Commodities are leading the global economic recovery. International demand for grains, dairy and forestry products is extremely strong – driven primarily by increased demand from China, ANZ Bank economists say in their latest NZ Agri Focus.
Dairy markets shot up in March, driven by strong buying from China, among challenging conditions to deliver product to market. Since then prices have stabilised near current levels, encouragingly, despite more product being added to the GlobalDairyTrade sales channel.
The recent strength in global markets, combined with a slight softening in the NZ dollar. has been supportive of farmgate milk prices.
“We are forecasting $7.70/kg MS for this season and $7.30/kg MS for next season,” the report says.
If cumulatively it has been a remarkably good season for the dairy industry, results have been more varied for the processing companies and for individual farmers.
Synlait and A2 Milk, for example, have not found the going easy, given the impact of Covid-19 on the daigou trade with China.
But Fonterra – as the principal player – has got back its mojo as industry leader, with its finances in much better shape under CEO Miles Hurrell’s leadership than under the previous regime.
A strong finish to the season is looming, with recent strength in global dairy commodity prices more than offseting the rise in the NZD. Immediate demand is being inflated by buyers making additional purchases to ensure they don’t run out of stock.
Stock levels were generally run down earlier in the pandemic as buying activity slowed a little due to uncertainty around the level of consumer demand.
The ANZ economists say consumers have continued to buy dairy products at similar rates to pre-pandemic levels. The economy of China – the world’s largest dairy importer – has recovered quickly from the pandemic which has helped boost dairy demand. Demand has also been supported by the rising consumer perception that dairy is a healthy food choice as many people have become more health-conscious as a result of the pandemic.
Given this background, morale has been recovering in the industry. It had been under constant attack from (mainly) urban critics with accusations of “dirty dairying”, even though a high proportion of NZ farmers rate as world leaders in environmental practice and in the lowest methane emissions.
So with the prospect of sustained high prices, the industry would have been working towards higher production next season.
But then along comes the government to say it intends to ban shipments of live animals.
“A kick in the guts” the ACT party says.
Federated Farmers throws up its hands in “surprise”.
Poor old Damien O’Connor is left in the dogbox (again), offering excuses as the bleeding hearts in the animal welfare groups celebrate.
It seems the Minister was rolled by the dominant “be kind” philosophy that prevails in the Ardern Cabinet, with Finance Minister Grant Robertson confirming animal welfare must be placed first.
The Agriculture Minister’s justification is based, he says, on the “risk” to NZ’s reputation for high standards of animal welfare. He reckons concerns about this “risk” have been steadily increasing.
But not – apparently – in the export markets to which the trade in live animals was directed.
“We must stay ahead of the curve in a world where animal welfare is under increasing scrutiny.”
So NZ has to sacrifice a trade worth $500m a year, according to some estimates.
Figures from Stats NZ show more than 100,000 breeding cattle were shipped to China last year, to the value of $255.89m.
O’Connor said the decision would affect some farmers, exporters, and importers and a transition period would enable the sector to adapt.
Officials had talked to key trading partners about the decision, he said, and recognised the importance of maintaining those trade relationships.
“We’re committed to working with them as we transition away from the shipment of livestock. NZ has an opportunity to boost trade through our cutting-edge scientific work into dairy cow genetics and germplasm use.”
O’Connor argues that once animals leave NZ by sea the government has very limited ability to ensure their wellbeing before they reach their destination. He describes this as an unacceptable risk to NZ’s reputation.
But has anyone noticed a risk to the reputations of other nations engaged in the trade?
And if there is an issue, surely the answer is to tighten the regulations under which animals are shipped.
O’Connor contends the ban on live exports means the animals will stay in NZ.
But they won’t stay for long. Because most of those due for export are usually surplus on local farms, they will now head to the works.
So will the new ban really do what the government says it will do in enhancing this country’s
“ … reputation as the most ethical producers of livestock protein in the world.
….”I think this will actually play positively into our international reputation.”
Good luck with that, Damien.
Meanwhile the people who will lose income and perhaps their livelihoods as a result of the new ban will just have to suck it up.