Back to failed policies of the 70s

20/03/2014

Labour leader David Cunliffe made an announcement of forestry yesterday which would take us back to the failed policies of the 70s:

The Labour Party’s desire to turn the clock back to the 1970s is once again highlighted with their grab-bag of ideas for the forestry industry, says Economic Development Minister Steven Joyce.

“Subsidised loans, expensive tax concessions, preferential treatment, and make-work schemes for young people are all a flashback to a time when governments decided which industries succeeded based solely on political whim rather than competitiveness,” Mr Joyce says.

“This is classic 70s ‘government knows best’ interventionism and we all know how badly that ended.  What next, supplementary minimum prices for wood?

“Why should the forestry industry receive preferential treatment over the high tech manufacturing industry, ICT, the services industries, the construction industry or the farming industry? Or is it Labour’s plan to provide subsidies for everyone so we can subsidise our way to success?

“About the only thing they have got right is suggesting a focus on innovation. However it’s like they have been asleep since 2008 and now woken up ‘Rip van Winkle’ like to say we should do some innovation.
 
“While Labour has been asleep this Government has massively lifted its investment in innovation and helped grow private sector R & D across the economy by 23 per cent in just two years. Total government funding since 2010 for forestry-related science, research and product development alone amounts to over $160 million.

“The only sensible way to run a modern successful economy is to provide a strong macroeconomic base, supported by polices that lift the competitiveness of all firms. Our comprehensive Business Growth Agenda, which Labour has still not bothered itself to read, systematically improves access to markets, innovation, natural resources, capital, skills, and infrastructure.

“The results of our policies so far are reflected in strong growth, lowering unemployment, a much improved trade balance, stronger productivity growth, and real wages rising faster than the cost of living. Turning the clock back to the 70s is an amazingly out-of-touch response to some of the strongest economic data New Zealand has produced in many years.

“New Zealanders know they are just starting to see the positive results of five years of sensible modern economic policies and hard work by New Zealand companies. Turning the clock back 40 years would send New Zealand back to the bad old days of sluggish performance, high current account deficits, low productivity, and high inflation that the Labour Party knows so well.”

Acting Prime Minister Bill English highlighted the flaws in the policy too:

Hon David Cunliffe: In relation to the economics of forestry, is he comfortable that the rate of unprocessed log exports has grown at 10 times the rate of processed logs, given that the export of raw logs is really exporting jobs?

Hon BILL ENGLISH: I would need to check the member’s figures, but he may also be interested to know that around 60 percent of all forestry production is currently value-added. It may well be that in the light of a rise in prices for export logs there are more logs being exported, but anyone who has been in the industry knows that those prices can drop as fast as they rise. I am sure that there are many people in the forestry industry taking a longer view and keeping that in mind. . .

Hon Dr Nick Smith: My question is to the Prime Minister and it asks what reports has he received on the recent developments in forest processing in Tasmania, where its Labour-Green Government has fallen apart over the very issues of forest processing and where there has been a huge loss of jobs and confidence in that sector because the—

Mr SPEAKER: Order! You have made the point with your question.

Hon BILL ENGLISH: I have received the same—[Interruption]

Mr SPEAKER: The question was what reports has he received.

Hon BILL ENGLISH: The Deputy Prime Minister and the Prime Minister have received the same reports, obviously, which have been to the effect that the Government in Tasmania has overseen the destruction of the forestry industry by trying to get involved in it.

Hon David Cunliffe: Would the Prime Minister support an accelerated depreciation tax including for forestry processing?

Hon BILL ENGLISH: No, we are not entertaining that. Those kinds of policies were tried consistently, I think, from the 1970s when they were a bright idea, and they lead to unsustainable industries and unsustainable jobs as a whole lot of Australian workers are now finding out, where industries that were subsidised by the Government there are now closing down. . .

Hon David Cunliffe: Does the Prime Minister support a pro-wood Government procurement strategy to assist jobs and value added in New Zealand, including in those South Otago sawmills; if not, why not?

