The key message of this article is that dairy is of fundamental importance to the future of Aotearoa New Zealand. However, the journey to get there is not straight forward and it will be controversial.
First, I set out the reasons why dairy is so important, and hence the need to face-up to the challenges that lie ahead. This then leads towards necessary actions to address the challenges.
It is no accident that New Zealand’s most important export industry is dairy, comprising some 30 percent of the export value of goods that leave New Zealand’s shores. Add in sheep, beef, timber, fish, kiwifruit and wine, and New Zealand’s primary industries contribute a little over 80 percent of the export earnings derived from merchandise goods.
The remaining exports are led by aluminium and some machinery. However, with these and other manufactured goods, the net contribution is typically much less than the export earnings, given the imports that are required to feed into the manufacture of these exports.
There are also non-merchandise invisible exports. These are largely tourism and international education of foreigners who come to New Zealand.
Alas, even in the good times these invisible inflows are more than balanced by the invisible outflows of foreign currency. These invisible outflows include Kiwis spending money on their own overseas tourism, plus interest paid to foreign lenders, plus profits to the overseas-owned businesses operating in New Zealand, with banks and insurance institutions being the standouts.
So, the bottom line when it comes to imports such as pharmaceuticals, computers, vehicles, machinery and fuel, plus surprisingly high quantities of imported food of types we do not grow, is that physical imports need to be balanced by physical exports.
The only alternative to this balance is to keep importing capital from overseas. New Zealand has become very good at this. But there has to be a day of reckoning.
Accordingly, the inevitable conclusion is that New Zealand’s future depends critically on its export industries.
It is no accident that New Zealand is so dependent on its primary industries for these exports. This follows naturally from being a small country isolated from much of the world. Very simply, New Zealand will never have the scale required to build a comparative advantage for large-scale manufacturing. Also, although some would like to pretend otherwise, New Zealand education levels provide minimal advantages and significant disadvantages when comparisons are made to that bigger world.
As for the specific primary industries, the development path that New Zealand has followed is also no accident. For example, the temperate maritime climate, the topography, and the low inherent fertility of nearly all New Zealand’s soils, all lead inevitably to pastoralism rather than large-scale cropping.
A quick look at export statistics confirms that exports of staple crops such as wheat, barley, oats and maize are insignificant. Major crops such as rice and soy are not even grown at all in New Zealand. This is not going to change.
As for horticulture, kiwifruit is clearly the stand out but there are other successes such as apples and some sub-tropical fruit. But if anyone thinks that horticulture can save New Zealand’s export economy, they lack understanding of the issues.
The major non-horticultural crops that New Zealand does export are small seeds, with this mainly linked to out-of-season production on behalf of overseas plant breeders. This trade is also at close to peak, given the need for isolation between cross-fertile cultivars.
The long-term perspective of Treasury economists, echoed by the Climate Change Commission, is that resources allocated to dairy and pastoralism can over time be re-allocated to other industries. However, the key resources that underpin dairying are the sunlight and rain that falls on the New Zealand countryside. How will those resources be allocated given the fundamental unsuitability of most of this land to non-pastoral activities?
I have yet to hear an answer to that question. I suspect this reflects the lack of biological understandings held by quantitative desk economists.
The other argument I hear from people who consider themselves economically literate is that not only dairy but also the overall agriculture sector is unimportant because it comprises such a small part of GDP. As I have pointed out many times, the GDP of agriculture captures only a small proportion of the on-farm value-add and none of the off-farm added value. Also, much of the on-farm contribution, including shearers and all other contractors, is allocated to the service sector. It is a crazy anomaly bound up in distant history when farmers did everything on-farm themselves.
I also read regularly that dairy consumption globally is supposedly in decline. But this is false news. Fresh milk consumption is in global decline, but overall dairy consumption, led by cheese, continues to increase.
I also read that New Zealand’s dairy will in future supposedly face trade barriers. However, I only hear that from people who are well-versed in political lobbying but are not out there in the Asian markets which New Zealand exports to.
