Free Ride for Farmers

The NZ Herald ran an article about Fonterra today that was particularly interesting. In conjunction with other recent media releases, it showed the dairy industry is getting a free ride at the taxpayer and environments expense.

As pressure to reduce the cost of dairy products increases in New Zealand, Fonterra released figures showing its revenue for the year was up 19% to $19.9 billion, and profit was up 13% to $771 million. The article went on to say:

The average price for a basket of products in Fonterra's online dairy auction has fallen since June 15, with an average winning price of US$3499 a tonne this week, compared with US$4826 on March 1.

"We saw a large growth in world dairy prices and we have not been able to pass anywhere near the full cost of dairy prices through to New Zealand consumers," Fonterra's CEO Andrew Ferrier said.

Hang on just a second... the price of a basket of dairy products has fallen by $1327 in six months, and we've seen no reduction in the cost of dairy products in supermarkets... I thought the high price of dairy products in New Zealand was because of international demand?

Here's another Herald article showing the falling price of dairy products. We've not seen any reduction in the cost in supermarkets though. Is anybody else feeling a bit ripped off?

To make matters worse, last Monday it was reported that the Climate Change Minister Nick Smith has indefinitely put on hold the entry of agriculture into the emissions trading scheme, which would have seen agriculture treated the same as other export industries.

He also made a few ludicrous statements showing that National is predominated by climate change sceptics:

Nick Smith said agricultural emissions would be included only if "practical technologies are available to enable farmers to reduce their emissions and more progress is made by our trading partners to reduce their emissions."

Basically that means he wants cows not to fart and is waiting to see how other countries react. Being that emissions from agriculture account for 43% of the total greenhouse gas emissions from New Zealand, an ETS is only workable if New Zealand includes agriculture within the scheme.

To adhere to an ETS and try to meet our conditions under the Kyoto protocol means we have to include agriculture. Rather than further expenditure on farm irrigation to increase intensification, New Zealand should be looking at diversifying our production base.

Without a progressive plan, National is simply promoting an unjust tripple whammy on taxpayers:

1. High and unchanging prices at the supermarket while international demand for dairy has fallen by 27.4% over the last six months.
2. Subsidizing farmers for their greenhouse gas emissions and paying for the environmental damage intensive farming causes to our waterways.
3. Subsidizing dairying with huge tax credits.

In July it was reported that in comparison to the average tax paid by dairy farms of $1506, the tax paid by a couple on the state pension was $3136, over twice as much as the average farm paid. Then yesterday Labour showed some of the true extent of taxpayer funded subsidies for Fonterra:

1. NZ$19.9 billion – revenue
2. NZ$622m – gross profit (before tax)
3. NZ$149m – tax credit
4. NZ$771m – net profit (after tax)

In the past five years, Fonterra has reported $2.3b of before-tax profit on $86b worth of revenue – and not paid any tax.! In fact, they have claimed $198m worth of tax credits.

This is a blatant con on the people of New Zealand. Dairy NZ, Fonterra and National have been stringing us along with lies, all the while destroying our environment and laughing all the way to the bank. It's an unacceptable system that must change.