Peters: Fed Farmers too cosy with govt to help farmers

MICHAEL Returning to the dairy downturn and the question of what role the government has in navigating the country’s rural sector through the pain of global uncertainty. Let’s bring in Northland MP and NZ First Leader Winston Peters and in Christchurch Dr William Rolleston, Federated Farmers President. Good morning, gentlemen. Winston Peters, if I could start with you. Will this low forecast send New Zealand into a recession?

WINSTON I believe so, but this forecast is going to get worse. We have still got people in denial.

MICHAEL How low will it go, do you think?

WINSTON Well, we predicted it a long time ago, that this was not going to be the end of it. I’m not being wise after the event – if you want to go back over our press statements, I’ve been saying it for some time. Because our information seems to be a bit better than some of the so-called industries’ information. So we expect it to go around about 350 and to last much longer and the consequences that outflow from that are just terrible.

MICHAEL Dr Rolleston, do you believe 350 – is that more realistic? Is that what the feeling is on the ground?

WILLIAM I think people are reasonably realistic about where the prices are at the moment, but look, if I could predict what the price was going to be, I’d be a rich man, I’d be doing another job.

MICHAEL Do you think below 385 is possible?

WILLIAM It’s definitely possible, but it would depend on what the dairy trade options do over the next few months as to whether that’s going to go down any further. But I think people are being pretty pessimistic in terms of the price that they’ve set already. So we’re looking at a pretty low price already.

MICHAEL What sort of impact is this going to have on the ground and is already having on the ground?

WILLIAM Well, dairy farmers are re-doing their budgets, they’re working with their banks, they’ll be reducing their costs as much as possible. Some of that will be bringing cows home and not grazing them on other farmers’ properties, on dry land properties. They’ll be cutting down their supplementary feed and cutting their numbers to some extent.

MICHAEL Will it be too much for some of those recent entrants to the sector? Will some have to simply give up dairy farming and walk off the land? Will we see bankruptcies, that sort of thing?

WILLIAM That happens whether the price is up or down. There are always people coming and going from the industry.

MICHAEL But are we going to see more of it, do you think?

WILLIAM Well, of course you will. You know, that’s just a reflection of the price and the stress that businesses will be under. I mean, this is a good reminder, I have to say, that these sort of industries are very cyclical. And we heard earlier in the programme that farmers had been putting money, strengthening their balance sheets while the prices were high. And remember, we had record prices two years ago. So if they took that opportunity, then that should help them over the next couple of years.

WINSTON Look, what you’re hearing here is a repetition of an argument made out to defend the position of Federated Farmers. And in terms of this leadership, it seems to let down the farming community and the dairy farmer in particular. I went to the AGM last year of Federated Farmers in Palmerston North and made it very clear then what I thought about Federated Farmers’ leadership of the industry in terms of the farmer on the ground. First of all, we should have suspended our participation and the global dairy trade auction for a start, albeit temporarily. You’ve asked him about five questions.

MICHAEL I’ll come back to you. Is that feasible, just quickly, to exit that dairy price auction, Dr Rolleston?

WILLIAM My understanding is that it’s not.

WINSTON Well, it is actually. They’ve done it before for some of their commodities – Fonterra has done it before for some of their commodities, and so Doctor, your understanding is wrong.

MICHAEL Okay. So what would you do, if in government, what would you do to help farmers? What’s your solution?

WINSTON Well, the first thing – I wouldn’t be running around believing some of this rubbish about how this is temporary. No, it’s not. I would ensure that certain fundamental things were in place.

MICHAEL Which are?

WINSTON Debt-mediation legislation for a start so they get a fair chance when they’re in this sort of trouble. I would have ensured that we had, in terms of farm costs, a change to the very structural expenses that you’ve got. For example, to build a farm cottage costs you $22,000 in mere application fees to go through the process. And then we’ve got all sorts of laws going through parliament right now to make their life even more difficult, supported, I might add, by the leadership of Federated Farmers. Why that would be, I wouldn’t know. But my real point is if you don’t set the Reserve Bank Act for a change to support our export industries, then this will go on again into the future, and if you don’t above all put the heavy work into expanding your research and development into new markets. We’ve relied upon one product, milk, for one company, Fonterra, to one market, China, and that was a very costly venture, and we said at the time, this is going to be a mistake.

MICHAEL Dr Rolleston, if I could bring you in on Fonterra. Does there need to be some legislative changes around the way that company is regulated?

WILLIAM Well, I think that one of the issues for Fonterra is that they are actually constrained by the Dairy Act. And so in terms of being able to retain earnings when the prices are high, they don’t have the flexibility to actually do that. But it would come back to a couple of the points that Mr Peters has made, and I do agree with him that now is the time to actually look at trying to reduce the regulatory burden that farmers have and also to be investing in science and technology. You know, we need to be investing for the long term. But I would also say that the low prices – this is a worldwide phenomenon, these low prices. And the response to low prices is actually to reduce production.

MICHAEL Dr Rolleston, what would you like to see the government do for you right now? Obviously, we heard from Andrew Little as well that there are some long-term ideas, but immediately, what could be done to help you out the most or help your members out the most?

