by frog
Shortly after Jeanette gave this speech on Saturday, the Herald reported:
Dairy giant Fonterra last night backed away from further price hikes after Green Party co-leader Jeanette Fitzsimons challenged it to make its products affordable for New Zealanders.
Published in Campaign | Economy, Work, & Welfare | Video by frog on Mon, June 2nd, 2008
Tags: dairy, Fonterra, food prices, Jeanette Fitzsimons, milk
on the trolls and those who are unable to keep on topic
Touche.
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BP and libertyscott will no doubt hate this one, but I’d suggest the answer is to regulate if Fonterra don’t play ball.
With the NZ market for dairy products being only 4% of Fonterra’s total, there is no effective competition.
And with Fonterra having about 94% of the NZ dairy product market (you could say a monopoly) it has no effectve competitors domestically.
I don’t complain about the market when it works fairly, but here the playing field is not level.
I can see two interventionist solutions that could see dairy products beign soled in NZ at prices NZers can afford:
1) The Telecom solution – separating the monopoly into supposedly competing companies. Maybe not all that effective, given the experience in the electricity industry – still to see if it works re Telecom; or
2) Regulating domestic supply share and price controls.
Hopefully we don’t need to go down either path – today’s (somewhat garbled) media statements from Fonterra may mean they will play the game to ensure New Zealanders can afford dairy products without heavy-handed Government action.
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ok I will play ball for the sake of it
BTW some background
I am one of those hateful Industrial dirty dairy farmers
we have a family farm on the West Coast of the South Island
we milk 450 cows
we don’t irrigate and all our farm and stock water water is gravity feed out of 2 dams
or effluent system is a twin pond system that is held and filtered by gold tailings
yes I do use nitrogen and I do fertilize but I do prefer to use lime if possible
I have in the last 5 years spent on average 5k every year fencing off our river
oh yes we don’t supply fonterra
Now I would be more happy to subsidize our products with the current pay out levels on the one condition that when either the payout falls to a certain level or our costs rise to a certain level the NZ consumers promise to return the favor and subsidize us,fair enough ?
I didnt hear anyone rushing to help us in 03-04-05-06 when we were struggling to break even on $4.10 payouts
we are and have always been asset rich and cash poor
now for the first time in living memory we finally have some spare cash and like true communists your first thoughts are to take it off us and dish it out
my contempt for the green message grows every day
WATERMELONS
Stalin would be proud
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Panda has a good point. Like any business there are good seasons and bad. For farmers, unfortunately the latter generally outnumber the former.
I accept that society needs to ensure that farmers they don’t profit from its expense, which was the basic principle behind Gareth Hardin’s “Tragedy of the Commons” or Tragedy of the UNMANAGED Commons” as he amended it.
tinyurl.com/49d7r8
I actually thought that dairy products were bad for the health, so why would the Greens advocate the Government to intervene to make it affordable to consume them?
l
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“Now I would be more happy to subsidize our products with the current pay out levels on the one condition that when either the payout falls to a certain level or our costs rise to a certain level the NZ consumers promise to return the favor and subsidize us,fair enough ?”
Yup, sounds fair enough – bring back SMPs! The Gereens really do have to decide whether they are for the market or against it.
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The Greens challenge to Fonterra should be to clean up dairy farming and to reward those that achieve clean farms with a higher payout. I don’t care about the price of milk, I do care about over intensification and the resultant environmental degradation.
Ditto with Sheep & Beef.
Panda. You are always asset rich and cash poor because everyone worships at the altar of tax free capital gains. Thus farms are always worth more than they are capable of earning. Thus the over intensification. Capital gains tax and a ban on foreign ownership would enable Kiwi farmers to farm for real profit.
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The Greens challenge to Fonterra should be to clean up dairy farming and to reward those that achieve clean farms with a higher payout
The thing you are forgetting is that fonterra is not a normal company
it is a co operative (something i thought all you greens loved)or is it just that they have gotten to big?
and fonterras only mandate is to return as much of the profit from its sales to its farmer shareholders
good or bad high or low
it is the governments job to dispense welfare
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samiam,
“Thus farms are always worth more than they are capable of earning.’
The value of the farm is only what someone is prepared to pay for it. There is no governing body to set farm prices.
So I doubt that the value of the farm is ever less then they are capble of earning.