Hon BILL ENGLISH: No. The member should have more confidence in the forestry industry. It has evolved from the time in the late 1980s when sawmillers used to be able to get very cheap logs from Government-owned forests through to a modern processing industry that is internationally competitive and makes very sophisticated decisions about the balance of financial risk, different types of product, and exchange rate and price risk in export markets. The idea that Labour would do a better job of that is wrong, and it would end up destroying the forestry industry if it gets that involved in it. . . 

Criticism of the policy isn’t confined to parliament:

Labour’s “pro-wood” government procurement strategy will create an inappropriate commercial advantage for one construction sector over another, according to the New Zealand cement and concrete industries.

Announced today by David Cunliffe at the ForestWood conference in Wellington, the policy would mandate that “all government-funded project proposals for new buildings up to four storeys high shall require a build-in-wood option at the initial concept / request-for-proposals stage (with indicative sketches and price estimates).”

Rob Gaimster, CEO of the Cement & Concrete Association of New Zealand (CCANZ), believes that policies which appear to be giving preferential treatment to one construction material are misguided.

“It is inappropriate to mandate that those designing new government buildings consider wood as a structural option, and then require an explanation if an alternative material is chosen,” says Mr Gaimster.

“Government should not be picking winners when it comes to the selection of construction materials, which should stand or fall on their own technical, cost, aesthetic and sustainability credentials.

“In addition, the policy does a huge dis-service to the hardworking men and women in the cement and concrete industries. Favouring a single construction material during the design phase of a new government building could seriously impact on their livelihoods and jobs.

“This policy does not create a level playing field for the use of construction materials in government buildings. In fact, materials other than wood will be considerably disadvantaged.

“We are concerned about the wide-reaching implications of this policy and believe it should in no circumstances be adopted.”

Labour’s policy is designed to help one sector but would hurt another.

Gravedodger illustrates other shortcomings in the policy.


Trees bigger threat to farmland?

23/04/2012

When we were on a farm tour of the East Coast last month we saw some land which looked as if it shouldn’t have been cleared of bush in the first place.

That was being addressed by replanting.

But we also saw good farmland which wasn’t at risk of erosion being planted in trees.

Federated Farmers believe this is a far greater problem than foreign ownership.

President Bruce Wills says the sale causes a minimal threat to New Zealand agriculture, when compared with the expansion of forestry.

He says 13,000 hectares of dairy land have been sold to foreign buyers since 2002, but in the same period, 1.78 million hectares of forestry have been sold to overseas investors.

Mr Wills says the debate about foreign investment in farm land needs to be extended to all land types.

He says more than 70% of New Zealand’s forests are now owned offshore.

The ownership of the forests doesn’t worry me but the waste of productive land and the impact on employment and local communities does.

A truck and trailer will carry about $3,000 worth of logs and it will be decades before the next harvest from that land.

A truck and trailer could carry about $50,000 worth of lambs and there will be another load from the same farm next season.


NZ poorly served by Kyoto negotiators

20/11/2008

The Emissions Trading Scheme is seriously flawed  and must be deferred engineer John de Beuger says.

There isn’t much low-hanging fruit left to pick when it comes to reducing our carbon footprint.

We already have a high percentage of hydro renewables, and because our animals are free-range and grass fed (not corn fed in feed lots), our agriculture is close to world-best practice.

We can certainly improve in transport, but this will cost.

With no other country even thinking about carbon footprints during the current financial crisis, why are we so hellbent on cutting our throats? This country was very badly served by our Kyoto negotiators.

Take two simple examples – exporting logs and mowing the lawn.

If two ships, one with imported oil and the other with export logs, pass each other outside the Port of Tauranga, under current Kyoto rules we get dinged for both – because we are going to burn the oil, and we have cut down the trees.

Compare this with an oil tanker passing a coal exporter outside Sydney harbour.

Under current Kyoto rules, Australia doesn’t get dinged for exporting coal – which is the main global warming culprit.

