Rural round-up

May 26, 2020

Hundreds of pruning jobs and Gwen Di Schiena can’t get one of them – Maia Hart:

A woman in Marlborough is saddened she can’t work, despite multiple job opportunities, as her visa conditions do not allow it.

Gwen Di Schiena, from Italy, moved to New Zealand to work in an administration role in Marlborough’s tourism industry.

Di Schiena is on an essential skills visa, with conditions that attached her to her employer, job title and region.

Di Schiena was on a seasonal contract until the end of April. She planned to travel New Zealand for a month and then go back to Italy for winter. . . 

Northland forest owners and managers slam new legislation – Imran Ali:

Larger forest owners and managers in Northland are opposing new government legislation to strengthen domestic wood processing, citing insufficient consultation and unnecessary duplication of existing rules.

In its submission on the Forests (Regulation of Log Traders and Forestry Advisors) Amendment Bill, the Northland Wood Council said inadequate consultation with the region’s iwi who were important stakeholders in the forest industry was outside the Treaty of Waitangi principles.

The Bill, introduced as part of the Budget 2020, will require forestry advisers, log traders and exporters to register and work to nationally-agreed practice standards towards a thriving forestry sector that benefits New Zealanders first. . . 

Food Ministry would seize Covid moment – Richard Rennie:

A nation that manages to unite and fight covid-19 is well placed to draw breath, reform and address its next big campaign – supporting, nurturing and promoting Kiwi food. Food writer, editor and chef Lauraine Jacobs believes New Zealand is at a time that cannot be wasted, where our efforts on dealing with covid-19 put us in the global spotlight and having a Ministry of Food could ensure our high-quality produce gets to share that spotlight. She spoke to Richard Rennie.

Foodie Lauraine Jacobs says the concept of a Ministry of Food is not new and first mooted in 2006 by food writer Kate Fraser.

“It is a debate that has been ongoing but never come to fruition. Now it is time that it did.”

As the primary sector has grappled with perceived rural-urban divides, environmental criticism, labour challenges and debt stress its collective purpose  to produce high-quality, nutritious food for the local population and earn valuable export dollars has been lost on central government. . . 

Targeted response could be needed for rural communities – NZIER :

Rural communities which are already deprived or reliant on tourism will need the most support to recover from the pandemic’s economic damage.

The Institute of Economic Research has calculated which regions are likely to benefit most from targeted support.

The just-released report shows every regional economy will be hurt, but the hardest-hit will be areas with more tourism and construction.

The analysis shows existing inequities in communities such as East Cape and Ruatoria will be made worse if those areas are not supported in the economic recovery.

The report’s lead author, Bill Kaye-Blake, said New Zealand’s Covid-19 recovery must include rural communities. . . 

Rates rise to hit Ōpōtiki orchardists hardest -Charlotte Jones:

Owners of high value kiwifruit orchards in the eastern Bay of Plenty will be the biggest rates losers in the coming year, forking out an extra $10,000.

While the average annual rate rise in the Ōpōtiki district is forecast to be 4.25 per cent – down from the 5.06 per cent originally signalled – the actual increase varies significantly depending on location and property type.

The big winners are the owners of coastal properties at Te Kaha who can expect an average decrease of 13 per cent and rural residential property owners whose rates will drop 8 percent.

Kiwifruit orchardists with properties valued at more than $9.3 million are the biggest losers with their rates due to rise 55 per cent, increasing from $20,000 a year to $31,000. . . 

“Pest” Wallabies could be earning money for NZ:

Wallabies given a dishonourable mention in government’s recent budget as a pest needing money to combat them, could be earning valuable local and export dollars money by way of meat and hides says a hunters’ environmental advocacy the Sporting Hunters Outdoor Trust.

The trust’s spokesman Laurie Collins of Westport, said the wild animals should be seen as a resource and in that way numbers could be heavily culled for wallaby-based pet food and meat for human consumption both in New Zealand and export markets such as Asia.

“The culture is wrong. Forget the word ‘pest’, think ‘resource’ and exploit them to manage and control,” he said. . . 

 


Rural round-up

September 17, 2019

Government freshwater proposals a blunt instrument:

The Government’s freshwater proposals represent a blunt instrument for complex water problems, according to the Meat Industry Association (MIA).

“We know that freshwater is at the centre of many New Zealanders’ way of life and that collectively we need to continue to improve,” says MIA chief executive Tim Ritchie.

“MIA generally welcomes the proposal for processing plants to have a Risk Management Plan for wastewater discharges into waterways. Under resource consent requirements, processing sites already have similar plans in place.

“The meat processing sector has  also invested significantly in wastewater treatment upgrades and made considerable improvements.

“However, the critical part to get right is to ensure there is enough flexibility in the legislation so that each local situation can still be considered on its merits and that we focus on the outcomes that communities want for their freshwater. . .

Canterbury farmers unhappy with freshwater plan -Eleisha Foon:

Some Canterbury farmers are dismissing the government’s plan to clean up the country’s waterways as a pipe-dream.

Regional councils across the country have been organising meetings to debate the best ways to reduce nitrates from dairy farming.

According to the Institute of Economic Research, Canterbury is the second highest dairy-producing region, behind Waikato, but many farmers there feel unfairly targeted by what the government has proposed.

“Farming is the art of losing money, while trying to feed and clothe the world while the world thinks you’re trying to poison them, the atmosphere and the environment,” Canterbury farmer Jeremy Talbot said. . . 

Fewer sheep and more trees outcome of freshwater proposals:

Research published by Local Government New Zealand shows the enormous impact on land use the Government’s freshwater proposals will really have, National’s Agriculture spokesperson Todd Muller says.

“If implemented, these proposals are going to see farmers in the Waikato go out of business and their land be converted into a sea of trees.

“According to the modelling, sheep and beef farming is expected to fall by 68 per cent, while dairy would be reduced by 13 per cent. Meanwhile plantation forestry would boom by an astonishing 160 per cent.

“Plantation forestry would then account for over 50 per cent of farmland in Waikato, as these onerous regulations make sheep and beef farming completely untenable. . . 

Water reform challenges a key focus of this week’s Water NEw Zealand conference:

Water reforms and the long term sustainability of water will be a key focus at the Water New Zealand conference and expo this week (18-20 September) in Hamilton.

The conference is being opened by the Minister for the Environment, Hon David Parker and Local Government and Maori Development Minister Nanaia Mahuta is speaking later in the day.

“We’re very pleased to be able to welcome key government Ministers to this year’s conference, especially given the ground-breaking reforms that the government is embarking on and the impact they will have across the entire country,” says Water New Zealand CEO John Pfahlert.

“This year one of two pre conference workshops will help update those working in the sector with the likely impact of the new regulatory process, while another will look at issues around wastewater – a key aspect of the Government’s recently announced Freshwater Programme.” . . .

A2 Milk and Synlait Milk shares jumped in early trading as a A$1.5 billion takeover bid for Bellamy’s Australia revived optimism that Chinese demand for dairy products remains strong. 

ASX-listed Bellamy’s today said it’s received a A$13.25 per share offer from China Mengniu Dairy Co and that its board will support the bid. That’s a premium to the A$8.32 price the shares closed at on Friday. China Mengniu is familiar with the Australasian market through Yashili New Zealand and Burra Foods Australia. It was also one of the unsuccessful suitors of Murray Goulburn. Bellamy’s soared 51 percent to A$12.55, less than the A$12.65 cash component of the offer which also allows for a 60 cent special dividend. . .

