Irish producers seek taxpayer support

Irish producers are calling for taxpayers to subsidise a sterling equalisation support scheme  to compensate them for the fall in the value of the pound which has reduced their returns from exports to Britain.

This comes just days after the European Union agreed to resume subsidies  on butter, cheese and milk powder which Alf Grumble thinks requries a less diplomatic approach  than the initial response from New Zealand.

Subsidies blunt market signals and will prolong the slump in prices because they’ll send artificial signals to maintain or boost production in the face of falling demand and they’ll also threaten free trade negotiations.

Both of these will harm our exporters and the wider economy.

EU resumes ag subsidies

The European Union decision to resume export subsidies on butter, cheese and milk powder which were suspended a couple of years ago is a blow to free trade hopes and our dairy industry.

The world milk price has fallen steeply in recent months, the EU is already subsidising butter storeage and the new subsidies will encourage further supply which is unrelated to demand.

Trade Minister Tim Groser and Agriculture Minister David Carter say it’s a negative signal when so much effort is going in to reducing protection.

Groser said this makes completion of DOHA negotiations even more urgent and Dear John says the prohibition of these subsidies should be the number one goal of current WTO negotiations.

New Zealand farmers were brought kicking and screaming into producing without subsidies in the 1980s. The pain at the time was intense but farmers are more efficient and more secure now than we ever could be with subsidies.

This message has still to get through to producers, manufacturers and politicians in other parts of the world and  everyone is paying the price of unsustainable production because of that.

NZ payout down EU subsidies up

Fonterra’s announcment on the milk payout at noon today will not be good news for farmers.

The company lets suppliers know of changes greater than 30 cents in the forecast and it’s a safe bet the payout won’t be going up.

Some commentators are predicting the drop might be as much as 60 cents. That would take it to $6 a kilo, which is still above the average payout for the seven years Fonterra has been operating.

The falling price of dairy products in international markets is behind the drop and there’s more bad news for New Zealand farmers in the EU’s decision to subsidise butter storeage.

The European Union agreed on Thursday to support butter producers by reinstating subsidies for private storage from next year as local butter prices in several EU countries have fallen sharply in recent months.

EU national experts voted to bring forward the subsidy scheme by two months, setting a flat-rate aid level of 15.62 euros ($19.51) a tonne, plus smaller extra daily payments to cover variable costs for cold storage and financing.

Subsidised storage is the EU’s method of providing income to farmers, when internal prices for a specific commodity fall below a pre-determined trigger price, so they can avoid selling at a loss.

The commodity is “bought in” to stores, either private or public, until prices rise again to a level attractive enough for it to be sold into the EU internal market.

That means when the price rices again the market will be flooded by this butter and anyone with a basic understanding of economics knows that if supply exceeds demand the price comes down.

EU ETS to be watered down

I wonder if anyone in the parties supporting the Emissions Trading Scheme legislation currently in parliament has noticed this:

Interestingly, there are reports from Europe today that the European Union’s proposed response to global warming looks set to be watered-down.

EU chiefs want to protect European industry from overseas competitors.

It’s still not too late for them to do the right thing and send the legislation back to a select committee where it can have the measured consideration it needs.

Embedded water new hurdle

First it was food miles, now it’s the carbon footprint and soon it might be embedded water.

The NZ Farmers Weekly (not on line) warns that virtual or embedded water – the amount used to produce food – could be the next hurdle primary producers have to leap over for export markets.

…this is a natural extension of carbon footprint analysis, only more specific to New Zealand’s pasture and irrigation-based farming systems.

If we thought we were in trouble on our carbon footprint, consider what the bean-counters might make of our water use. It’s questionable how well placed New Zealand would be, for instance, if European Union food officials started routinely asking for an audit of our water use from farm to shipment or flight.

The push for livestock traceability would pale in comparison.

Fortunately judging by a Crop and Food Research project announced last week, agricultural scientists seem to have seen the threat coming. The Crown Reserach Institute aims to develop plants with much-imporved root systems that require less water, pesticides and fertiliser, enabling New Zealand to compete strongly in overseas markets where consumers are increasingly demanding “green” food products.

This project tagged “roots for sustainability” seems a natural response to farmer demands for cheaper and longer-lasting plant growth – and better profitability. But like so many forms of farming innovation, it can also be seen as a response to changing political and social trends.

Mainstream awareness of embedded water is unlikely to be far away and NZ would be in the spotlight because of its growing dependence on man-made irrigation schemes.

When the world is short of food there will be something amiss if we are penalised for using innovative techniques which boost production providing we use them efficiently and sustainably.

Hopefully Crop and Food research is correct in asserting that its project … will see more effective water, nutrient and pesticide use, with reduced nitrate leaching and nitrous oxide emissions.

All of which have environmental and economic benefits.

To alternatively do little is to allow the concept of embedded water to leak into people’s way of thinking and for farmers’ reputations to again take a battering. If this latest environmental concept indeed sticks between people’s ears, agriculture will need to come up with quick answers and real solutions.

Pointing out that putting unnecessary hurdles in the way of producers inevitably leads to higher costs for consumers won’t do it. We need to be prepared to counter both the facts and the emotion this notion will generate.