By Alex Tarrant
I’ve been asked to pen my thoughts as a Gen-Yer over the sale of the Crafar Farms to a Chinese company
Well, I have to say, I’m actually loving watching and hearing our Baby Boomer politicians, media commentators, and talkback hosts getting all up in arms over it.
What a travesty, they all argue, the way we sell to the highest foreign bidder. These farms shouldn’t be allowed to be sold overseas. Kiwis can’t compete with the vast hordes of cash foreigners have.
First of all, I don't buy that. If a Kiwi investor, or a group of Kiwis, believed it was economical enough to pay what Pengxin’s offering for those 16 run-down farms, I’m sure they would have found the money.
We supposedly know about farming here. We supposedly know the economics behind it. We supposedly know the business models.
The fact no Kiwi bidder put up over NZ$210 million for the farms should be a sign that Pengxin is paying way too much for them. So good luck trying to turn it into an economic business. Let them pick up the pieces for a failed piece of lending by Westpac and Rabobank.
On the other hand, if in fact it is economical for Pengxin to pay NZ$210 million for the farms, then set up its own brands, set up its own processing plant and then make high-value products in New Zealand before sending them off to China, then aren’t we missing something?
Perhaps the belief that we all supply raw milk to Fonterra, which dries it out and then sends it to Indonesia for the value-add, needs to be challenged.
If that’s the case, then hopefully this is a wake-up call to our dairy industry leaders, and I welcome the sale. Teaches you right.
Secondly, my dear baby boomers, and this is the point I want to emphasise, to be quite honest, this bloody well serves you all right.
Squirm, squirm, and squirm some more. I’m actually enjoying it.
Between 2000 and 2009, farm debt in New Zealand quadrupled as the Australian-owned banks fought willy-nilly with a Dutch bank and each other for share in the rural property market.
Likewise, housing debt trebled, because, mate, you can’t lose with property.
Farmers were convinced by shiny young bank managers, many of whom had no experience in the sector, to buy the farm next door, then the one next to that, and then George’s old one down the road.
Borrow more, you were told. Farmers, (and Queen Street farmers) believed Fonterra payouts didn’t fall.
You ‘invested’ in any property you could find. Merrily bought and sold, round and round to each other due to a constant flow of credit from the Aussie-owned banks, which they sourced from offshore.
When banks are offering mortgages on third properties with loan-to-value ratios above 100%, then surely something’s wrong.
You bought the biggest flat screen tellies you could find. You bought flash oil guzzling cars, and boats. All from overseas and all hocked onto the mortgage.
Then the bubble burst. You were all sold a dream.
Allan Crafar was sold a dream. He expanded his farming empire year after year, on seemingly never ending credit from Westpac and Rabobank.
At some point during this expansion the Crafar Farms became foreign owned. There came a point where Allan Crafar didn’t own his farms; an Australian bank and a Dutch bank did. And when Westpac and Rabobank decided they didn’t want to own the farms any more, they kicked their tenant off and put the farms on the market.
Over that decade, as you were all buying and selling farms to each other (because mate the payout won’t drop), prices shot up so far that young farmers trying to get a foothold with their first slice of New Zealand land couldn’t even reach the first rung.
My partner’s brother is now the same age as his father was when he bought the family farm off his parents. Her brother doesn’t have a hope right now of being able to buy that farm with the same ease his dad did.
Likewise us in the city. We don’t have a hope of buying our first house the same way as my parents did.
Values are so high now that perhaps there should be a great ‘clearing out’. Perhaps we shouldn’t be letting Pengxin buy the farms. Let the banks take the hit for their irresponsible lending over the last decade. Bring values back down where they belong.
The banks had lent NZ$216 million on the Crafar farms. Imagine if they had to accept the Fay bid for NZ$45 million less – a 20% hit. If that happened to every property they’d lent on I’m not sure there would be many banks left standing to help us buy our first house, or help him to take over the family farm.
So while the values of your properties hopefully stagnate, and wait for our incomes to get back in line with the current cost of housing, squirm as you watch the Chinese take over your assets, baby boomers, squirm.
It should teach you all a lesson. It’s certainly taught my generation something, and that’s not to be as stupid and naive as our parents’ generation when the bank manager comes knocking on the door.
