Editorial

Riding the waves of market change

THE state or the market?

Depending on what political stripes you wear, the answer to most problems in society can be solved by one or the other, but not both.

At the moment many in farming feel the state is trying to solve all the problems at once – and may even be finding some problems that don’t exist to solve.

But the market is at work too and it could just be that it is undergoing a change in ideology.

The companies that sell our food and fibre are outwardly telling their suppliers that they must undergo a reinvention to meet the demand of conscious consumers.

People with means are reacting to the covid-19 pandemic by thinking harder about the food they eat.

They’re looking for healthy food that’s made with care for the environment.

And they’re increasingly willing to pay for it.

Our big exporters know this and are moving to meet that need.

That’s why we now have Fonterra suppliers earning a premium for hitting sustainability targets and sheep and beef farmers signing up for regenerative programmes.

And on a smaller-scale, farmers are banding together to market and sell niche, high-value and sustainable products themselves.

It appears that the market is catching up with the state – and fast.

Business is often a soulless affair, with decisions made based on ledgers and equations, but capturing the values of a consumer cohort is the key to success.

And if the production costs, supply chains and value returned all add up, then there’s only one decision to make.

The market speaks and New Zealand food producers have done a fantastic job in answering that call for 40 years.

But we need to keep on listening.

Early economist Adam Smith once said the invisible hand of the market was all that was needed to guide us.

That hand is pushing us now and we’re beginning to respond.

Bryan Gibson

LETTERS An expensive lesson to learn

RICHARD Rennie’s article on the Waimea Dam illustrates the lack of common sense of the irrigators, their chair, Tasman District Council staff, councillors and the mayor to understand the building process of the dam.

What they failed to anticipate was what if the geology proved too tough and they put a P95 on the potential for major cost blowouts?

But what they did instead was to put a P95 on the cost, being $75 million and then sold this to irrigators and ratepayers.

The cost is now $185m and is likely to touch $210m.

What is generally not known is that the dam is only an augmentation facility. It will not irrigate any more dry land. While irrigators have subscribed for shares for 3000ha, the additional 500 shares were taken out in the hope they would be sold for a profit. The shares are now unsaleable.

The Waimea Plains have been irrigated from the aquifers since the 1960s and it was only when consents were reduced and irrigators were told by the council their water would be cut off, irrigators were forced to buy shares. At around a running cost of well over $1000/ha, plus the cost of borrowing for shares at $5650/ ha share, the rapidly rising council rates, the dam debt to the irrigators, only the most profitable horticultural venture will survive.

The scheme is now the most expensive in the country and the world, yet it serves so few hectares. The only beneficiaries are the consultants, the dam builders and the money lenders. It is an expensive lesson to learn and sounds a warning to proposed other storage projects.

Ironically, if the dam was operating in the last two seasons, it would not have been needed with the water just running down the Waimea River to the sea.

Finally, the chair of the irrigators, Murray King, states that “you could not justify milking cows on these costs”, yet King is a dairy farmer on 65ha of irrigated land in the centre of the Waimea Plains.

Brian Halstead

Farm Consultant/Accountant Nelson

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Farmers Weekly is published by GlobalHQ, PO Box 529, Feilding 4740. New Zealand Phone: 0800 85 25 80 Website: www.farmersweekly.co.nz EDITOR Bryan Gibson bryan.gibson@globalhq.co.nz EDITORIAL Carmelita Mentor-Fredericks editorial@globalhq.co.nz Neal Wallace neal.wallace@globalhq.co.nz Colin Williscroft 06 323 1519

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