economy - or 'amenity' land for rich city slickers), particularly as we are going to need as much land as possible to meet our energy (and food) needs. The most shocking fact of all is that the UK Farming Strategy states that self sufficiency is no longer important - well given we have obvious vulnerability as an island and the increasing concern over 'food miles' and where our energy is going to come from this is clearly nonsense. By importing all our food we are just shifting 'environmental (and social) problems' to other countries (just as we have done by having everything manufactured abroad) and many of these countries have far more vulnerable soils (lower animal welfare, hygine standards, employment rights etc) than ours. The question is, how do we account for this 'wider (environmental, economic and social) picture' without contravening WTO agreements?

Stewart,

Mandelsohns attack on Fonterra is completely out of order.I had thought that he understood the situation better than that.

I have the greatest admiration for the way Fonterra have organised the market so that the profit stays where it rightly belongs, as have Danish bacon etcetera.

Because of monopoly laws and high costs British farmers just cannot compete.

Stewart would you do me a favour, put that article on BFF too?

Jack Caley

Mark - Don't forget, agricultural subsidies were introduced in Britain after world war two as an insurance that Britain would never 'starve' again through the over reliance on foreign imports.  Also, dont forget that Britain has 60 million mouths to feed not 4 million like NZ!  Yes, New Zealand wiped subsidies from it's farmers but subsidising your largest industry was unsustainable when first you require taxes from the same industry to pay these subsidies.  Secondly, NZ farmers do not have to compete with cheap foreign imports like us British farmers do.  Over 90% of NZ produce is exported, unlike ourseleves where we produce for the domestic market. Thirdly, when a NZ farmer decides to expand their agricultural business by acquiring more land they are competing against other farmers, we on the other hand are competing against Pop stars and Footballers who earn in excess of £100,000 a week (NZ$270,000 a week) and buy large areas of land as a tax break and a weekend retreat!  Try working on economies of scale when you're having to pay £10,000 an acre, roughly NZ$67,000 per hectare for land! 

In conclusion I agree with what you say about reducing costs and being efficient however, British farmers can't compete and will never compete in the global market for the resons above.  This is why we need subsidising - as an insurance that the 60 million mouths on this small island that require feeding daily actually get fed and don't starve through the over reliance on cheap, very efficiently produced foreign imports.          

Agricultural subsidies were introduced to encourage farmers to produce food after the war, when it was in short supply, once that aim had been achieved they should have been phased out, also remember that one of the many countries that was feeding the starving millions in the UK in times of shortage was NZ. We are an open market and as such have to compete with cheap imports on the home market as well as competing with the low cost producers on the world market.

 

Yes you are correct that over 90% of NZ produce is exported and the UK producers’ main market is the home one that should be an advantage to you.

 

You are way out in the assumption that a New Zealand farmer only has to compete with other farmers when it comes to buying land; they also have to compete with American movie stars, and wealthy businessmen.

 

I am a bit out of touch with the price of farms in the UK now so am not sure if the price of farmland you quoted is an average price or a high price achieved in the market for a specific property, as for economies of scale with land at NZ$67, 000 hectare many dairy farmers are paying close to that for farms now.

 

 

Supplying the domestic market is not an advantage at all - Perfect Competition - the hypothetical concept adopted by economists to compare businesses and economies shows that the greater the competition the greater the advantage, so the more markets you supply the more chance of profitability - if the NZ dollar is strong against the US dollar and weak against the UK£ you can simply shift supply accordingly - we on the other hand operate under oligopily/monopoly conditions where we supply four major retailers who between them supply almost the whole of the UK with their food, our level of competition is seriously retarded and we are price takers not price makers such as NZ  farmers.

I am not 'way out' with my assumption that NZ farmers are competing against each other, you only have to look at the Wrightson real estate web-page to see how many farms are for sale which would only appeal to farmers not American movie stars!  There are currently 9 pages of dairy farms alone for sale!  You can count the number of farms for sale on one hand in the UK.  And I can guarantee thast almost all of them will will be purchased for non agricultural purposes at very unrealistic prices.Also in 2002 the NZ government introduced a new law which made it much more difficult for foreign investors to purchase NZ agricultural land as so to protect their No.1 industry.  

The most expensive dairy land on the Wrightson real estate web-site works out at roughly NZ$45,000 per hectare, quite a bit less then NZ$67,000 and that is for the best land going to dairy farmers who are forever telling me "Dairying in New Zealand is like having a licence to print money"  compared to British farmers who ask -" Why does a litre of milk retail for less than a litre of mineral water at my local supermarket?"  Supermarkets (our customers) use milk as a loss leader in the UK in order to tempt customers into the shop.

New Zealand doesn't have to compete with cheap imports in their domestic market, you could feed the 4 million with what the country wastes each year.  Nor do you have to tag every lamb or have passports for your cattle or have to pay almost NZ$3 for a litre of petrol!

 

The idea that agricultural products can be shifted from one country to another to take advantage of currency strength or weakness may sound fine in theory, if only it were that easy, many of the markets have been built up over a number of years, to undersupply a market because that particular currency is weak could lose that market, so you have to keep supplying and take the hit on the currency at the time, one day it comes right again and you end up on the winning side.

 

The UK population is close to 60 million with another300 million on the doorstep this should give the UK farmer a huge marketing advantage, all you have to do is use it.