And by the way, just remember who’s going to be paying higher taxes to look after you all when you’re 80 because you haven’t put enough away for your retirement.
Good riddance.
Have a nice weekend.
76 Comments
Alex, I agree more with the last part of your article. Its really the Baby boomers laughing at us, they racked up so much debt paying too much for each other’s property’s and farms that the next generation can’t afford to buy it, so what’s the alternative sell it all to foreigners like the Chinese , the BB get there high prices and retire on the big money while a whole generation of kiwis have their birth right sold from under their feet. The BB will spend all the money on world cruises or the like I guess and NZ will be left with nothing. I imagine many BBs are going to find it sad though watching their children working for very little on Chinese owned farms that had been held for 3 to 4 generations in their family’s hands only to be lost because of 10 years of debt fuelled stupidity.
Muppet Kid... Now that is an utterly stupid ...purile...spiteful....piece of vitriolic baby spit.....I 'll get you a dummy....not wait..!... I see you've already got one , here it is..! , I'll just wipe my posterior with it and pop it back in for you shall I ....Brat.
I do hope that was clear enough for you...i had no intent to obfuscate.
What a nasty nasty piece of work we have here. There is only one, possible makes it into baby boomer category, to lay the blame fairly and squarely at the door of and that is Roger Douglas who went on a slash and burn crusade without so much as a jot of a mandate
Now let me put you right, as a tail end baby boomer I can assure you that life has not been the bed of roses you would like to portray, many of my generation and older have been stripped bare by wide boys who have had the opportunity to do so due to relaxed regulatory conditions, thanks to afforementioned Roger (well named I think)
Realistic view has the far more, well, realistic view here, our, at least my fears are not for myself there is little I can do to rectify the wrongs of others at this point, but I fear greatly for my children's children in particular and do not wish to see them tenants in their own land
Cutting of you nose to spite your face has never been a solution to anything, ask Michael Jackson
A positive future without the power of BB’s.
It is about time to see the younger generation expressing them selves and have more positive impact on politics and society. After the experience of WWII the BB generation had a wonderful opportunity to create a better world – unfortunately it failed miserably. After having 60 years of power the world is a mess – dictated by corruption, greed and consumerism.
Alex - well done it is about time your NZmedia generation starts commenting, rather then reporting on events. We need radical changes – urgently.
Colin - what about a contribution to the real issue. I’m only talking about national issues here. I think some developments in the near past and what is happening currently is extremely worrying. In your view - how can our society tackle such problems and improve on ethical and moral standards ?
Fair comment up to a point. I am keen to make a contribution but am not enthused about doing so in a forum that is essentially about defending the status quo - some of Tarrant and Hickey's articles especially are prime examples of creating division and/or deflecting attention from the real issues.
Get in touch with me directly if you want more on the real issues.
Has it occurred to you Alex that for the Chinese, (and I am not being xenophobic towards the Chinese here because it is in reality the Chinese Government who is buying - I don't mind leasing to foreigners but not buying) it is the ownership of the land they want not the business. They will hold on for years because as opposed to our politicians the Chinese think long long term. Think of the Vestys and Australia in the 1800s and what happened there. That is what happens if we let foreigners buy our land
Dont forget we are a soverign nation....Let the chinese own (some of) the land, at some stage we will be a) introducing export tarriffs and b) natioalising anything not kiwi owned. Oh and in terms of long term is isnt only the chinese buying.....others think they will get a return on their investment, they wont.
Argentina has just natioanlised its oil....so will we....and most other things....we will simply vote in a Govn that we will do this....
regards
I get annoyed at do gooders who hint at the fact that we occupy a territory that was at colonisation, entirely the property of Maori collectives. These people carrying a battery pack of a thousand holier than thou's but nothing in the way of solutions.
Presumambly DModes postion is (in this case) it isn't yours so you can't stop anyone else from coming? A favourite of a new wave of colonists?
Too old to be a BB!
We bought our first home that was priced at only 3 times my annual salary. But - this is what is not told these days - by legislation we HAD to have 1/3 deposit - by law. And the deposit came from a 5 year apprenticeship that started at 16% and ended at 86% of a tradesmans wage rate. I could go on with similar olden-days realities for hours. 10 years to save the 1/3 home deposit.