The overall trend in dairy and other food prices, albeit with inevitable volatility, has been upwards for the last two decades, with populations increasing and producers struggling to meet the increasing demand. There is no evidence that this will change. Growing more food is now a huge global challenge, largely disguised until recently by massive historical productivity gains in both plant and animal agriculture combined with huge fossil fuel inputs.
So, given the fundamental importance of dairy, there is a need to face-up to the environmental and other challenges that dairy faces, going forward. If New Zealand walks away from its pastoral industries, it is inevitable the whole economy will decline as imports have to be reined in.
A starting point is to address vociferous calls that dairy somehow threatens planetary survival.
There is no point in denying that methane and nitrous oxide, both fundamental by-products from dairy farming, are greenhouse gasses. These emissions have been with us since ruminant animals first evolved some millions of years ago. The issue is complex because methane is a short lived but powerful greenhouse gas, whereas carbon dioxide has less power but over a much longer atmospheric life.
The focus on methane is driven by short term temperature targets rather than long-term planetary sustainability. Holding informed debates on that issue is challenging.
I am reasonably relaxed about the current legislated 2030 methane target of 10 percent reduction from 2017 levels. This is a combined target for all biogenic methane and some, perhaps most, will come from the current transformation of sheep and beef land being converted to forestry. However, the 2050 target of between 24% and 47% methane reduction across all ruminant species is of a very different order. Quite simply, there are no technologies currently available to achieve this without a huge reduction in all of dairy, sheep and beef.
The second challenge facing dairy is the impact of dairy on water quality. Once again, there is no doubt that dairy can have a big impact on water quality, but sorting out truth from fiction is challenging. A key fact is that most of the nitrogen-leaching comes from urine deposited on paddocks in the second half of autumn and in winter.
I am closely associated with the development of composting-shelter farming systems where cows and in some cases beef animals are off-pasture during the winter, and are also bedded in these shelters at night time in autumn. This greatly reduces the leaching.
One of the current ironies is that development of these farming systems, which can also be super friendly for animals, are being led by innovative farmers who are learning through trial and error. It is time for the formal research and development (R&D) system to catch up.
There are also health challenges with some dairy products. I have for the last 15 years been closely associated with researching and communicating the health issues associated with A1 beta casein and the need to convert to A2. Right now, the A2 issue seems to have ‘gone quiet’ in New Zealand but elsewhere things are steadily moving ahead. Given the lack of commitment in New Zealand within the mainstream dairy industry, most of my own A2 work is now focused offshore.
Each of these challenges to the dairy industry deserves multiple articles of its own. All of them are big issues, with progress inhibited by a mix of misinformation and defensive lethargy.
There are tough times ahead for most New Zealanders, and it is not just dairy farmers. There is an old saying that one reaps what one sows.
*Keith Woodford was Professor of Farm Management and Agribusiness at Lincoln University for 15 years through to 2015. He is now Principal Consultant at AgriFood Systems Ltd. You can contact him directly here.
96 Comments
I do not think politicians in a developed country can willingly accept that agriculture underpins a country's future. Because it sounds so developing country, third world, hopeless, and not appealing to young generations and voters.
That is why, though sounding like a pipe dream, all NZ politicians (especially ones from the Labour) tirelessly talk about high tech, ICT, green tech, AI, high productivity etc, which are pretty much irrelevant to NZ.
https://interestingengineering.com/science/9-robots-that-are-invading-the-agriculture-industry
We will always need food. NZ produces some of the highest welfare, lowest environmental impact grass fed meat in the world. Innovation and breeding is improving milk production per animal and reducing emissions. There are loads of high tech jobs in agriculture from milking automation through to robotic fruit harvesting and remote sensing. It is an awesome industry to be in with good wages and great career prospects.
Dumping huge amounts of Urea, chemicals, ploughing and disking all the while killing our soil genome has a massive environmental impact. And all to produce a commodity (milk powder) devoid of nutrition. Sorry but milk powder is not food. Dairy has a place in the food chain, but once the corporates learn't how to control the industry (first indebt the farmers), all nutrition has been sucked out of the products. Corporate Dairy has been bad for the environment and bad for our communities.
Improving milk production per animal does not automatically result in reduced emissions.