 

I know of several farms that have sold for around $65,000 and as I said in the earlier posting this would be a top price as I suspect is the 10,000 pounds an acre quoted for UK farms, the average price of a reasonable dairy farm would be $50,000ha.  

 

I do agree with you that there will be more non farmers buying land in the UK than NZ with a large population that would be fairly obvious, one thing I do find puzzling is the lack of farms that seem to be for sale. These forums indicate that agriculture is suffering at the moment and land seems to be over valued so if farmers are struggling so much with little or no return why not sell??

 

At the equivalent of 12ppl I would not agree that dairy farming is a licence to print money.

 

NZ allows most countries to have access to its markets so we are subject to competition from cheap imports, as a low cost producer though very few countries can compete so most of the food is home produced.

 

A litre of water may cost more than a litre of milk the same applies in many countries including NZ

There is also a big difference between what the farmer receives and the retail price for milk in the supermarket, that is commercial reality.

 

You are correct that we do not have to tag every lamb, and we also do not have passports for cattle, am I correct in assuming that the original reason for the passports was as a way preventing fraud on the 2 amounts of subsidy received, they were later used as a means of tracking the animals after the health scares that the UK suffered.

 

Our petrol is about half the cost of UK fuel which is an advantage, it is very easy to pick out isolated costs that each country may have over the other, NZ farmers pay rates on farmland and have the highest interest rates in the OECD. That just happens to be the different tax and financial policies that each country makes.

 

I do not want to start a NZ v UK argument I am merely trying to point out that there are some misconceptions over the competitiveness of the low cost producing countries, the view seems to be that the NZ farmer has an advantage due to lower land values, less regulation and lower costs, on the last one I would agree, costs are lower, that is mainly due to the fact that the NZ farmer chooses to spend less.

 

Because of some of the differences  between the two countries it is difficult to compare them, what you can do though is look at why the agricultural sector is so competitive and see if any  of the systems and ideas can be adapted to the UK. I know there are several farmers who have done this and they have been successful.

I have studied NZ systems and ideas over the last few years and have been out studying NZ farming from Auckland down to Te Anau in the hope that I could apply what I had learnt to UK farming.  My conclusion? Don't compare NZ and UK farming!

One thing I do hear time and time again off several of the farmers I worked with in NZ is " Dairy farming is like having a licence to print money", I've seen the books - these guy's aint lying!!  No wonder they pay NZ$65,000 a hectare -with their profit magins I'm suprised they aren't paying more!!

You say you can't supply other countries when it suits you - one major supermarket in Britain has been warned not to be over reliant on NZ imports of lamb in the new year because they have been offered more money for the same product from the Chinese. 

Yes we have 300 million on our doorstep but their governments impose protectionism measures to stop us supplying them and they are getting subsidised even heavier than us. 

Costs are lower because the NZ farmer chooses to spend less?  I think it might be a bit more complex than that.  The fact that our cattle have to be housed for almost 6 months of the year adds tremendous cost and puts UK farmers at a serious disadvantage.  The fact that we then have to clean out and bed down these cattle daily means extra labour costs and the need to purchase machienary which NZ farmers simply do not even have to consider.  Also, with farming being the number one industry in NZ, labour costs are in line with the industry - Agriculture in the UK is about the 100th largest industry and is actually a smaller industry than the ready made sandwich market! We are having to compete with so many other affluent industries which offer staff salaries and fringe benefits way above what we can offer.

You've contradicted yourself when you tell us to simply sell up because we are not making any money but at the same time if we copy NZ farmers all our problems will be solved. Yes selling up would be the simplest and most sensible thing to do but we want to keep farming and don't want to see hundereds of years of hard work (as I am the seventh generation to farm our farm) sold off to some yuppie who wants to use it as a weekend retreat.

Like you say, we could go on and on getting into NZ v UK arguements, basically if you have any systems or ideas which haven't already looked at adapting over here - I'm all ears!!   

There is quite a big difference between moving product around the world at a whim due to currency fluctuations and supplying a higher paying market on a permanent basis.

 

As a member of the EU do you not have free access to their markets? I thought that all farmers in Europe received the same subsidy, is this not the case?

 

I farmed in the UK for 20 years so am aware of the higher costs of housing cattle and the extra labour and machinery required and fully understand that production costs will be higher than countries that can keep cows outside all year round. I am not sure when you were over here looking at the farming systems, if it was around 3 years ago when the NZ$ was buying 40c US and farmers were receiving $5.40 then it may have given the impression that “dairying was a licence to print money”. With the NZ$ now buying 70c and a predicted payout of $4.00 it is not as rosy.

 

 

Copying NZ farmers will not solve all your problems (did I really say that earlier?) what you can do is look at what they do and see if it can be adapted to suit UK conditions, the extended grazing is the obvious one and with all the NZ consultants that are in the UK promoting the system advice on how to operate it should be easy to find, the system may sound easy but it does take a while to get your head around how it works, some UK farmers have tried it and have been successful with it. The other system that is being tried here is once a day milking again this suits some farmers and not others, it certainly reduces the labour inputs.

 

Low cost production is only part of the story one of the main reasons for a successful dairy industry is the cooperative approach taken and the marketing and promotion of the products.