Healthy soil and sustainable growing

[Zachary Domikez <zdomike@yahoo.com>]

(My father sent me this with no reference, 'though you
may have seen it from today's news.  There is a
confusing finale, in which they describe 'smaller'
farmers getting out, while all farmers are in Coops. 
Is that socialism, or what?)

Surviving Without Subsidies
By WAYNE ARNOLD

OHINEWAI, New Zealand — Watching grass grow is
supposed to be dull. But watching it grow with a dairy
farmer like Malcolm Lumsden is anything but.

Cows turn grass into milk, and while dairy farmers in
the United States and Europe rely much more on grain
to feed cows, here in New Zealand grass is pretty much
all they get. The richer and more abundant the grass,
the richer and more abundant the milk.

So like mechanics tuning a race car engine, Mr.
Lumsden and his fellow dairy farmers keep close track
of the weight of the grass in their pastures,
precisely measure its protein and sugar content, and
produce computer charts tracking how much they have
left to feed their cows through winter.

“It’s a science,” Mr. Lumsden mused as he watched a
group of his black-and-white Friesians munching dark
grass on a wet winter day. “It’s a real science.”

Dairy farming in New Zealand was not always this
sophisticated. But ever since a liberal but
free-market government swept to power in 1984 and
essentially canceled handouts to farmers — something
that just about every other government in an advanced
industrial nation has considered both politically and
economically impossible — agriculture here has never
been the same.

The farming community was devastated — but not for
long. Today, agriculture remains the lifeblood of New
Zealand ’s economy. There are still more sheep and
cows here than people, their meat, milk and wool
providing the country with its biggest source of
export earnings. Most farms are still owned by
families, but their incomes have recovered and output
has soared.

“Farming in New Zealand is now a cold, hard business,”
said Mr. Lumsden, who at the time of the farming
revolution was president of Federated Farmers in the
Waikato region, the heart of New Zealand ’s dairy
country. “I think we have benefited hugely.”

New Zealand ’s farmers are not the only ones convinced
that eliminating subsidies, or at least sharply
cutting them, is a good idea. As negotiators struggle
to revive the failing global trade talks and Congress
moves ahead on a new farm bill in the United States,
New Zealand and Australia — which also cut subsidies
but not as drastically — are being extolled by
economists and advocates for poor countries as models
for Americans and Europeans to follow.

“They went cold turkey and in the process it was very
rough on their farming economy,” said Ray Goldberg, a
retired professor of agriculture and business at
Harvard Business School . “But they came out healthier
and stronger. They proved it could be done.”

Traditional subsidies, economists contend, generally
encourage inefficient farmers to grow unprofitable
crops far beyond what consumers actually need, secure
in the knowledge that the government will help protect
them from loss. And they make it much harder for
farmers in poor countries to compete on a level
playing field against coddled farmers in the West.
Removing subsidies, the argument goes, liberates the
best farmers anywhere in the world to produce what
people really want.

“When you’re not going to get paid for what the market
doesn’t want, you have to get off your backside and
find out what they want,” said Charlie Pedersen, who,
when he is not raising sheep and beef cattle on his
farm north of the capital, Wellington, is president of
Federated Farmers of New Zealand.

Just how much the United States can learn from New
Zealand is debatable: this country is small and its
subsidies and tariffs were a relatively recent
indulgence. And unlike the United States , where most
farm output is consumed domestically, almost all of
New Zealand ’s milk, meat and wool is sold abroad.

“There’s a lot of differences between New Zealand and
the United States ," Tom Buis, president of the
National Farmers Union in Washington , said in a
telephone interview. “They are almost completely
export oriented, and that’s quite the reverse of the
U.S. ”

If the United States were to pursue a New Zealand-type
strategy, Mr. Buis argued, large corporate entities
would end up controlling most farms as smaller farmers
went into bankruptcy. “Those people are going to get
financially ruined,” he said.

Whatever the differences, the response in New Zealand
’s dairy industry to the end of subsidies is broadly
instructive. Output has quintupled since the end of
subsidies, positioning New Zealand to take advantage
of a global boom in demand for dairy products, driven
from China and India .

With little suitable land available for growing grain,
New Zealand ’s dairy farmers survived by exploiting
their environment. Because winters are relatively mild
and the country has no predators like coyotes or
wolves, it can keep its cows and sheep on pasture
year-round with nothing but basic fences to control
them.

“The reason we’ve succeeded is we’ve been low-cost
producers,” said Kevin Wooding, a former chairman of
Dairy Farmers of New Zealand who milks about 700 cows
in the Waikato ’s rolling, iridescent hills. “We kept
our grass systems in place.”