How to make more dirt down on the farm and make money from it – Pip Courtney and Anna Levy:

There’s an old saying about soil: they’re not making any more of it.

But some farmers are.

In just five years, Niels Olsen used his own invention to build more soil on his property in Gippsland, Victoria.

It delivered him the title of 2019 Carbon Farmer of the Year and it’s vastly improved the health of his land — but it requires an unconventional approach.   .


Rural round-up

July 28, 2019

88-year-old dairy farmer keeps ahead of technological changes – Gerard Hutching:

“If you don’t comply you won’t be able to supply.”

Ngatea dairy farmer Ken Jones has seen the future – and at 88 years of age a lot of the past.

He knows farmers will soon be confronted with an assortment of environmental rules they will have to abide by – in fact they already are – and he wants to get ahead of the game.

“I don’t know how far off that is but it’s no good hitting your head against a brick wall. I just want to make the farm compliant so I can hand it on to the family.” . . 

Tech journey discussed – David Hill:

Tina Mackintosh admits there were some late nights loading data after she and husband Duncan opted to embrace technology more than a decade ago.

The Mackintoshs, who farm at White Rock Mains, north of Rangiora, shared their journey of using technology to improve their farm system at last month’s Beef + Lamb New Zealand FarmSmart conference in Christchurch.

”We have a curious mind about data and what it can do, and we also believe it’s about sharing the good things when they work and, equally, not being afraid of sharing when the shite happens,” Mrs Mackintosh said.

”As we were going along the journey we had two babies, so we were entering data late at night. There was a lot of data to enter so it was quite frustrating. . .

$10,200 dog makes quick impression – Yvonne O’Hara:

A farm dog that sold for more than $10,000 in Gore yesterday marked the occasion by lifting his leg on his new owner’s gumboot.

Heading dog Glen sold for $10,200 at the annual sheep and cattle dog sale at the Charlton saleyards.

PGG Wrightson Gore sheep and beef representative Ross McKee said his company was calling it ”a New Zealand record”.

”At $10,200 he is in a league of his own.”

Glen was sold by his breeder, trainer and farmer David Parker, of Teviot Valley, and bought by sheep, beef and venison farmer Richard Tucker, of Becks. . . .

The Poison of Precaution: The Anti-Science Mindset -Riskmonger:

In last year’s excellent book, The Wizard and the Prophet, Charles Mann juxtaposed two polemics on the environment in the 1940s during the turning point of agricultural development: Norman Borlaug and William Vogt. Borlaug (the Wizard) took the scientific approach to innovate and develop new tools to solve problems facing agriculture. Vogt (the Prophet and arguably the founder of the modern environmental movement) would see an environmental problem as a reason for man to pull back and let the planet heal itself.

To this day, both approaches (to innovate or to pull back and take precaution) have defined environmental debates. There is no doubt which side I fall on. Borlaug’s scientific route has allowed humanity to thrive over the last 70 years. The Green Revolution in agriculture led to global economic expansions as abundance led to generations of risk-takers being able to leave the land and develop other opportunities for wealth generation. Environmentalists argue that the agri-technologies have led to deeper problems from saturated soil and poisoned water tables to serious human health issues to climate calamity. Social justice theorists are proposing agro-ecology as a Vogtian response in pulling back from seven decades of agricultural development. . .

Landmark report shows value of pesticides to NZ’s land-based industries:

The New Zealand Institute of Economic Development today released a landmark report, showing that New Zealand’s economy would lose up to $11.4 billion without crop protection products – and that crops would lose 30 percent of their value overall.

The report covers forestry, pasture, horticulture, field crops and vegetable production.

Agcarm chief executive, Mark Ross, says that the report highlights the importance of the crop protection industry to New Zealand’s economy. . .

African farmers increase yields and income with their smartphones -Bekezela Phakathi:

From drones and big data to financing apps, advanced technology can be a game changer.

More farmers across Africa are set to turn to digital solutions within the next three years, which will boost productivity and, potentially, employment across the value chain, according to a new study.

The study by the Technical Centre for Agricultural and Rural Co-operation (CTA) and advisory firm Dalberg Advisors, says that several barriers hindering the adoption of digital solutions in agriculture across the continent — notably, limited access to technology and connectivity — will be overcome. . .


Dairy’s $7.8b contribution to NZ GDP

December 19, 2018

A report from the NZ Institute of Economic Research (NZIER) shows the positive contribution dairy makes to New Zealand:

Dairy contributes $7.8 billion to New Zealand’s GDP…

* The dairy sector contributes $7.8 billion (3.5%) to New Zealand’s total GDP.
* This comprises dairy farming ($5.96 billion) and dairy processing ($1.88 billion).

…and remains New Zealand’s largest export sector

* Despite the recent drop in global dairy prices, dairy remains New Zealand’s largest goods export sector, at $13.6 billion in the year to March 2016. Over the past five years, average export revenue has been $14.4 billion.
* It accounts for more than one in four goods export dollars coming into New Zealand (29% in 2016, down from a high of 35% in 2014).
* Dairy export growth has averaged 7.2% per year over the past 26 years.
* The dairy sector exports twice as much as the meat sector, almost four times as much as the wood and wood products sector and nine times as much as the wine sector. It generates almost four times as much export revenue as export education.

Dairy provides jobs and incomes for over 40,000 workers…


* The dairy sector employs over 40,000 workers, with 27,500 on farm and a further 13,000 in dairy processing.
* Dairy employment has grown more than twice as fast as total employment, at an average of 3.7% per year since 2000.
* It has created jobs at a faster rate than the rest of the economy in all but 5 territorial authorities across New Zealand.
* The sector paid $2.4 billion in wages to dairy farming and processing workers in 2016.
* The dairy farming sector has the second highest average wage ($46,640) in the wider farming sector, behind deer farming ($48,320).
* The average dairy processing wage is $72,910, well above all other forms of food product manufacturing. The average food manufacturing wage is $58,200.

…and plays a crucial role in supporting regional economic development

* Dairy provides over 1 in 5 jobs in three territorial authority economies (Waimate, Otorohanga, Southland); and over 1 in 10 in a further eight (Matamata-Piako, South Taranaki, Hauraki, Waipa, South Waikato, Clutha and Kaipara).                       

* The dairy sector accounts for 14.8% of Southland’s economy, 11.5% of the West Coast economy, 10.9% of the Waikato economy, 8.0% of Taranaki’s economy and 6.0% of Northland’s economy.

Dairy’s impacts flow well beyond the farm gate and processing plant

* Dairy farming supports a range of supplying industries: in 2016 farmers spent $711 million on fertilisers and agro chemicals, $393 million on forage crops and bought over $190 million of agricultural equipment.
* Farmers also spent $914 million on agricultural services, $432 million on financial services and $197 million on accounting and tax services.
* The dairy farming sector provides around $400 million of intermediates to the meat processing sector.
* As well as taking farmers’ raw milk, the dairy processing sector also spends significant amounts on packaging ($288 million in 2016), hired equipment ($199 million) and plastics ($174 million).
*  DairyNZ estimates that farmers have spent over $1 billion in recent years on environmental management systems such as effluent systems, riparian plating and retiring sensitive land, or about $90,000 per dairy farm.
* The processing sector has also made substantial capital investments in the past four years, adding over $2 billion to New Zealand’s capital stock.

