The economic laws of supply and demand are starting with the rises in dairy prices affecting local costs, and local consumers reacting by reducing consumption.
Strong overseas demand for dairy products will keep prices high in the meantime, but if big production increases eventuate in the US and India as predicted, price falls could happen.
With many of our agricultural commodities at high or record prices it would be disappointing if price increases restricted consumption of food produced in this country. Traditions of good cheap food produced locally are part of what NZ is.
The challege for agriculture and sustainability is to produce the volumes needed with a cost structure that gives good profits for reinvestment.
The price of milk has become too rich for many households' taste with dairy giant Fonterra reporting a "dramatic" fall in sales. The price of a two litre bottle of milk has jumped 15c to $4.30-$4.50 after two price rises in the past five months, the result of strong global dairy commodity prices reports Stuff. Fonterra Brands managing director Peter McClure, an industry veteran, says it is the highest milk price he can remember, and has led to a fall of about 1 per cent in milk sales in the past three months.
This is more significant than it sounds given milk sales have been growing solidly at 2-3 per cent for five years, boosted by Kiwis' love affair with coffee, he says. McClure has seen shoppers shy away from buying milk during previous price spikes but says sales have recovered quickly in the past. This time the decline is continuing. He could not rule out another round of price rises in March after Fonterra directors last month raised their milk payout forecast for the season to farmers from $6.60/kg milksolids to $6.90 on the back of continuing strong international prices.
Sales of 1kg family blocks of cheese have also dropped off after reaching $10, with shoppers reaching for smaller blocks, McClure says. Butter has soared by more than 50 per cent to around $5 for 500gms, but sales volumes are holding steady thanks to the "incredible impact" of householders' appetite for television cooking and celebrity chef shows, he says.
Fonterra Brands and Goodman Fielder are the big cheeses of the New Zealand domestic dairy product manufacturing market. However Goodman Fielder buys its milk from Fonterra, which controls around 89 per cent of the country's raw milk supply, so is subject to the same price rises as its competitor Fonterra Brands.
25 Comments
Consumption habits on beef have already changed. We buy for example 'mince' with chicken and red dye added and do not get informed this is happening whereas you would imagine there would have to be a huge warning on the packet that you are not buying what you think you are buying? I have switched to the greyest 'mince' i can buy and usually smell it before i cook it. Even so we buy a fair amount of 'mince' because we get tired of eating salmon tuna or chicken. Lamb being a rare luxury. Our latest discovery is home made 'meat' balls using 'mince'. God knows what is actually in them but with a bit of food flavouring from a 'meat' ball mix you can imagine better living.
My American neighbour tells me that in his native West Virginia pigs face & snouts were considered a delicacy ........ But you just can't get them now ,as they are ground into 'burger pattie mince ................ YUM !
..... Meebee we should move onto polar bear and fur seal steak ?
And we all know what goes into meat pies in Australia ; beef nose & lips , chicken combs ....... all the knarly excess bits that are unpalatable unless minced into an unidentifiable lump of " meat " . ........... Cobber , wanna " pie floater " ?
Given time as people stop buying essential foods for bone growth etc we will start seeing old diseases come back like Ricketts and milk will have to be reintroduced to schools.Ironically it is cheaper to buy powdered milk and reconstitute it than liquid milk, more litres for your dollar.
Milk in schools is already happening on a selective basis Janette
ANZ economist Steve Edwards said higher food prices were a double-edged sword but there were more positives than negatives for New Zealand as a whole.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10700304
Bravo Mr Edwards – what a short term idiotic view – what about considering other price increases for basic needs, affecting the majority of NZconsumers (families) earning less then $ 50’000 p/a before making such comments ?
Under Climate Change and it’s consequences does he not see even an explosion of food prices ? How much longer are people listening to such BS ?
Hey Walter...expect a visit from your 'friendly' bank next week...they are having a special on debt and want you to join the party...they have you down for an extra few hundred grand...run like hell Walter!
Pretty soon we can look forward to English taking off his mask and suggesting the peasants support their 'friendly bank' by borrowing some money and then spending it on stuff so he can cream off some tax along the way and hide his fiscal hole.
Be warned Walter...they're commmmmming...the knock on the door...the hard sell....the JK smiles....flash suits and 4wds....it's just a few hundred grand Walter and think of the stuff you can buy with it...why you could buy some more property....you don't want to miss out on the capital gains do you????
Despite having currently a good run selling to art- collectors, business is becoming harder. I think a high number of businesses are under a lot of financial stress - unfortunately an easy target for banks.
In order to avoid the JK smiles....flash suits and 4wds, we all have to make sacrifices – safe more, buy less – have a veggie garden – shorten our holiday – drive less – stay home.
The world has changed will change – fast.
