Dairy producers gain fresh momentum,so how sensible is it to impose a new levy on them?

After a slow start to the season, the NZ dairy industry has perked up,as at  the latest Fonterra  GDT auction prices firmed, after three successive falls.

That rise came on the heel of reports NZ dairy earnings from Australia have ballooned because processors there are short of milk and lining up to buy NZ dairy products.

Open Country Dairy, NZ’s second-biggest dairy processor and exporter, said it has had a 40% lift in demand for product from its Australian customers. South Island-based Westland Milk Products said it had been turning away approaches from across the Tasman.

Industry leader Fonterra, one of the world’s biggest dairy companies, said it was continuing to see strong demand from Australia. Fonterra had earlier earmarked for sale a stake in its Australian business,but only  last month announced it was not going ahead with that,a decision on which the board will be  congratulating itself.

NZ dairy exports to Australia in the first nine months of this year earned $8.6bn, according to Statistics NZ figures. This compares with $7.34bn in the full 2021 year.

Steve Koekemoer, CEO of 100% NZ-owned Open Country Dairy, said milk supply in Australia had been declining for some time, and dairy product manufacturers were struggling now to obtain supply for ingredients products like milk powders.

“They’ve switched their product mix away from wholemilk powder and I think they’re channelling their milk into higher value consumer products when they can.

“I think they’re diverting a lot of milk into cheese for example. Cheese is delivering a better result for farmers [to meet the contracted price with farmers] compared with wholemilk powder. That leaves less milk for wholemilk powder. A good source of that is New Zealand.”

Koekemoer said the increase in demand was coming from existing customers and traders, not new customers.

Now, for a trifecta, the dairyfarmers who supply Fonterra (as well as others supplying different processors) will be looking for better seasonal conditions to halt the decline in production. Fonterra recently reduced its 2022/23 milk collections forecast to 1,495m kg/MS, down from the initial estimate of 1,510m kg/MS (-1%).

So at the  latest Fonterra GDT auction, the  co-op sold 28,980 tonnes of product with the average price of $US3623 and the index up 2.4%.

The key products which have the strongest influence on the seasonal payout WMP and skim-milk powder were each up 3.1%

 to $US3397  and $US3097 a tonne respectively, while anhydrous milkfat was up 2.7% to $US5711.

 Butter was  down  0.8% to $US4829, and cheddar  1.3% to $US4746.

If then there is some relief prices have reversed the downward trend of  recent GDT auctions, it may not assuage the anger in rural  regions for the Ardern  government’s plan to impose levies on  agriculture for greenhouse gas emissions.

The government’s recommendations for the GHG emissions tax, which have changed from those in the He Waka Eke Noa Primary Industry Partnership’s proposal, indicate a reduction in production from the agricultural sector, driven by land use change. Forestry is modelled to take another million hectares of land, particularly in sheep and beef land.

Selling up appears to be a more viable economic action than trying to farm under an increased burden of levies. For dairy, the land use change is to horticulture, urban expansion and life-style blocks.

The farmers will be making the decisions for the future of their families, just like any business owner. When selling to forestry or lifestyle blocks, land is valued at over three times as much per hectare as drystock or dairy (the comparison being made in the same  same type of area). The result is a decrease in food production and export income.

 How sensible is that?

What NZ can learn (is Greenpeace listening?) from Sri Lanka’s blundering to combat climate change by going organic

Sri Lanka is in the grip of its worst economic crisis in decades, facing depleted petrol reserves, food shortages and a chronic lack of medical supplies.

More than a month of mainly peaceful protests against the government’s handling of the economy turned deadly last week when supporters of the former prime minister stormed an anti-government protest site in the commercial capital Colombo.

For New Zealanders, the troubles being experienced by Sri Lanka’s 22 million people might trigger humanitarian concerns but – at first blush – have little to teach us about good policy.

Kiwis therefore may shrug  off Sri Lanka’s plight as the consequence of incompetence by the governing Rajapaksa brothers, one of whom has resigned as prime minister, the other whose job as president is under threat.

But the policy blunders that precipitated the crisis should be studied by policy wonks in this country 

Greenpeace gripes at govt’s greenhouse gas agenda but agriculture leaders welcome it (and push genetic technologies)

Despite   pouring  $2.9 billion  of  taxpayer funds  into  the  battle against  climate  change, the Ardern  government won few  plaudits  from  climate  change lobbies – and  copped a  severe  caning   from  Greenpeace for refusing to cut  dairy herds.

As  Radio  NZ  reported,

“Climate activists say the government’s landmark plan to curb emissions is light on detail, full of fluff, and lets the worst polluters off the hook”.

Government  ministers were  nevertheless ebullient   about their  package, believing  they  had  delivered a  master stroke  in  earmarking $569 million  to help low-income families get  cleaner  cars  while winning  over  farmers  with a  new  agricultural emissions centre.

