Farming in a Declining EconomyFriday, May 4, 2001
New Zealand has been penalised for its expertise in producing agricultural commodities. So says a recent
report of the Institute of Economic Research
Initial farming reaction to that sort of statement is - so what?
Experience over the past 15 years has shown that the “sunset” agricultural industry scenario
does not exist in so far as there is a continuing need for any sort of export production to gather
overseas exchange to pay for imports.
The report identifies agricultural trade barriers and a limited global appetite for basic agricultural
and food products as the reason for New Zealand’s ever declining economic performance.
Does this mean that that in spite of the best of intentions a structure like Global Co, for dairy or
the meat export co’s, for meat, are doomed to declining performance, because efficiency improvement
will still be lower than the rate of decline of market prices?
Is this an investment issue or is this a performance issue? For Global Co it is undoubtedly an investment
issue, but for the country it is definitely a performance issue.
Will Global Co find high yielding investments? Perhaps.
Will Global Co improve performance beyond saving that iconic $300 million? Probably not
As farmers we are aware that with each passing price cycle we are working harder and harder to maintain
a profitable position against an increasing business risk. This is the evidence that we aren’t
improving our production efficiency as fast as prices received are falling
The Institute of Economic Research report has defined the problem it sees for NZ’s economy –
it will continue to decline relative to most other countries if nothing is done.
Will traditional farming take a drubbing if nothing is done? Undoubtedly
The big issue is how far does the economy decline before it hurts enough to lead to an attitude change
that will improve NZ’s economic fortunes?
In the meantime…that’s what!