Emissions are more closely correlated with amount of feed consumed, whether that is by 1 cow or 10.
These facts should be common knowledge, and yet are repeated over and over by vested interests pursuing an agenda.
In this case, she'll be right, science will fix it.
Emissions are correlated with feed intake, but improving production per animal does result in less emissions per unit of production.
That's because a cow needs a certain amount of food to stay alive, and the energy left over is used for production. A lower percentage of intake in high producing animals goes towards their maintenance compared to low producing animals. Also some cows are better at converting energy to milk and that's been selectively bred for over decades. Along with improved farming techniques the emission intensity of dairy from well farmed animals has declined by about 50% over the last 50 years. (That's not the case for cattle scratching out a living in subsistence farming systems.)
Some of what you say is true, but it is immaterial in the comment I made.
Dairy cows are agribusiness machines, you put in x calories, you get y production, and get z emissions.
The point that is commonly misinformed is that higher production per cow means less emissions per kgMS.
Genetics can play a part, but a minimal part at this stage, or else the problem would be solved.
As for the "certain amount of food to stay alive", well again, the biggest correlation here to environmental stress. Walking too far, lack of shelter to stay cool, poor husbandry.
Too much PKE probably in there as well.
No those things aren't irrelevant, they work in tandem with primary industries to make them safe, more efficient and more productive. Which is partly why NZ is one of the most efficient producers of primary products in the world. See the home grown Halter as the next revolution and the automated picking stuff coming online for kiwifruit. If we ignore the high tech industries our farming industries will suffer long term.
I have seen 3rd world farming methods and there is quite a difference between those and what we see in NZ. Much of it is subsistence farming, only producing what is needed with little surplus. If you are equating that to NZ farming, then you clearly don't have a grasp on either situation.
Oh won't someone think of the economy. Between 1990 and 2019 dairy cattle numbers increased by 82 percent to 6.3 million! Almost all of the rivers in pastoral land are now poisoned. Is it hysterical to be upset by that? Numbers need to come down. Peak cow has passed.
The irresponsible destruction of our waterways and the BS propaganda Fonterror has engaged in to cover it up is a major reason many of us have 'gone off' the dairy industry. The lack of action by Regional Councils who are loaded with self interested water polluters anther major problem.
So yeah..dairy is great in that we can afford the imports to satisfy our need for never ending growth - but a what cost and how sustainable is it?
The use of PKE (which is essentially a waste by-product of the palm kernel industry) has been an economically attractive option and has minimal net environmental impact. Nobody grows palm kernel for the PKE.
The industry could convert back to white clover - that was how it was many years ago when I first joined Ministry of Agriculture as a fresh faced farm adviser. However, the environmental improvement would be less than is often assumed and the reduced production would be significant. Also, GHG efficiency would almost certainly decline, reversing some of the improved GHG efficiencies of the last 30 years. Also, high clover pastures are not a natural feed for dairy cattle - those were the days when a trochar was a standard piece of equipment used on cows suffering from bloat. Losses from bloat were common, and dealing surgically with a trochar on bloated animals was not a pleasant task.
KeithW
PKE has "..minimal net environmental impact"? From whose environment? As it's sold by palm oil producers, it makes them more profitable... which means they decide to burn more forests and replace with palm oil. It's an imported good, so we are exploiting the carrying capacity of someone else's land, which means we are beyond our carrying capacity for the products we produce (obviously fertilizer also has the biggest impact). Let's not be disingenuous when we are talking about environmental impacts please. We should be saying PKE has serious impacts on SE Asian environment and should be phased out for a NZ based crop in the future, to discourage habitat loss in some of the most biodiverse forests in the world (I have seen/breathed the devastation first hand, it ain't pretty).
Yep, I agree with this. The argument that it's a byproduct and they'd grow the palm trees anyway is fallacious.
When they go into setting up these palm plantations, they would factor in the money they'll get from PKE.
$16k to have a truck/trailer load delivered the other day. It's a sh*t ton of money someone is making.