Greenpeace  saw  that  rather  differently.  As  their  spokesperson put it:

“The Emissions Reduction Plan gifts $710 million to the agricultural industry – a quarter of the entire Climate Emergency Response Fund which it has not contributed towards”.

Jackson explains co-governance in terms of democracy and equity – but don’t look too hard at what 50:50 means down south

Anyone bothered by the insidious spread of Treaty-based co-governance arrangements will have been enlightened if not reassured by Māori Development Minister Willie Jackson’s defence of the concept when questioned by Jack Tame at the weekend.

Co-governance is shared decision-making and partnership and it is democratic because democracy has changed, he explained.

At least, that’s what Point of Order thinks he was saying.

So how has democracy changed?

Well, under co-governance Maori would have the same representation as non-Maori on the proposed Three Waters bodies that administer the management of water services.  This would be done because Article Three of the Treaty gives Māori an opportunity in terms of an equitable right …

“That’s not a superior right, that’s an equitable right. Why would you not buy into Māori working in terms of the Three Waters.”

According to this reasoning, we should not get too excited about numbers.  Equitability would translate into a proposal to give Ngai Tahu the same clout as around 20 elected councils over the management of South Island water services.    

• One lot of co-governors would represent Ngai Tahu, a tribal business entity that claims the affiliation of 68,000 people,
• The other lot would represent 20 or so councils representing around 750,000 people.

Isn’t it good, Norwegian soot

Just keep reminding yourself that things need to get worse before they get better.

Norway – a grand profiteer from blood carbon, according to the puritanical wing of the climate church – has come up with a very old and very bad answer to Europe’s energy price crisis.

According to the Times, the government is going to help pay Norwegians’ electricity bills:

“Each household is expected to save hundreds of pounds through state subsidies to cover half of power costs above a price floor over the coming months.”

There is an alternative to Trump. It looks like this

Wolfgang Munchau is a favourite European political commentator.  You have to love a guy who ran the argument that Germany and Britain should team up to run the European Union.

Naturally you’d like to know his views on the new German governing coalition, which has just published its 178-page policy agreement.

The most interesting thing about the coalition is that it brings together the enviro-statist Green party with the right-liberal Free Democrats, who, as Munchau says “can’t stand the sight of each other”.

Maybe Judith Curry will be more famous than Greta Thunberg …

Now, a substantive contribution to the post-COP26 debate.

Ted Nordhaus is the nephew of Nobel prize winner William Nordhaus (who got his “for integrating climate change into long-run macroeconomic analysis”).  But it’s fair to say they don’t agree on everything.

You wonder what uncle might think about his surprisingly angry but nonetheless coolly rational attack on ‘big climate’ in the Economist.

It will be a good day when Judith Curry is better known than Greta Thunberg

The world climate revival meeting in Glasgow ended with Alok Sharma (the UK’s minister to COP26, as well as the presiding chief priest) in tears over a last minute word change.  The countries which have built more coal fired capacity, more quickly, than just about anyone else in history (that’s you China and India) would only agree to phase its use “down”, rather than “out”.

Despite the (quite literal) imprecations of hellfire, the only truly substantive outcome of the conference may be the Chinese government’s practical suggestion that the world should aim for a global temperature increase of 2°.  (Bill Gates also chipped in some climate realism, noting that 1.5° was probably unachievable.)

Planes, trains and automobiles – and also by foot, sail, cycle – and metal ball

So COP26 kicked off in Glasgow during the weekend. But it’s hard to get too enthused about an international jamboree if you’ve been involved in organising one. 

The striving by the in-group to pre-cook an outcome which can be pitched as ‘successful’; the breathless blow-by-blow media coverage; the travelling circus of groupies, civil society and protesters.  The Times reports on those making the pilgrimage to Scotland’s famously tough city, including “a Greek actor … on the final leg of a 2,000-mile run from Athens to Glasgow”. Which certainly sounds more attractive than the journey from Germany in a “human-sized hamster ball” – although the latter may have protection and shelter benefits.

NZ has yet to announce climate-warming pledge for Glasgow summit but RBNZ is developing guidance for our finance sector

The clock is ticking on global warming, the  Dominion-Post  warned this  week ahead of  the Climate Change Summit in Glasgow. 

The  opening  paragraph  of  the  report  was  ominous: 

“Even after  countries — excluding NZ — unveiled  ambitious new  pledges  to  cut emissions,  it’s still  not  enough to achieve the global of 1.5 degrees  Celsius of climate warming,  a  new  report  found.”

The  article  points  out that NZ  has been  notably  absent   from the burst of  announcements that have been made, but  suggests we may  make our declaration in Glasgow.

It  argues that, as  a  small economy,  NZ’s nationally determined contributions (NDCs) will  not sway  the  dial  much.

But Green  co-leader  James Shaw,  who is  representing  NZ  at  the  conference, may  find anything he says is not  greeted  with applause.  NZ, like  Australia,  is  regarded  as  a  laggard  on  climate  change.