Subsidies shape silly responses

The ag-sag of the 80s was tough, but let’s not forget the silly subsidies that led to it.

Sheep numbers peaked at  70 million in 1982 which was around 22 sheep for every person.

We’re down to only six sheep each now, but farmers have replaced quantity with quality.

The total number of sheep was down by just over 5 percent between June 2015 and June 2016, Statistics New Zealand said today. Provisional figures show that the number of sheep in New Zealand fell by 1.5 million, down to 27.6 million at 30 June 2016.

“Between 2006 and 2016 the number of sheep reduced from just over 40 million, a drop of around 30 percent,” agricultural production statistics manager Stuart Pitts said. . . 

Improvements in breeding and feeding are producing better stock and the amount of meat we’re selling is stable in spite of the fall in sheep numbers.

Returns from sheep meat continue to disappoint but the answer isn’t subsidies.

As the video shows, expensive subsidies shaped silly responses. Farmers went for quantity rather than quality and produced meat for which there was no market.

The video is one of a series of  short videos, Trailblazers: The New Zealand Story from Free to Choose Media.

The others are:

Main preview

Public Sector Reforms

Empowering Ordinary People

Fishing Reforms and Sustainability

Hat tip: Utopia

 

 

 

 

Baad driver feeling sheepish

Road spikes are often used to stop fleeing drivers, but today a car being chased by police found its way barred (baaad?) by sheep:

A Queenstown police officer’s flock of sheep joined the line of duty on Friday morning.

The sheep were being moved along Littles Rd when they became the road block finishing a 90 minute police car chase through Central Otago and Queenstown.

Senior Sergeant Paula Enoka, of Queenstown, said the mob belonged to a local officer and happened to be in the right place at the right time.

They were being moved by a farm worker, who appeared unfazed by the scene unfolding behind him and carried on with the job. 

None of the sheep, or working dogs, were injured as the car came to a halt before attempting to drive through the flock. . . .

The baaad driver and passengers are no doubt feeling sheepish.

Ewe’d have to see it to believe it.

 

Baa-rnstorming the Lourve

Visitors to the Louvre got more than they baa-rgained for yesterday:

It was more je ne sais baa than quoi at the Louvre museum this morning as a flock of sheep and their farmers stormed the Paris landmark.

The protesters were from the Farmers’ Federation, who carried banners reading “PAC’astrophe” in reference to the European Union’s Common Agricultural Policy, which is under reform.

They were objecting to the effects of the industrialisation of agriculture, saying they feared for farmers’ jobs. . . .

Change is difficult but necessary.

We can be grateful that difficult as it was at the time, being thrust into the real world in the 1980s has made agriculture in New Zealand stronger.

Without those changes New Zealand would not be leading the developed world in economic growth nor would we be able to afford so much of the imports and social services which depend on export income.

 

Lamb drop 2m down because of drought

The impact of last season’s drought in the North Island has taken a siginifcant toll on stock numbers.

Last season’s North Island drought has dented New Zealand’s sheep and cattle numbers and this spring’s lamb crop is expected to be 2 million lambs less – down 7.7 per cent to 24.43 million head.

The Beef + Lamb New Zealand (B+LNZ) Economic Service annual stock number survey confirms what many predicted, following the recent prolonged and extensive drought. The survey provides the country’s sheep and beef sector with a prediction of the productive base of livestock for the 2013-14 season.

While both sheep and cattle numbers fell – 1 per cent and 1.3 per cent respectively – it is the lamb crop that reflects the drought’s impact most significantly.

The export lamb slaughter for 2013-14 is expected to be 18.6 million head, a decrease of 8.5 per cent and the export cattle slaughter is forecast to decrease 2.7 per cent to 2.2 million head in 2013-14.

This will have a big impact on the meat industry and also on other businesses which service and supply farms including shearers and stock firms.

B+LNZ Economic Service Chief Economist, Andrew Burtt says the drought conditions affected ewe condition at mating and, consequently, scanning results were variable across the North Island.

“We’re expecting lambing percentages to be down by up to 20 percentage points in the regions worst hit by drought in the north. The South Island fared better and scanning results were down only a few percentage points – and that’s against last season, which was favourable in the south.”

