Simplicity chief economist Shamubeel Eaqub said imported butter had been cheaper than export prices for the past two years.<\/p>\n
\u201cThe main thing is the US has a record dairy herd. They\u2019ve had some problems in terms of exporting to China because of the trade wars, they have a bit of a glut locally. It\u2019s not normal for us to have import prices that are less than export prices.\u201d<\/p>\n
But he said the amount of butter being imported was \u201ctiny\u201d.<\/p>\n
\u201cFour per cent of our consumption in the last 12 months, so a really small amount. It comes with all the issues of logistics, of transporting a bulk commodity around the world.\u201d<\/p>\n
\u2018Some things we don\u2019t have a competitive advantage in\u2019<\/p>\n
Westpac chief economist Kelly Eckhold said people often thought of transport as being the main factor in the cost of a food product but it was not always. Things like the cost of energy could affect the price of products that were energy-intensive to make, like fruit juice, he said.<\/p>\n
The cheapest one-litre bottle of fruit juice at Woolworths on Tuesday was a Keri juice product made from imported ingredients.<\/p>\n
He said about a third of fruit and vegetables were imported. \u201cThat reflects the fact that fruit and vegetable supply is seasonal.\u201d<\/p>\n
New Zealand’s high agricultural land costs contribute to higher local food prices compared to some imports.<\/p>\n
ANZ agricultural economist Matt Dilly said there had been an increase in frozen vegetable imports that was creating competition for the local growers.<\/p>\n
\u201cNew Zealand doesn\u2019t really have the cost-of-labour advantage or the cost-of-energy advantage. There\u2019s also a lot of tropical fruits and whatnot that we don\u2019t do a very good job of growing ourselves.<\/p>\n
\u201cThat\u2019s the counterpoint to all the great agricultural exports we have \u2013 some things we don\u2019t have a competitive advantage in and we do import them.\u201d<\/p>\n
Dilly said the US butter being cheaper would be a short-lived phenomenon.<\/p>\n
\u201cIt\u2019s pretty unusual right now, where butter prices in the US are at a significant discount to butter prices in New Zealand and Europe. All those things do have a tendency to even out over time.<\/p>\n
\u201cWhile it seems unusual on its face, it is something that can be good for consumers to give them that choice of a lower-priced product, especially when there\u2019s cost of living concerns for a lot of New Zealanders at this point in time.\u201d<\/p>\n
Price of agricultural land a factor<\/p>\n
Otago University senior lecturer Robert Hamlin said food had become progressively more expensive over the past 30 or 40 years.<\/p>\n
\u201cAnd the primary driver of that has been the building up within this country of the value of agricultural land. <\/p>\n
\u201cNow, the trouble with that is if you end up paying 10 times as much for your land as you used to 30 years ago, it puts the land under pressure. <\/p>\n
\u201cIt obviously puts the farm operation under pressure because that\u2019s not actually doing anything to help you produce the product. It\u2019s simply making it more expensive.\u201d<\/p>\n
He said while New Zealanders were often told that the price they had to pay was influenced by the global price of food, in most places the majority of food was produced and consumed within the region.<\/p>\n
\u201cSo although we describe Fonterra as a titan of the international dairy trade, which it is, the fact is that the international dairy trade is a very small pond and Fonterra is a big fish in that pond, but it is a very small fish in global terms.<\/p>\n
\u201cAnd this means that you\u2019ve got the majority of food being bought and sold in individual jurisdictions, you\u2019ve got a small percentage of food swilling around internationally.<\/p>\n
\u201cNew Zealand is really rather unusual in that it has such a very large proportion of its agricultural production is going into this international market for food, which is highly volatile because you\u2019ve got people coming into the market to sell food that they\u2019ve got too much of and then coming into the market to buy food because they haven\u2019t got enough and that food, that means the international price gyrates around more or less continuously.<\/p>\n
\u201cBut what it boils down to is that we are a high cost producer and we are a higher cost producer than an awful lot of the major producers around the world and therefore you will find out from time to time that food that is produced in this country can be accessed for a considerably lower price overseas than it can be accessed here. And that\u2019s pretty much what\u2019s happened here.\u201d<\/p>\n
He said it potentially made New Zealanders vulnerable to the moves of other countries.<\/p>\n
\u201cThe supply and demand for food across the world is very tight. The amount produced is very close to the amount demanded and this means that it would only take a fairly minor problem within other people\u2019s domestic food market for them to generate a demand in the international market that would make the food in that international market unaffordable for a country that was paying that for all of their food.<\/p>\n
\u201cSo if we take for example the People\u2019s Republic of China and let\u2019s say that they have a problem with their agricultural production, they could then decide, well we\u2019re going to pay $60 a kilo for milk solids to acquire that small amount of our domestic demand that we need from overseas.<\/p>\n
\u201cThat will increase the price overall of milk products in China by a relatively small amount, but it would put the price in New Zealand up to $60. So you would essentially be paying $80 a kilo, probably nearly $100 for tasty cheddar and pretty much $100 for butter.<\/p>\n
\u201cIt\u2019s certainly quite possible given that this country and its exporters believe that they should be allowed to export to global markets for the highest price [they] can achieve and to hell with the consequences for the local population, I\u2019m a little bit concerned about a situation like that could arise very, very quickly.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Simplicity chief economist Shamubeel Eaqub said imported butter had been cheaper than export prices for the past two…\n","protected":false},"author":2,"featured_media":414222,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[95,5195,138,298,198,6434,813,4756,221,117,111,139,69,812,131,212980,153967],"class_list":["post-414221","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-and","tag-be","tag-business","tag-butter","tag-can","tag-cheaper","tag-edmunds","tag-foreign","tag-how","tag-new","tag-new-zealand","tag-newzealand","tag-nz","tag-susan","tag-than","tag-veges","tag-zealandmade"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/414221","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=414221"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/414221\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/414222"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=414221"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=414221"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=414221"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}