Farm prices immune to recession?

Federated Farmers Meat and Fibre chairman Bruce Wills has publicly stated he thinks farm prices could tumble by up to 30 % - a statement I'm not so sure is correct for some parts of the country.

Last year in Mid Canterbury farm values reached a record high when an irrigated farm was sold to process vegetable growers for $20 000 an acre. Prior to that farms in the area had been hovering between the $16 ooo to $18 000 mark.

Since then it has been hard to get a handle on values as farm sales in the area have come to a virtual halt. However, the law of supply and demand still stands and sectors such as the process vegetable community have held up in current economic conditions and although the dairying pay-out has decreased from $7.90 to $5.10 a kilogram the fundamentals are much the same.

Recession talk breeds more recession but in the case of some sectors of the farming community it is pretty much business as usual, and if you are a corporate farmer the ability to spread your risk can outweigh the current negative talk.

If you add to that the welcome drop in interest rates you could probably succeed in arguing that now is a good time to buy land, if it comes available - and I'm sure many of these farmers will take that opportunity should it come, hence the market may sustain its high.

Areas such as Northland may be vastly different of course but Canterbury and Southland (which is already showing signs of bucking the trend) are well placed to survive the recession panic.

Farmers are right to hold on to their land at present, it only adds to the competition when it does come available, and in these areas they should not succumb to the depressed spin coming out of the media.

Supply and demand - a fundamental that doesn't change.

Isolation not always a curse

Carbon miles, the distance to overseas markets and endless quota restrictions in these protectionist times can leave the New Zealand farmer frustrated at our relative isolation to the world's markets, but in some ways it can be a blessing.
The dying British farmer is facing a David and Goliath battle with the big supermarkets to survive and so far the supermarkets are winning.
Recession and aggressive competition have forced supermarket chains like Tesco's and Sainsbury's to slash the price of fruit and vegetables to meet, they say, 'consumer demand'.
Farmers have been reporting severe bullying tactics with one close to selling up after Tesco's dropped the spud price by NZ $138 per tonne overnight. Most farmers report being paid 50% less than the previous season for their vegetables and most agree it can't continue.
And of course with Europe on their doorstep the supermarkets can take produce from elsewhere at the cost of the British farmer.
The situation is dire, and the consequences may be equally as dire for those of us competing from this side of the world. The reaction, of course, is to protect these farmers and this is where protectionism becomes a major threat once more. As consumers' back pockets dry up food prices fall and despite Gordon Brown's free trade philosophy, the pressure from another suffering sector of the economy may force the Government to help out.
The over-riding problem is the lack of loyalty from British consumers and slick campaigns by the likes of Jamie Oliver and Hugh Fearnley-Whittingstall to get people enthusiastic about quality grown home produce may take years before any quantifiable results occur.
The idea is right though - positioning the UK farmers away from commodity products where they can't compete against aggressive European farmers, into quality driven produce may serve them well in years to come. Either that or they die.
But teaching the consumer the value of a head of British broccoli, or the health benefits of eating a free range chicken may take some time when we live in a society that doesn't value its food, and wastes disgracefully in a way previous generations would have shuddered at.
And just because we are isolated it doesn't mean our own domestic market is immune. We also need to be educating on the quality of our food. However, unlike British supermarkets, our own are quite adept at keeping the price up.

Global recession or global correction?

The global recession is just a way of purging the excess of greed that builds in every generation yet to witness the consequences of such a course.

Each world recession (think the 1980s) has a common denominator, whether it be from bankers eager to make a buck from clients who are just as eager to make a buck from expanding their business - greed marks us all.

Here's a fascinating exercise. If you ever get the chance, take a look at a property programme like Location, Location (A UK programme currently screening on TV1, focusing around a couple looking to sell up in the city and move elsewhere). Recently, by chance, I viewed a 2001 edition of the show, when a young couple thought spending $120 000 pounds ($328 000 NZ) on a house was a tooth pulling exercise. This season I was completely astounded by the fresh faced Londoners, barely out of nappies, demanding their first house, to be quite blunt, be one hell of a mansion with no work required of it. The price for their young dreams appeared unfixed - most couples ending up spending $500 000 plus Great British pounds ($1.37 million NZ). Couples without children required four to five bedrooms, four bathrooms and a country farm estate they could kick around on in their wellies during bank holidays. This may be far off telly-land but it does serve a purpose in explaining how we got where we are today.

"Those that cannot remember the past are condemned to repeat it." - George Santayana

Every generation must face a boom and bust process. It's how we learn and no amount of postulating or educating will stop it happening again. The young corporates and IT rich referred to in programmes like Location, Location have never experienced the consequences of prolonged credit and therefore borrowed and spent at an outrageous level. But we needn't blame them entirely. We live in a society that is all about borrowing. From when we leave high school and enter tertiary education, debt becomes our friend, our shadow and we live with it as easily as living with the designer bunion on our big toe. To get ahead we are told to borrow, to educate ourselves via student loans and then it is all the hammering of piggy banks from there.

It is no surprise that the student loan generation is by far the most debt ridden of any that have come before it. It is a generation bought up on the mantra of 'now' - a greed exacerbated by Governments who allow youth to think they can have it all by borrowing from at first the taxpayer and then from the banks.

How many times over the past few years have farmers been told at countless seminars that debt was not their enemy, it was indeed their friend, and a great tool to further success? This message has pervaded every layer of society and the condemnation now of excess spending by so many Governments around the world is rich considering they allowed it to happen while it was good for the treasury coffers, and indeed encouraged our youngest contributors in society to borrow and borrow again.

To shout 'whoa' at the World Economic Forum, when the carpet had already been hacked away is hypocritical and to pretend that this is and will be a one off event only relative to this generation is a falsehood designed to deny their own culpability.

Recession? No.

Correction?...we'll wait and see.