Agricultural Economics and Food Policy in New Zealand

Frontmatter

Chapter 1. Introduction

Abstract

New Zealand has considerably more fertile land than needed to meet domestic food requirements and supported its development by exporting food. The importance of New Zealand’s farming produce for foreign exchange gives agricultural economics and food policy a high profile. New Zealand has the second highest net specialisation in agriculture exports and it is in the top six exporters of ‘eight key traded farm products’. Combating market distortions has been a major concern. Unusually for a ‘rich’ country, most subsidisation was abolished. Development and implementation of New Zealand’s agricultural economics and food policy has been based on significant influence by farmers themselves through Federated Farmers. The book’s intention is to demonstrate how agricultural economics and food policy are dependent, jointly, on Government and farmers’ actions.

David Hall

Chapter 2. Coming Together to Work Collectively

Abstract

Federated Farmers gestation is investigated noting that farming’s diverse aspects, together with farmers’ individualism and differing regional viewpoints, makes collective action difficult. In the early twentieth century, a Farmers’ Union, Sheepowners’ Federation and Fruitgrowers’ Federation Ltd were formed separately. The three organisations’ shared interests led to cooperative action in the 1930s. The need for strong representation was strengthened when New Zealand elected its first Labour Government, perceived to be biased against farmers. Farmers’ many shared perceptions led in 1941 to a loose federation with the leaders of the main organisations meeting regularly. That step was encouraged by seeing an urban trade unions’ federation successfully winning preferment for its policies from Government.

David Hall

Chapter 3. Struggling Towards a Unified Organisation

Abstract

Joint concerns encouraged farmers, sheepowners and horticulturalists to move towards complete unity and ‘Federated Farmers of New Zealand’ was incorporated in December 1944. Within the unified organisation, branches and produce sections were autonomous. The coming together to form Federated Farmers demonstrated that farmers were dissatisfied with New Zealand’s Producer Boards whose prime interests were processing and marketing farmers’ produce. The boards were set up originally to organise better exports and their work was primarily with issues outside rather than inside the farm-gate. Meat, Dairy and Fruit Boards were set up in the 1920s, and a Wool Board in 1944. The Boards’ electoral arrangements led to insufficient accountability. While the Boards engaged with those processing and marketing farmers’ produce, Federated Farmers represented, more closely, the farmers.

David Hall

Chapter 4. Emerging from Wartime Conditions

Abstract

In the late 1940s, there were ample markets for produce and full employment; New Zealand was prosperous because the UK had contracted to buy from New Zealand all of its exportable surplus food and new contracts were agreed at ‘substantially increased prices’. When its first year ended, Federated Farmers main produce sections had been constituted—dairy, meat and wool, and agriculture. The essence of Federated Farmers was coping with an extremely diverse range of issues that impacted on agricultural economics and food policy. That was possible because the produce sections dealt with the more immediate problems associated with their particular produce. Federated Farmers’ influence on Government policy is demonstrated for 1947 by the diversity of issues influencing agricultural economics and food policy.

David Hall

Chapter 5. Impact Nationally and Internationally

Abstract

The Federation continued to benefit from the close links with Government formed during wartime. The distinctive roles of Government, the Meat Board and Federated Farmers were demonstrated by debate on overseas control of meat processing. Southland farmers formed a partnership with the overseas-owned W. and R. Fletcher Ltd to set up a processing facility but the Meat Board refused to grant a licence. Federated Farmers supported the Meat Board rather than Southland farmers. A Royal Commission found the Southland farmers’ actions to be justified. Southland farmers and Fletchers eventually reached agreement with the Meat Board. Federated Farmers’ role internationally became important when it was invited to promote an International Federation of Agricultural Producers (IFAP). The Federation played a strong role in the IFAP’s first meeting.

David Hall

Chapter 6. Farming Anxieties and a More Favourable Government

Abstract

Farming anxieties in the late 1940s were demonstrated by a Royal Commission that investigated the sheep farming industry, New Zealand’s main foreign exchange earner. Anxieties influencing agricultural economics and food policy were found to be economic, societal and environmental, and the Commission recommended increased support for the rural community. Increased support became more likely when the 1949 General Election brought into power the National Party, thought more sympathetic to rural society with a former Federated Farmers’ leader as Minister of Agriculture. Federated Farmers sought a mandatory levy on farming produce to support its central operations, but Cabinet decided that no commitment could be made. The Federation had to fall back onto annual grants made by the Meat, Dairy and Wool Boards.

