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In defence of dairy farmers - Tactical Ninja

May. 18th, 2011

09:26 am - In defence of dairy farmers

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This morning the wind is blowing straight off Antarctica with enough determination to get here in force. Bits of stuff blowing down the waterfront, large pieces of fabric torn off the building site which I think is fancy loos for the Rugby World Cup drunken rugbyhead pen *ahem* village, I watched a cyclist get one tangled up in his back sprocket and be brought to a sudden halt as the spokes in his back wheel broke and the thingy that the chain goes round sheared off. Poor bugger ended up carrying his bike to work after I helped him remove the stuff and threw it in a bin. I was amazed by how many people didn't try to catch this stuff before it ended up in the sea.

Also, what's up with all the older white men in fancy European cars driving around the waterfront this morning?


Headline on the front page of Dominion Post this morning - "Average dairy farmer only pays $1506 tax. Average worker pays $8020." I didn't actually read the article, but noted the bit at the bottom (inset in a box) where they did a comparison of who pays how much tax. They covered dairy farmers, agricultural/forestry sector, small business owners, workers, beneficiaries and couples on the state pension.

Notably missing from the list of who pays how much tax were investment bankers, property developers and corporations. It's no secret that these three groups are the largest guilty parties for dodging tax, and yet the article focuses on the dairy farmers.

So, why?

Well, if I were a cynic I'd say we were being softened up to be ok with some thing in the budget (due tomorrow) that's going to be particularly hard on dairy farmers. NZ still has, to an extent, that "Backbone of the nation" attitude about farming. Most of us know a farmer or two, and there's a perception that things that hurt the farmers hurt us. And really, NZ is the largest dairy exporter in the world. Quite something considering our diminutive size.

Anyway, dairy has been taking a bit of flak lately - the increase in cows is responsible for a considerable amount of pollution in our waterways due to both cow shit and fert runoff. Water requirements for dairy conversions have put water tables under threat, particularly in areas such as Canterbury where rainfall is not high and water is sourced from streams. Fonterra (the cooperative company collectively owned by dairy farmers that deals with marketing their produce) is seen as an evil corporate giant that will stop at nothing in the name of profit. And now, we're told, the average dairy farmer is a tax dodger.

And many of these things are true. Farms that were carrying 200 cows in the 1980s are now carrying a lot more - farmers got more productive in response to the challenges created by removal of subsidies and floating the dollar. They had to, or they'd go bust. Consequently, more water input, more waste output. We are reaching (and some would say have already reached) the critical mass of intensive farming of dairy cows in this country, to the point where it's affecting our clean green image - never mind the environment we live in. No more cows thanks, we can't cope with the ones we have.

In response, there's talk of regulating water, and of sanctioning the polluters of waterways. I'm thinking probably hefty fines and the like, along with potentially a payment scheme for water use. But the farmers won't like it (imagine having to cough up $4500/ha on a 200ha farm for water use), and Federated Farmers is a noisy group who object to anything that 'harms' farmers.

And here's where there needs to be some differentiation. You see, there are two kinds of dairy farmer. There's the ones who started off sharemilking then bought their own farm, who essentially run a small family business. Then there's the ones like the Crafar farms, the Chinese company that bid for those farms after the trouble, and the proposed Otago factory farms. We all know which of those are likely to create the most environmental issues, and I'd be willing to bet which of those are most likely to be avoiding paying tax as well. Yet in the paper, this distinction isn't made and I don't know about you, but when I think of 'dairy farmers' I think of the small business kind - in the national psyche it's likely a whole bunch of people now think the dairy farmers are ripping us off.

I reiterate, there is no mention of investment bankers, property developers and corporations in the article. Not even dairy farming corporations.

Anyway, here's where my conspiracy theorist rears her ugly head. Y'see, there's this trade treaty being negotiated right now. You may have noticed me mention it before, it's called the TPPA. One of the big 'selling points' is increasing our milk powder access to US markets. The problem with that, apart from the historical US protectionism that is likely to prevent that, is that in order to increase our milk powder production we'd need still more cows. We're already selling as much as we can produce. Fonterra, I'm sure, are aware that we can't sustainably increase the national dairy herd. They're probably aware that sanctions for polluting and payment for water are coming.

