World food price rises good for NZ

January 7, 2011

High world food prices are good news for exporters and the New Zealand economy.

The United Nations food price index shows prices for staple food items  – cereals, dairy products,  meat, oils and fats and sugar – in December were higher than the last peak in 2008.

The first auction of the year resulted in a good boost to milk prices,  meat prices are holding up and cropping farmers are getting better returns too.

The floods in Australia are already impacting on grain prices here, although if their milling wheat is downgraded to feed grain that will compete with local produce and counter some of the gains for New Zealand growers.

Flooding of of fruit and sugar cane will also lead to price increases.

In some years the wider economic benefit of  rising prices for one group have been offset by falling prices for another but this time dairy, meat and cropping sectors are all receiving better returns.

Higher export prices will lead to domestic price increases which will put pressure on budgets for those on low incomes. But we’re a food exporting nation and our overall wealth and wellbeing depend on good prices for our produce.


Grain Price Rises Pushes Food Prices Up

July 12, 2008

Good news for producers is bad news for consumers because rising international prices for grain will push domestic food prices up again.

Bread prices are predicted to rise 10c a loaf and pork and bacon prices $2 to $3 a kg.

Food producers face new grain contracts – $100 a tonne, or 30%, higher than last year.

Farmers say contracts for next season’s harvest, which are about to be signed, reflected those higher prices.

Pig and poultry producers say price rises are inevitable to cover higher feed costs.

Foodstuffs (South Island) chief executive Steve Anderson agrees, and warns costs will continue to increase across the board.

He could not quantify the size of any increase, saying that was up to suppliers, but he doubted there would be any price correction in the immediate future.

“We’re not planning on seeing a reduction in commodity prices in general.”

The price for meat and wool is also driven by the price of grain and that in turn is driven by the price of energy. The combined shortage of food and high fuel prices will push the price of all food up.

Grain prices were so volatile, milling wheat growers were not signing contracts at $500 a tonne, claiming the price was still $100 a tonne below the international price and higher-yielding feed wheat.

“It is a rising market. On a falling market, everyone would be signing,” Federated Farmers grains council chairman Ian Morten said.

Demand from dairy farmers had also driven up cereal prices. Growers have been encouraged to plant higher-yielding feed varieties instead of milling wheat, which gave them leverage against the mills.

Grain growers had this year resumed exporting to take advantage of higher international spot prices, something they had not done for many years, which reduced the availability of domestically-grown cereals.

On top of this is the competition for land from the misguided policy which changes land use from producing food for people to the production of fuel for vehicles.

Farmers and food producers also blamed Solid Energy for higher prices, as it has contracted 5000ha of predominantly cropping land to grow oilseed rape for biodiesel production this year.

Solid Energy plans to increase that production to between 20,000ha and 25,000ha within three years.

Mainland Poultry chief executive Michael Guthrie said international issues had driven grain prices up 80% for his egg business in the past 18 months.

Drought in Australia had decimated world grain production; there had been floods and biofuel production in the United States; growing demand for grain from China and India; low world grain stocks; and dairying had taken over cropping land in New Zealand.

Mr Guthrie said egg prices had been stable for the past two years. He expected prices to rise, but could not say by how much.

Pork Industry Board chairman Chris Trengrove said New Zealand was six months behind the rest of the world on feeling the impact of higher grain prices.

Pork and bacon prices would need to increase about $1 a kg to the farmer to cover rising costs, which translated to between $2 to $3 a kg to the consumer.

Production and transport costs are also rising for fruit and vegetables and that too will impact on retail prices.

Repeated competition from rabbits persuaded me to abandon my vegetable garden but now it has been securely fenced this seems like a good time to get it ready for spring planting.


How Much Will We Spend at the Fieldays?

June 9, 2008

It’s officially called the New Zealand National Agricultural Fiedays but such is its success, the biggest ag show in the southern hemisphere is generally just known as The Fieldays  

The theme for this year is The Science of Farming and I can’t argue with the need for more of that. But regardless of what is revealed when AgResearch and The University of Waikato unveil their latest research the big talking point is sure to be how much farmers spend.

Last year total sales reached $320 million. With this year’s record milk payout and next year’s opening bid from Fonterra set at $7 a kilo it will be no surprise if dairy farmers open their wallets. But while they aren’t getting the headlines dairying is, cropping farmers have had a good season this year and a rising schedule suggests the outlook for sheep and beef is improving so they might do more than kick tyres too.  


Country Could Weather Economic Storm Better Than Cities

June 5, 2008

The ag-sag of the 1980s influenced my generation as the 1930s depression affected that of my parents. We determined never to be that vulnerable to the vagaries of political and economic cycles again and while many are starting to worry about the economic outlook farmers and rural communities are much better placed than we were 20 years ago.

 

The sudden loss of subsidies plus a high dollar, inflation and interest rates above 20 percent and low commodity prices had a devastating impact in the 80s. Land prices plummeted leaving many of us owing more than the value of what we owned. As we retrenched those who worked for or provided services to us, and processed our produce lost work and customers. Eventually the impact of the ag-sag spread from farms to rural communities and then to towns and cities, and the downturn was then aggravated by the 1987 share crash.

 

Now, interest rates and inflation are higher than desirable, but still well below the levels we faced 20 years ago and not all sectors are getting poor returns. Cropping farmers are enjoying a long awaited upturn and the dairy payout is at record levels. While sheep and beef incomes are dismal it is not like the 80s when farmers received bills for sending stock to the works because the transport and killing costs exceeded the price of the animals.

 

Higher land prices mean most still have good equity in their properties too although rising land values are not going to keep pace with many repeats of last season’s losses. However, while prices have a long way to go to make sheep and beef farming sustainable meat prices are improving and sheep and beef farmers can take heart from what is happening in other sectors.

 

While the rise in dairy and grain prices was anticipated, no-one picked the increase would be as fast and as great as it has been so there is hope for a similar resurgence in the meat industry. Beef prices are on record highs in the United States, it is only the high exchange rate which is diluting the returns to our farmers. The growing demand for protein throughout the world which is helping dairy farmers should transfer into meat prices soon. And the huge decrease in stock numbers in the wake of last year’s drought in Australia and drought and dairy conversions here means demand will outstrip supply and those farmers who have stuck with sheep and beef are well placed to take advantage of that.

 

The ag-sag hit North Otago particularly hard because it coincided with another of the recurring droughts which plagued the district. We’ve had only about 1/4 of our annual rainfall in the first half of the year, but the impact of dry weather will never be as bad as it was 20 years ago because a far greater area is irrigated now.

 

Reserve Bank Governor Alan Bollard is predicting tough  times ahead.

 

Dr Bollard said:

* Household spending – the main driver of economic growth in the 2000s – will contract over the next couple of years, despite the Government’s announced tax cuts.

* Economic growth will come to a virtual standstill this year and will grow well below par at 1.4 per cent in the March 2010 year.

* House prices are forecast to plunge from their peak last year, by 22 per cent when inflation was taken into account.

* Unemployment will almost double to 6 per cent over the next three years and job creation will go backward over the next four years.

In the 80s the recession was felt first and hardest on farms and in the provinces. This time because of the growing international demand for what we produce so well, the outlook for agriculture is brighter which means the provinces may be protected from the worst of what looks like an urban-led downturn.


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