Rural round-up

April 27, 2017

Door-to-door farm visits welcomed as floodwaters recede and costs become clearer:

Teams from the local Rural Support Trust and Red Cross have been documenting destroyed pastures, damaged homes and inundated orchards, as they carry out assessment visits to flood-affected farms and orchards in the Bay of Plenty.

“Our farming and growing families have been very stoic in getting through the flooding, and now our visit is a chance for them to sit down, have a cup of tea, and see what they need to move forwards with recovery,” says Igor Gerritson from the Bay of Plenty Rural Support Trust.

“What’s immediately clear is the extra cost associated with the evacuations of about 5000 cows, and the pressing need to buy feed for stock whose grazing is destroyed by floodwaters. The cost of transporting stock out alone is estimated to be $75,000 in the first week of the event.” . . 

Fifty years of Canterbury farming revolution – Keith Woodford,

The ideas for this article were triggered by a recent reunion of former Ministry of Agriculture Canterbury farm advisers. There were about 45 of us who got together to tell tales of former years. Our collective experiences that day went back to 1946 when Austin Ebert joined what was then the Department of Agriculture, followed by Les Bennetts in 1947, and then Lyndsay Galloway and Dave Reynolds a few years later.

I was one of the later recruits, joining as a fresh-faced and very ‘wet behind the ears’ 22-year old at the end of 1969, having just completed a four-year agricultural science degree at Lincoln University. Compared to many, my farm adviser career was short.  I only lasted two years, one year either side of two years back at Lincoln for a Master of Agricultural Science degree, before heading off to South America for mountain-climbing and other adventures. But those two years as a farm adviser were enough to create many memories, and also to learn many lessons, both from colleagues and some very experienced farmers.  . . 

Wet autumn weather a ‘big shake-up’ for crop farmers:

Cropping farmers throughout New Zealand are feeling the impact of a wet autumn, with two cyclones this month leaving many crops underwater or too wet to get machinery in to harvest it.

New Zealand has been drenched in recent weeks, with the remnants of Cyclones Cook and Debbie causing widespread flooding.

Federated Farmers spokesperson Katie Milne said farmers across the country had been hit in different ways by the storms and while some areas had plenty of feed, others were struggling. . . 

Pumped Dry – Central Otago farmers’ fight for water – Ian Telfer:

Alarm is growing in the farms and orchards in the country’s driest region as irrigation rights granted during the Otago Gold Rush expire, and new environmentally sustainable allocations loom.  

More than 400 so-called deemed permits, which underpin Central Otago’s economy, have to be replaced with modern water permits within five years, and large cracks are appearing in the process.

The Carrick Water Race has run for 140 years, and survived, but its users might now have to dig deep to save it.

The historical hand-dug water channel has snaked its way downhill since the gold rush days, carrying water from Coal Creek high up in the mountains to the water-short land of Bannockburn. . . 

A2 Milk posts third-quarter sales that beat its projection, lifts annual guidance – Paul McBeth

(BusinessDesk) – A2 Milk Co’s third-quarter sales beat expectations as Chinese and Australian demand outstripped the milk marketer’s projections and the company sees annual revenue jumping by almost 49 percent.

The Auckland-based, Sydney-headquartered company forecasts revenue of $525 million in the year ending June 30, up from $352.8 million a year earlier, it said in a statement. A2 generated sales of $388.1 million in the nine months ended March 31, with the third quarter infant formula sales exceeding expectations.  . . 

Canadian Milkroad trilogy – Eric Crampton:

Three great reads on the insanity of Canada’s dairy supply management system:

Trevor Tombe explains the consequences of supply management:

According to recent estimates from the OECD, the artificially high agricultural prices in Canada transfer $3.5 billion from consumers to producers annually — nearly $3 billion from milk alone. Spread over the 8 billion litres of annual production, it’s effectively a hidden milk tax of 37 cents per litre.

For producers, this is a big deal. At the end of 2015, there were just under 11,500 dairy farms in Canada. The $3 billion that supply management allows them to extract each year is equivalent to $260,000 per farm. Much of this is capitalized into the value of the quotas they are required to hold. A single one in BC and Alberta, for example, is currently worth roughly $40,000; in Ontario and Quebec, they go for $24,000. With nearly one million dairy cows in Canada, quotas are collectively worth tens of billions of dollars, an important cause of our country’s higher production costs. . . 