So what would you do? I know what I'd do. I'd be looking to increase markets for high-price, specialised dairy products such as fancy cheeses and the like, which means less cows required to make more money. And since the US is highly unlikely to be opening up their market for such things (traditionally tarriffs have mostly gone on 'processed' products and raw products are cheaper to import), there is little trade-based reason for Fonterra to support the TPPA. In fact, given the stuff in there about patents and how that might affect a) sales of products with names like camembert, and b) purchase of products that dairy farmers use (hey Monsanto, I'm looking at you!), I'd suggest that Fonterra has reason to oppose the TPPA.

The TPPA has been getting some traction in the media lately, and kiwis are uneasy about it. We don't trust the US and our government seems to be hellbent on sacrificing our sovereignty and way of life to get this trade deal signed, and it all looks dead dodgy. So what better way to undermine Fonterra's (speculated by me) opposition to the TPPA than by making us all think the dairy farmers are a pack of money-grubbing tax dodgers? And what better way for us to be ok with whatever's coming to them than that we think they deserve it?

Yes, water should be regulated. But I'm afraid that under the TPPA it'll be privatised and that's a whole different kettle of fish. Yes, pollution in our waterways should be reduced but that'll affect both productivity and income for farmers, and as far as I can tell the farmers' collective is attempting to create a situation where farmers can become less productive while not going bust by focusing on boutique products instead of MOAR COWS. I'm aware something has to happen now. And I think this slagging of the dairy farmers for tax dodging is propaganda/manipulation in preparation for something. It'll be interesting to see if I'm right.

Remember kids: investment bankers, property developers, corporations (including dairy farming corporations). Don't be sucked into finger-pointing at the wrong culprit.


Gosh. Looks like I felt strongly about that.

Anyway, last night I spun 2 spools of brown/white mottled romney. Tonight I'll warp up my loom. This time it's a full-width (36") piece of fabric. There is no purpose for this fabric except to be pretty and lie around making me feel good about my crafting productivity. Hey Happy! I'm a Weaver!

Comments:

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From:bekitty
Date:May 17th, 2011 09:48 pm (UTC)
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I imagine that most farmers are earning substatially less, and have more overheads, than your average salaried worker. Which is most likely why farmers pay less tax overall.
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From:rantydave
Date:May 17th, 2011 09:56 pm (UTC)
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I imagine that many farmers are claiming range rovers and mercs as expenses. I imagine many of them are carving off lifestyle blocks; putting in water, sewage, phone (regarding *this* as an expense); then selling them because capital gains are tax free.

The tax system is horribly simple to exploit if you have big lumps of money to exploit it *with*.
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From:tatjna
Date:May 18th, 2011 01:13 am (UTC)
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This might interest you.

It's about banks and the sorts of things that happen with farmers aka why some farmers write off range rovers and others can't afford a 1981 Datsun.
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From:t_c_da
Date:May 19th, 2011 08:45 pm (UTC)
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On the radio this morning I heard comment that Budget2011 was a "Bankers Budget rather than a Business Budget"...

Also "The less government and leave it to private enterprise to sort it out approach has been proven to fail, repeatedly" (paraphrased)...

(Links to be found in Radionz.co.nz, Morning Report, between 6:30 & 7am today.)
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From:vernacularity
Date:May 18th, 2011 02:36 am (UTC)
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or maybe the whole thing is a beat up
http://www.beehive.govt.nz/release/dunne-dairy-farmer-tax-headlines-simply-wrong
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From:(Anonymous)
Date:May 18th, 2011 01:39 am (UTC)
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I imagine that most farmers are earning substatially less, and have more overheads, than your average salaried worker.

I seriously, seriously doubt that.
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From:tatjna
Date:May 18th, 2011 01:45 am (UTC)
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I'm not up for hunting up figures at the moment, but I have anecdata!

In the world of drystock farming when I was a shepherd, most farmers in my district were profiting less than I currently earn - the only money was in bull beef and it hadn't taken off to the point where they'd recovered setup costs yet. Since then, I've seen estimates that 'the average farmer' ends up paying themself a wage of ~$20,000 a year.