 

Further global or regional trade liberalisation would enhance the sector’s ability to support the government’s ‘Export Double’ target

* If all global dairy tariffs were eliminated, and New Zealand’s milk production is held constant, the value of New Zealand’s dairy exports would increase by $1.3 billion, generating a $1.03 billion increase in New Zealand’s nominal GDP.

Preventing a retreat to protectionism has considerable value to the New Zealand economy too

* In a separate modelling scenario, if global dairy tariffs increased from their average applied rate to their average bound rate, New Zealand’s dairy exports would fall by $2.3 billion, leading to a $1.66 billion fall in New Zealand’s nominal GDP.
* This provides an indication of the value of historical dairy tariff reductions due to multilateral, plurilateral and bilateral trade negotiations, or the benefits of preventing any backsliding towards trade protectionism.

Those last two points show the value of free trade and the cost of protection.

This report doesn’t mention on-farm investment nor does it note the social impact of dairying.

There were four houses on our farm and our two immediate neighbours’ before we converted to dairying. There are now 15 and the 16th will be built early next year.

Some of the people in the houses are young travellers. Others are a bit older with families. All contribute to the economic and social fabric of the district.

The environmental impact of dairying isn’t mentioned in the report either.

There is no doubt intensification has had a detrimental affect on water quality and the vast majority of farmers, with the encouragement from DairyNZ, Federated Farmers, regional councils, and irrigation and dairy companies are now doing everything they can to remedy that.

Water quality didn’t deteriorate overnight and it will take time to improve it.  A few poor performers are still letting everyone down but it is unfair to tar the whole industry with their dirty brush.

The NZIER report shows the positive impact dairy makes and it is that $7.8 billion contribution to GDP that helps pay for the first world services and infrastructure we need.

Environmental concerns can not  be ignored but any action taken to solve problems must take into account the economic and social impact or it will sabotage the government’s wellbeing goals and we will all pay the price of a much lower standard of living.


Paying for poor policies

August 31, 2018

Business confidence has dropped to the lowest point for 10 years:

In the August ANZ Business Outlook Survey headline business confidence dropped a further 5 points to a net 50% of respondents reporting they expect general business conditions to deteriorate in the year ahead.

However, firms’ perceptions of their own prospects are a much better gauge of actual economic outcomes. This series stabilised at a net 4% expecting an improvement, well below the long-term average of +27%. By industry, manufacturers’ expectations dropped 11 points to become the least positive about their own activity (-4%), while retail and services improved somewhat.

Turning to the survey detail:

* A net 5% of firms are expecting to reduce investment, down 6 points. It is rare for this series to be negative.

* Employment intentions fell 8 points to -6%. No sectors are positive.

These two points are most concerning. Businesses reducing investment and with negative employment intentions will have a direct and negative impact on the economy.

* Profit expectations were flat at -17%. Retail and manufacturing are the weakest sectors at -27% (up 1%pt) and -28% (down 12%pts) respectively.

* Firms’ pricing intentions fell 2 points to +27%. They are strongest for construction but also lifted for retail. Inflation expectations were flat at 2.2%.

 * Residential construction intentions eased 3 points to +13%, while encouragingly, commercial construction intentions bounced 13 points to -4%. . . 

The economy is delicately placed. But it seems increasingly inevitable that wariness amongst firms will have real impacts, in the near term at least, as investment and employment decisions are deferred. . .

The outlook isn’t all bad.

But firms have real concerns about industrial relations policy, minimum wage hikes and costs more generally – and particularly about their ability to pass on higher costs and maintain profitability. Troubles in the construction sector appear to be starting to cause stresses in related firms. And exporting firms will be keeping a nervous eye on signs that global growth has peaked. . .

The Taxpayers’ Union says the drop in confidence shows the urgent need for tax reform:

. . .Taxpayers’ Union Economist Joe Ascroft says, “Businesses need more than a working group. They need real changes in policy direction, including tax reform. Business breakfasts with CEOs and Cabinet Ministers simply won’t cut it for the average small business.”

“Company tax rate cuts – accompanied by full capital expensing – would put a rocket under business investment and put an end to the doldrums. If focused at measures to boost productivity, the evidence shows that tax relief would flow through to workers in the form of higher wages.” . .

Tax reform would help and not just for businesses.

The lower dollar helps export returns but increases the cost of imports, including fuel, the price of which is also being boosted by extra taxes:

The Government’s obsession with fuel taxes shows it doesn’t care about the cost of living for ordinary Kiwis, National’s Transport spokesperson Jami-Lee Ross says.

“Now is the time for solutions to the cost of living, not new taxes. National is taking the initiative with a bill lodged today to repeal regional fuel taxes within three months.

“Fuel prices are sitting at record levels across the country and are set to rise further because the Government is proposing three additional rounds of national fuel tax increases totalling an extra 12 cents a litre of fuel in new taxes.

“In addition, there is an 11.5 cents a litre regional fuel tax in place in Auckland that will be rolled to other regions in a few short years. It adds to this Government’s sorry record of driving up costs for households and businesses and choking economic growth. . .

 

But tax is only part of the problem. The Government has several other poor policies that we’re all paying for:

The message from economists is loud and clear: the Government’s bad economic policies mean New Zealanders will be thousands of dollars a year worse off, says National Party Leader Simon Bridges.

“In the last three months alone NZIER has revised down their GDP growth forecasts which means every man, woman and child will be $1600 a year worse off on average by 2022. That is $6400 for a family of four.

“NZIER are clear that the decline in the economic outlook isn’t just sentiment. Profitability has deteriorated and businesses’ own activity, a measure closely correlated with GDP growth, has weakened. There are real implications for businesses, workers and New Zealanders trying to get ahead.

“The reason GDP growth is now faltering is because this Government has imposed a wide range of policies that are bad for growth. They have imposed more taxes, shut off foreign investment, significantly increased labour and compliance costs, banned oil and gas exploration and wasted billions on low-quality spending.

“And what was the Prime Minister’s solution this morning: another working group. The Government needs to understand that lower growth has real consequences for New Zealand families. Working groups do not drive economic growth, good policies and hardworking New Zealanders do.

“So the goal is simple. We must grow the economy if we want New Zealanders to be better off. A growing economy means more jobs, higher incomes and more revenue to pay for the things we need.

“We need to be pro-growth as that is the only way we can improve our standard of living. National wants New Zealanders to keep more of what they earn. Higher taxes, more regulation, compliance costs and a rising cost of living do nothing to help families get ahead.

 

Added costs and uncertainty are a poisoning business confidence and this week’s announcement of a business council is no antidote.


Rural round-up

March 3, 2018

Hauraki Plains dairy farmer elected to oversee the creation of Auckland educational farm:

A respected Hauraki Plains dairy farmer will lead the board overseeing the development of a new educational farm in Auckland.

Julie Pirie has been elected to chair the five-member Donald Pearson Farm Board.

The 74-hectare dairy farm in South Auckland was gifted to NZ Young Farmers by the late Donald Pearson last year. . . 

Slim pickings: Worker shortage leaves apple farms frantic – Anusha Bradley:

Apple growers in Hawke’s Bay are preparing to work around the clock to cope with what’s being described as an extreme shortage of seasonal workers.

Orchardists said they have less have than half the workers they need, and despite a recruitment campaign, are failing to attract the usual hordes of backpackers they rely on.

Hastings-based Bostock is the largest producer of organic apples in the country.

Bostock human resources manager Vikki Garrett said usually they’d hire about a 100 or so backpackers, but had only managed to recruit 10. . . 