Earth Day isn’t relevant here – Uptown Farms:

The last few days social media has been blowing up with Earth Day celebrations. Earth Day was born in 1970 by protestors in response to “the deterioration of the environment,” according to EarthDay.org.

This morning on our farm, we will get up and go to work like we always do.

We will check cows that are grazing our crop fields, currently seeded with turnips, radishes, and cereal rye. We refer to that mixture as cover crops, which we’ve been using on the farm for the last eight years or so, and they provide immeasurable environmental benefit. They reduce our chemical usage, runoff and erosion while increasing our soil organic matter and soil microbes. That means healthier fields and healthier environment surrounding our fields. . . 

Canterbury’s leading agritech companies showcase their solutions to increase productivity and profitability in agriculture:

Canterbury’s leading agritech companies, who contribute to the country’s $3 billion agtech sector, will be showcasing their solutions to increase productivity and profitability in agriculture, at a TechWeek event on 10 May 2017.

Robotics, software, pasture mapping and management are some of the solutions being integrated into on-farm practices across New Zealand, and will be exhibited at Lincoln Hub’s ‘Showcasing Agtech’ event in Lincoln.

For the first time in Tech Week’s history, events are being held outside Auckland, including the showcase, which has been developed to raise the profile of Canterbury Agtech companies, as well as create a conversation around sustainability and growth in the agriculture industry. . . 

NZ’s largest logging industry event planned for June:

The New Zealand forestry industry set a new record last year for the annual forest harvest. There is no denying the fact that the sector is on a high right now. On the back of booming log exports to China, low shipping rates and strong domestic demand, wood harvesting has reached record levels.

This year forestry export revenues are forecast to rise even further. For the year ending June of this year, they’re forecast to increase by 5.8% to NZ$5.4 billion, and climb a further 8.8% to NZ$5.9 billion in the year to June 2018. With the supply of harvestable wood also forecast to rise even higher over the next five years, logging contractors and transport operators from around the country will continue to be extremely busy. . . 


Quote of the day

March 18, 2015

In self-proclaimed intellectual circles, it has long been fashionable to belittle the idea of economic growth. “GDP is not the same as happiness”, some critics of growth will explain. Others will warn that excessive growth could destroy the environment and leave our planet uninhabitable. Others still will warn that the finite nature of our resources does not allow continuous growth in any case.

This kind of critique has become a pastime of the chattering classes. It is now part of polite conversation in the better suburbs of developed world cities. To question the value of growth at dinner parties in air-conditioned or heated houses while sipping French champagne and eating Italian prosciutto presumably adds a sense of intellectual gravitas to one’s physical well-being. These people probably do not even realise the self-contradiction in condemning economic growth while enjoying its blessings.  . .

Economic growth is no silver bullet to all the world’s problems. But it comes close. There is overwhelming evidence that the unprecedented economic expansion humanity has experienced roughly over the past three centuries has been a great force for good. It has made our lives better in ways that would have been unimaginable to previous generations.

This should also be the response to the aforementioned critics of growth. At which stage in history do they believe we should have proclaimed the end of economic development? Certainly not in Plato’s time (4th century BC) since that would have prevented the invention of the canal lock (3rd century BC) and paper (2nd century BC). Development should not have stopped at the time the Gospels were written either since otherwise we would not even have invented the wheelbarrow (2nd century AD).

To move to more modern times, had economic development stopped when Ernst F. Schumacher suggested it should (Small is Beautiful was published in 1973), we would have never seen CD-ROMs, the Internet or the first vaccine for meningitis. And even if we had only stopped to grow and develop when Pope Francis told us to in November 2013, we would have never seen the first human clinical trials in the United States for a wearable artificial kidney – or the new iPhone 6.

Economic growth is the driver behind all of these developments because at its core, economic growth is not mainly about the production of more but about the discovery of better (though often it is both). Economic growth helps us to find new and improved ways of combining resources. The outcomes could be a new medicine, a faster way of travelling, a healthier way of eating or a better way of learning. . . Dr Oliver Hartwich

This is an extract from the New Zealand Initiative’s report The Case for Economic Growth by Eric Crampton and Jenesa Jeram.

 


Latta vs rich List

August 4, 2014

Nigel Latta’s TV programme on the New Haves and Have Nots has reignited the debate on inequality.