I also imagine there are those who are creaming it. But I suspect it's like the rest of the population - most are scraping by, those that are creaming it are REALLY creaming it.
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From:(Anonymous)
Date:May 18th, 2011 04:50 am (UTC)
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I could believe that, but from my understanding you were a shepherd quite a long time ago, certainly before the commodities boom. Also, as we know, sheep farming is less profitable day-to-day than dairy farming, hence all these conversions. So, I don't want to slam your anecdata but I think there are reasons to doubt it's applicable.
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From:tatjna
Date:May 18th, 2011 04:56 am (UTC)
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Actually the commodities boom was happening while I was a shepherd, and dairy farming has always been more profitable than drystock farming. It also requires higher inputs both capital and ongoing, dairy land sells for substantially more per hectare, it's harder work and dairy farmers usually have bigger mortgages - which is why sharemilking has always been popular as a way of getting into it in stages.

All of which leads to my point - more profitable doesn't necessarily mean more actual money in the farmer's pocket, and the scraping by vs creaming it comment applies to dairying and drystock alike.

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From:(Anonymous)
Date:May 18th, 2011 05:08 am (UTC)
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Either you mean more profitable for somebody other than the farmer, or you're counting the initial setup costs against profit.

If it's the former, I guess we're back to the corporations/individual farmers dichotomy. If it's the latter, true, but eventually the farmer will pay off those setup costs and begin creaming it. Agriculture isn't the only business where people face a trade off between setup costs and profits. But when we see some flashy Wellington or Auckland corporate lawyer clearing big dollars we usually don't sympathetically count the cost of his university education, social networking, expensive clothes or high-rent downtown office against that.
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From:tatjna
Date:May 18th, 2011 05:16 am (UTC)
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Many farmers are still paying a large mortgage into their sixties. Unlike your flashy Auckland lawyer, their continued income relies on being able to service that mortgage.

And you can argue that when they pay it off at 65 they can sell it or retire and be rich, but that's one hell of a way to spend your life, you know?
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From:(Anonymous)
Date:May 18th, 2011 05:32 am (UTC)
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It's better to be rich post 65 than not be rich at all. And that latter situation is the one most NZ wage workers are facing now. Given that the Dom Post's article raises the comparison between the average farmer and the average wage worker, I think that's valid.

No, farmers aren't some kind of gloating Orwellian overclass but they do benefit from the system in the way the average person doesn't.
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From:tatjna
Date:May 18th, 2011 05:39 am (UTC)
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That article also took the figures from a year when 'the average farmer' made a $50,000 loss, therefore paid little tax.

If I made a $50,000 loss I would pay no tax. Yep, farmers and workers are different, and the guilty parties in tax evasion are still investment bankers, property developers and corporations for the most part.
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From:morbid_curious
Date:May 17th, 2011 09:49 pm (UTC)
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My main issue with dairy farming has always been the drain on Canterbury's aquifers that the high-intensity dairying causes, along with the environmental damage we've seen from not handling effluent/runoff properly. I must admit, I've been guilty of thinking of "dairy farmers" as a homogeneous group of people doing this, when it's not. Props for calling me and others on that one.

I still feel that Fonterra acts as an amoral profit-generating corporation, regardless of its collective ownership, though. But then, a lot of large corporations do bad (or at least questionable) things while representing and with the stated aim of generating wealth for good people. Governments, too. It'd be naive to think that Fonterra has the only moustache in town to twirl.
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From:tatjna
Date:May 17th, 2011 10:06 pm (UTC)
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I agree. I doubt that Fonterra is squeaky clean (in fact we know it isn't) - it's also our biggest company and therefore in the spotlight a lot more than others. But I can't help feeling that there's a certain amount of tarring going on here.
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From:morbid_curious
Date:May 17th, 2011 10:10 pm (UTC)
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If the shit is flying, it's always a good idea to pay attention to who is throwing it around, and what they might stand to gain.
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From:(Anonymous)
Date:May 18th, 2011 05:33 am (UTC)
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Yeah... isn't being profit-generating the whole point of a corporation?
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From:rantydave
Date:May 17th, 2011 09:53 pm (UTC)

Investment bankers?