The PKE money is mainly the cost of transport to NZ (which has recently been very high) and the merchandising along the supply chain. There will also be some costs of drying the product; i.e. after the palm kernel oil (which is a different product to palm oil, albeit coming from the same plant) has been removed, and the QA and certification of the product.
I do not by any measure regard myself as an expert on PKE, or the broader palm oil industry, but I have spent a lot of time on rural projects in areas where palm oil is grown. I remain of the view that PKE returns are not a factor that influences palm oil development projects.
KeithW
Keith, you need to stop propagating this lie that it is a waste product, one that is from the Feds fact sheet 30 years ago. PKE is an important industry in its own right, has its own FOB price which has been growing quickly over the years, and most importantly, has an extremely low cost of production.
PKE also has to be a major vector for F&M into NZ.
Which means its net contribution to the palm oil industry is close to 50%. As the revenue from palm oil is higher, but cost of production of palm oil is far higher. The only cost associated with PKE is getting child labour to turn it in the sun.
The fact that you are so beholden to PKE, and that NZ imports 2 million tonnes per annum, is evidence in itself that it is far more than a waste product.
And I know that you understand what net contribution is as you mention it in your article yourself.
Mind you, I didn't see any of the externalities associated with dairy in your analysis, so maybe not.
Scott
If you want to reduce the profitability of the palm oil industry, then I suggest that every time you go to the supermarket you check out the ingredient lists for the products you buy, and every time you see something that contains 'vegetable oil' you put that item back on the shelf. There are likely to be quite a lot of items that you put back on the shelf.
And if you had absorbed the content of the article then you would have seen that a considerable part of the article was indeed about the externalities of dairy and the need for these to be addressed.
KeithW
Rastus,
I recall water skiing in Lake Ellesmere/Waihola in the 1960s.
The water quality in those days was foul, and that was a good incentive to stay on the skis.
Back in those days the population of Aotearoa NZ was about half of the present population and the demand for imports was also much lower. Accordingly, the primary industries had a much lower burden to bear.
KeithW
That's a strawman argument Keith.
Something I would expect on Stuff, not here.
For your information, I avoid all processed foods so I doubt I consume a smidgen of palm oil in any given year.
But many others do, so I agree food needs to be better labelled.
But when Fonterra includes palm oil in baby formula, it makes it pretty tough for most to avoid.
As for externalities, touching on the matter is not the same as comprehensively carrying out a benefit:cost analysis to determine whether dairy does in fact contribute, or not.
Just because it raises foreign currency does not make it essential, especially when the cost of those externalities is ignored.
Dairy farming in this country is more about property speculation, where income tax is minimised and massive tax free capital gains are maximised, than any meaningful contribution to the economy, or to feed an ever increasingly hungry world.
And you seem to totally ignore opportunity costs, as if that land is going to lie in fallow, or be planted in pines. Both of which is unlikely.
Yes you touch on the latter matters, without offering anything positive towards any debate.
It's the massive energy demands with dairy that give me doubt. With farming for meat there's a single vehicle trip to the freezing works at the end of the beasts life. With dairy there's a twice daily tanker trip that may involve a crazy distance travelled, followed by very high energy inputs for processing. Any dried product (milk powder) absorbs tons more energy, while the ready to consume products (milk/butter/cheese) typically require constant energy inputs for refrigeration while they are shipped thousands of km on ships that seem to have zero prospect of ever being carbon neutral.
Once the carbon price gets higher (and it has to) these energy inputs will make our exports uncompetitive with what our overseas markets can produce for themselves locally.
I see little hope for dairy. Better prospects for beef and lamb, and a flood of conversions to pine until something legislative puts the brakes on the conversions (but then, how do we balance our carbon?)
No, we need more intelligent debate about how to transition from an unproductive form of earning FX to a productive one.
Destroying the environment, utilising huge amounts of water and energy, just to send a low end commodity offshore is not a productive use of the comparative advantage we have in NZ.
Yikes, I'm getting old. 'Upgrading New Zealand's Competitive Advantage' (M Porter) was written in 1991. A worthy read I recall but that was 3 decades ago. (And I recall it being comparative advantage). The principal remains. How does the NZ dairy industry stack up against the rest of the world for greenhouse gas emissions and energy use? Keith, are there any robust and balanced studies out there?. Those two aspects will be fundamental to the future of the NZ Dairy industry. My guess is we stack up well for energy into market per unit of product but the GHG footprint is less clear.
