The record breaking rise in global food prices announced this week by the UN’s Food and Agricultural Organisation’s Food Price Index (FPI) is great news for farmers and New Zealand as a whole in tough economic times.
“Combined with the positive results we saw yesterday from Fonterra’s Globaldairytrade milk powder auction, it looks like the world markets are in a good position for agricultural exporters,” says Lachlan McKenzie, Federated Farmers dairy chairperson.
“New Zealand is an agricultural exporting country. Our entire nation’s economic prosperity depends on it, whether you’re a sharemilker in Te Kuiti or a hairdresser in Auckland.
“New Zealand sends 95 percent of our dairy produce overseas, which means that these raised FPI prices – the highest since recording began in 1990 – ensure that our struggling farmers get fair payment for their hard work.
“We are the world leaders in free trade and Kiwi farmers work without government subsidies or protectionism of any kind. We certainly don’t receive the leg up some of our trading partners get, so it’s important we make hay while the sun shines.
“Putting it simply, a higher paid price per tonnage of milk solids brings more money into our economy. Basically, we are exporting roughly the same tonnage of milk out but at a higher price. This means kiwis can buy and import more products we don’t create here, such as TVs, cars, petrol and tropical fruit, for the same work expended.
“Most importantly, this cash injection flows through our whole economy and means we can reduce our debt levels, a welcome relief during these tough times.
“Its important for everyone to remember: we are a small free trade country. This means sometimes we have to sell at lower prices than we’d like. Other days we get a higher price like today. In a free market everything is balanced out fairly over time. It’s the same supply and demand economics we were all taught at school.
“Subsidies, and other protectionist market influences, such as in the US and EU, distort the market. After what has been a rough run, what with the economic crisis and droughts plaguing many of our main primary production regions, this comes as a nice bit of relief. Let’s hope we can take advantage of it,” Mr McKenzie concluded.