David Hall

Chapter 7. The Weakening Relationship with the UK and Market Diversification

Abstract

New Zealand realised its entrenched relationship with Britain would no longer provide sufficient overseas income, but market diversification was hindered by trade barriers, including barriers in New Zealand, itself, which imposed restrictions on imports. UK bulk purchase agreements ended in 1954, but those had made farmers lose touch with modern marketing requirements for other countries. Farmers recognised early the importance of establishing relations with US farming organisations if trading with the US was to be developed. New Zealand’s dependence on the USA for security discouraged trading links with China. But, eventually, a New Zealand trade mission to China identified that import of milk solids would be needed in China. China would eventually replace the UK as New Zealand’s main agricultural trading partner.

David Hall

Chapter 8. Growing Farmer Influence on Government

Abstract

At the start of the 1960s, the New Zealand Finance Minister said ‘every effort must be made to diversify markets and persuade others to moderate agricultural protectionism’. Federated Farmers was sufficiently confident to propose a comprehensive policy for the New Zealand national economy. The Federation urged curbing inflation partly by a progressive reduction in protection to secondary industries. An Agricultural Development Conference identified the main needs to ensure increased production and the Government announced policy measures in line with the Federated Farmers’ proposals. How Federated Farmers achieved its objectives was described by the Federation’s Research Officer. In mid-1964, Federated Farmers decided it was again appropriate to request a mandatory levy on farm produce to fund the Federation’s activities, but, again, the request was refused.

David Hall

Chapter 9. Domestic Matters for Meat, Dairy and Agriculture in the 1950s and 1960s

Abstract

This chapter analyses meat and dairy farming in the 1950s and 1960s. Federated Farmers was shocked when the Government did not ask the Federation’s consent to use surpluses built up from finance stabilisation policies during wartime. Farmers pressed for full dairy farming costs to be recognised, but the Government did not want to continue linking its ‘guaranteed price’ for dairy produce with farm costs. Prices paid to farmers would depend largely on overseas realisations for their produce. The 1960s were marked for the dairy industry by many attempts by Federated Farmers to bring to the attention of Government the relatively low incomes of dairyfarmers and to seek relief. Farmers encouraged also schemes to eradicate bovine tuberculosis, brucellosis and leptospirosis.

David Hall

Chapter 10. Wool: Prosperity Then Reform

Abstract

This chapter discusses horticulture and wool farming in the 1950s and 1960s. Increase in wheat acreage created transport, storage and distribution problems. During the Korean War, the wool tonnage purchased by the USA from New Zealand increased fivefold and prices tripled. The organisation set up in the 1940s to handle wool surpluses finished and a national scheme replaced it with the objective to offer ‘greater resistance to any downward trend’. Synthetic fibres began to compete with wool sales. Wool reform debate demonstrated the difficulties in modernising farming. Proposals for compulsory acquisition were rejected. But Government removed from the Legislation provision for agreement by growers before powers of acquisition could be used.

David Hall

Chapter 11. Impact of the European Economic Community (EEC)

Abstract

Possible UK European Economic Community (EEC) membership was potentially catastrophic for New Zealand. But New Zealand worked to protect its vital interests rather than opposing UK membership. That approach was successful despite New Zealand’s import restrictions on British goods. Federated Farmers’ discussions with the EEC encouraged hopes of more outward EEC agricultural policies. New Zealand had to choose between shipping produce to the EEC and new markets, it fell 15% short of filling its EEC quota. The weakening trade relationship with the UK encouraged New Zealand to build trade partnerships in the Pacific and Asia recognising it would have to give up narrow, inward-looking, protectionist policies. Federated Farmers told the Pacific Basin Economic Council that trade expansion needed removal of market distortions.

David Hall

Chapter 12. Encouraging Government Support for Farming

Abstract

The 1970s were marked by high inflation and global economic crises. Federated Farmers proposed a cost adjustment scheme to compensate farmers for inflation, but it was ill prepared. When the 1973 oil price crisis impacted on New Zealand’s major customers, the Federation secured major subsidisation from Governments to increase farm exports. The Federation also secured support for a levy to support its activities. When export lamb prices increased, the Government asked meat and wool farmers to voluntarily deposit, temporarily, $85 million of their increased income. The Government threatened to introduce a system of reference prices for export meat with payments above the reference price diverted from farmers to a ‘stabilisation’ fund. But violent opposition by farmers was threatened and the price reference scheme was abandoned.

David Hall

Chapter 13. Subsidisation Keeps Growing

Abstract

World recession hit the export industries. The Government granted $71 million to establish stabilisation funds for farming and to hold farm costs. Special measures were introduced for agricultural servicing industries and tax advantages encouraged development of the cooperative movement in farming. Responses to the Government’s assistance demonstrate the perception of farming subsidies by others. The Federation proposed measures to control the Government’s economic policy and the Federation was invited, unusually, to attend the Cabinet Economic Committee. The Government adopted many points made by the Federation. A new Prime Minister, Robert Muldoon, emphasised the need to increase farming exports; ‘Supplementary Minimum Prices’ (SMPs) were introduced to meet farmers’ living expenses, operating expenditure and new development. Farming was now a highly-subsidised industry.

