Recession deepens milk surplus climbs

January 12, 2009

If the demand for widgets drops it’s not difficult for the factories producing them to reduce production.

It’s much harder with plants and animals so although the demand for dairy products has fallen farmers can’t turn off the milk tap and as the New York Times reports  that’s leading to stockpiles of milk powder.

As a breakneck expansion in the global dairy industry turns to bust, Roger Van Groningen must deal with the consequences. In a warehouse that his company runs here, 8 to 20 trucks pull up every day to unload milk powder. Bags of the stuff — surplus that nobody will buy, at least not at a price the dairy industry regards as acceptable — are unloaded and stacked into towering rows that nearly fill the warehouse.

Mr. Van Groningen’s company does not own the surplus milk powder, but merely stores it for the new owners: the taxpayers of the United States. To date, the government has agreed to buy about $91 million worth of milk powder.

. . .  Government price supports provide a price floor for agricultural products as a way of keeping farmers afloat during hard times and ensuring an adequate food supply.

. . . Some critics of farm subsidies argue that price support programs are antiquated and allow farmers to continue producing even when the economics make no sense, as taxpayers will always buy up the excess production.

The USA isn’t along in stockpiling milk powder. The EU is too and  it’s also happening in New Zealand although here it’s the farmer owned company Fonterra and not the government doing it.

Roarprawn asks whether Fonterra shareholders are getting the true picture when Agridata points out that stock piles mean milk isn’t selling.

I was at a meeting in December where we got a frank account of the state of the industry and while whitegold has lost the lustre it had just months ago, the long term outlook is positive.

That doesn’t mean the short to medium term will be easy, especially for those who converted recently when land, stock and building prices were at their peak.  And if dairy farmers are tightening their belts their employees and those who service and supply them will feel the pinch too.

In light of this, farmers who’ve put their efforts, and money, into expensive supplementary feeding systems designed to increase production would do well to remember New Zealand’s competitive advantage is the ability to grow grass which gives us a low cost, pasture based dairy industry.

As for Fonterra, the measure of a company is not how it handles a rising market but how well it does when prices fall and it will be some months until we can judge them on that.


And what would she do?

January 12, 2009

There’s no better illustration of the differences between the leadership of the current government and the previous one than than Helen Clark’s criticism of John Key because he’s having a holiday.

She was all-controlling, he trusts his ministers.

She thinks the government is the answer, he knows the last one was a big part of the problem.

Former Prime Minister Helen Clark, on holiday in Europe, criticised the Government for taking a “laissez-faire” approach to the economic crisis.

“The rest of the world is aware there’s an economic crisis on, they are aware there’s a huge international crisis in Gaza, and the New Zealand government is on holiday,” she said.

“At the end of the day, when you’re elected, you don’t have a 100 per cent holiday.”

Even without the hypocrisy shown by criticising Key for taking a break while she too is on holiday, this is more than a bit rich coming from the woman whose government left an economic mess for National to clean up; and whose election promises included a secret mini-budget to be announced before Christmas.

National made its policy and 100 day plan clear before the election, formed a government in record time and passed legislation to deliver on some key parts of its pledges before parliament went in to recess last month.

They were criticised  then for moving too fast and now they’re being criticised for not doing enough.

But what would she be doing if she was still in control? Cancelling the tax cuts, calling meetings, commissiong reports and reviews and achieving little or nothing as she did for nine years?

Key and his family have made significant financial and personal sacrifices so he can be Prime Minister. There is absolutely nothing wrong with them taking a rare opportunity to have a holiday together.

Although, it won’t be “100 per cent holiday” for him. He’s contactable by phone and email, he’ll be keeping up with news, reading and as many people in leadership roles do when supposedly on holiday, he’ll be making plans.

Hat Tip: Keeping Stock  and Kiwi Blog

P.S. – someone whose political memory is better than mine may correct me on this but didn’t Clark carry on with an overseas trip after the 9/11 attacks and wasn’t she not just out of the country but unreachable after the tsunami in Thailand?


The new three Rs

January 12, 2009

The three Rs used to be Reading wRiting and aRithmetic.

Now they stand for reduce, reuse and recycle.

As a child of children of the depression who had a Presbyterian upbringing I have no argument with the economic and environmental sense of reducing and reusing. But I am yet to be convinced that the enivronmental and economic benefits of recycling outweigh the costs.

There is no doubt recycling reduces the amount of waste put into landfills which in turn reduces the headache for councils which have to deal with ever growing mountains of waste.

But I’ve often wondered if the energy used in transporting and processing paper, plastic, glass and other recyclable materials justifies doing it. My doubts over whether recycling was better for the environment were compounded by a news story a few years ago, which I’ve never seen contradicted, about a plastic recycling plant in China which was causing huge air and water pollution and severe health problems for its staff.

Now the ODT reports that recyclable materials are piling up because the market for them has slumped. That may have nothing to do with the environmental costs and benefits but it is a sign the economic benefits are now outweighed by the costs.

Recycling is the easiest green initiative for individuals. If your town has kerbside recycling it’s just a matter of chucking things into the right bin with just a little more effort required to wash anything which is dirty.

It takes a bit more efforts in towns without the service and the country where you have to take your recyclables to a depot but that can usually be done enroute to somewhere else.

It’s not hard to make small gestures towards reducing and reusing – taking your own reusable bags to the supermarket does both;  and washing the empty vegemite jar and refilling it with homemade jam is easy.

But serious reduction and resuse requires restraint and effort.

However, unlike the old 3 Rs where all Rs were equal, the first two of the new 3Rs – reducing and reusing are almost certainly superior to the third – recycling.


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