Overall, sheep numbers were down 1 per cent to 30.94 million head at 30 June 2013, compared to 31.26 million a year earlier.

Mr Burtt says breeding ewe numbers were also down 1 per cent overall, but the numbers in each island moved in opposite directions. “Ewe numbers in the North Island decreased by 2.7 per cent to 9.52 million, while South Island ewe numbers were almost static (+0.5%) at 10.69 million.

“Hogget numbers reflected a similar pattern – back 1.3 per cent overall, but down 3.5 per cent in the north and up 1 per cent in the south.”

Meanwhile, cattle numbers fell 1.3 per cent to 3.69 million head at 30 June 2013, from 3.73 million in 2012. “Again, the North Island figures tell the drought story, with numbers back 2.5 per cent – with particularly large decreases in East Coast and Taranaki-Manawatu – while the South Island’s cattle numbers rose 1.8 per cent.”

The full report is at Beef + Lamb’s website.

Nokia vs sheep

Gerry Brownlee’s response to David Shearer’s desire to emulate Finland has caused a bit of a stir.

As is usual in such stoushes, emotion beats facts, but  Federated Farmers has the numbers to prove sheep beat Nokia:

Federated Farmers‏@FedFarmers

@ChrisKeall ‘More money selling a Nokia than a couple of sheep’? Nokia lost €954m in Q4 and sales were down 31%. C/W http://www.stats.govt.nz/browse_for_stats/industry_sectors/imports_and_exports/OverseasMerchandiseTrade_HOTPFeb12.aspx

Hat tip: Offsetting Behaviour

By-products boom boosts sheep prices

When sheep prices were in the doldrums most of the fingers were pointed at the meat industry.

But meat is only part of the value of sheep and lambs. Until the last couple of seasons it wasn’t just meat prices but returns for by-products like wool, pelts, lanolin which were also low.

In the last couple of years returns from sheep and lambs has been much better, partly because of the increased demand and consequently price of meat but also because of higher demand and prices for the by-products.

Among those is lanolin, the price of which has doubled  as sheep numbers have dropped.

New Zealand Wool Services International (WSI) – one of the country’s  two scour operators – says prices for that product have almost doubled
in the past two years.

WSI chairman Derek Kirke says like wool, the price surge has been  driven by a world supply shortage, due to the drop in sheep numbers.

Tailing hasn’t finished yet but early indications are this year’s lamb tally will be well up on last season’s which was hit by big losses after the September snow.

Not all of those will be sold this season, if feed supply allows it, farmers will hold some stock back to rebuild flocks.

Demand is still expected to remain high although there will be a ceiling to the price.

Lamb is already out of reach of the budget conscious and there will consumer resistance from those with more disposable income if the price gets too much higher.

Will the good prices last?

Last season was the best in a generation for farmers, but there is reasonable confidence that bust won’t follow the boom.

Prices aren’t likely to stay at this year’s highs but Alliance Group expects protein markets to stay strong:

Speaking in Oamaru during the company’s annual series of shareholder/supplier meetings, chief executive Grant Cuff said it was expected 2012 prices to shareholders would remain high for lamb, sheep, cattle and deer.

Indicative pricing was that lamb would remain at $100 plus and sheep at $85 plus, with cattle prices down slightly.

Sheep and beef numbers were stable worldwide, consumption of meat was increasing and there were growing sales in the East.

Uncertainty in Britain, Europe and the USA is concerning but our two most important trading partners, Australia and China, are more stronger.

A free trade deal with India would provide more opportunities.

One of the benefits of new markets in Asia is that they are interested in the cheaper cuts which aren’t popular in our traditional markets.

To kill or to breed?

Whether to kill lambs or keep them for breeding is the question exercising the minds of many sheep farmers.

With prices at levels we could only dream of this time last year it is tempting to sell but there’s also a need to rebuild the national flock.

Lamb numbers have been dropping for years for a variety of reasons including better returns from other land-uses.

Last spring’s snow storm in Southland which killed thosuands of sheep compounded the problem and falling lamb numbers are hitting the freezing works.

While that’s difficult for people whose jobs are affected it could be a sign that farmers are choosing to hold back stock for breeding which is better for the industry in the long term.

Carbon farming could beat sheep

A Waikato study has found that carbon credits from trees grown on poorer hills could provide better returns than sheep.