Generalisations are dangerous. But Alex - as an old coot - you and I have a similar opinion of (not all) a large proportion of those very 'special people' known as Baby Boomers. Most of my friends are by choice older than me - and also from your age group. Pleasant realists!
Overall - well done. Nothing like a bit of polarisation to keep this great website to the fore.
Thank you
Absolutely rudderless
Translated to 2012, would your 10year of 16%-86% of today's tradesman wages provide you the same 1/3 deposit for the same house in this market? That would provide a good comparative
And let's not call them Baby Boomers. How about "those born between 1946 and 1964 when there was less pressure on the labour and housing market". Though BB is much easier to say
Alex, your comment about banks taking a hit "I am not sure there would be many banks left standing if they took a haircut of 20%.......
Banks are taking haircuts and there will be more to come, yesterday dairy farm sold for 60% of debt value,
Banks still have a lot of regulation adjustment and there is still a considerable lack of capital for New Zealanders to invest in our own country.And if the payout is poor there will be plenty more farms under the hammer
The Crafar farms will have been an expensive purchase for Chinese as receivers have dropped production from 7 million kgs to 4.5 mill kgs, but I guess the longterm goal justifies the entry price. There has been wheels within wheels in this whole debacle and to say there hasn't been any government influence from both China and New Zealand govt is just simply BS. Keys had given his assurance that the deal would go through some time ago to the Chinese. Keys is desperate for capital as the country is broke.
Alex,
I don't care if you are a bitter and twisted individual.
I don't care if you have deep phsycological problems.
I don't care if you were on drugs when you wrote this.
None of this concerns me, i am not your keeper, and i would not wish to be.
What does concern me, is when a frothing at the mouth individual, atemps to turn an otherwise good site into a run of the mill facist hatred site. Lord there are already plenty of those on the internet without adding another.
I come to this site for good intelectual debate on matters affecting the economy and if Bernard H is not prepared to put a halt to such behavior i shall move on and let you self destruct.
... in all fairness to Alex , Bernard has written many articles where he's slagged off at us BB's , playing a " generational war " theme ....
As a BB , I must say though , I'm a tadge miffed at the " Good riddance " .
...... and I thought the folk at interest.co.nz were kind , caring folk ........ tsk tsk , simple sweet trusting soul that I am ..
Not cricket , Alex ....... not cricket at all , old chum !
And to think Gareth took a pasting for saying Cock in a Headline......
Good riddance...Alex.....a penny for your mutterings as you stand at Mommy or Daddys grave. ...good riddance indeed.
At least Amanda had the foresight to let Nicole generate the Headline...and take the flack that came with it..
Only one thing left to do .....Alex please forgive me please...! and take me back , I promise to be good......i'll even go kill some old people down at the war vet place to show how desperately I need your approval.
No just not cricket at all ...young chum..........hey ,that sounds a bit...?
A good dollop of thick treacly emotion there Mike B. Well done.
I thought it was a great piece. Though I don't seriously ascribe to the generational divides - it accurately represents the sense of realisation of 'the loss of entitlement' of younger people, that the BBs are seen to have had in an era where the standard of living was simpler yet richer, NZ/ Aus/ US/UK were powerful real economies and life was pretty sweet.
OK, but at the root of it fiat and credit has to go somewhere, and it's gone into asset prices. But thats alright everyone thinks there is no inflation.
Also 'Baby Boomer' is just another poorly used aggregate statistic, like GDP, aggregate demand etc. There is no such entity, sure some of that era made good decisions, others poorer, but that can be said of any defined generation population.
You'd be better to focus on the incentives that have led to the particular outcomes. Depreciating money being one of them.
There is no inflation trend in commodities overall....in fact Interest's price basket suggests slow dis-inflation.....which is a) a warning b) very interesting.....its different....
Asset prices have been boosted with cheaply borrowed money which has to be paid back. Right now the Fed is lending at 0.25% essentially free and has said its going to continue to do so for 2 years....
Stats, well frankly I think you are ignoring any data you dont want to see...good luck...
regards
....... we have rain at last , Walter ...... only 16 mm recorded since January 1 ...... now some serious rain . Excellent !
The bananana & the passionfruit are roaring along , basil , thyme & all that malarky . Mummy Gummy got 70 pumpkins from the small patch I planted for her , last November .....