In addition to reducing the need for expensive fuel to
transport feed, Mr. Wooding and other farmers here
aver that their pastoral system produces healthier
animals.

After growing rich in the early 20th century off the
byproducts of its pasture, New Zealand imposed
subsidies not so much to protect farming but as part
of a plan to insulate its domestic manufacturers from
global competition. It offset the costs to its farmers
from higher industrial tariffs by giving them
subsidies. But farming is not a small part of the
economy as it is in the United States ; it is the
nation’s largest, most important sector.

“It was wacko,” said John Yeabsley, a former trade
official who is now an economist at the New Zealand
Institute of Economic Research in Wellington . “Who’s
going to pay for the subsidies?”

Farmers eventually realized that it was them. They
responded to their higher tax burden by maximizing
their subsidies. “The whole thing,” Mr. Wooding said,
“was a game to try to get as much government money as
possible.”

By the early 1980s, the cost of this system had
created a balance of payments crisis for the nation. A
newly elected, left-leaning Labor Party government
under Prime Minister David Lange took the
uncharacteristic step of pushing through a radical set
of free market economic plans, with agricultural
subsidies the first to go.

When the government also floated the New Zealand
dollar, the currency skyrocketed, costing sales abroad
while sending interest rates soaring and land prices
lower. More than a few farmers flirted with
bankruptcy. Some succumbed.

As anger mounted, thousands of farmers marched on the
capital, letting sheep loose on government lawns and
buzzing Parliament with crop dusters.

Even Mr. Lumsden, who bucked many of his fellow
farmers by favoring the end of subsidies, found that
his own debts had grown so heavy that he was forced to
sell his family farm to the government.

Faced with a potential avalanche of bankruptcies, farm
leaders persuaded New Zealand ’s banks to write down
some of their debt. It made the difference: after
fearing that 10 percent of farms would go bust, Mr.
Pedersen said, only about 1 percent did.

Mr. Lumsden was eventually able to buy his farm back
from the government — at a discount.

As industrial tariffs fell, the benefits of lower
equipment costs made themselves felt and farmers were
able to expand by buying out struggling operations. As
a result, there are more milking cows in New Zealand ,
but fewer herds.

With the world shifting to more health-conscious
products, farmers responded by moving away from
Jerseys, with milk rich in butterfat, to larger
Friesians, which provide more protein-rich milk. To
produce the higher-protein milk in a more compact
animal, they began crossing Jerseys with Friesians, in
a breed now known as the Kiwi cross.

Today, cows in New Zealand cost less to feed and yield
more milk solids, making them more profitable. Dairy
farming has become so much more lucrative in the
postsubsidy era that many sheep farmers, once even
more heavily subsidized, have been shifting to dairy.

Sheep farmers also responded by becoming more
competitive themselves. Farmers reduced the huge herds
of mostly small and fatty lambs they had been raising,
importing breeds from Finland and Denmark to improve
the fertility of their ewes and producing larger,
leaner lambs.

“The output of 40 million sheep we have today is as
great as from 70 million,” said Tom Mandeno, a
director at Meat and Wool New Zealand, who manages
2,500 sheep and 400 beef cattle.

Australia ’s experience in eliminating subsidies,
though less sweeping, was similar. Dairy production
has boomed; government stipends helped ease the exit
of less-efficient farmers.

“There were a lot of small farmers who were dying very
slowly and were going to have to leave the industry
anyway,” said Phillip Goode, manager of international
policy at Dairy Australia in Canberra . “This gave
them a way to leave in a financially dignified way.”

Without government aid, New Zealand farmers have found
other ways to deal with the vicissitudes of commodity
markets. In 2001, dairy farmers merged two rival
cooperatives to form their own purchasing and
exporting cooperative, Fonterra, which also gives New
Zealand pricing heft in international markets.

“I’m very happy with Fonterra,” Mr. Lumsden said.
“They’ve taken the peaks and troughs out of the price
in the world market.”

Fonterra also drives innovation and product
development: New Zealand ’s dairy farmers have
ventured into new lines like antibody-rich milk for
the health food and pharmaceutical markets, kosher
milk and even chocolate cheese.

“What’s happened since the reforms is that you have a
new type of farm emerging — a business farm,” Mr.
Lumsden said. Giving up subsidies made farming harder,
he conceded, but introduced the pride that comes of
entrepreneurship. “It made it more enjoyable,” he said.


      
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