Unless one bougtht a farm as a lifestyle option and are prepared to loose on the business. Something I dont think is the case.
Farms cost what they do because the long term ROI is feasable.
“Capital gains tax and a ban on foreign ownership would enable Kiwi farmers to farm for real profit.”
How??
Wont the capital gains tax also hurt th NZL farmer?
I would say that all farms are business owned (by the single farmer or a corporate) so that the capital gains tax does nothing to control farm prices.
The farmer simply sells the business on which there is no capital gains tax.
Now you could try adding a capital gains tax to business sales but I would suggest that would meet major opposition.
Just think of the ramification for a government who is bugetting for X amount of capital gains tax to fund the new Kopu bridge, and nobody sells their business! No tax take.
No foreign ownership is a position you could take, but again the rmifications are huge. The Cullen fund, your KiwiSaver fund, etc. may be banned from investing by other countries if we dont allow their investments in New Zealand.
You could argue this would be good for New Zealand (get the country working again) but it is a huge bet for your retirement funds to only invest in New Zealand.
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I’m not a big milk drinker myself but I see nothing wrong with mates rates for milk…
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I’m not a big milk drinker myself but I see nothing wrong with mates rates for milk…
WHY ??
Who pays ?
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It’s because of the expectation of future, tax free, capital gains that the price of farms is above that of the earning ability.
I’m from a 4th generation of Sheep & Beef farmers and I assure you that the situation of running at nil or negative rates of return has been the situation for many many years. That is because the price of a farm has risen faster than farm produce. Now that’s no problem if you never sell or if you never expect to make trading profits. It’s when a farmer wants to buy out her siblings that the ugly truth comes home to roost.
Foreign bidders ramp demand up. That prices land out of real farmers means.
Introduction of a capital gains tax would only hurt those who bought at a premium in expectation of selling at a capital profit Once values adjusted back to the ability of the farm to produce a real return then balanced farming decisions could be made. It would make no difference to long term holders only to speculators.
I have no problem with foreign ownership of companies, but I do have a problem with foreign ownership of our property.
Panda. I agree completely, does Fonterra see a premium market for er um green milk out there on world markets? We need to find an incentive to clean up, that’s the challenge.
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Samiam,
Farmers must be incredibly stupid to buy farms at a price that means they will never get a ROI. Ever.
But I dont think they are. Unless they buy a farm and run it at a loss, then claim tax rebates on the loss against more profitable companies.
Otherwise why bother owning a farm?
Sorry samiam, your answer does not make sense.
it would be more profitable to put the money in the bank. For a million dollars it cost to buy a farm (very conservative), your annual revenue before tax is around 100,000. After tax about 60,00 for doing nothing.
I know what I would do. And perhaps that is what you should do with the your family’s sheep and cattle property. Sell it now while the price is high and before your wish for a capital gains tax (bought 100 years ago for 500 pounds say and now worth say 2 million?) becomes a fact. Capital gains tax on that would be?
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should be 60,000 for doing nothing
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Farmers ARE stupid to do that, speculators, however are not. Hence the rush of big money chasing tax free capital gains and pushing prices above that sustainable by earning potential alone.
Just watch Dairy farms adjust up in price to cut the throat of any young farmers wanting to buy in. Just watch existing land owners convert their land to dairy and promptly sell out to chase those tax free capital gains rather than the trading profits. Capital gains do not benefit buyers or owners of farms, only sellers. Selling isn’t farming.
Gerrit, go and look at the books of any sheep and beef farm and see just how wildly distorted the real picture is. The capital equation completely swamps the trading equation. It’s daft.
The result is land completely over-farmed in a desperate attempt to close the gap. We all pay with slimy rivers to subsidise land speculators.
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Samiam,
You are still not making sense.
Your family is not making money (ROI) on the farm. A speculator offers you moonbeams for it. You dont take it, instead you want to carry on sheep and cattle farming. Even though it is sending your family broke.
However a speculator sees the potential of your property as a dairy unit, or a vineyard, or a deer farm, or a hunting lodge, or a kiwi fruit orchard, etc. and prices the farm on a decent return after buying and improvong the property.
He sets the price and while you are not selling, your neighbour does. Setting the selling price for farms in your area. However if you are not selling it doesn’t matter what the farm prices are (in fact the higher they are the better borowing from the bank to do your own improvements).