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Do we actually have any?

Property developers, IIRC, are rather more direct - preferring to create a company, sell some stuff and then go broke owing money. It's not just tax that's singled out and it's everyone that gets shafted.

Corporations are bastards. Google, for instance, is actually a subsidiary of Google Ireland. That way they can shove their money through Ireland's low corporate tax regime. "Don't be evil" my arse.
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From:tatjna
Date:May 17th, 2011 10:10 pm (UTC)

Re: Investment bankers?

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TBH I don't actually know whether we have investment bankers. Pretty much all our banks are overseas owned. But if we do, they are likely to be dodging tax with the best of them. Nyah.
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From:ferrouswheel
Date:May 18th, 2011 12:32 am (UTC)

Don't forget...

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NZ is run by one - which explains alot.
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From:ferrouswheel
Date:May 18th, 2011 12:35 am (UTC)

Re: Investment bankers?

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I dunno, I'd prefer Ireland to get Google's corporate tax than the USA. It'd be interesting, given Google's size, to work out just how much USA military spending it'd equate to if they weren't a subsidiary.
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From:friggasmuse
Date:May 17th, 2011 10:05 pm (UTC)
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I would love to have a loom!
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From:tatjna
Date:May 17th, 2011 10:08 pm (UTC)
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Mine is just a table-mounted heddle loom, they are (apparently) easy to make and this one is simple to use. But it's very time consuming to try and produce anything and I sometimes find myself wishing for one of these:



With a house to put it in. And lasers.
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From:t_c_da
Date:May 17th, 2011 10:13 pm (UTC)
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I seem to recall links floating around here recently pointing to Vodafone (UK) dodging some UKP6 billion of tax, and convincing the UK government to allow them to do so (remembering their govt is of the same stripe as our current bunch, and just as "business friendly"), which leads me to wonder what sort of tax rorts are going down around here (I'm looking at Telescum, Yodafone, Fonterror, TranzRail (now gone) and others of similar ilk)...

And I agree with rantydave about corporations wanting EVERYTHING their way, sod the workers who make &/or buy their stuff, and please can we have these extra, special subsidies to cover the fact that we aren't gouging enough profit out of our "customers".
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From:tatjna
Date:May 17th, 2011 10:20 pm (UTC)
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Speaking of Telecom, the clause in the Telecommunications Amendment Bill that would have given them a 10 year regulatory holiday from Commerce Commission oversight has been removed in the face of a lot of opposition. Good news!
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From:rivet
Date:May 17th, 2011 10:23 pm (UTC)
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I couldn't help thinking that headline looked like (1) a smear campaign and (2) a trumped up distraction [it's not the fault of the govt and their tax cuts, it's those pesky farmers!]

I think the distinction between small and large farmers in a useful one. Have you considered writing a letter to the editor to that effect?

incidentally, new stock numbers out yesterday say we added another 50K dairy cows last year.
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From:tatjna
Date:May 17th, 2011 10:28 pm (UTC)
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That is one very large pile of poop!

I have never written a letter to the editor - wondering if joining the world's slowest flamewar might be fun. ;-)
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From:t_c_da
Date:May 17th, 2011 10:48 pm (UTC)
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I think that particular flamewar has sped up somewhat since the days of needing a stamp and a postie to deliver your letter to the editor...
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From:tatjna
Date:May 18th, 2011 02:10 am (UTC)
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I should probably also mention the grilling Key got in question time yesterday. I don't know how public that was but the "Is this fair?" headline about dairy farmers this morning could be a case of deflection.
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From:tatjna
Date:May 17th, 2011 11:28 pm (UTC)
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*cat looks around confusedly as to why there's no pandemonium*

Not sure what response you were expecting but there's nothing in there that I disagree with. Farming was unprofitable when subsidies were removed, the carbon cost/water pollution subsidies are about to be removed (or at least that's the impression I'm getting), and the farmers will have to change their game plan to stay profitable. There's stuff in my post up there about ways in which this might happen - and trying to sell more milk powder to the US isn't it.