There can be both economic and environmental gains from planting trees on erosion prone land.

At least some of this steep hill country would never have been developed had it not been for subsidies to boost stock numbers although this was neither economically nor environmentally sustainable.

The circle has turned and trees might now produce a better income with a better environmental outcome.

The bad old days

Jamie Mackay introduced last Thursday’s Farming Show with a reminder it was the anniversary New Zealand’s bloodiest farming protest (from 4:31).

June 9, 1978 was the day 250 farmers frustrated by on-going strikes at the freezing works drove 1500 sheep into the main street of Invercargill and slaughtered them.

Those were the bad old days when unions ruled and the rest of us paid for it in frustration, inconvenience and lost productivity, wages and opportunity.

My father had retired by 1978 but he’d been a carpenter at the freezing works. As a tradesman he was usually able to continue working when the freezing workers struck but he used to come home with stories about the stupidity of many of the strikes, called for little on no reason, sometimes over an issue somewhere else.

They had a propensity to call strikes at the most inconvenient time when stock were prime or feed was short and delays were costly in both financial and animal welfare terms.

Repeated strikes weren’t peculiar to the freezing industry, but on the wharves, railways, ferries and anywhere else where unions held sway.

Changes to employment law in the 1990s by National curtailed much of the union silliness. Labour reversed some of the changes, giving more power to unions which isn’t always to the benefit of workers.

Unions aren’t all bad. Businesses with large workforces often prefer to deal with one bargaining agent than lots of individuals. Unions can often achieve more for workers collectively than they’d be able to get for themselves individually; they can be a strong advocate for a worker with a grievance and they can bring about improvements in workplace safety and conditions.

But their actions sometimes appear to be more about flexing union muscle than doing what’s in the best interests of their members. Prolonged strikes are an example of that when wages lost through time off end up costing more than the wage rise over which a strike is called.

National has moved the employment pendulum back towards the centre with improvements to the law since 2008 and is now intimating it will campaign on making more progress:

Prime Minister John Key has indicated National will campaign on further changes to labour laws – and will not rule out reinstating a youth minimum wage or changes to collective bargaining.

At the Seafood Industry Council conference yesterday, Mr Key said making the labour market more flexible was a priority as the economy began to grow and National intended to unveil further changes in the election campaign.

There is debate about youth rates but there is no doubt that youth unemployment has gone up much more than that for other ages since youth rates were removed.

Offsetting Behaviour has several posts on the issue including youth rates revisited with graphs which clearly show youth unemployment has been worse than general unemployment since the removal of youth rates. Check My Sources explians how young workers are being priced out of the labour market.

In an interview with Sean Plunket on The Nation yesterday John Key said:

We know that there are people that are 18 years of age on an unemployment benefit and I think as a country most of us would sit around and say that’s crazy, they should be in work, they should be in training, or they should be back at school.

It would be much easier for young people to get work if employers weren’t forced to pay them the same rates as they pay more mature workers.

A little more flexibility in labour relations which won’t be welcomed by unions but will be better for employers and their staff would also be welcome.

We’ve come a long way from the bad old days when unions held the country to ransom but there’s still room for improvement.

Sheep smart, farmers smarter

If you were looking for the animal equivalent of mastermind you probably wouldn’t start with a sheep.

But research by Professor Jenny Morton, a neuroscientist at University of Cambridge, has found ovine intelligence is greater than most people realise.

She said: “They have a reputation for being extremely dim and their flock behaviour backs that up as they are very silly animals when in a group – if there is a hole they will fall into it, if there is something to knock over, then they will knock it over.

“So I didn’t expect them to be so amenable to testing and certainly didn’t expect them to be so smart. In our tests they performed at a level very similar to monkeys and humans in the initial learning tasks.

“When we then changed the rules they still performed as well as monkeys and better than rodents.

“They are quite intelligent animals – they seem to be able to recognise people and even respond when you call their name.”

Anyone who’s had pet lambs wouldn’t argue with that. Rainbow, our longest surviving pet lamb loved people, came when she was called and was walking, baaing evidence that sheep aren’t stupid.