And that is what your family has to decide to do
Either keep the farm running as it is and stop complaining that you are not making a living off it. Or develop the property to its full potential by either borrowings or maybe a float on the stock exchange.
All that farm property from Christchurch north to Kaikora where farms have been converted to vineyards (or for that matter the Bay Of Plenty where dairying has converted to Kiwi Fruit) is a classic case of speculators seeing potentials and putting their money where their dreams are.
Your family has the same opportunity.
The slime rivers are not the fault of the speculators but light handed regulators. Each farm should have a settling pond to contain dirty runoff.
Have a go at the regulators not the speculators. After all your family could be one pretty soon.
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Interesting weekend for the Greens. This announcement is one that should appeal to all those whom hear that Saudi citizens pay 20c per litre for petrol, whereas we pay $2. Something about a global market?
I’ve added some thoughts of my own.
http://newzblog.wordpress.com/2008/06/03/good-things-take-time-time-for-fonterra-to-offer-kiwis-a-better-deal/
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Was I complaining? I was merely commenting on the root causes behind farms being asset rich and cash poor, as pointed out by Panda. The same factor behind why houses are over valued, everyone with their snout in the trough of tax free capital gain. Kiwis are wedded to it, but it can’t be sustained, in the long term we are all the poorer for it.
I agree it doesn’t make sense, by the way.
Environmental regulators, now that’s where the Green Party needs to step onto the stage….
Yep we might just sell the farm and put the money with that nice man from the finance company! ;^)
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Did Jeanette simply make a mistake or was she lying?
http://www.kiwiblog.co.nz/2008/06/keith_ng_on_greens_compost.html#comment-452160
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“The Gereens really do have to decide whether they are for the market or against it.”
If so many environmental and social issues weren’t tied into the market, the Greens would actually be market-agnostic. The impression I’ve got is that the Greens aren’t particularly for the market or capitalism in general that much, but they will use it as a means to an end when solutions are floated that work well within the current market system.
As long as we take real and timely action on climate change, I don’t see the problem with some amount of normalisation for dairy prices when the market is drastically imbalanced.
As Sam points out, tax-free investments in the form of property need to be nipped off in a fair but simple way. I have no problem with speculators, but it drives these unsustainable property booms and plays havoc with living costs, mortgages, and interest rates.
(A little bird tells me that this is being looked into, in fact)
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Did Jeanette say:
60 per cent increases in the price of milk or 60cent?
[Did anybody else notice that
$3.22 - $2.62 = $0.60
which is easily misreported as a 60 percent increase rather than 60 cent increase?]
http://www.publicaddress.net/system/topic,1146,onpoint_bandwagon_hobos.sm?i=20#forum-replies
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“Secondly, if there is one thing we can produce efficiently here, it is milk. In fact, we produce so much that we can use only 4% of it here and the rest is exported. It’s true that costs of farm production and factory processing keep rising with the price of oil and other inputs, but not by 60% in one year.”
http://greens.org.nz/searchdocs/speech11880.html
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So since when has encouraging consumption of saturated fat laden dairy products been good? This is a chance for heart disease rates to drop as meat and dairy prices soar. Imagine, less pizzas, burgers with cheese, milkshakes, ice cream, milk chocolate – oh you didn’t mean that did you? Ok how do you want to micro-manage this one? Just milk then? OK, funny how milk supplies suddenly become scarce when forced to sell below market price, maybe the range of different fat levels drop out of the system, maybe flavoured milk remains a lot higher.
Besides, why should a New Zealander who has nothing to do with a dairy farmer pay less than someone in Samoa, Malaysia, India, China or Portugal? Just nationalist nonsense?
The foolishness of the central planner, thinks she has all the answers but actually creates loopholes, opportunities for arbitrage and ripping off the system that is created, produces shortages and then blames the producers for responding rationally to her signals.
Either pay up, invest in some dairy farms to share in the profits, or change your diet.
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I’ve taken a fancy to cheese since the price has gone up. If truffles were cheap we would throw them on the compost heap.
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I can see two interventionist solutions that could see dairy products beign soled in NZ at prices NZers can afford:
1) The Telecom solution – separating the monopoly into supposedly competing companies. Maybe not all that effective, given the experience in the electricity industry – still to see if it works re Telecom; or
2) Regulating domestic supply share and price controls.