David Hall

Chapter 14. Subsidies at Their Maximum and Their Death

Abstract

The Federation recognised Government inflationary policies, including increased support for farming, endangered the overall country’s economy. Federated Farmers pressed its ideas on economic reform and the Finance Minister, Roger Douglas, in a new Government agreed with those ideas and his first step was removing most assistance for farming. But other changes recommended by the Federation, such as liberalising import licensing to reduce farming costs, took place more leisurely. ‘Rogernomics’—removing farming subsidies without reducing farming costs caused a short-term disaster for the rural community. Farming leaders led farmers’ militancy in a campaign known as the ‘Roar from the Hills’. But the urban public’s perception was different, farmers were seen as a privileged group who could bear their changed economic circumstances.

David Hall

Chapter 15. A Comprehensive Strategy for Agricultural Economics and Food Policy

Abstract

Farmers looked back angrily to the mid-1980s believing Government and other sectors of the economy had ‘ripped farmers off’. Federated Farmers developed a future strategy for agricultural economics and food policy, recognising New Zealand living standards depended upon increased growth led by farming exports and noting that future farming prosperity depended on sound Government economic management. A competitive, market related, economy had to be created by reducing Government spending, reducing protection of manufacturing and liberalising the labour market. The freehold family farm would continue to be farming’s cornerstone. The strategy included that it was essential that New Zealand continued to encourage international free trade, but attempts to liberalise global trade were hindered because New Zealand was a protectionist country, restricting imports from manufacturing countries.

David Hall

Chapter 16. Enforced Change in Farming Practices

Abstract

1980s changes in New Zealand’s economy was accompanied by enforced changes in farming. An optimistic assessment was that the dairy industry could grow by 3.5% annually but cut back in Government research threatened the export drive. Extra growth was to be based upon improving returns from existing herds rather than increasing herd sizes. The Government withdrew from Dairy Board affairs. The Board became a self-regulatory single seller. Inflation had swallowed up any gain from productivity increases in the meat and wool industries. A Task Force recommended that Meat Board should control all export lamb and mutton. Concern grew over forestry’s adverse impact on rural infrastructure. The ‘farm forester’ concept emerged with farmers integrating small batches of trees within their farms.

David Hall

Chapter 17. Reforming Their Own Organisation

Abstract

Reform for farmers’ own organisation became essential when Federated Farmers decided to end the compulsory levy funding its activities because the levy was inconsistent with the Federation’s policy of opposing compulsory unionism. Farmers discussed whether all rural organisations should all merge into a consolidated voice to better harness their resources. Rural people were thought to be treated unfairly. Its Chief Executive said the Federated Farmers had not changed since the 1950s because it was ‘too comfortable’. Now the compulsory levy had gone the Federation had to run as a business. But the Northland province refused to transfer to a reformed Federation raising issues of wider application on the autonomy of provinces. It took many years of litigation before the matter was settled.

David Hall

Chapter 18. Producer Boards’ Reform

Abstract

The Government asked whether Producer Boards should be abolished—was their mixture of regulatory and commercial activities still appropriate? The dairy industry was evolving towards merging the Dairy Board and Dairy Companies into a single company, Fonterra. The Treasury thought producer control of marketing gave only minor benefits. Marketing by a single organisation stifled the innovation and efficiency gains from competition. Producer Boards had wide-ranging regulatory functions but separating regulatory and commercial roles was an underlying principle of contemporaneous public-sector reform. Treasury considered that regulatory functions should be administered by Government. Accountability to farmers needed to be enhanced. The reviews and consultations produced the Meat Board and Wool Board Acts in 1997. Those redefined the objectives of the Boards and increased their accountability.

David Hall

Chapter 19. Reform to Reduce Farming Costs

Abstract

Through the 1990s Federated Farmers campaigned to reduce farming costs by reforming coastal shipping and waterfront activities. The Government deregulated coastal shipping and initiated major reforms of the waterfront industry. Another major cost imposition on farming was union militancy in the meat freezing industry. The Government accepted the need to get away from traditionalism and protection and deregulated the industry. Also, unemployment weakened union power when two major meat-processing employers went into receivership. The average wage of the meat-processing worker decreased but productivity increased. The most effective change in waterfront and freezing works’ reform was achieved when Government introduced employment legislation making relations between employers and employees controlled by direct contracts and the right to strike was restricted.

David Hall

Chapter 20. Environment

Abstract

Environmental considerations were becoming important for agricultural economics and food policy. Economic decisions needed to take into account environmental impacts. Severe drought strengthened arguments for increased irrigation but that conflicted with environmental concerns. The High Court decided using water reserves for irrigation was a legitimate use, refuting claims by conservationists. The Minister advised farmers to avoid pesticide practices which could tarnish New Zealand’s ‘clean green’ image. Consensus was sought on the biosecurity practices to protect farming from pest incursions. Views became polarised on using wood from indigenous forests for export. Government proposed new resource management procedures to balance development and environment needs. Farmers feared planning decisions would reflect the wishes of a vocal minority rather than the balanced needs of the wider community.