Yes.
Economists talk of 'comparative advantage' which relates to relative efficiency at the level of nations. It is a very powerful concept developed by David Ricardo more than 200 years ago. It was a remarkable insight relating to relative cf absolute advantage.
Within management science, Michael Porter developed the theory of 'competitive advantage'. This has been very powerful within strategic management circles. But whether Michael Porter and his NZ colleagues actually got it right when they applied those theories to the NZ situation is a moot point.
For long-life products, NZ dairy stacks up well on energy criteria against other countries.
As for GHG criteria, that gets a little more complex and also controversial. An important KPI for methane is milksolids per kg of animal liveweight and the Europeans and Americans are ahead of us on that particular criterion. Another KPI is milksolids per kg of feed eaten, and the Europeans and Americans also beat us on that criterion. On those particular criterion India would come last among major producers. However, there are other aspects of GHG emissions where NZ is ahead. Overall, I am cautious about comparisons unless they are done on the basis of a full life cycle analysis. Some of the analyses have been communicated on the basis that the desired outcomes were the starting point.
KeithW
Keith, your articles are always insightful.
Any person comparing Dairy exports to GDP is missing the point entirely, it is the current account.
I am very bearish about our economic prospects, I simply cannot, for the life of me, see how we can replace export receipts from beef/dairy/sheep country with pine plantations that are effectively an additional tax on domestic residents (not withstanding my moral objection to planting Aotearoa with an invasive weed). You don't need a phd to realise that as our export receipts drop, so will our standard of living.
Not true.
We lost almost 100% of tourism receipts and we just sold more houses for more money now we're way richer than we were.
What really can't be afforded is for the general populace to lose dairying as a whipping boy and then having to look in the mirror at the general state of degradation practiced by urbanisation.
.
Timely article KW and reading some of the comments its clear some people still dont understand how important agriculture is to NZ and will remain so
I recall politicians 30 years ago talking about a sunset industry - which was as much bs then as it is now
Maybe timely for a refresh of a couple of govt depts after the next election
and a review of the rules around the use of GM in NZ which are looking very dated
and the classification of Greenpeace as a political lobbyist
Farming has a future, but farmers need to start paying their way. Sure they bring in welcome export receipts and money for ancillary local industries, but they literally pay no tax. They need to stop bidding up the price of land to produce break even businesses. The only thing really farmed these days is tax free capital gains.
GST is paid by the end user. i.e. it is added to the cost of everything the farm sells. Businesses and farms claim all the GST that they pay themselves back. So in fact farms pay no GST. And yes they pay tax on their income, but my understanding is that incomes are intentionaly kept low by investing in further acquisition or capital improvement when a tax bill looks likely. The trade off for the low income is that when you eventually sell you gain a windfall. I will probably never convince you, but maybe try talking to an accountant that works with farmers.
The gst the farmer(or any busiess) adds has to be paid to IRD. they cannot claim gst on wages etc , so they definetly would be paying gst for income less gst claimable exppenses.
As Nz has no capital gains tax , the aim of any business owner is to add as much capital value as possible. Farmers are ntot alone in this , and dwarfed by property speculators , who produce nothing.
As I understand it farmers pay GST on any goods and services they use in the generating of income. Plus they pay income tax on any profits. My only gripe with farm income is that somehow this generous income ‘disappears’ or is reduced significantly when it comes to their children qualifying for a student allowance. This rankled me when our son attended University some 15 years ago. Many of his friends from farming families and large business owners qualified for an allowance when our son had to pay for everything as our income was > 60k if memory serves me correctly. I understand they are all operating ‘within the rules’ but it seems grossly unfair that they can reduce their income below the limit.
Yours and all the other comments above except for El torso are forgetting that the farm owner is paid GST by the company. If paid $100k for production they will receive $115k including gst.
Businesses are gst neutral.
Businesses are gst neutral
Businesses are gst neutral
If not, get a new accountant.