Grant McMaster of Closeburn Station  a guest on The Panel yesterday, pointed out that smart sheep require smarter shepherds:

“Sheep are very smart animals and that’s why farmers are smart because they’ve got to outwit the buggers all the time  . . .  Sheep are very smart like the fellows who run them.”

Anyone for maaastermind?

Lamb demand high but prices not

  Beef + Lamb New Zealand’s  Sheep & Beef New Season Outlook 2010-11  is predicting good demand for our beef and lamb will continue.

In spite of that expected export receipts and farmgate returns don’t make cheerful reading.

B+LNZ  . . .  sees beef and lamb export receipts totalling $4.7 billion, 1.6 per cent less than last year. The decrease predominantly reflects a 3.5 per cent decrease in meat shipments to world markets, while lamb prices per tonne held on last year and beef prices lifted 3.0 per cent. . .

As always, the exchange rate will have a big influence on incomes.

B+LNZ Economic Service Director, Rob Davison says

. . . Based on a more optimistic exchange rate assumption than today of a 68 cents/US$ exchange rate and its associated cross rates, all classes average sheep and beef farm profitability before tax is estimated to average $54,000 per farm for 2010-11, down 5 per cent on 2009-10.

“At a less export favourable exchange rate of 72 cents US to the NZ dollar this would see sheep and beef farm profitability fall to $34,000 per farm.”

This continued dismal outlook underlines the importance of the red meat sector strategy and farmers are encouraged to fill out an on-line submission form.

Saturday’s smiles

A young teacher started work at a country school and was keen to make lessons relevant to her pupils.

During maths she said to her class:  “If there were 12 sheep in a paddock and six of them got through a hole in the fence, how many would be left?’

“None”, answered Peter.

“None, Peter? You don’t know your maths if you think 12 minus 6 equals none.”

“No, Miss, you don’t know your sheep. When one goes, they all go,” Peter replied.

Meat sector strategy urgent

Returns to sheep farmers seem to be defying the normal rules of supply and demand.

Sheep numbers have dropped and the demand for lamb is high which ought to mean good returns to farmers but although they’re not as bad as they were they’re not as good as they ought, and need, to be.

The relatively high exchange rate and dismal returns from wool, pelts, tallow and other by-products are partly to blame. Other factors include over capacity in the meat industry and changes in eating and cooking trends.

The result is a difference between profits of $600 a hectare from sheep farming and $3,500 to $4,000 for dairying which is encouraging more dairy conversions.

However, not every sheep farm is suitable for conversion and not all farmers who could change to dairy want to. They’ll be hoping that the meat sector strategy delivers.

The initiation of the meat sector strategy is a critical step towards improved profitability within the sector, according to project Co-chairs Meat Industry Association (MIA) Chairman, Bill Falconer and Beef + Lamb New Zealand (B+LNZ) Chairman, Mike Petersen.
 
Mr Petersen says the concept of developing an overarching strategy for the meat sector was championed by the organisation previously known as Meat & Wool New Zealand during last year’s referendum debate, when farmers expressed frustration at volatile and marginal profitability.
 
“We are delighted that through the Meat Industry Association, the processor/exporter part of the sector also sees the need to do this, and is prepared to work alongside farmers in identifying the opportunities for step-change improvement.”
 
B+LNZ, MIA, New Zealand Trade and Enterprise and MAF have agreed terms of reference and funding for Phase one of a two stage strategy process, which entails an overarching ‘umbrella’ study of the issues and opportunities across the sector from market to farm. Mr Petersen and Mr Falconer are optimistic that there will be a number of ‘quick-wins’ identified from that Phase one process.
 
In Phase two, willing industry participants will collaborate to adopt and implement initiatives to drive change. These may include research & innovation, market development or whole of supply-chain initiatives.
 
Mr Falconer expects Phase one to be complete in the first quarter of 2011.

Federated Farmers is backing the strategy:

“There’s a hell of a lot hinging on the meat industry strategy for New Zealand’s meat farmers,” says Bruce Wills, Federated Farmers Meat & Fibre chairperson.

“The really important thing is that farmers and the marketers are both seeing the highest ever in-market prices for Kiwi lamb, but they’re not benefiting from those prices. 

“The meat companies tell me they could sell double the lambs we currently produce and at these record prices too, but that’s where a massive disconnect between ‘there’ and ‘here’ kicks in.