...... life is good , my friend , gooder than the alternative ........
I don't know whether to laugh or cry about Alex's post. The options I have considered after reading his post are:
a) he was being paid by National for the Wedge nature of the post. It has successfully diverted attention from the issue of National selling out to the issue being one of Gen-Y schadenfreude at BB (and god knows why he is having schaudenfreude. National allowing this sale means Alex's partner's brother is MUCH less likely to be able to buy a farm. If I was Alex's partner's brother I would be asking Alex why he threw away a chance to have a crack at the politicians for making it harder for him to be able to buy a farm)
b) Alex really means the post. In which case, I would cry for the lack of sophistication and general naivety of the post. If National haven't paid him for this post he has missed out on a source of income. This is a great example of a successful wedge and a great diversion of attention away from the selling out of the younger generation of New Zealanders by dogmatically following a dis-credited dogma
Alex Tarrant's BIO: University of Auckland BA, Politics, Media, Economics 2005 – 2009 Spent first two years at Vic, but finished at Auckland. Went back to do some economics while at interest.co.nz in 2009.
Alex asks: "if it's economical for Pengxin to pay NZ$210 million for the farms, then set up its own brands, set up its own processing plant and then make high-value products in New Zealand before sending them off to China, then aren’t we missing something?"
If you have followed the press releases of Pengxin's long range intentions and understand the implications of the "chinese command economy" and the relationships between business and the "peoples congress" you should (now) be able to hypothesize how the reverse could be achieved by willing New Zealanders. And answer your own question.
It's highly probable the $200 million paid by Pengxin is a "loss leader" ahead of the bigger picture. (price no object). No NZ outfit could contemplate a stand-alone competitive investment against that. Alternatively Michael Fay thought his star was in the ascendent again and his next pay-day had arrived. But he underestimated the planning of the PRC, and got gazumped.
Also, With the deal, Pengxin acquire a lot of shares in Fonterra. Maybe the end game is Fonterra.
Well. Not understanding what the TAF stood for, off to urban dictionary again.
http://www.urbandictionary.com/define.php?term=taf
And, well, quite frankly, that wasn't much help either.
For context, Iconoclast, could you please indicate who did the spray? And what do you mean by TAF?
It staggers me that no-one else seems to have seen that particular possibility and could very well be the answer to the question "why have penqxin paid such an over-the-odds price with a whole lot of expensive conditions attached" and that has been one of my answers ever since that one was thrown in the pot.
Don't worry about Chinese control of PGG Wrightson, worry about where tradeable shares and ultimately, control, of Fonterra WILL end up
This is going to end up a battle of sorts for our control of our own country and destiny
And for all of you who bang on about the amount of land, assets etc sold under Laobur, well I wouldn't want to wave that around as a justification for further selling off to foreigners, because, you sell your assets, you WILL BE poorer. We've sold a truck load of assets and hullo, we are poorer. Yes, best you stay away from that one, it is grist for OUR mill, and remember the old expression about when you find yourself in a hole
i read the article and all of the comments. Ys it is a rant and there is nothing wrong with a good rant.
Selling out New Zealand
1. What if Dairy Farms had to be regulated like Pharmacies- so to own a Dairy Farm you had to be a Dairy farmer and you had to actually work it. Sounds crazy- well if works for Pharmacies. This would help keep a lid on asset prices- afterall plenty of people may want to own a Dairy Farm - but how many acually want to work them. There is actually nothing particularly wrong with this approach.
Housing
Banks can only lend 80% against the value based on rental return - ie economic value of the property not how much someone can borrow. We need to realise that whilist banks provide a useful function theyare inherently dangerous
Alex I agree with your article but not with the conclusion.This is a bad day for gen y not the bb,s.
Basically their over inflated farm values (and large debts)have now been underwritten by the PRC.
It has set a precident.Some of my own concerns are...
The govt has staded that "their hand were tied" and that the Pengxin bid met all the criteria.....well...wasnt Landcorp,s involvment fundamental to the the sucess or failure of the bid? Landcorp..A SOE .. The Govt could have withdrawn Landcorps support but didnt...Why? probably pressure from the Aussie banks who were keen to see land values held up uneconomically high to protect their loan books.
