Ned_Flanders
Make me an Admin!
- Aug 22, 2009
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Yeah sorry my articles painted a worse picture than your 14%. But, enjoy your $2 milk and $1 bread, because as we are about to learn through the power industry, it isn't gonna last.
Keep your head in the sand pal, it kind of suits you right now.
*sigh* foreign ownership has nothing to do with that
Most foreign buyers invest here for one key reason, to source a reliable supplier of product for export markets
For example, Chinese are buying dairies to guarantee milk supply. Japanese and us firms bought beef farms for export beef supply.
This doesnt impact upon domestic pricing however, as for most buys they are existing farms already supplying mostly (if not exclusively) for export
so why is the sale happening in the first place?
1) economies of scale. The era of a dairy herd being viable with just 70 cowsdead and a herringbone shed is long dead. You have to have a larger herd size (and therefore pasture size) to produce milk that competes with local suppliers.
Lion (for instance) have a handful of mega suppliers in victoria. These guys get better pricing that most sellers, but they sell volume (herds of 2000-3000 head), and they guarantee 365 day supply (which means not drying off a big number of cattle over winter)
The rest supply the exporters (mg and fonterra) and this means getting the world export price converted into aussie full stop. World export prices can plummet when production is high and demand falls, and this drives smaller less efficient farmers to the wall as they mostly fail to maintain cash reserves sufficient for downturns
2) idiocy. Farmers get pay outs like the dairy assistance scheme, or they have a ripper harvest during high prices. Do they reinvest in the farm or pay down debt? Far too many buy a new statesman/hot ute/jet ski, and when prices drop they lack rhe investment to be efficient enough to survive. So their property goes on the block and the evil capitalists get blamed.
3) gen y. Gen x left the farms in droves, but gen y are making them look like amos. Kids dont want to farm, which is why those mgc meetings looked like rsl get togethers. You cannot force a younger gen to farm, so when hitting retirement age the farm gets sold.
Now this creates a problem, lots of people wanting to sell, but whos buying? For all the reasons above, it aint small family farmers. Its corporate farmers, estate developers, or foreign buyers. Ban foreign ownership and the price of sales will fall, hurting local farmers who are trying to sell their properties.
As for $1 milk:
1) it doesnt make the price of farmgate milk cheaper. Most farmers supply the export manufacturers, and their price is dictated by world commodity markets
2) the milk isnt sold at a lost, but at cost. Farmers milk price is unchanged, its the dairy who take the hit. The reason they do this is because in return for the $1 milk supply, they get much larger and better slots in the dairy case. When lion had the ww contract, its no coincidence yoplait, pura, and farmers union dominated the dairy case. Dairies do the math, and the profit they forgo on drinking milk sales is more than made up for by much larger yoghurt/cheese/cream sales.