16 July 2015

More R&D needed to offset plummeting dairy price

Plummeting global dairy prices overnight show why the Government needs to invest in adding value not volume to the dairy sector, the Green Party said today.

“Just doing more of the same – expanding stock numbers and raw commodity exports – leaves the rural economy open to the risks of continuing low global dairy prices,” Green Party primary industries spokesperson Eugenie Sage said.

“National’s economic strategy bets the farm on high international dairy prices rather than building a diversified, R&D focussed export sector. The Government needs to step up, take some responsibility for the effects of this, and support rural communities to find new ways of creating value.

“Rural families will be hit hard by the low dairy price which is barely going to cover the costs of production, with absolutely nothing left over for debt servicing. Given that 20-30 percent of farms are already so heavily indebted that the Reserve Bank thinks it’s a fundamental risk to New Zealand’s economic stability, this is a seriously worrying problem.

“We can’t just grin and bear it, waiting for the global trends to change back in New Zealand’s favour, because recent significant policy changes to EU production quotas and US domestic subsidies mean that things may never be the same again for New Zealand dairy exports.

“The Government needs to be supporting real value add investment in the rural economy, including through stimulating R&D to increase value – not just product volume and on-farm stock intensity.

“Rural communities are really going to be hurting because of the low dairy price. If it wasn’t for the Government’s simplistic volume-focussed support for the dairy industry we might not be facing this grim situation.

“A smarter way forward is to invest in innovation and policies that support adding value to our export sectors.

“New Zealand business investment in R&D is still only about half the OECD average.

“When the profits of some of New Zealand’s largest rural supply companies, like PGG Wrightson, are actually going offshore to overseas majority shareholders, doing more of the same by expanding volume not value is not a real fix for New Zealand’s regional economies,” said Ms Sage.

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