What you need Walter is to diversify...no good wasting good customers when you can sell them a top Quality cup of coffee and cheese on cracka snacks...invite the banks round...drop hints about wanting heaps of loot...flog the buggers some paintings and charge them for the coffee..then delay your decision...before asking them back for another go....
Hoisington Fourth-Quarter Report
by Van Hoisington and Dr. Lacy Hunt
QE2's Problems
Clearly, Fed actions have affected stock and commodity prices. The benefits from higher stock prices accrue very slowly, are small, and are slanted to a limited number of households. Conversely, higher commodity prices serve to raise the cost of many basic necessities that play a major role in the budget of virtually all low and moderate income households.
For example, in late 2010 consumer fuel expenditures amounted to 9.1% of wage and salary income (Chart 2). In the past year, the S&P GSCI Energy Index advanced by 14.6%. Since energy demand is highly price inelastic, it seems there is little alternative to purchasing these energy items. Thus, with median family income at approximately $50,000, annual fuel expenditures rose by about $660 for the typical family. In late 2010, consumer food expenditures were 12.6% of wage and salary income. In the past year, the S&P GSCI Agricultural and Livestock Commodity Price Index rose by 40%. If we conservatively assume that just one quarter of these raw material costs are ultimately passed through to consumers, higher priced foods will have added another roughly $626 per year of essential costs to the median household budget. These increased costs could be considered inflationary, however, with wage income stagnant, higher food and fuel prices will act like a tax increase. Indeed, the approximately $1300 increase in food and fuel prices is equal to 2.6% of median family income, an amount that more than offsets the 2% reduction in the social security tax for 2011
Uk
I read somewhere when food costs become 60% of income people will start rioting. In some low socio economic countries food is now 50% of income. Look at Algeria that started as food riots. India a staple product onions too expensive and not enough causing huge concern. When food becomes too expensive I think there will be civil unrest.In the great depression alot of men went into the bush to kill food for their families my grandfather was one.
Sadly we don't have that ability any more and people are conditioned to go somewhere and buy. A bit like cows that are feed a lot of supplement they stand and wait for the feed wagon to come and don't know how to graze.A lot of the world lives day to day and need to access food daily, no power or refrigeration to store food. There is plenty of food produced and the worlds wastage of food is obscene it is all about distribution
AAs for banks they are pushing people to buy a second house I know someone that wanted to change a few things with her Bank and they said buy another house for investment. She said no. They pestered her with phone calls and letters of offer.She told them what part of no don't you understand ( incentivised lending in action I am guessing). The bank finally got the message.
Luckily for NZ we still have our its big economic gun to fire.....namely widespread water storage projects to fully enhance and leverage our agricultural potential. Alot of work going on behind the scenes, starting of course with the sacking of ecan. Screw building more roads in Auckland, this should be economic imperitive number one. A sure fire winner which will have payoff over centuries. Canterbury only uses 4% of its available fresh water, a complete no brainer!
It's a message the peasants everywhere need to get WJ....the stronger the trend to avoid mortgages and save instead, the faster deflation in the property bubble and the sooner the saved capital will cover the cost of a new or used box of ticky tacky.
The rural sector would find it slow going growing on their own profits but in time that would speed up. There is no bloody need for the banks to have a feed.
Why are so many so easily tricked into borrowing from banks. All that has been achieved is to hand the banks a fat slice of the wealth created by the country.
By and large humans are thick, they have been programmed into believing the mind bending BS on the big flat screen ( on tick) hanging on the wall.
Maybe we deserve an eye watering lesson from the banks on the responsibility of debt, for some the only way they learn is the hard way.
Realtor in France
whats happening with real estate in France?I looked a a few farms there in 2007. What are houses selling for in the south west, I take it thats where you live? My wife wants a bolt hole in France, so we are thinking about looking around this winter.
Thanks I have a contact in Limoges, hes ex foreign office and great at helping people buy in Europe. We looked at places around Foix and loved it. I need to be around Toulouse so I can go hunting with my friends who take it very seriously and make the best foie gras ever, they have a farm and I just go visit for the food. love the wild horses and the farmland around there. Can I get Bernard to give you my email? My wife is in the UK for another week(speaks French, rusty but Ok ,better than her Italian) I have a daughter working on some big production at the royal London opera house,Giselle, which goes live in a few days and is a big deal according to her. I couldn't live in the UK but France is no trouble. Houses are so good buying in France and Im wasting my time hanging around here with out any opportunities. However I start Tuna fishing next week and love it so may need to spend a few months a year here. I regret not selling the lot (i kept 250 acres and house) Ties me to the place for no reason and no money in farming at present, for me anyway, perhaps I should try harder.
Thanks Andrew
No problem my email. 4landnz@gmail.com
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