New Zealand then is quite exceptional amongst the so-called 'developed countries' to be so dependent on agriculture (12% of GDP and 70% of New Zealand's merchandise export earnings Ministry for Primary Industries).
Biosecurity (see my page The Time Machine) in New Zealand is tight and vigilant but it will always be a source of potential vulnerability. The 'New Zealand' brand is generally well regarded but the botulism in milk scare last year led to a temporary ban on dried milk imports into China.
Strengths come from having a strong focus and infrastructure to support agriculture and a dynamic sector that has had to change rapidly in the face of issues like UK accession to the then European Economic Community, the sudden removal of state subsidies in the mid-1980s and rapidly developing Asian, North American and European food and produce markets.
Currency fluctuations and shipping costs are other areas of potential risk particularly for time-sensitive exports in the face of consolidation of shipping in international shipping (see OECD NZ Agri Risk p.11.)
Structural weaknesses and over-reliance on milk exports?
But not all see these developments as sustainable. New Zealand is increasingly reliant on dairy exports - they made up one third of all exports in 2013 at NZ$13.4bn - and the Chinese market.
According to Stephen Jen, a partner at hedge fund SLJ Macro Partners, quoted in this FT article a fall in milk prices or other external shocks could have major impacts in an economy that,
'has severe structural weaknesses that are very similar to those of crisis-hit southern European and southern emerging market economies.'
Jen likens the New Zealand economy to that of pre-financial crash Ireland - which has the highest agricultural land prices in the world - based on debt and credit, low savings rates and current account deficits and an over-valued currency.
Risk Management in a globablised industry
A recent OECD study of risk management in New Zealand agriculture (see below) concludes by stating that there is little appetite in New Zealand to extend 'transfers to support the farming business' and that public perceptions see farming as both a 'normal' and lucrative business that does not qualify for special support (p.66).
This last area is particularly interesting in as much the further intensification and extension of agriculture to feed global markets is in danger of growing environmental costs - greenhouse gas
emissions, water pollution and water shortages - and the potential impacts of climate change in New Zealand.
New Zealand has the second most expensive agricultural land in the world after Ireland as a per hectare price at US$28,662 according to a Financial Times article.
This compares to $8,747 in the US, 6,840 in Brazil, and $25,575 in the UK. Prices in Germany ($18,521) and France ($6,951) are considerably lower.
There is considerable controversy over over foreign investment in New Zealand agricultural land, particularly by Shanghai Pengxin (see press report below).
Yes. The end of this page needs a bit more work. But I hope you get the picture.
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