No, that is definitely not how it works. The business or farm is not paying the GST on their sales, they are merely passing it to the IRD. i.e. although the money was in their bank account, it was never theirs. Only the end consumer pays GST. If you don't believe me - below is straight from the IRD website. I am assuming you won't believe that either, so I have added the link.
Paying GST when you buy something
Most things you buy have GST added to the price. You pay the GST to the seller and they pass it on to us.
https://www.ird.govt.nz/gst/what-gst-is
Yeah, you're still misunderstanding.
If say income is $100k + GST pa. And expenses are $80k +GST pa. Then you are paying more GST than you're taking in right?
Yes you can argue that GST was never yours to begin with, but it's still an amount you have to find at the end of the month to forward on to the IRD. You have collected it and passed it on to them at your own time and effort (which is a cost).
What other costs did I say farmers don't pay? I believe farmers pay a lot of costs. In fact costs so close to their revenue that that they don't pay any tax. I am not anti farming and I believe that farmers are hard working people. I just believe the current system is broken and results in little tax being paid by farmers. We can agree to disagree on this one.
Not if they didn't produce anything, then GST receipts are lower. This is why when a farm is broken up into unproductive lifestyle blocks, it's a net loss to the economy and tax receipts. A farm generates product and therefore tax, no matter where it is paid. A lifestyle block that doesn't generate a product (or products only for consumption of the owners) pay no tax and are essentially "unproductive" from an economic/tax sense. You aren't considering the oppourunity cost of not farming the land (or having it in pine forests or similar).
Dairy farmland is circa $50,000 ha, based on its yield, which other than good animal husbandry, is not set by the farmer.
Yet that same land can be rezoned by the council and be worth up to $2,000,000 ha based on its restrictive monopolistic rentier extractive capital gains value alone. IE without any amenity value being added other than the present rural land growing grass for cows to eat.
That would make for pretty expensive milk if the same yield was required.
Hear hear Dale. Imagine how much a section would cost if we had to pay Dairy Farming prices for the land (50k per hectare) plus any costs associated with infrastructure development, plus a small profit. It actually disgusts me. Seems so unfair on our youth. Maybe I am missing something with regard to the losses the farmer might incur as part of subdividing their land. Perhaps someone can enlighten me.
That's exactly what developers pay for development land in Texas, ie its rural land value.
This is due to far fewer restrictions on which land is next up for development, so no farmer or land banker can hold land to ransom, so if the farmer wants more than its rural land value, then the developer can go to any other land for sale. In theory and in practice this always gives more supply than demand. Hence housing is around 3x median income multiple.
Farmers don't incur any losses, because if this was the case, then they won't develop and keep farming. The actual profit they make is enough to make it with their effort, or they just keep farming so there is also no zoning rates pressure to stop framing just because the council has zoned them out.
El Torso: "But they literally pay no tax" ... where does this come from?. I have a 30% share in a 420 cow farm in Southland, our 31 May 2022 draft accounts just dropped in my inbox this morning. I can assure you we DO pay tax .... $135,000 of it in the last financial year. There really are some very blinkered arguments and opinions around farming in 2022 ... blimey!!
I would say you are very unusual.
As previously stated most farms will do "improvements" to increase the capital value of the farm, yet describe these improvements as R&M in their accounts to reduce their profit(and hence reduce tax). How many times have you seen an IRD auditor walking over a farm?
Great to hear that your business produces a solid income and hence pays significant tax. My understanding is that there are around 11,000 dairy herds in New Zealand and yours is just under the average size. If all of New Zealand's dairy farms performed like yours, there would be over 1.5 trillion dollars in tax receipts from dairy farming alone. I really hope that is the case and shows up in the Govt accounts, hence proving me wrong - I will remove the blinkers.......
I think you meant $1.5 billion.
That won't be to far away from the correct figure for the year just ended, with some already paid as provisional tax and some to still be paid as terminal tax.
And there will also be big provisional taxes coming up very soon for 2022/23.
KeithW
I am not aware of any tax statistics for dairy farmers or any other group in NZ - for example accountants, lawyers and medical specialists. It would be interesting to know what those groups pay but it would be very complex because of the trusts and company structures that are used.