“On-farm, sheep farmers are exiting the industry because there’s little or no profitability.  Sheep farmers are voting with their business plans in order to survive.

“We’ve now got a consensus among farmers and the processors that the industry is broken and it needs shape and form to go forward.

B+LNZ is forecasting a lamb crop of only 21 million – two million fewer than forecast last December.

That’s not only concerning for farmers because the meat industry still plays an important role in the eocnomy:

The New Zealand meat industry (lamb, beef, mutton, veal and co-products) is unique in the world with the great majority of production exported to overseas markets (more than 90 per cent of lamb and over 80 per cent of beef exported).

The New Zealand meat industry generated $5.8 billion in export revenue in 2009 – 15 per cent of New Zealand’s merchandise exports.

In 2009, New Zealand meat products were exported to 119 different countries.

Total meat production (on a bone-in basis) was 1.2 million tonnes for year ended 30 September 2009.

Total labour employed in the New Zealand meat industry is 72,000, which is 5 per cent of the total labour force (according to New Zealand’s 2006 Census).

It’s very unlikely we’ll get back to the days at the height of subsidies when we had 70 million sheep, but if  the strategy succeeds we could look forward to modest improvements in the sheep population. 

That will  come on the back of better returns for farmers which will in turn help those who service and support them, people involved in processing and the wider economy.

Researchers give methane a curry up

Newcastle University researchers have found that coriander and turmeric – spices used to flavour curries – can reduce the amount of methane produced by bacteria in a sheep’s stomach by up to 40pc.

Working a bit like an antibiotic, the spices were found to kill the methane-producing ‘bad’ bacteria in the animal’s gut while allowing the ‘good’ bacteria to flourish.

The findings are part of an on-going study by Newcastle University research student Mohammad Mehedi Hasan and Dr Abdul Shakoor Chaudhry – the most recent part of which is published this week in the Asian-Australasian Journal of Animal Sciences 2010.

Mehedi explained: “Spices have long been used safely by humans to kill bacteria and treat a variety of ailments – coriander seeds, for example, are often prescribed for stomach complaints while turmeric and cloves are strong antiseptics.

“Methane is a major contributor to global warming and the slow digestive system of ruminant animals such as cows and sheep makes them a key producer of the gas.

“What my research found was that certain spices contain properties which make this digestive process more efficient so producing less waste – in this case, methane.”

It sounds good in theory but there’s a long way between what works in a lab and what can be applied in the field – literally in this case.

Can coriander and turmeric be grown by the thousands of hectares in the soils and climates in which grass grows well?

If it does, will sheep eat it?

Will they get the nutrients they need from it?

What will eating spices do to the flavour of their meat and milk?

That said, reducing methane emissions in animals relies on science. Reductions of up to 40 per cent in the lab make persevering with the study to see if if can be applied in the fields and paddocks worthwhile.

Hat Tip: Interest.co.nz

Bigger or better?

Bigger or Better? was the theme of Baker & Associates annual Winter Seminar in Masterton yesterday.

My farmer was one of the speakers and had been asked to address large scale sheep and beef farming.

You know all the stories about men teaching their wives to drive? We could tell a few about women helping their husbands with speeches. In spite of my help/hindrance with the preparation, his speech was very well received.

Bigger and better aren’t mutually exclusive. One of my farmer’s points was that it’s possible to get better without getting bigger but if you get bigger without getting better you’ll get in to trouble.

He also said lessons he’s learned from dairying have made him a much better sheep and beef farmer. This includes the value of growing and utilisation of new grass, the use of nitrogen to extend the shoulders of the seasons, the value of sharing of information and how that helps in growing your business.

Another point he made was the importance of NFOs – Non Financial Objectives. Even if you love your work and reckon life’s one long holiday when you enjoy what you’re doing, it’s not healthy if that’s all you do.

Figures favour dairying

The average gross return from dairying is $9,000 a hectare, costs are about $5,ooo to $5.500 a hectare which leaves $3.5 to $4,ooo a hectare in profit.

Cropping returns around $4,000 a hectare with costs of about $2.5,ooo leaving $1,500.

Sheep grosses $1,500 a hectare with costs of $800 – $900 leaving just $600 a hectare in profit.

