Changing Times in the Market PlaceMonday, Jun 30, 2003
The announced reform of the EU’s Common Agricultural Policy is being greeted as significant by our leaders but the real test will be how the EU individual farm business reacts to and manages the changed method in which they will receive the same amount of billions of Euros in subsidy as is currently distributed via direct price support.
To the average Kiwi farmer having what appears to amount to the equivalent of their farms overheads taken care of by direct grant it would be tempting to apply more effort to increasing total production up to the point where average variable costs match income .In other words produce more because there is still an margin of return from more production
That seems to point to increased production of the very products NZ produces so well. Unfortunately if, as it appears likely in the new scenario, the extra production of the EU farmers will then be exposed to the normal market forces and EU consumer product prices may then fall. This in itself would be no bad thing for consumers but what effect will such a movement have on the prices received from NZ’s quota entry products which currently give an excellent premium for both lamb and dairy products.
These are times of major change when some of the things NZ exporters have been pressing to be dismantled since the seventies are starting to happen but the potential for less than expected outcomes seem to be increasing.
The northern hemisphere subsidies and tariffs have been a cause of over production. It is hard to believe that simply by renaming the subsidies and distributing them on different criteria there will be a change the trading fortunes of NZ producers.
Let’s hope our leadership has the wit and judgement to identify and publicise the consequences of the changes that we have been agitating for do in fact make the expected difference
Its been said, beware as sometimes you get what you wish for.
NZ Farmers have been in the forefront of those demanding elimination of agricultural subsidies where ever they exist. We may be getting our wish but not the real outcome desired - a level international trade playing field.