Meanwhile New Zealand cops it for exporting plantation forestry trees, which are good news for the planet.

To show how truly stupid the Kyoto Protocol is for food-exporting countries like New Zealand, agricultural consultant Robin Grieve has calculated that mowing a lawn with a motor mower is six times better for the environment than letting sheep graze it. (The environmental impact of sheep, as defined by Kyoto, is 19.65kg carbon-equivalent compared with a lawn mower’s 3.107kg of carbon – i.e., a sheep is 6.3 times worse for the environment than a lawn mower.)

It gets worse. The methane emissions of livestock have been seriously misrepresented because, over time, pasture grass is carbon neutral – whether it is eaten or not.

Grass grows in the spring and summer, and dies back in the autumn after flowering.

If it isn’t eaten, then depending on the decay process, it releases the CO2 it absorbed during its growth back into the atmosphere.

If cattle eat the grass, and live for several years before being slaughtered, they are acting like trees in the sense of temporarily storing carbon that would have been emitted by decay if they hadn’t eaten the grass.

During digestion, a cow discharges methane equivalent to one-third of the carbon consumed, while the other two-thirds is stored in their body until they end up on a hook at the works.

Cows are thus temporary carbon sinks – a simple truth that one might have thought was self-evident to the Kyoto negotiators.

Carbon credits should accrue to grass-fed meat producers, not penalties.

But no, we are dinged for the methane cattle emit because our negotiators misunderstood something as simple as the carbon life cycle of grass.

Under current rules we will be penalised for our agriculture – as well as achieving an own goal by exporting our energy-efficient production to Asia, where the predominant source of energy is coal.

If other countries are not prepared to sacrifice their livelihoods, why should we? In Canada, Stephen Harper has just been re-elected after reneging on Canada’s Kyoto Protocol commitment over synthetic crude oil.

Extracting the dirty oil from Alberta’s tar sands leaves a footprint three times greater than normal crude.

Similarly, in the wake of the global credit crunch, any resolve in Europe to make meaningful emission reductions is crumbling by the day.

Although the European Union ETS only covers about 40% of European emissions, they are fearful that the cost of emission reductions will force energy-intensive industry to exit Europe and set up in parts of the world where there will be no carbon charge.

Never mind about China – they will cheat anyway.

The rules affecting agriculture under the Kyoto Protocol are wrong.

With the agricultural sector being so important to our economy, it is clear that Kyoto 2 seriously needs sorting out.

That’s why deferment of the current ETS is essential.

Act New Zealand’s insistence on setting up a special select committee to investigate the mess is correct.

We can’t afford to get it wrong.

As a small player in this fraught business, it is ridiculous for New Zealand to be a leader – rather than a follower.

It would be lunacy for John Key to adopt a scheme that is so obviously flawed, and shoots us in the foot for no environmental benefit whatsoever.

Agriculture is one of the most important sectors in our economy yet we’re the only country to include it in our Kyoto commitment. The looming economic crisis may well help us because because if other countries put their economies before their Kyoto commitments, many of which will do little or nothing to improve the environment, we will be able to renegotiate our commitments too without being penalised.

We’ve been very poorly served by past negotiations but we can take some comfort from the knowledge that the new Minister for Climate Change negotiations, Tim Groser, has both the will and skills to ensure we’re better served in negotiations from now.


Key facts for primary sector outlook

07/08/2008

MAF’s SONZAF (Situation and Outlook for Agriculture and Forestry)  key facts  indicate:  

Dairy

  • Dairy export earnings are projected to peak next year at $12 billion – more than 40% higher than earnings two years ago.
  • Dairy export earnings are projected to ease back to $10.5 billion in 2010 before rising again to just under $12 billion by 2012.
  • The weighted average payout (net of industry goods levy) for the next four years averages around $6 – significantly higher than the previous five year period. Detailed payout projections are $6.90 (2009), $5.78 (2010), $5.98 (2011), $6.32 (2012).
  • Demand is growing from new markets in China and OPEC countries. OPEC countries account for 21% of New Zealand’s total dairy exports.
  • The South Island continues to drive dairy herd expansion. The South Island herd grew by 13% last year – 31% of New Zealand’s dairy herd is now in the South Island.