These figures show why cropping and sheep farmers are converting to dairying.

One of the consequences of that is less stock for the meat industry which is why no-one is surprised that Silver Fern Farms is likely to close its lamb cutting plant in Christchurch and its Belfast beef plant.

There is over capacity in meat processing and more conversions to dairying will only make it worse.

Land which is suitable for cropping  is generally fine for dairying but not all sheep and beef farms are suitable for conversion. Some farmers who choose not to, or can’t, convert  do dairy support instead – growing supplementary feed or grazing young stock and carry over cows.

But that’s not an option for all sheep and beef farmers. Many of these have been farming for capital gain and as land prices have slipped back they’ve been eating into their equity. That may be okay in the short term but it’s not a financially viable policy in the long term.

Forecasts for next season are cautiously optimistic about lamb prices but wool, pelts and other by-products are still in the doldrums and returns won’t come near those from dairying.

Sheep shortage leading to silly prices

The ODT’s headline tells a classic supply and demand story: Sheep shortage underpins demand.

You don’t have to be an economist to know that when demand exceeds supply the price rises and people who frequent stock sales say stock agents and farmers are paying silly prices for sheep.

There are several reasons for this.

Sheep numbers plummeted over the last few years because of dairy conversions and drought.

There is an over capacityof killing space in the meat industry.

Last season’s milk price fall led dairy farmers to cut costs so some farms which were growing supplements or providing grazing for dairying are looking for sheep to eat their excess feed.

All of that’s led to an increase in demand which has led to an increase in price for store stock  which isn’t necessarily related to the value of the meat or wool on international markets.

8 sheep and a cow each

The sheep population has dropped and the  dairy cow population has climbed according to Statistics NZ’s latest animal production survey.

Total dairy cattle numbers hit a record high of 5.8 million in 2009, 4 percent higher than in 2008. Since 1979, numbers in the overall dairy herd have doubled according to the annual survey, which collects information on livestock and arable farming, horticulture, forestry, and selected farming practices, including fertiliser and cultivation.

At 4.6 million, the 2009 milking herd, identified as cows and heifers in milk or in calf, was 250,000 larger than in 2008. This expansion was due to both dairy conversions and growth in the number of milking cows in existing herds. “Increased numbers in the milking herd have resulted in there being one milking cow for every New Zealander”, said agriculture statistics manager Gary Dunnet.

The increase in dairy cows was one of the reasons the sheep population dropped –  down 5 percent on 2008 to 32.4 million in 2009. that’s below the peak of 70 million reached in 1982.

The beef cattle population at 4.1 million was similar to the previous year and the 1.2 million deer was 6% fewer.

If you divide the human population by that of farm animals we’d all have just under 8 sheep, a dairy cow, a beef cattle beast and 1/4 of a deer each.

It’s only a couple of decades ago that a design-a-tee-shirt- contest was won by one with the slogan: NZ, we’re “ewenique”, 60 million sheep can’t be wrong.

But New Zealand’s not the only country with a declining number of sheep. In Australia drought and conversion to cropping have led to a big drop in the ovine population. It was about 120 million in 1997, now it’s around 70 million.

Meat demand to double

For several years sheep and beef returns have been well below those from dairying.

Last season meat prices were higher and dairy prices were lower but this season meat’s down again and dairying has regained a fair bit of ground.

There is however, hope for all food producers in an article in The Economist:

Between now and 2050 the world’s population will rise by a third, but demand for agricultural goods will rise by 70% and demand for meat will double. These increases are in a sense good news in that they are a result of rising wealth in poor and middle-income countries. But they will have to happen without farmers clearing large amounts of new land (there is some scope for expansion, but not much) or using up lots more water (in parts of the world, water supplies are stretched to their limit or beyond).

Dr David Hughes, Emeritus professor of food marketing at Imperial College London, who was here last month, pointed out that most people in the emerging markets don’t eat much red meat.

That provides us with the challenge of introducing the delights of beef and lamb to people more accustomed to eating fish and chicken.

It may not be easy, but if meat and three veg New Zealanders can be converted to sushi and other once exotic foods, surely it’s not impossible to convince people in other countries to enjoy our meat.

Hat Tip: Inquiring Mind.