Eric Crampton counters the assertion inequality is growing:

. . . First, as noted last night, inequality has not been increasing. There was an increase from the mid 1980s through the early 1990s, and it’s been flat since then. Last night I put up the Gini time series, but that’s hardly the only measure of inequality. Let me here quote the Ministry of Social Development report:

Overall, there is no evidence of any sustained rise or fall in inequality in the last two decades. The level of household disposable income inequality in New Zealand is a little above the OECD median. The share of total income received by the top 1% of individuals is at the low end of the OECD rankings.

That’s one of their big bolded summary findings. Inequality is flat, we’re hardly out of line for the OECD, and whatever you think about inequality in NZ, it’s not being driven by the top 1%. . . .

Whether or not he read that, Latta added to the debate with a Facebook post:

And… for all those people out there who dispute the fact that inequality has been steadily increasing in this country… and who argue the ins and outs of the statistics from the most recent Household incomes survey… and even the man on Newstalk ZB who just said the episode was all just “socialist propaganda”… well, all those people might be interested in the fact that in the latest National Business Review Rich List Survey the collective wealth of our rich-listers has more than doubled since 2004 from $22.3 billion to $51.2 billion in 2014.

You can call that any one of a number of things, but I don’t think you can look at those numbers and say that inequality has been “stable” since the 1990’s.

So, you know, there’s that.

To which responds:

. . . Meantime, is the Rich List 2014 exhibit A for growing inequality?

It’s worth noting the Rich List isn’t stuffed with cigar-chomping bankers or sweat shop owners or other Dickensanian characters.

Take the wealthiest new entrant, Ian McCrae (Orion Health) or Rod Drury (Xero) who had one of the biggest jumps in personal wealth this year.

Both of these sell-made CEOs have roughly doubled their software companies’ workforces from around 400 to more than 800 a piece over the past 12 months. 

Those are high quality jobs. As are the 1500+ employed by Rich Lister John Holdsworth at Datacom, which has shot up the TIN100 rankings to become our second largest high tech exporter (just ahead of Fisher & Paykel Healthcare, founded by the Rich List Paykel family).

Companies on the TIN100 (and NZTE/Callgahan Innovation-backed list of our largest high tech companies) piled on staff last year — and would have added more if not for a skills shortage. The TIN100 is stuffed with NBR Rich Listers too numerous to name, but it includes Sir Peter Jackson, and the Gallagher Family.

Many make a broader contribution. Xero has fostered a shoal of smaller NZ software companies that support its platform. Holdswoth and Morgan each invest in dozes of startups, as does another Rich Lister Sir Stephen Tindall (and there are many other examples of investing in new businesses; I’m just pulling a handful from the tech scene). Morgan is also investing further afield including multiple projects in Africa aimed at creating sustainable businesses. 

It’s also worth noting that Drury and McCrae’s companies are barely gouging and exploitive by nature. Xero will only succeed against rivals if it makes it easier for small businesses to do their books. Orion Health has had wins around the world for its software, which among other things makes it easier for healthcare providers to put patient records online and share them others who need access. But its biggest success as been in the US on the back of the Obama reforms which have made healthcare more accessible. Orion is helping to make our hospital system work better too. That’s a good thing.

It’s true Rod Drury’s wealth has increased four-fold over the past couple of years, but it’s not like he got there by reaching into workers’ back pockets. It reflects the value that NZ, Australian, US and other investors have ascribed to his company’s shares.

Drury and McCrae have also made useful contributions to the debate around ICT infrastructure and public education., among other areas.

Not all Rich Listers have made such active investments in terms of employment or otherwise contributing to the economy. Some have merely seen the value of properties increase over the past year, with mixed results for middle and working class NZ. And not ever retailer on the Rich List is about to get a medal from the CTU. But it’s notable that the largest retailer, Sir Stephen Tindall’s The Warehouse, introduced a living wage programme over the past year (or Career Retailer Wage as the chain calls it). There are counter examples, but across the Rich List there are lots of examples of good jobs being created and even, like Sir Stephen, a few examples of closing the gaps.

Most wealthy people are wealthy because they have worked hard and taken risks.

They have earned their wealth and most have made a positive contribution to both the economy and society in doing it.

A very few might have got ahead at the expense of others but most get ahead by creating wealth which not only helps them it also helps others, by creating jobs and providing goods or services.