Bug’s impact on horticulture devastating, report says:

An economic report, released today, says if the brown marmorated stink bug (BMSB) establishes in New Zealand it would dramatically impact New Zealand’s gross domestic product (GDP) as well as export revenues from horticulture.

Prepared by the New Zealand Institute of Economic Research (NZIER), Quantifying the economic impacts of a Brown Marmorated Stink Bug incursion in New Zealand, shows GDP falling between $1.8 billion and $3.6 billion by 2038, and horticulture export value falling between $2 billion and $4.2 billion by 2038. . . 

Agriculture exporters meet to discuss issues:

Key stakeholders in the agro-export market today gathered to discuss possible solutions to address pertinent issues faced by exporters in the export pathways.

While officially opening the Agriculture Exporters Symposium at the Tanoa Plaza Hotel this morning, Permanent Secretary for Agriculture, Mr. David Kolitagane said the objective of the workshop was to address constraints in the agro-export pathway as the impact of the contribution of agricultural exporters was integral to economic development.

“The rationale for organizing today’s symposium is to address constraints in the export pathway, collate information and make appropriate and . . .

Farmers left in limbo as Mycoplasma Bovis takes hold:

With just one month to go until a decision will be made, farmers will understandably be left confused and anxious about whether the Government is going to eradicate the crippling cattle disease Mycoplasma Bovis, National’s Primary Industries spokesperson Nathan Guy says.

Ministry for Primary Industries (MPI) officials appeared before the Primary Productions Select Committee at Parliament this morning to answer questions about how the Government plans to contain the spread, compensate farmers for their losses and ultimately to eradicate it. . . 

Tractors lead agricultural imports:

Tractor imports have remained at high levels in January 2018, continuing the trend for the last year, Stats NZ said today.

The value of imported tractors rose $27 million (191 percent) in January 2018 from January 2017. For the year ended January 2018, values were up 51 percent compared with the January 2017 year.

“Imports of tractors can be an indicator of confidence in the agriculture industry,” international statistics manager Tehseen Islam said. “The last time we imported this many tractors was in 2014 when dairy prices were at their peak.” . . 

Deborah Marris joins Synlait leadership team:

Synlait will welcome Deborah Marris to the Executive Leadership Team in the role of General Counsel and Head of Commercial on Monday 5 March.

“Deborah’s outstanding legal and commercial background makes her the perfect person to join our team. Our rapid growth requires strong leadership in this area and Deborah has the skills, foresight and international experience to support us well,” says John Penno, Managing Director and CEO.

Ms Marris’ role will encompass legal affairs, risk, corporate governance, insurance and commercial matters, including customer and supplier contractual relationships. . . 

NZ King Salmon sees weaker second half on hot summer; 1st-half profit soars 81% – Jonathan Underhill:

(BusinessDesk) – New Zealand King Salmon says the “extraordinarily hot summer” has cut survival rates at its fish farms in the Marlborough Sounds and it expects weaker second-half earnings after profit in the first half soared 81 percent.

Profit rose to $15.7 million in the six months ended Dec. 31 from $8.7 million a year earlier, the company said in a statement. Sales climbed to $87.7 million from $63.6 million. . . 

Seeka annual profit falls 44% on lower kiwifruit volumes, impaired banana business – Paul McBeth:

(BusinessDesk) – Seeka posted a 44 percent decline in annual profit as Australasia’s biggest kiwifruit grower booked a $2 million charge on its banana sourcing unit while managing a decline in kiwifruit volumes.

Net profit fell to $5.8 million, or 34 cents per share in calendar 2017, from $10.4 million, or 62 cents a year earlier, the Te Puke-based company said in a statement. The year-earlier figure was bolstered by a $3.1 million gain on an insurance payment. Revenue fell 2 percent to $186.8 million. . .

Comvita swings to first-half profit, reiterates full-year guidance – Rebecca Howard:

(BusinessDesk) – Comvita, the mānuka honey company, swung to a first-half profit on strong sales growth and a recovery in the “grey” or informal sales channel into China and reiterated its full-year earnings guidance despite bad weather hitting the 2018 honey season.

The Te Puke-based company reported a net profit of $3.7 million, or 8.31 cents per share, in the six months to Dec. 31 versus a loss of $7.1 million, or 17.18 cents, in the prior period. In January the company said net profit would be more than $3 million. Sales reached $83.6 million versus $57.7 million in the prior year. Earnings before interest, tax, depreciation and amortisation were $9.9 million versus an ebitda loss of $2.8 million in the same period a year earlier. . . 


Free trade 2-way street

October 21, 2017

Free trade is vital to New Zealand, Horticulture NZ Mike Chapman says.

New Zealand is a trading nation. We rely on export earnings from free trade for our financial prosperity. But free trade is a two way street – the countries involved open up their borders to allow free movement of goods and services on an equal basis. This includes property ownership.

The pathway to premium export earnings is through innovation and having a point of difference. Access to the latest techniques and innovations is key to New Zealand remaining competitive and market leaders.

The truth here is that to do that, New Zealand needs strong links with the international science community, companies involved in innovation, market leaders and companies with scale and market penetration. Many of those international companies have operations based in New Zealand. Equally, New Zealand also has operations based in their home countries. That involves property ownership. Here, I’m not talking about residential properties.

The importance of trade was recently highlighted in a report by the New Zealand Institute of Economic Research (NZIER). Here are a couple key points from their analysis:

– Trade accounts for $85 billion (43%) of New Zealand’s GDP.
– Trade gives each household in New Zealand improved product choice worth $3.9 billion, or $2,300 per household.
– A US study estimates that trade contributes about 30% to the average US household’s purchasing power. In New Zealand this would be far higher, given how trade reliant we are compared to the US.
– More free trade agreements will increase New Zealand’s GDP by $18 billion and create 42,000 skilled and 20,000 low skilled jobs.

Freeing up trade and keeping trade free are vital for New Zealand’s continued prosperity.

Tightening up on any aspect of our free trade may have a ripple effect. As a country, we do not want to slip into economic decline. So Horticulture New Zealand’s plea to New Zealand’s new government is to keep the previous Government’s free trade agenda running. Foreign investment in New Zealand enhances our economic prosperity.

We need to keep the door open for three key reasons:

– New Zealand’s prosperity depends on free trade – we can’t compete if, due to tariffs and other barriers, our goods and services are more expensive than those from other countries. Simply put, our goods and services will not be purchased.
– Many overseas companies that have invested in New Zealand enhance our ability to be market leaders and innovate, provide many jobs, and contribute to our economic prosperity and ability to buy goods from around the world.
– New Zealand’s companies need to invest in overseas countries to enhance our ability to compete for premium prices and keep ahead of innovations – it is a two way street.

We can’t win the fight to open doors for our goods and services if we close our own.

Successive Labour and National governments have agreed on the importance of free trade and worked to advance it.

We’ll all lose if the new government attempts to return to the bad old days of fortress New Zealand.


Rural round-up

August 9, 2017

100-plus rivers and lakes to be improved:

Freshwater improvement projects covering over 100 rivers and lakes across New Zealand are to receive grants of $44 million from the Government, Environment Minister Nick Smith announced today.

“The Government has an ambitious plan to improve water quality in our rivers and lakes that involves stronger direction to councils, tighter regulation and funding to support projects. Today we are announcing grants of $44m for 33 projects which, with Council and other contributions, will see $142m invested in over 100 lakes and rivers.” . . 