Now the Pengxin group has a foot in the door (boxes ticked and all that) how long before they make further applications for farm purchases? cos I dont think they wanted only the Crafar farms..watch this space i reckon.
Hi Alex. Good on you for doing this opinion piece but did you get the short straw with BH away? ;)One mortgagee sale certainly isn't the start of the boomers demise. My 5c is the following: you have age on your side, get a plan work hard and in 20 yrs time you can be in the same position if not stronger than today's BBs :)
The whole point is that he can't.
The BB's had the best of the energy and resource flow. End of story.
I apologised to my two kids, years ago. Pointed out that not many did it knowingly, those who had sounded the warning were (and are, look what happens here) squashed, ridiculed and ultimately, silenced, so not many folk got to know. I'm not so sure I was right - seems to me there's a lot of denial and/or blameshift out there - straight-out immaturity.
Some of us worked it out from first principles, but its not rocket science. When Alex's Dad was born, there would have been maybe 3 billion people on the planet, there are now 7, consuming more per-head too. Alex has to be poorer, well over twice as poor.
And he's been sold a shyte-sandwich; a load of CO2 in the atmosphere, a load of every other pollutant in the soil and water, and the dreg-end of the energy-curve to deal with it all. Oh - and an unsustainable infrastructure he can't possibly maintain, either.
Poor sod - I'd be angry too.
PDK: please explain. Are you wearing your Domestic or International Cape here?
Global poulation increase 3bn to 7bn = 233% agreed
Absolute population growth since 1970
AU = 12,300,000 - 2010 = 22,000,000 = 79%
NZ = 2,800,000 - 2010 = 4,300,000 = 53%
Organic population increase
AU 7.3%
NZ 7.5%
So where is that 233% growth coming from. I'm not challenging it. Need more information. It appears to be a Northern Hemisphere problem that is re-locating itself down here. I believe NZ has to close its doors. If it doesn't then more and more will see the solution to their Northern problems as shifting it away from the existing pain and the pain to come, and bringing it down here.
good link for that kind of info iconolast......http://www.geohive.com/
First of all, I don't buy that. If a Kiwi investor, or a group of Kiwis, believed it was economical enough to pay what Pengxin’s offering for those 16 run-down farms, I’m sure they would have found the money.
...........................
Alex will know why the Chinese pay a premium when they go after resources... I don't, but Alex will; it's his job.
Asset inflation isn't wealth creation, it simply creates a hole that has to be filled. In this case the government could let the banks loose out so generation y'rs could have a better chance to become dairy farmers. Poor generation Y'rs.
Alex if your heart was in the right place, your logic wasn't; and that's not suprising given you've been educated in neo-classical economics which is riddled with crude and false assumptions which have led all into this merry mess.
If we've got any chance of building the world class university that the team at interest.co thinks will transform our economy, we will need to place some value on retaining export reciepts. At the moment dairy is one thing we can sell to the world, although as PDK points out, time may not be on our side.
The government and National in particular seem hell bent on not letting this happen, as anyone who has studied DIRA (regulation of Fonterra since formation), and TAF (misnomer of trading amoung farmers) would know. The motivation behind this is the government, financial associates and some morally challenged industry leaders want to list Fonterra. We are told it will ensure stability for the 'co-operative' and farmer shareholders, and boost the stock exchange, and allow Fonterra to flex muscle in global markets. What do you reckon?
Given that:
PM says 'no'
Prime Minister John Key reiterated later a land tax and broader capital gains tax were still off the cards. Asked whether the implementation of one or the other could allow government to reduce income taxes to give people more income to spend, he replied:
“At the risk of repeating myself from last year, we looked at a land tax, and land taxes, one, reduce the value of land in New Zealand, by definition, and it has an impact on every single homeowner in New Zealand."
All the Productivity Commission needed to say in its housing affordability report: 'Quit whining about tax; It's land supply, stupid'
It looks like generation Y isn't any better than generation X?
