On Being CautiousWednesday, Nov 15, 2000
The Rabobank survey of rural confidence shows a more cautious response from farmers to their expectations
from this seasons economic outcomes. An awareness of the many variables that may influence the
prices received from our markets and the potential for a rapid lift in the value of the NZ dollar
certainly indicates the need for caution.
Reports from traders of increased demand for NZ products due to the lower dollar identifies the underlying
flaw in the belief by the export sector that the lower the dollar the better return.
Marketers have an unfortunate characteristic of wishing to sell their products for the lowest price
possible to maintain volume.
With a higher proportion of NZ farm products now marketed in retail form our product prices are not
protected by the fundamental relationship of commodity prices and exchange rates.
Processed and packaged products require the individual marketer to raise prices in each market to match
the changed price structure. Clearly those meat marketers excited about increased volumes are
not recovering the full difference induced by the lower exchange rate and are therefore shortchanging
Beware of the smooth talking marketers claiming success - they to need to have their success measured
by the cost/volume/profit relationship that regulates all business.