Partnership approach on freshwater quality hailed:

A partnership approach to dealing with river and lake water quality offers the best prospect of making sustained progress on problems that were often decades in the making, Federated Farmers says.

The Federation’s water spokesperson Chris Allen hailed the announcement today of an initial $44m in grants from the $100m Freshwater Improvement Fund, particularly as it will leverage a further $98 million of investment by councils, farmers, other land-owners and agencies.

In total, 33 projects covering more than 100 lakes and rivers have won funding, including at Lakes Tarawera, Horowhenua and Wanaka and involving the Manawatu, Wairoa, Waimea and Selwyn Rivers. . . 

Horticulture welcomes funding for water protection project:

Government funding for a nationwide project to better protect waterways, by measuring and managing nitrogen on cropping farms, has been welcomed by Horticulture New Zealand.

Today Environment Minister Dr Nick Smith announced funding of $485,168 from the Freshwater Improvement Fund for a three-year project: Protecting our Groundwater – Measuring and Managing Diffuse Nutrient losses from Cropping Systems. . . 

True value of Coromandel seafood industry realised in report released today:

Moana NZ’s oyster processing plant based just out of Coromandel Town

Coromandel mussel and oyster farmers, along with industry, iwi, businesses and agencies came together today to celebrate the findings of a report which demonstrates the real economic and social value of aquaculture to the Thames-Coromandel and surrounding regions.

Some of the key findings from “The Economic Contribution of Marine Farming in the Thames-Coromandel District,” written by the New Zealand Institute of Economic Research (NZIER) include: . . 

NZ beef export market faces headwinds, AgriHQ says – Tina Morrison:

(BusinessDesk) – Headwinds are building for New Zealand exports of beef, the country’s largest meat export, according to AgriHQ.

The outlook for beef prices is weakening in the US, the largest market for New Zealand beef, after a United States Department of Agriculture report showed cattle numbers at a nine-year high as farmers rebuild their herds following heavy culling in 2014 and 2015, with most of the increase in beef cows rather than dairy cows. Elsewhere, Japan has temporarily lifted the tariff on frozen beef from New Zealand, rival exporter Australia has increased supplies, and a rise in the New Zealand dollar  . . 

CropLogic’s ASX float underwritten by Australian corporate adviser Hunter Capital  – Paul McBeth:

(BusinessDesk) – CropLogic, the agricultural technology company which counts Powerhouse Ventures as a shareholder, will have its initial public offering underwritten to ensure it crosses the A$5 million threshold.

Sydney-based Hunter Capital Advisors has been acting as a corporate adviser to CropLogic and has committed to ensuring its public listing succeeds, acting as an underwriter for the offer, CropLogic said in a statement yesterday. Christchurch-based CropLogic is offering 40 million shares at 20 Australian cents apiece to raise as much as A$8 million and listing on the ASX. Those funds will pay for market development, research and development, working capital, and to cover the cost of listing, which is a certainty with the underwrite. . . 

The great food disruption: part 3 – Rosie Bosworth:

Milk without the cow, meatless burgers that bleed, chicken and shrimp made from plant matter, and now foie gras without a force-fed goose in sight. A new food revolution enabled by science and biotech is brewing and, if it succeeds, animals will have little to do with the future of food. For some, that future looks rosy, but, as Dr. Rosie Bosworth writes in part three of a series, the implications for New Zealand’s agricultural sector could be less than palatable.

For all its promise, synbio and lab-made food need to overcome a number of challenges and not everyone is convinced it will be the solution to the problems of conventional animal agriculture. This gives New Zealand at least a small window of respite while it assesses a potential road ahead without the farm.

4,500 Years of Crop Protection: – Mark Ross:

Like all agricultural innovations, crop protection products have evolved tremendously since their inception. From natural chemical elements, to plant and metal-based insecticides, to synthetic products, formulations have drastically changed for the better. Today’s products are more sustainable, targeted, efficient and environmentally-friendly than their predecessors.

The first recorded use of an insecticide was about 4,500 years ago by the Sumarians, who used sulphur compounds to control insects and mites attacking their food sources. In the first century B.C., Romans made a compound from crushed olives, burnt sulphur and salt to control ants and weeds in their crops. In 800 A.D., the Chinese used arsenic mixed with water to control insects in their field crops and citrus orchards. Other pesticides, derived from natural sources such as pyrethrum from dried Chrysanthemum flowers and nicotine extract from tobacco plants, evolved over time. . . 

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Farmers do cry over spilt milk.


Get in behind trade

July 10, 2017

Export New Zealand is challenging all political parties to get in behind trade:

ExportNZ says all political parties should be supporting international trade.

ExportNZ today released a report analysing the benefits to all New Zealanders from freely traded exports and imports. The Benefits of Trade shows that New Zealand’s export sector directly and indirectly accounts for nearly three quarters of a million jobs, and that exports bring in 43 percent of New Zealand’s GDP.

“This is a massive chunk of our economy. Without exports we would literally be a third world economy,” said ExportNZ Executive Director Catherine Beard.

“New Zealand exporters – manufacturers, primary producers and technology and services exporters – earn the foreign exchange that pays for all the good things we enjoy. Without a vibrant export sector, we would not be able to afford the infrastructure, health, education and welfare services that are the mark of a first world nation.

Exports enable us to pay our way in the world.

We can’t afford imports unless we successfully export.

It’s not just luxury goods but basic requirements for first world living standards including health supplies, machinery and the food we can’t grow ourselves that we need to buy from other countries.

The money to buy those goods come from our exports and the freer we are to trade the better off we all are.

“We have a brilliant export sector keeping our economy afloat, and we should all be supporting it.”

Catherine Beard said with the approach of the 2017 Election, it was important to hear from all political parties on how they would support trade and free trade agreements with other nations.

“It’s time for all political parties that want a higher standard of living for Kiwis to get in behind New Zealand being a participant in high quality free trade agreements wherever in the world we can get them.

Catherine Beard says in a world of increasing protectionism it is important for all political parties to be united behind an ambitious free trade agenda, because the benefits to New Zealand are overwhelmingly positive.

“The data indicates that in a world where free trade was the norm, New Zealand’s GDP would be $18 billion higher, with an additional 62,000 jobs.”

Key points on the benefit of trade:

 The tradable sector directly and indirectly accounts for $85 billion (43%) of New Zealand’s real
GDP and almost three-quarters of a million jobs.
 Trade helps Kiwi households buy higher quantities of goods and services with their wages, and
lets them access a wider variety of products.
 The gains to New Zealand households from improved product choice from trade alone come
to $3.9 billion, or around $2,300 per household, based on estimates from the literature.
 One US study estimates that trade contributes about 30% of an average US household’s
purchasing power. In New Zealand this share would be far higher, given how trade-reliant we
are compared to the US.
 When tariffs were removed in the late 1980s in New Zealand, import prices dropped sharply,
boosting Kiwi households’ purchasing power by 2%.
 Further multilateral trade liberalisation would deliver huge benefits to New Zealand: the OECD
estimates that New Zealand’s real GDP would increase by $18 billion over the long run if G20
tariffs and non-tariff barriers were halved. This scenario would also create over 42,000 skilled
jobs and 20,000 low-skilled jobs.
 ‘Trade policy’ is now about much more than reducing border tariffs on trade in goods:
services, investment, global value chains, non-tariff measures, people movements and the
flow of technology are hugely important.
 Global services trade liberalisation has been estimated to potentially lift New Zealand’s per
capita GDP by over $1,000 by 2020.
 A comprehensive Trade Facilitation Agreement which reduces red tape associated with trade
could reduce trade costs by 14.5% globally and boost global GDP by between US$345 billion
and US$555 billion per year.
 The reduction of non-tariff measures could deliver significant gains for New Zealand. The cost
to New Zealand exporters of these measures in the APEC region has been estimated at $8.4
billion.
 Around 70% of the economic benefits accruing to New Zealand from the TPP are estimated to
come from a reduction in non-tariff barriers.
 There are some valid concerns about how the benefits from globalisation are shared, but its
positive impacts are undeniable: the World Bank states “The number of people living in
extreme poverty around the world has fallen by around one billion since 1990. Without the
growing participation of developing countries in international trade, and sustained efforts to
lower barriers to the integration of markets, it is hard to see how this reduction could have
been achieved”.
 Addressing New Zealanders’ concerns about globalisation and the future of regional economic
integration in will require more detailed research into the benefits and trade-offs involved in
‘new’ trade issues, and continued reminders about the costs to households of more
isolationist policy settings.

