Changes, Changes - Always Changes.Wednesday, Dec 27, 2000
The holiday season throws up many odd stories as reporters struggle to find notable items to fill their
columns. But todays news continues the theme of the past month - changes will affect farming.
The dairy merger remains in the in the forefront with better identification of the hurdles still in
front of a satisfactory outcome. The price that may be extracted by the local market in exchange for
the government looking the other way by taking the Commerce Commission out of the picture will
be of interest. It will be ironical if 5 percent of the industries milk sales on the local market
controls the exported 95 percent of milk that normally sets the local market price. Farmers can give
thanks that WTO rules will not allow a local market differential.
Those wonderfully competitive Australians are now applying additional creative skills to the fireblight
game being played out seemingly without rules. It is a short step from sensible aggression to
total petulance and our Aussie mates are crossing the line.
Coca-Cola has announced that it is entering the flavoured milk market targeting 5 to 15 year olds. Is
this an early indication that the market is looking for more healthful drinks and a rising demand
for milk and milk components to formulate trendy drinks for the volume market? It is ironical the
perceived long time competitor of milk consumption - Coca-Cola should cross over and set out to
do the job that our own marketers seem to have failed to develop.
Finally in this mid holiday missive is the direct warning that the good effects of the lower exchange
rate on farm gate prices may be well and truly over. In spite of optimistic government and Reserve
Bank economists and even our own producer organisations forecasting a slow rise in the NZ dollar
next year the alarm bells should be ringing if farmers are spending on the basis of today's prices
for product sales in 3 months time. There is a change coming and it will not be for a continuation
of improved farm gate prices. Have a look at the latest Agri-Fax graphs on the Export Prices page
and look at the strong relationship and speed of decline in prices and the exchange rate.