The recent political and media focus on the increasing price to New Zealanders of milk, leading to scrutiny by the Commerce Commission, leaves one feeling rather cynical. Despite the fact that we are a food-producing nation, our food prices are subject to world prices and world prices for dairy, meat and grain products have all increased.
Since the 1950s, consumers have enjoyed food prices declining as a percentage of household or personal income.
For example, at a conference I attended in 2008, a speaker quoted that British food prices had fallen from 30% of household income in 1960 to 16.4% in 2008.
In Farmers Weekly recently, Mike Peterson quoted a Time magazine article which stated US expenditure on food had fallen from 22% of disposable income in 1970 to just 7% in 2010. The comparable figure for Europe was 9%.
I have no doubt the trend in New Zealand is similar.
At the same time, in addition to the traditional costs, during this period farmers and food processors have faced new costs in the form of environmental management, landscape management, animal welfare, food safety standards, food labelling, health and safety in employment, accident compensation corporation and disease management such as tuberculosis.
Farmers have absorbed these costs by becoming larger, adopting new technology and becoming more efficient. Since the restructuring of the 1980s, labour productivity on farm has increased at a significantly greater rate than the rest of the economy.
However, there is a limit to farmers' ability to absorb costs. There is also a balance in the environment's ability to absorb the impacts of intensified agriculture.
Sheep and beef cattle numbers in New Zealand and around the world have declined significantly as their production becomes less economic. Pork and poultry producers worldwide are under severe pressure due to increasing costs, including grain prices. Grain prices have increased because of land use changing to growing crops for biofuel.
At the same time, demand for food and especially protein has increased as the world population increases and growing economics such as China and India switch to more protein in their diet.
The same Time article stated that households in growing economies such as Indonesia, India and China still spend 35% to 43% of their disposable income on food.
I suspect that for the Western world, at least, the days of food prices declining as a proportion of disposable income were over a couple of years ago.
To ensure continued adequate supply of high-quality, safe food produced to high environmental and animal welfare standards, consumers are going to have to be prepared to pay a little more than in recent years.
Meanwhile, congratulations to Federated Farmers. At times I have felt that Federated Farmers is overly reactive to issues and sometimes should take a more proactive approach.
The farm open days are an excellent initiative. The support from Federated Farmers to farmers during the adverse weather events of last spring was excellent and the Federated Farmers organisation of the Farmy Army following the Christchurch earthquake was outstanding. It made me proud to be a member of Federated Farmers.
- John Aspinall