Anyone old enough to remember what life was like in New Zealand before the trade liberalisation of the 1980s and 90s won’t want to go back there.

Domestic goods were usually more expensive and of inferior quality to imports.

Imported goods were in short supply and usually had inflated prices owing to tariffs.

People didn’t travel as easily or often as they do now and when they did they returned laden down with goods which were not available or far more expensive here.

Any policies which limit trading opportunities for exporters or hamper the ready access to imports will hurt us all, and the people who will be hardest hit will be the poor.

With freer trade we all benefit and can even sell avocados to Mexico.


Rural round-up

February 24, 2017

Isn’t agriculture really just at war with liberals? – Uptown Farms (Kate Lambert):

Last week after a speech, a young college student approached me. Eager to connect, she started with, “Do you ever get completely frustrated with these liberals?”

Her question was intriguing to me. Not because it was unique, the exact opposite. Because it was so common.

Almost without fail, when I get the chance to talk to producers about the desperate need to tell the story of agriculture, someone asks a similar, politically loaded question.

But it’s a fair question, isn’t it? In this politically correct era, surely a blogger can still call a spade a spade?

Because isn’t the reality that our enemies are easily identifiable? Isn’t agriculture really just at war with liberals? . . .

WTO agreement a victory for NZ exporters:

Trade Minister Todd McClay has welcomed the entry into force of the WTO Trade Facilitation Agreement (TFA) saying it is a big win for New Zealand exporters.

“The TFA will benefit all New Zealand exporters and is particularly good for small and medium sized enterprises. The TFA reduces the cost, administration and time burden associated with getting products across borders and into the marketplace,” Mr McClay says.

“New Zealand’s agricultural exporters will also benefit significantly from a provision to hasten the release of perishable goods within the shortest possible time.”

A rising tide of protectionism could hit NZ dairy sector hard: NZIER –  Rebecca Howard:

(BusinessDesk) – New Zealand’s economy would be hard hit if there is a retreat to protectionism in the global dairy sector, a report from the New Zealand Institute of Economic Research has found.

“In the current global trading system, the tide of protectionism is rising. Brexit and the initial trade policy proclamations by Donald Trump both point to a challenging environment for further trade liberalisation, at least in the short term,” said NZIER in the report for the Dairy Companies Association of New Zealand. Against this backdrop there is an increasing risk that tariffs could be lifted rather than reduced, it added. . . 

Bobby calf death rate halved over a year – but still room for improvement – Gerald Piddock:

Bobby calf deaths more than halved after a big improvement in their transportation welfare last spring.

A new report from the Ministry for Primary Industries showed the mortality rate went from 0.25 per cent in 2015 to 0.12 per cent last year.

Last year 2255 calves were reported dead or condemned during the time they were collected for transport to their slaughter from 1,935,054 calves processed.

Young NZers chase endless shearing season – Alexa Cook:

The declining number of sheep in New Zealand and changes in weather patterns are driving more shearers to chase work around the globe.

The national sheep flock is now about 27 million, a big drop from the 70m or so sheep that the country had in 1982.

Jacob Moore from Marton is part of a group of about 60 young shearers who follow the summer seasons for work.

Mr Moore said for shearers who were at the top of their game and established locally, there was full-time work and contractors tended to hold on to them for many seasons.

Wool market strengthens:

NZ Wool Services CEO John Dawson reports 4600 bales on offer this week saw an 87 percent clearance with mostly positive results, with lambs wool increasing considerably.

The weighted currency indicator is down 0.34 percent having a small but positive impact.

More growers are continuing to hold back wool, further reducing volume which is restricting supply in some categories.

Mr Dawson advises compared to the last South Island selection on 16 February; . . 

A2 CEO, chair sell down holdings following strong first-half earnings – Sophie Boot:

(BusinessDesk) – A2 Milk Co’s chief executive and chair have sold down their stakes in the milk marketing firm, less than a week after reporting first-half profit more than tripled as demand for its A2 Platinum infant formula surged in its key Australia, New Zealand and China businesses.

Chair David Hearn sold 1 million shares for about $2.5 million, or $2.48 a share, on Friday, while chief executive Geoffrey Babidge sold 900,000 shares for $2.2 million, or an average price of $2.49, yesterday. Hearn gained the shares by exercising 1 million of his 5 million options, for which he paid $630,000, with the sale to facilitate a property transaction in the UK to move his personal residence, according to documents published to the NZX. . . 

Maize crops ‘worst in 30 years’ – Alexa Cook:

Farmers in drought-hit Northland battling with a shortage of stock feed are also experiencing the worst maize harvest in 30 years. . 

Northland Regional Council is warning farmers to be careful with feed reserves and not get too excited about the recent rain.

The council said the drought meant some farmers had already used up their extra supplementary feed, which was being saved for the autumn and winter months.

Northland dairy farmer Even Sneath said it had been a terrible season for growing crops. . . 

Busy summer for MPI biosecurity staff:

Faced with record numbers of international visitors this summer, Ministry for Primary Industries biosecurity staff have intercepted risk goods ranging from the bizarre to the potentially devastating for New Zealand’s economy and environment.

Some of the unusual airport interceptions so far this summer include:

• A chilly bin of live spanner crabs from Thailand presented to officers at Wellington Airport.

• Fruit fly larvae in mangos found at Auckland Airport inside a suitcase from Malaysia jammed full of plant produce and other food. . . 

New Zealanders Offered Sweet Investment:

New Zealanders are being invited to invest money for honey in a revolutionary hive sharing initiative launching today.

Whanganui-based Canaan Honey has launched a PledgeMe crowdsourcing campaign for investors looking to get a sweet return: a lifetime supply of honey.

A launch party last night saw the season’s first harvest of honey with a 3kg bonus honey offered to the first 10 signups.

Hive Share lets backers around New Zealand become beehive owners, without the fuss of having to look after the hive. . . 


NZIER: water taxes will suck Otago & Canterbury dry

September 18, 2014

Water taxes could become a regional tax on Canterbury and Otago, seriously impacting those regional economies.

This is the conclusion of a New Zealand Institute of Economic Research (NZIER) report for Federated Farmers.

Care needs  to  be  taken  when  considering  taxing  competitive  agricultural  sectors since  countries  which  have  done  so  without  strong  justification  have  performed poorly (e.g. Argentina).

While there is little policy relevant data to tell us how much water is being used by the rural sector, preliminary estimates suggest that for every cent (per cubic metre of water) the rural sector is charged, $39 million will be taken out of rural communities.