One small quibble - the capital gains from farming came after it recovered from the last subsidy hit and became productive - during that recovery farmland was not worth a pinch of goat shit. So it could be argued that capital gains and productivity are inextricably intertwined in farming, since in order to increase capital value, someone has to want it and for that to happen, it has to look productive enough to be profitable.
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From:tatjna
Date:May 17th, 2011 11:41 pm (UTC)
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Are you ignoring the development of higher-priced, lower volume markets that is supposedly going on right now, that would potentially allow for a reduction in cow numbers without the dramatic drop in profits everyone is scared of, because you think it's a dumb idea or because you didn't read that bit?

If you think it's a dumb idea, why is it?
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From:tatjna
Date:May 17th, 2011 11:51 pm (UTC)
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It's certainly not an idea that should be ignored or given up on, especially since you've so eloquently spelled out the alternative.

And I fail to see how the TPPA would improve the situation.
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From:polychrome_baby
Date:May 18th, 2011 01:26 am (UTC)
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Well, this makes me awfully happy to have you friended.

This entire thing is very interesting to me. Thank you for sharing. I'd write more, but I'm completely worn out from a fairly long day.
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From:tatjna
Date:May 18th, 2011 01:34 am (UTC)
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Whee, thanks!

(as an ex shepherd who could never afford to buy a farm i have kind of a vested interest)
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From:rivet
Date:May 18th, 2011 01:30 am (UTC)
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I can't say the dairy farmers are helping themselves much on the public relations front, however http://www.radionz.co.nz/news/rural/75429/sudden-rise-in-effluent-breaches-on-southland-farms
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From:tatjna
Date:May 18th, 2011 01:34 am (UTC)
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I just read that and I agree. Southland is one of the areas that has been rife with dairy conversions in the last 15 years - lots of the builders down there have been making cowsheds as bread-and-butter for a while now. I am wondering how many of the offending farms are recent conversions or upscaled existing farms?

Also, the Southland Council seems cagey about prosecution and while I agree that prosecution should happen, I can imagine they're concerned with the potential immediate loss of growth if they do. I still think they should go ahead, but I fear the consequences. Again I find myself wondering if forced fixes (under threat of bigger sanctions) would be a better way to tackle it than fines and prison sentences.
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From:(Anonymous)
Date:May 18th, 2011 01:48 am (UTC)
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And here's where there needs to be some differentiation. You see, there are two kinds of dairy farmer. ...

I think you could have simplified it and said 'There's good dairy farmers and evil dairy farmers'. Or in fact you could have simplified it still further and said 'There's dairy farmers, and then there's evil corporations who aren't farmers at all, just faceless logos that we can shake our fists at and blame for everything that's wrong with agriculture, while leaving our nice mate who owns a farm in the Manawatu blameless'.

There's actually a case to be made that large agribusiness may actually be less responsible for the problems you've identified, not more. When it comes to pollution agribusiness has the capital to make start-up-capital intensive alterations to farming practices that will reduce effluent flow which smaller farmers don't have, even if they're doing comparably well. As for tax cuts, Fonterra is a collective. It doesn't buy farm machinery, its shareholders do that, so Fonterra doesn't see a dime of the tax write offs that are lavishly available on that front.

I think in a sense there's a good cop/bad cop relationship between Fonterra shareholders and the corporate brand. People are disposed to see the genial old bugger in a Swandri as bluffly honest and incapable of rorting his fellow taxpayers, while Fonterra is a Big! Faceless! Evil! Corporation! You don't often see 'Joe Bloggs, Fonterra shareholder' as a title on the TV News when they're interviewing some dairy farmer about farming practices.

And finally, I seriously doubt the government is going to screw farmers in the next budget - unless you agree with Urs that its farmers, not salary earners, who make up the working class in this country.
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From:tatjna
Date:May 18th, 2011 01:57 am (UTC)
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I have thought about that - the large corporations are the ones with enough money to set up sustainable practices whereas "Mum and Dad" dairy farmers may not have the resources or willingness to do the necessary work.