It would be very interesting to see these numbers.
My support for the notion that dairy farmers are currently paying about $1.5 billion was based on the estimate that farmers are typically paying about 75c per kg MS based on an income approaching $10 per kg MS, and profits before tax of about $3 per kg MS.
Farmers have been using their cash surpluses to reduce debt rather than undertake development and debt reduction has to come from tax-paid proifts. In general it is not possible to pay down debt without also paying considerable tax.
KeithW
Perplexed at the poking re dairy farm income and expenditure. With all due respect running a 'break even business' would not be the focus of many business owners. Also applies to those in the dairy sector that rise at 3.30am, and are committed to the high work load required in their business. That sort of job is not for everyone, and that is just fine.
Contract milkers and sharemilkers earn decent cash at a higher payouts, as they should. If they are prepared to work longer hours than in non- farm roles, and thus generate more income from their skills, then good on them.
Dairy farmers pay tax. They also need to attend to hefty invoices and large maintenance costs associated with running said dairy business. Dairy farm drawings are not generous. It is just not exciting stuff, honestly.
The higher payout offers an opportunity to reduce debt, Keith has previously written regarding the high debt levels in the sector. As said, not exciting stuff.
What always surprises me around Dairy and other NZ primary exports, is the lack of discussion around the impact that technology will impact on these key sectors for NZ in the coming decades.
Given the rate of impact of AI, Health and provision of replicating these food groups with artifical replicants (even if they are very very far off currently) - do we really expect that the world by 2040/50 etc - will not have moved on and found a cheaper alternative to such key primary products as Dairy?
And if it does - what's plan B for NZ, given we are so reliant on primary to enable NZ to support a first world health, education, pension system?
Unfortunately the NZ resource endowment does not provide the base for a Plan B that is independent from the primary industries. People have been looking for that solution for the last 50 years. Food and energy are the key constraints that nature imposes, and which we all have to work within. Even artificial food requires an energy source. One way or another, with the exception of nuclear, it all comes from the sun.
KeithW
We will always have dairy but, it will be interesting to see what increasing carbon costs do to production costs. And to competition for land.
Many seem to think that all this carbon credit business is a voluntary thing , and something only NZ is subjecting itself too. Lets pull out then , and see how we go selling our WMP on the world market in 10 years time.
I suspect we could drop 10% in production , raise or maintain the world price , and reduce imported inputs for farming by 20 % or so , therefore been 10 % better off. but the holy grail is production (in any business) , and the idea of been better off by reducing production will never fly.
There needs to be a debate about the dairy industry alright, but it needs to be led by someone without a vested interest and someone who is prepared to comprehensively look at all the costs and downsides, including externalities, as well as the benefits.
And it needs to be integrated by looking at the opportunity cost of using the resources we have, land dairy and clean air, compared with other higher value industries.
Thanks for the article Keith. You speak an inconvenient truth. In that we must preserve our ability to pay our bills. Dairy is a big part of that equation. It is beholden on us as a nation to use a carrot and stick approach to drastically reduce the environmental footprint as you say. Especially with regard to nitrogen leaching and water for irrigation. Water abstraction is a vexatious issue. We must find an equitable way to both support dairying and preserve our waterways. With regard to the ongoing output of GHG’s CH4 and NO2 as a nation we will probably just have to ‘pay the piper’ in terms of our committments at 2050. Because as you say to date there are no practicable ways of eliminating these gases from our herds. We must continue to produce our meat and milk proteins for export whilst finding ways to reduce the environmental costs. I do understand the push back by many members of the public though. I just think on balance we need to ‘hold our noses’ when it comes to the emissions from our herds. We have no realistic alternative currently to replace the lost currency from reducing these emissions to zero.
I know, let's export some of the most polluting animals to Australia, California, or better still, China. Like the concrete cave dwellers of Wellington and Auckland who so despise agriculture, farmers and all those "deplorable" rural people who use guns to kill things. Let's set up a people export scheme, $20,000 a head to bugger off and stop whingeing. Or, am I being too harsh and unreasonable?
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