This assumes  that  the  policy  is  enforceable  and  that  any  exceptions  could  be adequately  accommodated.1

Further, if  focused  on  irrigation  only,  the  tax  will predominantly fall on Canterbury and Otago  water users  (see following table), while traditional dairying areas such as Taranaki and Waikato will pay a minimal water tax.

While water  quality  is  reasonably  good,  maintaining  water  quality  is  a  major challenge that needs  to be overcome  with the  spotlight firmly on non-point  source agricultural run-off. Farmers need to be proactive in addressing this issue or others (e.g.  over-zealous  regulators, foreign consumers)  will do so  instead, possibly in ways that are less efficient for farmers and the country than an industry-driven initiative.

Doing nothing about water quality  is  not a sensible  option.  Neither is rushing ahead without sufficient information.  

But this is not a new problem. New Zealand can learn from other countries’ water quality regulatory experiences here and hopefully avoid making their mistakes. Some key lessons are:

  •  Addressing water quality that impacts on agriculture is a long term game. Rash decisions made now could have significant and costly unintended consequences
  •  Use science to determine minimum flows to sustain healthy water ways, and be flexible and adaptive in the management of the environment as scientific knowledge improves
  •  Using markets to allocate water between competing uses can be efficient and effective when conditions allow, but be aware that market forces alone will not solve all problems
  •  Water taxes will not be an effective allocation mechanism if significant physical, regulatory or information barriers exist. Specifically, further work is required in understanding the detailed water use trade-offs since we lack the necessary policy-relevant information, data and institutional capability
  •  Where possible, including urban areas within the same water allocation and trading framework will improve efficiency. . . .

It compares the policies of the National, Labour and Green parties and says:

There certainly  needs  to  be  a  step  up  in  primary  sector  –  and  other  sectors’  – responsiveness to this issue. But durable, effective water  trading  solutions take time to develop and must be based on robust analysis and facts, not rhetoric and ideology.

Voters should  be  wary  about  promised  policy  outcomes  when  the  evidence  base around  the  economic,  environmental,  social  and  cultural  impacts  of  the  proposed policies is far from complete. . .

There are no credible arguments against the importance of good water quality, the need to prevent degradation of water ways and clean up the dirty ones.

But imposing a water tax on Canterbury and Otago farmers to address problems all over the country, some of which have nothing to do with irrigation or farming, is not the answer to poor water quality in some areas and will create other problems.

It will also impose huge costs on a relatively small number of farmers in two regions:

“Let’s not kid ourselves that the road Labour and the Greens are travelling down with Water Taxes, looks more like regional farming taxes to us,” says Ian Mackenzie, Federated Farmers Environment spokesperson.

“The NZIER have calculated that a water tax of one cent on every cubic metre (m3) of water used for irrigated and stock purposes, means $39 million would need to be paid by farmers. 

“While Labour and the Green Party won’t confirm what they are considering, in 2011, the Greens campaigned on ten cents a cubic metre.

“If that happened then Canterbury’s farmers would foot 62 percent of the cost ($248 million) while 21 percent of the cost would fall on Otago’s farmers ($82 million).  Those two regions being where most of New Zealand’s irrigation happens.

“This represents something like a 13 percent bite out of agricultural GDP in Canterbury and 12.5 percent out of Otago’s agricultural GDP.  That’s one heck of a wallop and for what?

“These taxes have little to do with the political rhetoric of tackling water quality. There are plenty of regions with little or no irrigation, which have water quality challenges due to agriculture, industry and municipal influences.  

“It seems more about revenue generation to plug big spending promises and farmers, horticulturalists and vintners in Otago and Canterbury are being lined up to foot the bill.

“There’s no mention that these same businesses already pay thousands of dollars each year in ‘taxes’ to regional and district councils for the privilege  of accessing water.

“It doesn’t take a rocket scientist to work out that water taxes will only drive up the cost of food production, especially locally grown fresh vegetables and fruit.

“Are Kiwis really prepared to gift our domestic food market to other countries by pricing ourselves off the market?

“Labour and the Greens claim it will drive better and more efficient use of water. Well they are too late. Over the past ten years or so, farmers have been spending hundreds of millions of dollars upgrading on and off-farm irrigation infrastructure to more efficiently use water.

“This is plainly obvious for all to see in Canterbury with the proliferation of centre pivot irrigators.  With each one costing some $250,000, they allow the farmer to use substantially less water producing more food and fibre over traditional border dykes.

“There’s only so much money to go around for farmers to invest.  These proposed tastes will only slow down or stop a farmers’ ability to invest in new technologies.

“You’ve got to remember that we’re only using a fraction of New Zealand’s renewable freshwater resource, but the proper word is renewing.

“As the NZIER also notes, there are large informational, institutional and implementation gaps on water taxes. In our view, water tax proposals should have ‘use with caution’ in flashing red lights.

“If you want an example of a country with ill-founded and ill-thought out taxes that are like a wrecking ball through the primary industries then Argentina provides it.  Dr William Rolleston visited it earlier this year and saw for himself how everyone loses out there.

“By attacking Canterbury and Otago irrigators, there is such a dislocation between who you tax and the problem you want to solve, that the only thing you hurt is the economy.

“That’s why the media, politicians and commentators need to heed NZIER’s advice that, “care needs to be taken when considering taxing competitive agricultural sectors since countries which have done so without strong justification have performed poorly”.

“With some trading partners increasingly believing we are not responsibly harnessing our water resources to guarantee production, this is no place for policy experiments,” Mr Mackenzie finished by saying.

We don’t need an expensive experiment the direct costs of which will be carried by a relatively small number of farmers and the indirect costs of which will impact on Otago and Canterbury.

We need more of what’s already working.

This includes independently audited environmental plans for farms, which is what the North Otago Irrigation Company requires of all its water users.

Farmers already had lots of reasons to vote for another National-led government. This report provides them with more.


Labour’s CGT no good – NZIER

September 10, 2014

A report by the New Zealand Institute of Economic Research (NZIER) reinforces Federated Farmers concerns over Labour’s proposed capital gains tax:

“The NZIER say the Labour Party’s proposed Capital Gains Tax would not be a good addition to New Zealand’s tax mix as it is proposed, we agree,” says Dr William Rolleston, Federated Farmers President.

“The nature of politics will see the Labour Party try to dismiss the NZIER report.  Yet they must listen to the message because the messenger is credible.

“We commissioned the NZIER to examine Labour’s CGT proposal since it represents a major change to New Zealand’s tax system and has been devoid of critical analysis. 

“Perhaps the most concerning aspect of the report comes down to the Labour Party’s revenue assumptions.  In 2011, the Labour Party estimated a 15 percent capital gains tax would raise $17.5 million in its first year, rising to $3.7 billion by 2026.

“The NZIER tell us these estimates are high, since the revenue potential of its proposed CGT is more likely to be half that sum.  In fact it may be smaller.  If this key policy is out by such a margin it asks fundamental questions about the Party’s shadow budget. 

“What’s more, the Labour Party’s estimates of CGT revenue were revised up this year.  The NZIER noting Labour’s “…2014 estimates are less believable than the 2011 estimates.”

“Labour also expects to raise at least $1.3 billion from the farming sector but a more realistic estimate is half that sum in 15 years’ time.  NZIER further estimates that the loss in current farm values will be between $2.4 billion and $7.6 billion.  But this will be a one off hit for farmers.

