(en) AWSM.NZ: Wooly Thinking by Pink Panther
Sheep. ---- There are about thirty million of these animals in New Zealand. For almost a
decade the number of sheep plummeted as farmers switched from them to dairy farming. The
price of milk solids soared, along with dairy produce prices, with the price reaching as
high as $8.40 a kilo in the 2013-2014 financial year. Many in the sector were cashing in
on this bonanza. ---- It seemed Fonterra could do no wrong and they would keep milking the
profits forever. Milk solids were going up in price and so Fonterra was able to dominate
the dairy industry to the point that, as of 2015, they had 80% of the world dairy trade.
Fonterra's domination and the less savoury aspects of dairy farming were ignored or
downplayed. Behind the scenes environmentalists, fishermen and tourists watched in dismay
as rivers were polluted and environmental laws were tossed by the wayside with little
interference by the government. They also became overly dependent on the Chinese market
with most of the dairy produce being exported there. Such was the dependence upon the
skyrocketing price of milk solids and dairy produce in general that few wanted to consider
what might happen if global prices fell. They also failed to consider the possibility that
the Chinese might stop buying as much, particularly after several scandals involving
contaminated infant milk formulas and other milk products in the early 2010s.
A plunging New Zealand dollar (around 65¢ US as of mid-August), falling demand for New
Zealand dairy produce in China and elsewhere, and a major over-supply problem brought an
end to the dairy farming boom. From Northland to Southland dairy farmers watched as the
forecast pay-out went from a record $8.40 a kilo to $3.85 a kilo in the space of just two
years, which has seen dairy farmers reduce milking to once a day. In other cases,
especially in the Hawke's Bay and Waikato, farmers are sending their dairy herds to the
freezing works just to generate enough income to pay off their debts. Others are walking
off the land or converting to sheep farming, as the price of wool and lamb has been more
stable.
Dairy farmers should have learned from history when the United Kingdom joined the (then)
European Economic Community in 1973 and cut back on New Zealand imports. It resulted in
the first of the slumps in the local post-war economy. It led to the realisation that
dependence on primary industries needed to be reduced and to export to more markets.
Thanks to over-dependence on dairying and the Chinese market, it is estimated that
plummeting milk solid prices will cost the economy $13 billion in the current financial
year (TVNZ, May 28). The impact has hit rural areas and many small to medium sized towns.
Few farmers are hiring workers and retailers in industries that serve farmers are
recording sales figures in single digits, such as in many RD1 stores. (RD1 stores are
basically department stores that specialise in goods that farmers would want or need.).
With many towns dependent on incomes from seasonal work - for example, 75% of Waipukurau's
labour force relies on seasonal income earnings - the situation for retailers and other
businesses dependent on farm earnings is grim, with long established businesses closing down.
Further aggravating the situation in the rural sector has been the reluctance of banks to
lend money generally since the 2008 recession. They have also hesitated to lend money to
already heavily indebted farmers to convert to other forms of farming, such as sheep
farming. Not that converting a farm from dairying to sheep farming is easy or cheap.
Partly for these reasons, farmers are selling their farms to both domestic and foreign
corporate entities and simply walking off the land.
In the main centres, like Auckland and Wellington, it is hard to believe that there is a
crisis in dairying because milk prices remain stubbornly high. A two litre bottle of milk
in a typical dairy can be as high as $3.90. This is due in part to price gouging by
wholesalers and retailers claiming it costs a lot to sell milk due to overheads like
refrigeration and a short shelf life.
One consequence of these trends in the rural economy is that declining milk prices are
indirectly impacting on house prices generally. As jobs in dairying disappear people are
moving to the few places where jobs are still plentiful. While not wishing to overstate
the case, this is certainly one of the many factors adding pressure on housing, which is
already hard to obtain thanks to rampant property speculation and escalating rents. In
Auckland the average house price was $826,474 in June 2015 according to the NZ Herald
(July 13, 2015). The average rent was as high as $678 a week for a three bedroom house in
a suburb like Devonport (NZ Herald, 30th March, 2015). At a time when the media and
certain politicians are grabbing populist attention by whipping up simplistic images of
'foreigners' as the cause of high house prices, these overlooked flow on effects from
changes in dairying highlight that the causes of the problem are far more complex than
they acknowledge.
In August 2008 I travelled around the North Island on a road trip. Dairy ruled the farms.
Cattle dominated the landscape. Milk tankers traversed the country, delivering their
produce to ports from which they were exported to high growth markets like China. In
September 2015 the sheep is now becoming the king of the farm again. Farms once filled
with dairy herds are now either deserted or full of sheep. Apart from niche farmers (such
as alpaca and deer farmers) it would appear the ones that have weathered the crisis better
so far have been those who either remained sheep farmers or had a diversified livestock
profile.
To a city dweller like myself it is easy to dismiss the decline of rural New Zealand as
something that isn't a big deal. Derelict housing, shops closing down and empty farms
isn't something that we think about. Out of sight, out of mind. That is, until we realise
that the tax take from $13 billion that has now disappeared could've built new homes for
low income families, paid for more medical staff and equipment, reduced classroom sizes
and provided better public transport. It's also worth remembering that a substantial
amount of violent crimes, including family violence, is a growing problem in rural areas
and small towns as lack of money and jobs push families to breaking point.
Back in the 70's, in line with the post-war Keynesian consensus, this country had an
economy that was substantially managed by government intervention. Farmers were heavily
subsidised and protected, which created an artificial situation and cumulatively warped
the overall picture. The neo-liberal 'correction' that replaced this has caused damage of
its own. Unfortunately many overseas and some people here seem to think scapegoating
foreigners, introducing some kind of closed off fortress economy like that of North Korea
or returning to a social-democratic nostalgia trip version of the past or accelerating
free-market mechanisms, will solve the difficulties facing the economy. Practice overseas
has shown that the public are as tired of the broken promises of governments calling
themselves "Socialist", best exemplified by the Syriza government in Greece, as they are
in the capitalism of the International Monetary Fund. Perhaps the simple truth is that
regardless of labels, no governments can effectively correct what are fundamental problems
within a complex trans-national economic system.
A genuine alternative to the current mess is required and while an Anarchist society is
not going to happen soon, there is a need for a grassroots/flaxroots solution to problems
facing rural New Zealand. Anarchist ideas are surprisingly compatible with rural living as
farmers tend to have skills of self-sufficiency, while appreciating the need for
co-operative forms of working and they can see the inter-dependence that is involved in
the supply chain from farm to port. If adapted somewhat, this could tie in well with our
own ideas of de-centralised, federated organising. Building understanding between the
working poor of the cities and the farming-reliant small towns, emphasising commonalities
of experience and helping people recognise who has been pulling the wool over their eyes
for so long, are important tasks for those of us opposed to the existing system.
In the meantime the humble sheep is making a comeback. However it may be a case of too
little, too late. The world is facing a crisis of over-production of most commodities,
including most primary produce, but there aren't enough people who can afford to buy this
surplus as wages in the European Union, the Russian Federation and Australasia have
slumped as the result of austerity and under-employment. Nobody can predict the future for
certain, but let's hope those on the receiving end of this system of boom and bust, can
turn things around by taking control bit by bit. That way, we won't be lead like lambs to
the slaughter.
http://www.awsm.nz/2015/09/09/wooly-thinking/