There is no doubt there are people in dire circumstances in New Zealand but the statistics on how many and comparisons with others don’t matter nearly as much as the people who are in need.

The easiest way to reduce inequality is to make the rich poorer but that won’t help the poor.

The real problem isn’t the gap between rich and poor but whether those at the bottom have enough and how easy, or difficult, it is for them to improve.

Some in immediate need require immediate direct help.

The key to helping the rest is improvements in their education, health, and helping those who could work but aren’t to move from welfare to work.


Living wage will cost jobs, kill businesses

September 5, 2013

A “living wage” is one of many expensive policies based on emotion rather than research which Labour’s aspiring leaders are promising to implement.

Prime Minister John Key said the policy would cost about $2.6 billion and predicts 26,000 jobs would be lost.

The Motel Association said the introduction of a living wage will cost jobs in the motel sector, with some owner-operators indicating they do not have the capacity to pay more in wages, and would instead lay off staff.

. . . While it’s all well and good for politicians to talk about raising wages, but thought needs to be given to the businesses that end-up footing the bill, MANZ Chief Executive Michael Baines says.

“It’s a simple equation, raising the minimum wage to the so-called ‘living wage’ level of $18.40 will cost jobs. That is a fact,” Mr Baines says.

“Motels are being hit on one side with sharply increasing costs, often in the form of rating and compliance costs that are forever being cranked higher by greedy local government. On the other side we are facing competition from the likes of B&Bs and holiday homes which are untaxed, unregulated and can dodge these compliance costs.”

The majority of motels are owner-operated, so when costs increase but revenue does not, usually the only option is for the owner to lay off staff and do more of the work themselves. This is what will happen under the living-wage scenario.

“If politicians wanted small business owners such as in the motel sector to have the capacity to raise wages then they should cut the red tape, reduce compliance costs and create an even playing field across accommodation providers,” Mr Baines says.

 

“If you create an environment where quality businesses can flourish, especially small businesses, then the rewards will flow for everyone.”

Max Whitehead, CEO of the Small Business Voice said the policy would cause economic disaster for working New Zealanders:

Mr. Whitehead says that 97% of New Zealand enterprises employ less than 20 people — mum and dad businesses struggling to keep afloat.

“These are Kiwis who mortgage their homes to have a go at running a small business. They give people in the dole queue a job and hope for the future. If their businesses go well, then you’ll find that employees’ wages, along with job security, will increase too.”

Mr. Whitehead says a 34% wage increase will hit these business’ hard. David Cunliffe and Grant Robertson’s over-generous declaration with “other people’s money” will most certainly bring many of the small businesses down and, ironically, cost jobs.”

The costs will be put back to the consumer; inflation will go up; the Reserve Bank will respond by raising interest rates and, in turn, mortgage rates will go up.

“ The very people this bribe is designed to please will be the ones who suffer. Is this what Labour wants?

Eric Crampton at Offsetting Behaviour runs an economists eye over the proposal:

. . . Were the government promising an $18.40 minimum wage across the board, things would be rather worse. The median hourly wage in the 2012 NZ Income Survey was $20.86. A minimum wage that’s 88% of the median wage would be rather, well, breathtaking. Recall the median wage is the one where half of all wage earners earn more and half earn less. Workers vary in ability; a minimum wage at 88% of the median would disemploy anyone who cannot produce value equal to just a bit less than the median worker. This would obviously be very bad. Recall that unemployment weighs far more heavily in disutility than do wages. . .

The proposal here isn’t for an $18.40 minimum wage but rather for a living wage mandate for government workers. The effects then are more minor. . .

The main effect will be an increase in the cost of providing some government services. At the margin, this should mean that we have a few fewer things done by government, albeit within the context of an expansion in the size of government under a future Labour government. There would also then need to be an increase in taxes to fund it, or reduced spending in other areas to compensate, or higher deficits. I suspect Labour would bridge the gap via tax.
Bereft of ideas which would foster economic growth and so increase the tax take, one of few tools it has to fund its wild spending is to increase tax rates.
There will be some transitional unemployment as marginal jobs undertaken by government get shifted away from the government sector. If some of these workers were earning substantial rents in the government sector and are not employable above the legal minimum wage in the private sector, there could be some increased longer-term unemployment from that. . .
Another important effect: contractors will enjoy less of a cost advantage relative to government departments; we could easily read the policy as a way of trying to knock out contracted services to benefit public sector unions.. .
A policy that benefits unions but costs jobs – where’s the economic and moral argument for that?
If you want to increase the wages of the working poor, you hardly should be starting with government workers, who earn more on average than those in the private sector and who typically also enjoy greater job security and flexibility. And if you want to run transfers to the working poor, generalised wage subsidies are the least distortionary way of doing it. Labour’s proposed mechanism would be likely to reduce the efficiency of government services by pushing away from contracting out, and to skew the optimal balance between government services and other goods and services by increasing public sector costs. . .

