Obama 'punishing' our dairy sector, say Fed Farmers

Federated Farmers president Don Nicolson.

President Barack Obama and his Agriculture Secretary, Tom Vilsack, are "punishing" New Zealand farmers for their success, a farm leader has told Americans.

Federated Farmers president Don Nicolson said in an opinion article in the Wall Street Journal that the Obama administration's implementation of subsidies under the Dairy Export Incentive Program (DEIP) were distorting the prices paid for unsubsidised New Zealand dairy exports.

The subsidies -- euphemistically described as "bonuses" -- to cover the difference between American farmers' cost of production and prevailing international prices would cover 92,000 tonnes, which was 7 per cent of total United States dairy exports.

"Programmes like DEIP are punishing us for our hard-won success," said Nicolson.

The American dairy lobby complained of the squeeze put on US farmers by Fonterra, saying Fonterra was "flooding" the market with milk products at less than market prices, he said.

But because New Zealand dairy farmers were not subsidised, they could not dump product at less than the cost of production, he said.

Next season's forecast payout for many NZ farmers was about US$2.88/kg of milksolids, but the cost of production was currently US$2.87/kg.

"Some farmers will inevitably fail," said Nicolson, who noted New Zealand farmers had felt the pinch from last year's worldwide decline in market prices as keenly as other farmers around the world.

"Now Messrs Obama and Vilsack would punish us for our adaptability by subsidising New Zealand's competitors," he said.

That was not only bad for NZ farmers but for American consumers and taxpayers, and America's moral authority in promoting free trade.

"The question ... will be whether Mr Obama will improve on his current record, or backtrack,"' said Nicolson.

"To judge from his administration's DEIP decision, the early signs aren't exactly promising."

New Zealand is the world's second-largest dairy exporter -- after the European Union -- and accounts for 22 per cent of the global market, compared with the US's share of 16 per cent.

- NZPA