Real economic growth will never transpire until the Baby boomers get the hell out of our way. They are so greedy that they will buy anything not nailed down and then buy all the nails. How much is enough? You own several houses a myriad of cars and boats, and all the bells and whistles. They bought so much stuff that nobody but they can even afford to buy any of this crap. And now they blame us for not having enough money to buy them out! Now they are saying that we are so lazy and can’t keep up with their fictitious wealth generator that they are going to even justify spending every single cent of their wealth before they die. They are the most entitled generation known to man and they are destroying our future. And now look at them, they are all freaking out because all that illusionary wealth will blow up in their faces and they are too old to do anything about it. I say let the great “reset” happen so they can finally let go. I say Gen-X and Y should take control…oh and the Millenials can come too.
-Gen-X
Did you mean transpire? "Illusionary growth will never transpire" yes....I can see that except the shear numbers of BBs mean they have consumed all the cheap stuff....but I know Xs and Ys as well and frankly they seem no different...
Bear in mind some BBs have done very well....but its not been that evenly distributed. The real problem of BBs is there was/is simply so many of them....it always come back to population and hence energy.
"destroying our future" no they have destroyed it....there wont be the energy to pay the debt they racked/are racking up so we will default. And then they will expect free healthcare to keep them going.....I really wonder....just how that one will end as there clearly isnt the money to do it, yet thay have the voting block so its sell assets and gorge on debt.....hence for me land taxes and CGTs are the way to go....
"they are all freaking out because all that illusionary wealth will blow up in their faces and they are too old to do anything about it."
LOL, very true....personally I think we need a 2nd Great Depression because I cant see any other way of resetting and leveling the playing field, if we dont see something that drastic then the Pollis etc will just keep pandering to that voting block.
regards
Although we will agree to disagree about running out of relatively cheap energy, I will concede one point. The BB generation had no clue that their entire wealth bubble is based on really really cheap energy. Will we run out of oil…that is debatable? But you and I have always agreed there are too many people on this planet.
Now as for what we define is “cheap” I think we will always disagree. Although the price of oil looks bad right now I can assure you that it does not accurately reflect Supply and demand. There are three main factors at play in the price of oil. 1) Speculation is about 15-30% of the current price. (I’ll just split the difference and say 20%) 2) Saber rattling: all the war talk and the fact that the US currently has three aircraft carrier fighter groups just off the coast of Iran won’t really help bring the price down. I’ll chuck another 20% for war mongering 3) Inflation: since 95% of the world’s oil is price in USD the USD is really back by oil. All the money printing in the last 10+ years isn’t really helping to stabilize the price. Now the US government would have you believe the inflation was only $12 over the last 14 years. But I feel it was much more aggressive than that. In fact I think systemic inflation can account for at least $30 of today’s price. That is only double what the US government would have you believe, I think it’s higher but I’m being conservative. So what’s the final price?
$100 - $20 - $20 - $30 = $30
The real price of oil has never been cheaper. What we’re paying for right now is rent of speculation and inflation tax. If you include Saber rattling the price of oil, in real terms, should only be $50 max!
My Mother (a Booster by the way) used to say, "Be careful what you wish for." I have noticed, with much sadness, the tone of many articles in this publication, and the NZ Herald via Bernard Hickey, the growing and fierce anti-baby boomer retoric.
We need to take a step back from this unfortunate scape-goating, which if allowed to continue, may cause unnecessray mis-directed anger towards baby boomers, many of whom are not wealthy and will not be able to support themselves in retirement.
How about Bernard and Alex you do some hard yakka investigative journalism and seek out the causes of the credit bubbles from 1980 to 2007 and how these large swaths of credit created mis-appropriation of capital.
Yes, it is easy to blame amd shame and create anger, but be careful not to create misplaced blame which may turn nasty.
Its not just that fact that BBs or some of them have done very well its a case of there are so many of them....its population........however being born isnt their fault, but then that didnt stop them having more than need be.......which brings us back really to the Pollies....seems for generations they have successfully promised gravy today while can kicking....managed it for 50~60 years....but no longer.....
Bad news, BBs will have to support themselves in retirement.....personally I expect that I will never be able to retire....even if my life savings (pensions etc) dont disappear in the next few years (which I expect they will).....it wont be enough..........
And lets look at the BBs who have been the chief Pollies for many years....have they done anything to try and curb the excesses? no and the voters who are dominated by the BB block didnt want to know. What generation have been leaders of industry? seen any sign of worrying about what they have done? cant see any sign and in fact they seem hell bent on extending....
