Dairying is diversification

Labour’s initial response to the whey protein contamination was restrained but the restraint didn’t last long.

During Question Time yesterday David Parker reminded us that his party doesn’t like dairying.

Hon David Parker: Does he agree with the article in the Washington Post on 7 August that the botulism issue highlights New Zealand’s reliance on dairy exports?

Hon BILL ENGLISH: Well, you did not need the botulism issue to highlight the importance of the dairy industry to New Zealand. I must say that the dairy industry deserves some support, despite New Zealand talking for 20 or 30 years about being too reliant on commodities. The dairy industry has performed better than the fashion industry, the IT industry, the wine industry, and the film industry, and it has injected billions of dollars of extra income into this economy in the last decade. We think that is not a bad performance.

Hon David Parker: Given that over the last 5 years under National, New Zealand’s reliance upon dairying has increased and the latest jobs statistics show a further decline in manufacturing employment, how can he deny that he has failed to rebalance and diversify the export sector despite his promise to do so?

Hon BILL ENGLISH: As the member may well know, it is not really a matter of whether Governments can just pick to have another industry. New Zealand has 30 years of experience of trying to do that, and how it has turned out is that we are very good at some things, such as the production of protein and high-value niche manufacturing, and those are the growing parts of the economy. Labour thinks it is good at government, and it decided to grow the Government part of the economy. Well, it turned out that that does not work very well.

This week’s food health scare, made worse by Fonterra’s response, has reinforced just how reliant we are on dairying.

It would be better if our economy was more diversified but Rob Hosking points out that diversification is a slogan not a policy.

He also points out that dairying is diversification.

Forty years ago we depended on the produce of one animal in one market – sheep in Britain.

Successive governments tried various ways to foster a variety of industries, without success, but dairying has grown without any government initiatives.

Farmers have made the most of New Zealand’s natural advantages to respond to international market signals driven by growing global demand for protein by producing, and selling more milk.

The export income and economic growth which has resulted from that has made a significant contribution to helping the country through the global financial crisis.

We would have done even better had we been producing lots more of whatever else the world wants and is prepared to pay for.

A broader economic base would make the country stronger but Labour’s failed strategy of bigger government wouldn’t.

7 Responses to Dairying is diversification

  1. Good post Ele. I well remember the Holyoake years, and the strength of the sheep farming industry. I can also remember the “butter mountain” in Europe where we struggled to find buyers for our dairy produce. How things have changed!

  2. Armchair Critic says:

    I’m not convinced Ele.
    It looks a lot like we’ve moved from one farming output to a different one. Rather than living off the sheep’s back we now live off the cow’s udder. That’s substitution, not diversification.
    Considering that Fonterra is by far the largest player in the dairy sector, whereas there were and still are range of meat companies (and the virtues of this are a separate debate), the diversity 40 years back was greater.
    Looking at it from another perspective, both then and now we relied on the fertility of the land, and on that basis we have neither substituted nor diversified.
    Suggesting that Labour’s line of questioning shows they hate the dairy sector is indicative of paranoia or poor comprehension. The questioning was clearly about the economy in general; I reckon you should not take it so personally.
    BTW the link to NBR is hidden behind a paywall (so I can only read it at work) and isn’t very helpful for supporting your argument.
    Are you going to the conference? Will you post on the proceedings, assuming you attend?

  3. Mr E says:

    Strange AC. Can you give me an agricultural example of diversification that doesn’t involve substitution?
    Are you suggesting that we shouldn’t rely on the fertile land?
    Face it AC, the left has shown virtually zero support to the dairy since its recent unfortunate incident. This is despite almost no short term negative pricing signals. To me it seems the left are almost willing the dairy industry to fail. Very unpatriotic in my view.

  4. JC says:

    Diversification is an utter bullshit concept in most cases, eg, the UK has just approved a plan for an offshore wind generator plan whereby the tax payer will pay *three* times the market price for wind generated power.

    At the same time the UK govt has produced a plan for a massive increase of diesel fuel generated power for when the wind doesn’t blow.. under the plan hospitals with emergency diesel generators will feed power to the national grid sans wind. It doesn’t take too much imagination to see that hospitals might be forced to forsake patient safety for the “national good” to keep the lights on for the general population who vote. In addition, one of the UK’s biggest power producers is changing from coal to wood.. the wood will be supplied from the forests of the USA.

    Thats three diversifications the UK has done for power.. all are utterly clueless, expensive, dangerous and corrupt.

    For NZ and the rest of the world the year is 2013 where globalisation is a reality and nations must produce what they are good at and import the other products produced by nations that have natural advantages for what they are good at.. that means we produce exportable stuff like services.. our No 1 export, dairy No 2, metals and machinery No 3 agricultural products and fish No 4, other food No 5, wood and paper No 6, meat No 7 and so on.

    Now, lets look at dairy.. its a little under 20% of total exports and around 20% of dairy product goes to China and we have a number of other countries named that we export to, but “other countries” is our biggest customer.

    If we lost half our China trade in dairy we would lose a billion or so dollars.. yes, thats how small and insignificant the loss is and how incredibly diversified our export trading is.. losing half our dairy trade in China would result in a 9% loss in total dairy exports and be greedily swallowed up by our other Asian buyers.

    For NZ export diversification isn’t about producing designer jeans with a 3:1 subsidy but producing what we are good at and suitably spreading these exports over dozens of countries.. thats why Key has been visiting nations like Mexico, Sth Korea and parts of Asia and Sth America, he’s spreading and deepening diversification in all the stuff we are good at producing.

    JC

  5. Armchair Critic says:

    Fair cop Mr E. I was contesting the premise of the post and not actually offering anything in its place. I’m not inclined to answer any of your questions, not because they are not worth answering (in fact they probably are worth answering) but because the objective of my comment was to express my disagreement with the premise of the post. Nothing you’ve written has gone any way towards making me revise my opinion.

  6. Mr E says:

    You’ve challenged Ele’s definition of diversification, suggesting it is more like substitution or nothing at all. I am querying the practicality and sensibility of your definitions.
    Ignore as you will, it does suggest you contest from a strong position.

  7. Armchair Critic says:

    Thanks, I think, Mr E. Where I was going, in my head if not in my comment, was that dairy may well be the present, but I doubt it is the future. That’s not to knock dairy, all I’m suggesting is that if I were asked to put money on whether “dairy” or “something else” will be our main export in fifty years time, I’d go for “something else”. I don’t have any special knowledge on which I would base such a bet, just a little understanding of history.
    Diversity would involve having the proportion of our exports that arises from the generation of value from non-farming sources increase. That is quite different to “the left…willing the dairy industry to fail”, but I can see how it could be interpreted as you say. We will always rely on fertile land and a predictable supply of water.

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