However, many individual farmers only run small numbers of cows, and it's the larger players that are running the herds in excess of 1,000, using large wintering pads and collecting them all in a small space twice a day to crap all over the place while they're milked. More cows = more effluent output, more water input.

So it may well be six of one and half a dozen of the other, but I know which ones are likely to be creaming it financially and which ones aren't.

I don't really see Fonterra as evil tbh, especially not in the face of the behaviour of some of the other corporations in NZ - it's just the biggest therefore everything it does is under scrutiny.

In terms of tax cuts, I think rivet may be right - dairy farmers are a currently 'in bad favour' group and that makes them easy targets for blame. "Nope, not our tax cuts for the rich and frivolous spending that's running us bust, it's those damn dairy farmers!"

I guess it makes a change from blaming the unemployed?
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From:vernacularity
Date:May 18th, 2011 02:34 am (UTC)
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see response from Peter Dunne http://www.beehive.govt.nz/release/dunne-dairy-farmer-tax-headlines-simply-wrong

its the newspapers beating up farmers on false maths.
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From:tatjna
Date:May 18th, 2011 03:54 am (UTC)
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Yeah, I laughed at the $500,000. I'm a bit afraid of how many people won't realise that $459,000 of that goes on overheads and mortgage servicing.
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From:vernacularity
Date:May 18th, 2011 04:04 am (UTC)
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however you might also ask why "normal" people don't get to claim back their own mortgages and overheads like any other "business": we are all in the business of selling our labour to other organisations, so why shouldn't our operational requirements also count as running costs?

fuck this entire system.
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From:tatjna
Date:May 18th, 2011 04:51 am (UTC)
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Because we are Labour. Duh.

I believe wages are supposed to factor in running costs, although the current popularity and conditions of contracting would bely that.
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From:(Anonymous)
Date:May 18th, 2011 05:04 am (UTC)
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Individual farmers are running small numbers of cows in comparison to large agribusinesses, but they are running large numbers of cows in comparison to the number individual farmers were forty or thirty years ago. Of course you could argue that they're doing this as a response to the withdrawal of subsidies and competition from agribusiness, but that's presuming that they wouldn't be trying to maximise profits anyway, which seems unlikely.

When you say "creaming it financially", it's true that agribusinesses are likely to be making larger net profits, but the debate about how much tax they pay isn't actually about net profits, it's about individual profits. Even if the farmer's lower tax doesn't lead to him ascending into the financial stratosphere it's still pretty unfair to those of us who are struggling. Maybe farmers aren't hooning around in Beamers or taking holidays in Hawaii, but maybe they are having an easier time sending their kids to school or insulating their houses or doing the other mundane, non-glamorous but nonetheless meaningful things that so many NZ families, many of them wage-earners, are having increasing trouble with.

I actually feel the opposite. Dairy farmers are not in bad favour, not with the government and not with the public. The idea that some sort of law or regulation will harm farmers - by which we mean dairy farmers, since dairying is responsible for the majority of employment, land use and profit in NZ - is generally enough to cause a massive backlash. The incredible sweety deal that farmers got under the current emissions trading scheme is a great example - they were seen as simply untouchable, that placing any financial burden on them was both morally wrong and economically suicidal. As has been pointed out elsewhere, farmers are allowed to write off their mortgages because farm ownership is seen as beneficial to the entire state, but home ownership or store ownership or any other sort of ownership isn't. And these laws, particularly the ETS, come from a Labour government. Now we have a government that numbers numerous dairy farmers among its members, including the Minister of Finance and the Minister of Agriculture. Kind of hard to see farmers as a group on the outside of the power structure.

I mean I'm kind of six to one/half a dozen to the other too. I just don't think you can draw this easy divide between farmers and agribusinessmen. Agribusinessmen often come from farming backgrounds and continue to farm while also seeking profits in business: farmers of invest in agribusiness or cooperate with agribusinesses in their farming activities.
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From:tatjna
Date:May 18th, 2011 05:12 am (UTC)
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Congratulations, you just said pretty much everything I said in my post.
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