So in terms of credit bubbles etc, who as in charge again?
regards....
Yes Alex it is great being a baby boomer.
My wife and I brought three kids up starting from the "Muldoon Economic mircle" - that was great. Working two jobs to get by and paying sixty percent, yes 60% tax on overtime.
Then we got "Rogernomics", that was fantastic - the whole economy kicked to the floor to satisfy the delusions of the monerterists- who are still with us.
This was of course at the time when my kids wanted to go to University - oh bring on user pays.
Never mind, then came Ruthernomics - another bloody good kicking.
The vast majority of Baby boomers have had so many kickings at the hands of the flat earth monerterists we didn't get caugth the last time.
Your remarks about dairying are just plain wrong.
Why Popularity of dairy products, westernisation of diets and the increasing range of dairy products continue to be the key drivers underpinning dairy markets worldwide.
Outcome The dairy sector remains among the fastest growing sectors covered in the OECD-FAO Agricultural Outlook 2011-2020.
Forecasts New Zealand dairy export income to rise by 27% between 2011 and 2015 and a further 19% between 2015 and 2020
“NZ (has) the lowest dairy production costs of any major exporting nation.” Study of the International Competitiveness of the Irish Dairy Sector at Farm Level June 2011
New Zealand is at the beginning of a very good decade. Don't worry be happy
Too big for our gumboots.
The four points you mention are sort of valid. (be careful of export income forecast - is this rising volume or rising unit price value) But:
They support the thesis that FG milk price is between $5 and $6 (which it almost has if you CPI back years).
This time it was meant to be different, Fonterra's scale for commodities providing a platform to drive along the "supply chain" to branded products, value add call it what you will etc, etc... and greater on farm returns....
The greater on farm returns imagined in some cases have been immediately banked/borrowed against. Certainty other extensive livestock activities have been no match.
However, the industry wise heads seem only now to appreciate that export market/international business is full body contact (that others want to dine on the margins above processor level) ....
1. Fonterra ANZ brands earnings have been taken away by the two Australian Supermarkets.
2. Much of ANZ brand earnings is due to brand licencing from Nestle eg. Ski
3. Mutinational/Fortune 500 food companies are driving hard in the China infant/supplement powder market.
4. The farms Fonterra is developing/running in China and India make it difficult from the NZ polly characters to decline China and Indian purchase here.
5. Once commodity powder price rises, production from other countries flows into world markets.
The co-op message this year seems to be we will pull back from some markets/activities...
Some say that several Fonterra insiders are distracted by the collapse of SCF and Dairy Holdings, finding equity for farms in Chile and the like debt stress. One thinks they were looking the wrong way.
If they'd spent the same energy concentrating on dealing with the ANZ supermarkets to maintain earnings margins (therefore farmer payout), managing the Nestle relationship to capture more "brand value" and identifying/avoiding the freshmilk supply chain risks (remember the China folk that were executed over the melamine) - eg running formula blending plants in China using NZ powder and keeping pricing power.
In effect re China as Fonterra have not been doing such, China as (they think had to) come down here and do what Fonterra should have (in their eyes) been doing (they don't understand why we didn't) ...
Meanwhile Fonterra is put back in the processor box...
Hows this: dairy farms need be sold with three types of share:
1. Fornterra Shares
2. Coles/Westfarmers or Woolworth Shares
3. Nestle Shares...
- have you had your bowl of rice today?
HT: the way the distribution chains are screwing the life out of the manufacturers, can you hazard a guess as to why the milk-suppliers dont go back to home delivery and provide an introduction to job training for 1000's of youngsters as they once did. If they can afford to drop the price of supermarket home brand milk to $1 per litre it shows you how much profit there is and how much they can be screwed.
Milk does not need be sold thru supermarkets.
Or, if there were 12 supermarket groups, then fine.
But when there is really just 2 "Houston we have a problem".
Consumers might think intense competition gives them a good deal on dairy but it comes at a cost.
Read more: http://www.smh.com.au/business/supermarket-price-wars-end-up-milking-quality-20120420-1xckl.html#ixzz1sp3BEMWZ
Yes Alex it is great being a baby boomer.
My wife and I brought three kids up starting from the "Muldoon Economic mircle" - that was great. Working two jobs to get by and paying sixty percent, yes 60% tax on overtime.
