Frozen Vegetables, Food Security, And The New Zealand Dollar

Tuesday, 31 March 2026, 4:38 pm
Opinion: Keith Rankin

Unbelievably in a month of global economic warfare, New Zealand's two main producers of frozen vegetables are planning to stop production, and to import these foods instead. Mainstream headlines tend to see it more an issue of lost jobs than one of food security.

The two issues are simple yet subtle. Our over-globalised New Zealand economy is far less food secure than most New Zealanders realise. And the circumstances which lead to the present business calculus of Heinz Wattie and McCain are highly ephemeral, meaning that those circumstances can change very quickly.

See below (ie the end) for stories this month about these production-line closures, and some of their possible consequences.

The general issue

The general issue comes in two parts; one historical, and one current.

Historically, the world's most famous famines have occurred in food-exporting countries; countries which continued to be food exporters during the famine. The most famous of these are the Irish 'Potato Famine' of 1845 to 1852. The second was the Ukraine Famine (the Holodomor) which peaked in 1932 to 1933. The third was the Bengal famine of 1943.

In the first of these three, globalised market forces drove the east of Ireland into producing foods for export – especially to England – while peasants in the west of Ireland were dependent on a subsistence monocrop economy. Soon enough, that crop failed; potato blight. In the second case, Joseph Stalin's Bolshevik regime extracted almost all the grain from Ukraine, to feed Moscow and Leningrad, and also to earn foreign currency to pay for imports. In the third case, during World War Two, the Churchill regime in the United Kingdom was doing much the same to India as what Stalin was doing a decade earlier to Ukraine.

Currently, New Zealand's two main staple foods are almost entirely imported, albeit from Australia; that is, wheat and rice. New Zealand consumes imported calories. Could New Zealand go back to the days of the 1850s when farmers reputedly ate mutton for breakfast, mutton for lunch, and mutton for dinner? Hardly.

Yes, New Zealand still produces a surplus of food, in that the market value of exported food exceeds the market value of imported food; but that food surplus may not last, as demand for imported food increases in the wake of shut-down domestic supply.

New Zealand specialises in mainly relatively-expensive protein foods, and the fats which accompany meat and milk. If New Zealand needs to look to its own resources to feed itself in 2027, because of a diminished ability to source food imports, then a massive change in land use will have to happen in an impossibly short time frame.

What staple, carbohydrate-based foods, could New Zealand produce much more of, at short notice? And especially being mindful of access to the fertiliser products New Zealand farming depends on. The short answer is that New Zealand consumers would have to pivot to potatoes and maize; though maize (as sweet-corn) – as a commonly-frozen vegetable – is in decline in New Zealand as is wheat. The good news is that the potato/carrot economy of Ohakune would revive; good news in the light of the recent sufferings of the Ruapehu region.

New Zealand could soon become a country of urban peasants dependent on a crop subject to blight. The South Island could probably pivot to oats, which kept the Scots and the Swedes strong in the nineteenth century; oats then served as both human staple and transport fuel.

The ephemeral issue

New Zealand's present circumstances depend on – in addition to the maintenance of trans-oceanic transport – both the continuance of global economic growth and an overvalued exchange rate.

On the global growth issue, the important concept is income elasticity of demand. This is why New Zealand has enjoyed record-high terms of trade in recent years; high prices of green-and-white gold – grass and milk. As middle-class incomes in Asia have grown at a higher rate than the world economy has grown – many more people as well as higher per capita incomes in Asia – there has been a bonanza demand this century for New Zealand's green-and-white gold.

This situation may have already reached its full extent, possibly even if the present globally significant Israel-Iran war had not occurred. The war impact may well be to reverse this, as Asian consumers with squeezed incomes may be more prepared to give-up New Zealand imports than to give up other things. New Zealand's terms of trade could plummet, as they did in the mid-1970s when both export prices fell from their brief highs of 1972 and 1973, and oil prices increased dramatically from their early-1970s' level.

The most obvious victim of this possible rapid change of fortune will be the exchange rate of the New Zealand Dollar. A country's currency can be said to be overvalued, for sure, if that country has many years – even decades – of consistent current account deficits in that country's external accounts. The last year that New Zealand did not have a current account deficit was 1973, fifty-three years ago. A current account deficit means that the 'current receipts' (eg export revenues) of a country fall short of its 'current payments' (eg import payments, interest payments overseas, profits receivable by overseas investors). The presence of a current account deficit means that the deficit amount has been financed. The financing of New Zealand's deficits can be summarised as an inflow of 'foreign investment'.

That financial inflow keeps the exchange rate higher than it would otherwise be. This has happened every year since 1973; and, of particular note, since 1985 when the New Zealand dollar was freely floated in the world's monetary marketplace. The principal mechanism for sustaining those deficits for the last 41 years has been monetary policy; keeping interest rates high enough to ensure a financial inflow every year – an 'investment' inflow, if you will. Thus, interest rate policy has been the essential mechanism for keeping the New Zealand dollar overvalued, and thereby enabling New Zealand consumers to live a more affluent lifestyle than New Zealand's productivity would justify.

