by (Guest Contributor) Pink Panther

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Sheep.

There are about thirty million of these animals in New Zealand. For almost a decade the number of sheep plummeted as farmers switched from them to dairy farming. The price of milk solids soared, along with dairy produce prices, with the price reaching as high as $8.40 a kilo in the 2013-2014 financial year. Many in the sector were cashing in on this bonanza.

It seemed Fonterra could do no wrong and they would keep milking the profits forever. Milk solids were going up in price and so Fonterra was able to dominate the dairy industry to the point that, as of 2015, they had 80% of the world dairy trade. Fonterra’s domination and the less savoury aspects of dairy farming were ignored or downplayed. Behind the scenes environmentalists, fishermen and tourists watched in dismay as rivers were polluted and environmental laws were tossed by the wayside with little interference by the government. They also became overly dependent on the Chinese market with most of the dairy produce being exported there. Such was the dependence upon the skyrocketing price of milk solids and dairy produce in general that few wanted to consider what might happen if global prices fell. They also failed to consider the possibility that the Chinese might stop buying as much, particularly after several scandals involving contaminated infant milk formulas and other milk products in the early 2010s.

A plunging New Zealand dollar (around 65¢ US as of mid-August), falling demand for New Zealand dairy produce in China and elsewhere, and a major over-supply problem brought an end to the dairy farming boom. From Northland to Southland dairy farmers watched as the forecast pay-out went from a record $8.40 a kilo to $3.85 a kilo in the space of just two years, which has seen dairy farmers reduce milking to once a day. In other cases, especially in the Hawke’s Bay and Waikato, farmers are sending their dairy herds to the freezing works just to generate enough income to pay off their debts. Others are walking off the land or converting to sheep farming, as the price of wool and lamb has been more stable.

Dairy farmers should have learned from history when the United Kingdom joined the (then) European Economic Community in 1973 and cut back on New Zealand imports. It resulted in the first of the slumps in the local post-war economy. It led to the realisation that dependence on primary industries needed to be reduced and to export to more markets. Thanks to over-dependence on dairying and the Chinese market, it is estimated that plummeting milk solid prices will cost the economy $13 billion in the current financial year (TVNZ, May 28). The impact has hit rural areas and many small to medium sized towns. Few farmers are hiring workers and retailers in industries that serve farmers are recording sales figures in single digits, such as in many RD1 stores. (RD1 stores are basically department stores that specialise in goods that farmers would want or need.). With many towns dependent on incomes from seasonal work – for example, 75% of Waipukurau’s labour force relies on seasonal income earnings – the situation for retailers and other businesses dependent on farm earnings is grim, with long established businesses closing down.

Further aggravating the situation in the rural sector has been the reluctance of banks to lend money generally since the 2008 recession. They have also hesitated to lend money to already heavily indebted farmers to convert to other forms of farming, such as sheep farming. Not that converting a farm from dairying to sheep farming is easy or cheap. Partly for these reasons, farmers are selling their farms to both domestic and foreign corporate entities and simply walking off the land.

In the main centres, like Auckland and Wellington, it is hard to believe that there is a crisis in dairying because milk prices remain stubbornly high. A two litre bottle of milk in a typical dairy can be as high as $3.90. This is due in part to price gouging by wholesalers and retailers claiming it costs a lot to sell milk due to overheads like refrigeration and a short shelf life.

One consequence of these trends in the rural economy is that declining milk prices are indirectly impacting on house prices generally. As jobs in dairying disappear people are moving to the few places where jobs are still plentiful. While not wishing to overstate the case, this is certainly one of the many factors adding pressure on housing, which is already hard to obtain thanks to rampant property speculation and escalating rents. In Auckland the average house price was $826,474 in June 2015 according to the NZ Herald (July 13, 2015). The average rent was as high as $678 a week for a three bedroom house in a suburb like Devonport (NZ Herald, 30th March, 2015). At a time when the media and certain politicians are grabbing populist attention by whipping up simplistic images of ‘foreigners’ as the cause of high house prices, these overlooked flow on effects from changes in dairying highlight that the causes of the problem are far more complex than they acknowledge.

In August 2008 I travelled around the North Island on a road trip. Dairy ruled the farms. Cattle dominated the landscape. Milk tankers traversed the country, delivering their produce to ports from which they were exported to high growth markets like China. In September 2015 the sheep is now becoming the king of the farm again. Farms once filled with dairy herds are now either deserted or full of sheep. Apart from niche farmers (such as alpaca and deer farmers) it would appear the ones that have weathered the crisis better so far have been those who either remained sheep farmers or had a diversified livestock profile.

To a city dweller like myself it is easy to dismiss the decline of rural New Zealand as something that isn’t a big deal. Derelict housing, shops closing down and empty farms isn’t something that we think about. Out of sight, out of mind. That is, until we realise that the tax take from $13 billion that has now disappeared could’ve built new homes for low income families, paid for more medical staff and equipment, reduced classroom sizes and provided better public transport. It’s also worth remembering that a substantial amount of violent crimes, including family violence, is a growing problem in rural areas and small towns as lack of money and jobs push families to breaking point.

Back in the 70’s, in line with the post-war Keynesian consensus, this country had an economy that was substantially managed by government intervention. Farmers were heavily subsidised and protected, which created an artificial situation and cumulatively warped the overall picture. The neo-liberal ‘correction’ that replaced this has caused damage of its own. Unfortunately many overseas and some people here seem to think scapegoating foreigners, introducing some kind of closed off fortress economy like that of North Korea or returning to a social-democratic nostalgia trip version of the past or accelerating free-market mechanisms, will solve the difficulties facing the economy. Practice overseas has shown that the public are as tired of the broken promises of governments calling themselves “Socialist”, best exemplified by the Syriza government in Greece, as they are in the capitalism of the International Monetary Fund. Perhaps the simple truth is that regardless of labels, no governments can effectively correct what are fundamental problems within a complex trans-national economic system.

A genuine alternative to the current mess is required and while an Anarchist society is not going to happen soon, there is a need for a grassroots/flaxroots solution to problems facing rural New Zealand. Anarchist ideas are surprisingly compatible with rural living as farmers tend to have skills of self-sufficiency, while appreciating the need for co-operative forms of working and they can see the inter-dependence that is involved in the supply chain from farm to port. If adapted somewhat, this could tie in well with our own ideas of de-centralised, federated organising. Building understanding between the working poor of the cities and the farming-reliant small towns, emphasising commonalities of experience and helping people recognise who has been pulling the wool over their eyes for so long, are important tasks for those of us opposed to the existing system.

In the meantime the humble sheep is making a comeback. However it may be a case of too little, too late. The world is facing a crisis of over-production of most commodities, including most primary produce, but there aren’t enough people who can afford to buy this surplus as wages in the European Union, the Russian Federation and Australasia have slumped as the result of austerity and under-employment. Nobody can predict the future for certain, but let’s hope those on the receiving end of this system of boom and bust, can turn things around by taking control bit by bit. That way, we won’t be lead like lambs to the slaughter.