Then we got "Rogernomics", that was fantastic - the whole economy kicked to the floor to satisfy the delusions of the monerterists- who are still with us.
This was of course at the time when my kids wanted to go to University - oh bring on user pays.
Never mind, then came Ruthernomics - another bloody good kicking.
The vast majority of Baby boomers have had so many kickings at the hands of the flat earth monerterists we didn't get caugth the last time.
Your remarks about dairying are just plain wrong.
Why Popularity of dairy products, westernisation of diets and the increasing range of dairy products continue to be the key drivers underpinning dairy markets worldwide.
Outcome The dairy sector remains among the fastest growing sectors covered in the OECD-FAO Agricultural Outlook 2011-2020.
Forecasts New Zealand dairy export income to rise by 27% between 2011 and 2015 and a further 19% between 2015 and 2020
“NZ (has) the lowest dairy production costs of any major exporting nation.” Study of the International Competitiveness of the Irish Dairy Sector at Farm Level June 2011
New Zealand is at the beginning of a very good decade. Don't worry be happy
In 1985 dairying was marginal. China wasn't a customer of NZ for its milk products. NZ was captive to the European CAP (Common Agricultural Policy). Price of farms were ridiculously high. Queen Street Farming was all the rage. What kept NZ farming afloat were the subsidies. The subsidies were (a) government guaranteed, and (b) were the profit. The smart money bid the price of farmland up and up and up. What drove prices were the government subsidies. Farmers were in effect investing in the "subsidies business" and not the business of farming. The very first thing Lange and Douglas Labour did in 1985 was to eliminate the farm subsidies, forcing an economic rethink on the viability of investing in farming as a stand-alone proposition. Farm prices dropped 50% overnight.
Farm prices and prices for farms dropped 50% overnight.
Interest rates doubled - First mortgage rates 17% to 21%
And as the Rural Bank was Govt. owned (and pretty much the only rural lender of any size) to save some they cut the balance owing on the loan to suit the cashflow of prices and interest rate.
Rural Bank took large losses and was then re capitalised and sold.
A history note:
In 1894 the Advances to Settlers Act established the State Advances Department with the function to lend money to farmers on an amortised basis at reasonable rates, on the security of rural land. The standard loan term was 36.5 years, with a rate of interest of 5 per cent.
The Department later became the State Advances Corporation to provide cheap, long-term, urban and rural financing on first mortgages, it later became the Rural Bank.
The Mortgagors and Lessees Rehabilitation Act 1936, got many lenders out of rural lending (often widows and orphans taking the loss).
Many banks/finance companies had either a ban on or very low lending rural (often on one could match thestate Advances/Rural Bank terms etc) until the Rural Bank was sold.
Geezz ..some of you do not accept the chinese to buy over the farms..but you do accept them to buy your high priced properties..Well if we open doors for them to come in to buy..so don't complain that the chinese are coming in to buy over NZ land+properties..if you don't accept them...so you have to accept the properties in NZ going to collapse..that's the fact! That's for continuing the ponzi scheme..then why the complain!
..been to some auctions...and you know what...almost half of them are chinese if not all..bid for your NZ properties at high price...the crafar farms case is the one example! so Gen Y are left behind..good luck
Farmers were convinced by shiny young bank managers, many of whom had no experience in the sector, to buy the farm next door, then the one next to that, and then George’s old one down the road.
So who exactly were those young bank managers then, Alex? Gen-Yers? Must have been your generations fault then. Serves you guys right!
David you are sort of right..but the "young shiny arse bank managers" were in fact just salesmen.Selling debt to all and sundry .The critera of which would have been set by those further up the banking food chain, and a lot less likely to be Gen x/y.
I have seen plenty of previously freehold farmers suckered into debt(greed & empire building played a part) who are now under financial pressure.The "economies of scale thing" didnt always eventuate.Many of these farms now have issuses regarding..
..drop in stock performance (including high death rates and animal health problems)
..lack of farm maintanance
..high staff turnover&/or staff lacking skills/experience
..high stress
regards
"My generation has learnt not to be as stupid and naive as our parents.”
They all say that, then they grow up, get married, have kids and then as punishment they have to hear their own kids saying the same thing without reacting or taking offense.
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