WILLIAM Look, I think that the most important thing is to have cool heads at this time. I don’t see this actually at this point as a crisis. It’ll be a crisis if people start panicking, and I don’t see that happening. I see the banks actually working very well with farmers. They understand the cyclical nature of commodities.

MICHAEL But is there anything the government can do to help you out?

WILLIAM Well, yes, there is, and that is that they need to continue to reduce the burden of regulation that farmers have at this time.

WINSTON Look, I’m not going to sit here and hear this sort of nonsense. The truth is you’ve got the Canadians, the Japanese, the Chinese, you’ve got all of Europe and the Koreans supporting their farmers, and what’s the government doing here? Absolutely nothing. I’m talking about them sabotaging the very future of provincial New Zealand in their inactivity. To say this is not a crisis suggests that somebody doesn’t know what’s going on down at the farm.

WILLIAM Mr Peters, that actually suggests that you’re panicking.

WINSTON I’m not panicking. I said this a long time ago. I’m sorry, sir. I went to the Federated Farmers conference last year and told you all this.

WILLIAM Yes, you did a lot of talking, but didn’t do much listening.

WINSTON And you decided to ignore it. And no, I don’t listen to people who think it’s more important to back the government up no matter what they’re doing rather than to back up their hardworking farmers out there on the land, who are doing the graft after all.

MICHAEL Does anybody on the ground there believe Mr Peters? Do they like what he’s saying? Your members, does he have any cut through with them?

WINSTON Yes, he does.

MICHAEL Hold on, Mr Peters.

WINSTON I’ve shown you that in Northland, for goodness sake.

MICHAEL Dr Rolleston, if you could answer that.

WILLIAM Yeah, I would say we listened politely.

WINSTON But that’s the very attitude, you see, that has brought farming to where it is. We are still number one in the world, but we’ve had a range of policies that have been unhelpful to farming for a long, long time. He talked about the dairy industry restructuring. Well, frankly, that’s only about competition. What about the trading amongst farmers?

MICHAEL What about TPP? Let’s look at TPP. How crucial is that for dairy farmers? Hold on.

WINSTON Well, I can explain this to you. No, no, we’re going to have a fair amount of debate here.

MICHAEL We will. Dr Rolleston, TPP – is that something that your members see as essential to growing dairy, to getting access to more markets, to really digging your way out of this hole?

WILLIAM Yes, but it needs to be a good-quality agreement, and, you know, I think when we’ve looked back at the free trade deals that we’ve done around the world, we have a pretty good set of negotiators and we’ve driven a pretty hard bargain. So I see that TPP is a huge opportunity for us, but it does need to be a good-quality deal.

WINSTON Look, there’s a classic statement of someone who’s meant to represent the farming community. We went into Korea, and they secured a tariff against us at 176% permanently against our products above 2000 tons. If he thinks that’s a high-quality deal, then I’m afraid we’re talking to the wrong industry here. But we’re not in there – that’s the point. They went into Korea and did that. It was a shocking deal. And now that we’re prepared to trade our future way, our export and farming future way in a so-called free trade deal. Now, the reality is that for other reasons, it failed. But they are prepared to go down that track all the way, even when we’re in the middle of a crisis. And sir, I’m not panicking. The reality is it is absurd when we don’t actually do something, and the range of those things could have been done a long time ago.

MICHAEL What about Russia? That’s obviously something you think that Fonterra dairy farmers can make greater gains into Russia. Andrew Little doesn’t like that; why do you?

WINSTON Well, because it’s the world’s second biggest dairy importer. No, we haven’t got sanctions against them at all.

MICHAEL We are supporting the nations that do have sanctions.

WINSTON That’s a golf course arrangement. That’s my point.

MICHAEL But how do you overlook those issues that brought about this? Okay.

WINSTON I’ll get to it. During the Afghani invasion by Russia, we still traded with them. During the Cold War, we still traded with them. So what is the specific position now that stops us from trading with them? Now, yesterday, Theo Spierings said that we are going to, he said. Now, that’s against what Mr Key told parliament on the 22^nd of July, when he was asked the question. He said that he would actually go for a formal sanction. See the difference? At least now Fonterra realises this is a market here. But my point is, why have they not been pushing it for all it’s worth?

MICHAEL Do you agree with that, Dr Rolleston? Should there be a greater push into Russia to simply help make more money?

WILLIAM Look, I think that’s a question that Fonterra and the other dairy companies need to be looking at. There is some opportunity, but I would also say that just because Russia has not taken product from Europe hasn’t changed the world demand; it’s changed the dynamics – of course it has. So I think from the government’s perspective, they’re going to have to look at what effect that might have on the behaviour of Russia, because if no one is actually exporting into Russia, then the Russians are going to want product from somewhere, and that will put pressure on them. But that’s a political decision, not one for Fonterra necessarily to be making.

MICHAEL Sounds like there might be a little bit of common ground there. Dr William Rolleston from Federated Farmers, President, and Winston Peters, thank you very much for your time. You can call each other on the phone and continue your yelling match. Thanks, gentlemen.