Beef

  • Manufacturing beef (a type of minced beef) prices are expected to rise by more than 30% over the five year forecast period.
  • Beef export volumes are projected to fall by about 2% next year due to drought but to grow back to 2007 levels by the end of the five year forecast period.
  • Export returns currently at $1.5 billion are expected to climb steadily to $2.26 billion by 2012.

Lamb

  • Sheep numbers were down 4% at June 2007.
  • The drought and recent low prices are pushing further declines in sheep numbers – adult sheep slaughter increased by 28% for the year ended June 2008.
  • Lower stock numbers and lower weights mean lamb export volumes are projected to fall through the five year period by 11% to 287 000 tonnes.
  • Higher prices are set to push overall export earnings over the same period up by 25% from the current $2.1 billion to $2.6 billion.

Wool

  • The average wool sale price is projected to rise by just over 40% over the next five years to $5.35 per kilogram.
  • Wool volumes are projected to plateau as falling sheep numbers balance higher prices at 142 000 tonnes.
  • After an initial fall export earnings are projected to grow by 29% over the five year period to $795 million.

Forestry

  • Log prices and pulp prices are both projected to climb by more than 30% over the next five years.
  • Timber and panel export prices are projected to fall before recovering but volumes remain relatively flat over the next five years.
  • Overall forestry export returns are projected to grow from $3.3 billion in 2008 to $4.5 billion in 2012.

Wine

  • Wine grapes are now the largest single horticultural crop in New Zealand at more than 25 000 hectares.
  • A big harvest this year will boost export volumes by 30% in next year and increased plantings will push exports up by more than 50% by 2012.
  • The value of wine exports is projected to rise by 76% to $1.3 billion by 2012.
  • Sauvignon Blanc makes up 75% of wine exports and is New Zealand’s largest wine export followed by Pinot Noir, Chardonnay and Merlot.

Kiwifruit

  • The current average price of $8.1 per tray of kiwifruit is projected to grow to $10.7 a tray by 2012.
  • Predicted kiwifruit export volumes remain static at just under 100 million trays over the next five years.
  • Kiwifruit export returns are projected to grow from $779 million dollars to $1.06 billion by 2012. 

MAF’s assumptions are based on expectations for “normal” climatic conditions with no allowance for domestic or international natural disasters nor major economic changes. Projections are based on Treasury’s exchange rate assumptions from the 2008 Budget.


There’s Still Gold in Grass

17/06/2008

The price of farms sold doesn’t reflect the supposedly weakening economy with record median price for dairy farms at $4m last month.

 

The dairy boom is having a flow on effect to other prices with the national median for all farm prices at $1.8m, up by more than 50% on May last year.

 

Real estate agents at the fieldays told me they had no problem selling farms, but there were more buyers than sellers so they’re having problems finding farms to sell.

 

However, 72 Otago farms sold in May, up from 66 the previous month and 39 in May last year. Of those farms 31 were finishing and 28 grazing, which are sought after by dairy farmers. Five were special, five dairy and one each arable, forestry and horticulture.

 

In Southland, 108 farms sold in May, up from 103 in April and 96 in May 2007.

 

The median Otago farm price was just above the national median but eased to $1.87 million in May, from $1.96 million in April, but still up on the $1.16 million in May 2007.

In Southland the median price rose to $2.41 million in May, up from $2.37 million in April and $1.30 million in May 2007.

 

REINZ rural spokesman Peter McDonald said while fuel price rises will hit farming hard that’s not yet reflected in property sales.

 

Mr McDonald said the main drivers for the rural strength were city investors wanting to get into farming, and dairying in particular, as well as farmers wanting to extend their landholdings and amalgamate properties where possible.

 

“It is clear that farmers are taking the view that now is as good a time as any to amalgamate properties to achieve better economies of scale.”


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