There may be two reasons why countries' exchange rates may be overvalued. One, the monetary policy mechanism described above, may be called the 'Ponzi Syndrome'; the other has been called 'Dutch Disease'.

Dutch Disease was so-named in the 1970s, when North Sea Gas exploitation turned the Netherlands into a prosperous commodity-exporting country. The exports of natural gas pushed up the exchange rate of the Dutch Guilder (this was before the Euro), and had the unwanted side-effect of rendering Dutch manufacturing 'uncompetitive'. (The correct Dutch policy would have been for the government to collect gas-royalties, and invest them overseas, thereby offsetting the downside of the 'windfall' gas revenue.)

New Zealand has experienced both syndromes. On its own, the Ponzi Syndrome would give the exchange rate a boost for a while; but, probably within a decade, the outgoing interest and profits (which may be called 'debt-servicing costs') would be outpacing new financial inflows. There are two things that make a country's Ponzi Syndrome sustainable over the long run. The first is an ability to keep increasing the financial inflows so that they keep exceeding the country's increasing debt-servicing costs. The second is a decade or so of very low global interest rates; which of course is what did happen in the 2010s.

So, New Zealand sustained its overvalued exchange rate through its monetary policy and through low interest rates in the rest of the world.

And through Dutch Disease, which from now on I'll call Dutch Syndrome. If New Zealand had eschewed Ponzi Syndrome but had caught the wave of Dutch Syndrome (which was exogenous to New Zealand), New Zealand's productivity levels would be substantially higher today than they are; meaning that New Zealand's exchange rate would also be higher. New Zealand has managed to have a substantially overvalued exchange rate without it being much higher against other currencies than it was in say 1987. New Zealand's non-overvalued exchange rate today should be very low (maybe about 45 US cents to the NZ dollar) – based on New Zealand's low productivity and its high present debt-servicing burden (the burden of the New Zealand economy, not the New Zealand Government) – but is being bolstered by the present Dutch Syndrome.

There is every reason to believe, given the global situation, that the New Zealand dollar will soon be able to be sustained neither by the Dutch Syndrome nor the Ponzi Syndrome.

The result would be that the New Zealand dollar could fall dramatically in the quite-near future.

The trigger may happen before the abatement of the two syndromes. Players on the world markets can be cruel. Once they sniff out a one-way bet they go for it. In financial circles, the process is called short-selling. In the face of short-selling, the Ponzi mechanism – the monetary policy actions to finance ongoing current account deficits – has to work very hard, and may snap. A particularly crucial part of this mechanism is for New Zealand to maintain high credit ratings with companies like Fitch, Moodys, and Standard and Poors.

It may be even worse. New Zealand might have to start paying bounties to secure any level of imported fuel and fertiliser. Those bounty payments would further exacerbate a slide in the New Zealand dollar exchange rate.

Do I dare mention the word 'inflation'? Not single-digit inflation. Double-digit inflation at least.

Back to Frozen Vegetables

What happens to the domestic market for frozen vegetables if/when there is a substantial run on the New Zealand dollar?

It means that the imported product – say frozen peas, but equally refined oil or fertiliser – becomes prohibitively expensive. The economic price signal from a low exchange rate is to produce domestically rather than to import. Under a low exchange rate, there should be substantial domestic value-added with respect to both importable and exportable products.

What has New Zealand done in recent years? It has done the very opposite. It has minimised domestic value-addition, on the assumption that New Zealand will have a permanently overvalued exchange rate.

On frozen vegetables, refer:

How secure are food supplies for New Zealanders?, RNZ Nine-to-Noon, 30 March 2026

Advocacy group calls for prioritisation of food security amid fuel crisis, RNZ News, 30 March 2026

Central Hawke's Bay Mayor Questions Wattie's, McCain Closures In 'Pretty Good Food Producing Region', RNZ via Scoop, 28 March 2026

McCain and Heinz Wattie’s close New Zealand vegetable processing facilities, Liam O'Callaghan, Produce Plus, 27 March 2026

Heinz Watties confirms 300 jobs axed, National Business Review, 27 March 2026

Hawke's Bay grower responds to McCain closure announcement, RNZ Morning Report, 25 March 2026

Watties looks to close some manufacturing operations in NZ, RNZ Morning Report, 25 March 2026

Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

© Scoop Media

Keith Rankin

Political Economist, Scoop Columnist

Keith Rankin taught economics at Unitec in Mt Albert since 1999. An economic historian by training, his research has included an analysis of labour supply in the Great Depression of the 1930s, and has included estimates of New Zealand's GNP going back to the 1850s.

Keith believes that many of the economic issues that beguile us cannot be understood by relying on the orthodox interpretations of our social science disciplines. Keith favours a critical approach that emphasises new perspectives rather than simply opposing those practices and policies that we don't like.

Keith retired in 2020 and lives with his family in Glen Eden, Auckland.

Contact Keith Rankin

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