That would increase the burden of government and  make it more difficult for businesses outside government to compete for staff.

Improving incomes is a laudable aim but imposing a “living wage” is not the way to do it.

Sustainable wage increases must be based on productivity and profitability, not government dictate.


Exclusive use can benefit environment

January 12, 2011

Federated Farmers makes a stand for landowners in saying that fishing rights shouldn’t trample property rights:

Federated Farmers will defend a fundamental principle of land ownership – the right to exclude access – even if some anglers may have to choose to pay for convenient access.

“Federated Farmers agrees that selling river fishing rights is against the law,” says Donald Aubrey, Federated Farmers game and pest animal management spokesperson.

“Yet all landowners have the right to exclude access to their land by people who are uninvited, whether you live in the town or the country.

Few people would expect to have open access to a section in town, it doesn’t make any difference in the country just because the property is bigger.

“What this boils down to is common courtesy and respect for the property of others.  I know many farmers who freely grant access for recreational hunting or fishing but it’s based on the common courtesy of asking permission first. 

“A farm may be open ground but its also private property like someone’s house in-town.  Importantly it’s also a working environment that may contain sensitive areas or hazards.  Taking rather than securing permission is not only illegal but may have unintended adverse consequences.

“Anglers need to respect the right of the landowner to grant or refuse access.  After all, if you’ve had your gates left open, fences damaged or discarded fishing line left behind, then you’re probably less inclined to say yes. . .

We have never had any problems with people who’ve asked permission to cross or property but we have had problems with those who don’t – including theft of fuel, illegal hunting and damage to a security camera.

Donald was responding to comments from anglers criticising landowners who grant exclusive access to fishing guides which was the subject of a post on Monday.

Over at Offsetting Behaviour, Eric Crampton points out there can be environmental benefits from exclusive access:

One of my favourite Kiwi enviropreneurs is Elm Wildlife Tours down in Dunedin. I always recommend that folks visiting the Department book in with them if heading that way. Elm partnered with a local farmer whose land had Yellow-Eyed Penguin habitat: Elm gets exclusive access for its tour groups and works to improve the habitat. Making the resource excludable encourages conservation.

Maintaining and enhancing natural resources takes money and this is an excellent way to control access, for the sake of the landowner and the penguins, and ensure the habitat is looked after.

Landowners are charging for access, not for fishing, although if the only way to the river is through a farm it’s a distinction which makes no difference. Those complaining about that ought to remember it’s not only private landowners who charge. DoC sells concessions to tourist operators who use  land under their control and they also sell the right to hunt on it.

We neighbour a DoC block and the easiest access is through our property. We’ve never charged anyone who’s asked to cross our land although that increases the need for maintenance on our tracks.

But charging by DoC is a sensible form of user pays – those who make money from others or enjoy hunting  on DoC  land pay for the privilege which helps offset the cost of maintenance and enhancement.


Ignorance leads to left wing governments

March 7, 2009

I’ve always had my tongue in my cheek when I’ve suggested that we ought to pass a comprehension test before we’re allowed to vote, now I’ve read Offsetting Behaviour I’m not sure it’s so funny.

Offsetting Behaviour is a welcome addition to the blogosphere by Eric Crampton who has some fascinating posts defining political ignornace , measuring ignorance, measuring economic thinking and  asking who’s ignorant?

Hat Tip: Anti Dismal


Dismal stats

October 31, 2008

Eric Crampton’s has analysed voting odds at iPredict and concludes:

So, National’s chances of getting more seats than Labour look more like 57% than like 70%. And those chances get much worse in the 26% probability case that Peters returns to Parliament.

Anti Dismal  says:

Don’t you just love economists and statisitics?! But what this says is that either Eric has gotten his calculation very wrong or the iPredict market has gotten something wrong. If it is the latter then there is money to be made. Go to it!


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