Farmers not the villains in price increases
Recently, I was asked to comment on the 1.4 per cent increase in the price of food, with the biggest rises coming from the dairy and red-meat sectors, and how this would affect farmers. While this increase was in line with the inflation rate, the headline for the story said mothers were "going without" to feed their children.
Although producers and consumers are sitting on an even keel here, when good healthy food goes up in price for New Zealanders, farmers often get the blame. What goes unsaid is farmers have little control over what the international market does, and they feel inflation just like everybody else. While the demand for our product overseas can push the price up, the rise has more to do with the supermarket duopoly we have here and the cost of getting produce around a long country divided by water.
Having more affordable produce available here would require the Government to subsidise it, set a value for certain foods, which would mean we would all need to pay more tax.
There will always be a fallout somewhere, so it comes down to what is most practical in the bigger picture. While some of our produce may seem costly, our trade plays a huge part in bringing New Zealand back out of recession and back into a surplus. With the tradeable sector growing 11.1 per cent since 2009 and New Zealand's terms of trade being at their highest levels since 1973, the Government is forecasting economic growth of 3.6 per cent next year, falling unemployment, higher wages, an $86 million surplus for 2014-15, and the prospect of being able to pay off debt.
Farmers produce a product that should be a part of a staple diet, and we are very aware of the need to make our product accessible to families. Interestingly, most consumers do not realise that the international price of cheese was up 30 per cent for the past year, according to the Global Dairy Trade, but only up 5.4 per cent in New Zealand. Do not get me wrong, the amount of my grocery bill challenges me just as much as the next guy, but my point is that people need to be careful of creating victims and villains on assumptions; it is irresponsible and unproductive.
So much goes into influencing the price of food: trade relations, politics, natural inflation, supply and demand, the weather at home and abroad, exchange rates, retail margins, transport and so on. Products that cost more to produce, such as cheese, have a higher mark-up than more straightforward products such as milk, and sometimes it is a simply a matter of the value added by market demands. If you are comparing milk with a bottle of water, don't forget that highly nutritious foods involve a lot more production work and processing than water and should rightly be reflected in their prices.
In saying so, dairy farmers are well to aware of the need for affordable milk in New Zealand, especially for young children. That is why Fonterra came up with the initiative to get dairy products into schools at no cost to the kids or the schools. Farmers should not be made to feel guilty for making a living or a profit.
Going into any business, you are faced with many risks, some years you will take a hit, which is often in farming, and some years you will do well. This is the prerogative of the person who puts their hat into the ring and takes those risks. If the price of what they produce goes up, it does not mean they are stealing food from mothers' mouths.
* James Houghton is Federated Farmers Waikato provincial president.