Flexibility wins against threats to trade

Most people understand the "asymmetrical trade threats" to biosecurity.

On TV3's The Nation recently, Fonterra Co-operative Group chief executive Theo Spierings underwent a rare hardnosed interview. The sort of grilling usually reserved for the Prime Minister.

What caught host Lisa Owens by surprise was the risk posed to Fonterra by Ebola. Spierings puts the impact of this disease at up to 6 per cent of Fonterra's exports; $150 million. The reason being, people in affected countries are unable to get to markets and so economies start to unwind.

Only the journalist Bernard Hickey "got it", by pointing out that Fonterra had the means to switch production from powder into other products. This not only shows it is a different beast than many give it credit for but highlights that Fonterra is our only real "global company".

The impact of Ebola makes me think we need to borrow a term usually associated with the military. You see, Ebola ranks right up there with the Eastern Ukraine as examples of "asymmetrical trade threats". What Russian separatists do has already cost our dairy industry and economy hundreds of millions by dislocating European milk. Ebola's cost to us is already $150 million and counting.

I think most people reading this will understand the "asymmetrical trade threats" we face -- things like quotas, subsidies and tariffs. As The Economist noted earlier this year, "the Senate passed the farm bill, a strange piece of legislation which costs nearly a trillion dollars [US]. It mixes benefits that mostly go to the poor (food stamps) with agricultural subsidies that mostly go to the rich (crop subsidies for large farms) ... "

We should fear "asymmetrical trade threats" and it would be the same if our biggest export happened to be iPhones, software or tourism instead of dairy.

Explaining this to the public is hard when a senior journalist went on to Twitter and seriously asked if beetroot makes milk pink. Other reporters I've spoken to over the years have firmly believed fresh milk is just reconstituted powder.

Just like eating scallops won't turn your blood white, non-farmers need to know that a cow has four stomachs which break down and extract nutrients from grass, feed and water. Stuff we can't but they can. Cow mammary glands take these nutrients from the bloodstream, turning them into the white stuff we call milk. As for the powder claim, what can you say? Do some people seriously think we milk cows then remove all the water at great expense just to add it back in? Heard of the Fair Trading Act?

The Nation seemed captivated by reports saying China could soon become self-sufficient in milk. The assumption being that all countries are the same and all farming is done the same way.

The US is about the same size as China and although some 40 per cent of the US is farmable, only about 11 per cent of China is.

Though you can run a barn system in China, those cow stomachs need to be fed and if you can't grow grass like we do, it means fodder crops on land you don't really have or importing feed.

The good news for "NZ Inc" is that Fonterra is growing in China, which helps to explain why New Zealand exported $17 billion worth of dairy products in the year to date, but Fonterra generated $22.3 billion in revenue.

This year was the first time that the $20 billion in revenue barrier was broken; corporate New Zealand's "four minute mile". What's that about value-add again?

Andrew Hoggard is Federated Farmers' Dairy chairperson