“Lower land values mean lower tax revenue too.

“Aside from simply delaying sale, the NZIER notes there would be significant opportunities to avoid taxable ‘realisation’ events by keeping assets in the family. The CGT tax proposed would not treat transfers to family members as events where capital gains are assessed.

“A CGT genuinely risks capital lock-in with the housing market.  To avoid taxable gains people will choose not to sell achieving the opposite of what is desired for productive investment.

“Since the housing market has been part of a CGT’s rationale, the NZIER found Labour’s CGT will not aid affordability and is not as progressive as many would like to think.  Indeed, a CGT may lead to higher rents. 

“What is more, speculative property investment is already subject to income tax on capital gains.

“The lesson we can draw from countries with a CGT is that they are not immune from rising house prices, indeed, two weeks ago, the Sydney Morning Herald reported that Sydney and Melbourne had their strongest winter price surge since 2007.

“Federated Farmers, NZIER and others like Victoria University’s Tax Working Group agree that a CGT, of the kind proposed by the Labour Party, would not be an efficient and effective option,” Dr Rolleston concluded.

The party has criticised the criticism to which  Feds replied:

The New Zealand Labour Party has issued a media release calling into question the efficacy of the report authored by the New Zealand Institute of Economic Research (NZIER).

Federated Farmers notes the NZIER details Victoria University’s Tax Working Group consideration that a CGT, of the kind proposed by the Labour Party, would not be an efficient and effective option going forward.

This media statement confirms that the NZIER stands by its report and Federated Farmers deliberately selected an independent organisation to prepare the CGT report.

The NZIER report was issued to generate discussion on what could become a major change to New Zealand’s taxation base. In doing so, it casts doubt about Labour’s revenue projections and assumptions about the capital gains tax.

The Federation believes it is incumbent on the Labour Party to release detailed calculations supporting the basis for its policy allowing independent scrutiny ahead of the General Election.

Particularly, the analytical basis underpinning the Labour Party’s estimates of CGT revenue, which were revised upwards earlier this year.

The comments we have read do not represent the report NZIER wrote . . . 

Other objections raised by the Labour Party are reflective of debates around the world, in which the Labour Party holds a different philosophical view.

The NZIER fully stands behind its key findings and messages.

 

A simple and comprehensive CGT which was combined with lower personal and company taxes might work.

Labour’s is complicated, has several exclusions and is in addition to existing taxes.

It won’t do anything to cool the housing market, will distort investment and reduce the reward from risk taking and hard work.


Less than 2% of land foreign owned

February 16, 2014

The sale of Synlait farms to a Chinese controlled company brought the usual xenophobic response.

However, OIO approval for the sale of three North Otago farms to Cragimore Investments went unremarked.

That adds credence to the belief that at least some of the opposition is racially motivated.

Whatever, the motivation, a lot of it is based on the erroneous belief that we’re in danger of becoming tenants in our own country when in fact only 2% of land is foreign owned.

The sale of Synlait Farms to a Chinese-controlled buyer is part of a process ensuring New Zealand grows the right products to meet world demand, NZ Institute of Economic Research (NZIER) economist Chris Nixon says.

“That’s the fundamental point – land must reflect world prices because that’s how we decide what to grow on the type of land we’ve got,” Nixon said.

NZIER didn’t comment on the merits of individual deals but the trend was important for NZ to be a successful part of an international world, he said.

Nixon, who has written research papers on foreign direct investment, said the level of overseas ownership of land in this country was low by world standards and wasn’t growing quickly.

 “We’ve missed out really. The land is seen as relatively expensive and we are a long way from world markets.

“The deals we see are high profile but they are small and it tends to be spiky – it happens now and then.”

NZIER studies showed less than 2% of NZ land was owned by foreigners. The exact level of farmland ownership by foreigners wasn’t known but it would be within that range, Nixon said.

Most of the acreage was expected to be in forestry.

Less than 2% is a very small amount and that inwards investment brings benefits.

Waikato University professor of agri-business Jacqueline Rowarth said overseas investment helped maintain farm values and protect the high debt levels held in the dairy sector.

Restricting sales would make many current farmers “green round the gills” because of the impact on their farm values and debt they had taken on.

“Treasury says we haven’t got enough money coming in as a country to make investments and the Reserve Bank says that dairying debt is a major issue if things go wrong.

“Without the interest shown by overseas buyers the value of farms would drop.” . . .

The benefits aren’t just to those who sell the land.

          SFL will invest $20 million to develop the Synlait farms and Pengxin is spending about $18m on development in the North Island.

The multiplier effect of that level of investment in infrastructure and services in a regional economy meant everyone would benefit, Rowarth said.

The proof was in the Southland economy, which was booming because of dairy conversions. Dairy investment involved huge expenditure.

Rowarth also counters the myth that foreign owners compete unfairly with locals.

While overseas investment would maintain farm values, it wasn’t pushing prices out of the reach of New Zealanders as long as milk prices and operating costs were at levels to make the farm business profitable, she said. . . .

While foreign direct investment was important for the economy, it was also important for New Zealanders to capture the foreign trade benefits through ownership of the processing and marketing companies, Rowarth said.

“I’m less worried about the foreign ownership of land than I am about the companies, because that is where the brands and the value is.

“We’ve got companies like (PGG) Wrightson and now Synlait Milk majority overseas owned and the questions are where are the profits going? Are they coming back to NZ?”

It’s not the profits but the loss of  intellectual property a company like PGGW has in seed development which might be of concern. But there’s not the emotional attachment to IP the way there is to land.

Synlait Milk had said it was not paying dividends but would invest in its assets and the risk was  NZ investors would sell out if they weren’t getting an income from it.

Nixon has also noted greater reaction to farm acquisition than to foreigners buying agri-businesses, saying that was surprising when agri-business had more impact on the daily lives of New Zealanders.

Having open markets that encouraged overseas investment was important for credit rating agencies, he said.

Without that NZ would face greater interest costs on overseas borrowing.

Higher interest rates, and the inevitable increase in the value of our dollar that would follow, would be a very high cost for banning sales to overseas interests when such a small amount of land is owned by foreigners.


More migrants better for all

February 11, 2014

Increasing the number of migrants would increase incomes for all New Zealanders.

A new Insight from the New Zealand Institute of Economic Research (NZIER) shows that increasing net migration would lift incomes not just for immigrants but for the native population.

An additional 40,000 people a year for 10 years increases GDP per capita by a chunky $410 a year.

“A more ambitious population policy is needed to increase New Zealand’s population.” said Dr Kirdan Lees, Senior Economist at NZIER. “New Zealand’s point-based immigration framework gets the mix of migrants required about right. But we need to do more to keep lifting the number of migrants that come.”

Almost one-in-four New Zealanders are born overseas but the current policy of 45,000 to 50,000 migrants a year is too low and very arbitrary – bringing in more migrants would lift incomes.

Immigrants provide firms with new skillsets, allowing firms to access new markets, new ideas and new products. A deeper population base also helps firms to get big and offset initial start-up or fixed costs that can be high. But our work shows that the impact on incomes outweighs the inflationary impacts of migration.

International studies also point to positive effects of immigration.

“So let’s grow for it and plan to entice more migrants.”

Migrants are often willing to work in jobs which New Zealanders are less keen to do. They are usually very welcome in the dairy industry.

But the benefits migrants bring to their host country aren’t just economic, they can be social too, introducing a different culture and opening the eyes of locals to different customs.

The paper is here.


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