David Hall

Chapter 21. Water Quality: ‘Clean and Green’ Versus ‘Dirty Dairying’

Abstract

New Zealand’s projection of a ‘clean green’ image made exports vulnerable if its environment was perceived to be degraded. The phrase ‘dirty dairying’ represented environmentalists’ concerns about farm effluence disposal. Water in agriculturally developed regions were in poor condition through animal faecal contamination. The dairy industry, regional councils and the Government agreed to work together to improve water cleanliness. But environmentalists saw major flaws in the plans. Federated Farmers took steps to improve water quality, collaborating with other primary sectors to implement a Primary Sector Water Action Plan. But when the Government announced regulations for achieving healthy waterways. Federated Farmers claimed the regulations were an example of an ill-informed process resulting in a bad outcome.

David Hall

Chapter 22. Farming and Māori, New Zealand’s Indigenous People

Abstract

The chapter reviews relationships between New Zealand’s indigenous people, Māori, and farming. Before European colonisation, New Zealand was occupied by Māori with land used communally rather than owned individually. In 1840, ‘sovereignty’ passed to the UK through the Treaty of Waitangi with unclear consequences for Māori. A new court, the Native Land Court, impacted disastrously on Māori agriculture. In the 1920s, Government funded consolidating Māori land into economic farms. But only a small minority of Māori was supported. Later in the twentieth century Māori became increasingly urbanised and remained disadvantaged. The Waitangi Tribunal assessed Māori claims of Treaty breaches since 1840. Federated Farmers opposed the Waitangi Tribunal recommendation that privately owned farming land be returned to Māori. Eventually, Government purchased the farms at market value.

David Hall

Chapter 23. Difficult Times in the New Millennium

Abstract

Federated Farmers found itself under pressure in the first decades of the twenty-first century, partly because the Producer Boards had converted to organisations, still levy funded, but more clearly focussed with an advocacy role. A young farmer perceived a lack of relevance among younger farmers. Membership halved. Farming was attacked as a major cause of environmental damage and that turned young people against farming. The Federation was living beyond its means. Rural militancy was increasing. That captured media attention but risked damaging farming’s image in urban communities. A significant criticism was that too often Federated Farmers adopted a position of opposition to Government. But other farm organisations saw Federated Farmers as an essential advocate for farmers.

David Hall

Chapter 24. Increasing Pressures on Farming from the Outside World

Abstract

Farming became more constrained by global environmental concerns. Its Animal Welfare Act gave New Zealand modern animal welfare legislation. Federated Farmers proposed using genetic modification (GM) where the technology could be applied safely. An alternative view was that by not exporting GM food New Zealand could boost its trade prospects. In response to climate change concerns, the Government’s Emissions Trading Scheme planned to charge farmers for methane emissions from stock flatulence but that was reduced to a levy for research into inhibiting stock methane emissions. Over two decades, farmers had reduced their carbon intensity by 1.2% a year. The Federation pointed out that equally as important as climate change was how to produce enough nutritious food to support the fast-growing, global, population.

David Hall

Chapter 25. Trade Agreements

Abstract

This chapter reviews the impact of trade agreements on New Zealand. During the GATT Uruguay round, New Zealand advocated ‘farming without subsidies’ and expected the settlement to give certainty of access to traditional markets. Also, it was hoped the US and European Union would reduce subsidising farm exports. But New Zealand regretted many GATT countries were ‘getting round the new rules rather than honouring them’. New Zealand feared that the US pulling out of Trans-Pacific Partnership would weaken its trade with the US and Japan. China now filled the trade role previously played by the UK but without the mutual trust of the UK relationship. New Zealand’s ethos of liberalised trade was challenged by doubts over foreign investment in New Zealand farmland.

David Hall

Chapter 26. Future Agricultural Economics and Food Policy?

Abstract

In the twenty-first century, Agricultural Economics and Food Policy depended on responding to attacks from groups making sensational claims about farming’s negative environmental impact. Anti-farming campaigns questioned water quality, climate change and genetic modification. The ‘anti-dairy’ movement had concerns over animal welfare and the environment. ‘Bad news’ was seen as highly effective in influencing public perceptions even if it was untrue. Farmers described that as ‘post factual science’, arguments dressed up as science but abandoning the principles of evidence, balance and context. Some of the criticism was accepted as justified, but some was considered ‘way over the top’, ignoring the good work going on by farming to improve the situation. Agricultural economics and food policy threatened to be determined by sensationalism rather than balanced judgements.

David Hall

Backmatter