Federated Farmers - Chariman's Address
Chairman Federated Farmers Grain & Seed
1PM WEDNESDAY 24 JUNE 2008
ONE EVENT - GRAIN & SEED
RYDGES HOTEL, CHRISTCHURCH
The Federated Farmers Grain & Seed executive has been very busy over the past year with many issues being discussed and still proceeding. You will find our report in your conference papers.
The 2008 season will be remembered for the rise in world food commodity prices, followed by an even bigger rise in input costs. With many of the agricultural commentators and farmers realising that their input costs will have doubled by the time they have harvested and delivered their crops. Why would you sell grain and seed if the price does not reflect the massive rises in input costs as well as demand exceeding supply. It is now our turn to return our industry to the profitability that we once had.
The theme for One Event is "Food For Thought" my first thought is:
What will our standing charges be in nine months time?
Remember many of you will be facing a review of your government valuation so affecting your rates. Rates will not come down because as I was in the team putting together the Agricultural Vehicle Guide it became evident that road infrastructure is not capable of taking large agricultural vehicles. Add on compliance costs such as ACC, interest rates and insurance and your crop worth has doubled.
We would all like to be able to pick the top price, but before signing a contract or selling you must weigh up whether the price covers the cost of production, you can afford to pay the standing charge, you should give yourself a wage and have something left to reinvest.
I have attended many conferences. I look back at how things have changed. At the Energy Efficiency and Conservation Authority biofuels conference, the question I asked was:
Where is the food going to be grown?
The answer I received was: We will find more land, more water and we can use sugar. Sugar prices at the moment are on the decline from 2006 record prices and farmers are questioning the viability of this industry. Why is oil at a record price? Food for thought - is biofuels the politicians answer to climate change?
Another conference was the 20/20 Summit held in Christchurch. There was definitely two sides to this conference, one that was for sustainability and producing goods for the discerning shopper promoting such ideas as food miles. They dominated, but there was a small group who were not taken seriously.
They said the world was running out of food because farmers were only covering the cost of production. Countries were importing at a higher price than what they paid their local producers, families take-home pay was being used to buy consumables and pay the mortgage and was not being spent on food. In 2007 65 percent of the pay packet went on paying the mortgage. In 1990 only 35 percent went to paying the mortgage.
Now how are the politicians going to increase food production, when the land and water in many countries has been mismanaged? The science research for increasing crop yields has slowed along with the supply of inputs. There is a lack of investment and infrastructure so countries can produce food.
Food for thought - When are other countries going to adapt New Zealand's free trade regime or have they seen it may not be fair trade?
There is no sign that tariffs and subsidies are going to be reduced in the countries that we compete against. Yet there is no better time as world food commodity prices continue to rise.
Food prices will continue to climb even faster because food producers demanding high prices have not been factored in yet. The processors have only passed their energy, transport and compliance costs on. The big processors of take-home, ready-to-cook meals, have absorbed some of these increases.
Developed countries such as the USA, Japan and Europe have only just felt a prick in food prices. The cost of energy is still their major concern.
Developing countries such as China and India whose families grow their own food and still prepare their meals in the kitchen are faced with both food and energy prices rising. They are getting squeezed.
Under-developed countries who rely on grain imports have no energy needs but now can't afford the high input costs to grow more food.
Food for thought – The hungry are going to get hungrier.
How long will it take our consumers to realise that cheap commodity food is history? They are going to have to pay a huge cost to remain sustainable, have traceability and continue to farm under increasing regulations and compliance costs while increasing food production by 50 percent. We now have our minister at the food summit saying 50 percent more food will have to be grown by 2030. He also should be reminding every New Zealand household, they need a food producer and not a just relationship with a supermarket.
The New Zealand grain and seed grower is well placed to capitalise on these circumstances because we are both commodity producers, but also niche market producers. As New Zealand food producers we are both reliable and most importantly the food we grow is safe to eat.
It is now time to thank Carly and Federated Farmers staff for the support they have given the Grain & Seed Section and myself. I also must thank my family who have run our business for the past three years. I hope I can lose that highly visible vest with visitor on it.
In closing, the new executive of the Grains & Seeds Section has a platform with the rising food prices to promote our industry. Currently we are invisible to the New Zealand public and the regulators of this country. How important we are to the New Zealand agricultural scene should be conveyed.
We are sustainable with our rotation. Many of our break crops, outside commodity crops, are beginning to show an even bigger price lift. We have the world's best traceability. We can control our inputs with crop modelling. We are the top producers of quality and quantity on a per hectare basis but yet we lack funding for research and recognition on how we treat the environment so we can be recognised as a major contributor to the New Zealand agricultural scene.