Methane emmissions from cows contribute to AGW. A political party makes a keynote speech promising that they will ensure that everyone has as much cheese, butter and dairy as they can eat…
More cows, more pollution, more AGW.
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I suspect McDonalds may be pleased with Jeanettes pontifications….
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Since leasehold land was passed onto farmers early in the 20thC (what an election bribe) farming has become an investment as much as an occupation.
The increased dairying returns simply bids up the price of land (allowing existing farmers a huge capital gain) and thus will not result in a new generation of farmers with an assuredly successful career. If anything the business risk increases, farmers become increasingly dependent on their borrowing cost and thus farm to service debt for the eventual reward of an untaxed capital gain when they sell up.
Regulation of dairying needs to be increased, such as stock limits, this would constrain land values. Also bringing in a capital gains tax, which is passed onto the buyer as equity (reducing business risk) in return for a code of farming conduct agreement (and also perhaps a price subsidy on local product sales) offers some regulatory advantages.
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SPC, If you really want to reduce the price of farmland just dig up all the country roads.
A serious question in light of the above discussion – who is paying for the damage milk tankers are doing to roads built for occasional use by stock trucks? Sure, Fontera is paying road user charges for that damage, but the state takes half that money to subsidise State Highways. That leaves all the district ratepayers, including the dairy farmers, paying to fix the damage that Fontera has already payed to fix. The only organisation that doesn’t support an increase in the FAr to 90% seems to be Cabinet.
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Kevyn
It’s more a case of enabling a more secure business for farmers – with a transfer of costs from debt servicing to land resource management regulations.
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SPC, If it could be made to work. Code of conduct? Too many cowboys. Mandatory fencing and sewage disposal regs would be better. If it’s good enough to do that with swimming pools it should be good enough for our public rivers and streams.
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Mandatory fencing of what
what is a stream? what is drain?
havent you been paying attention ,we already have ewage disposal regs as well as a code of conduct
this is what annoys me about this hateful campaign being run by the greens, we are never given any credit for anything we do.
You just keep shouting shrill slogans “dirty dairying” and “industrial dairying” to try and garner support form your liberal urban power base
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Panda, the Greens are not attacking dairy farmers as a whole. There are many responsible dairy farmers who farm on suitable land and who do fence streams and ensure effluent doesn’t find its way into them.
Unfortunately, there are also those who do not. The term “dirty dairying” is quite correctly applied to that sub-group of dairy farmers.
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Panda said: what is a stream? what is drain?
An interesting question these days, Panda. Recall the Mataura drain post a couple of months ago?
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Unfortunately, there are also those who do not. The term “dirty dairying? is quite correctly applied to that sub-group of dairy farmers.
I know what u are saying toad but unfortunately that difference is not picked up by the public and he media as a whole
and I think your green activists know this.
the subtleties don’t translate well to mainstream media and so the whole industry gets tarnished
it would be nice to once and a while hear a green MP stand up and give some well deserved credit to the dairy industry
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um..!..what exactly should the dairy industry ‘well deserve’ ‘credits’ for..?
..they are peddling foul unhealthy muck..
our high consumption of which is the direct cause of our world-beating rates of ‘thick-blood’ diseases..(heart/stroke etc..)..
..and in the process are poisoning/polluting our country..
have i missed something..?
phil(whoar.co.nz)
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Phil
for someone so intelligent you are a complete effing idiot
I am not even going to dignify that total crap with any sort of reply
no wonder the greens are only just pushing 5%
just see how NZ INC would be doing without the dairy industary
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i’m not denying the monies being made..
..so..if that is your only focus..ok..
..but i note you didn’t answer the questions/issues i raised..
..ie..the longitudinal study done at auckland university..funded by the dairy industry..
(oh irony..!..you are so cruel..!..)
that study that has proven the link between our world beating rates of dairy consumption..(three times as much as the aussies..!)..
..and our world beating rates of ‘thick blood’ diseases/death..
..if you wish to stuff your fists in your ears and go ‘i’m not listening..!..i’m not listening..!”
..that’s your call..
..but the facts i lay out are just that..facts..
..not necessarily ‘total crap’.
..eh..?
and you still haven’t answered my original question..
..aside from that money..(at what ‘real’ cost..?..)
what on earth do they ‘deserve credit’ for..?
phil(whoar.co.nz).
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