Farming Without Subsidies

New Zealand eliminated agricultural subsidies in 1984, citing concerns of overproduction, environmental issues and inflated land prices. Roger Roney of Lovington, IL went there to see for himself the impact of those two decades of totally free market ag.

“When they eliminated the subsidies, they estimated that 20 percent of farmers would be out of business, but only 2 percent left. The farmers that stayed had to become more creative. They had to utilize the resources that were on their farms,” Roney said.

One farmer converted his sheep and livestock farm into a vineyard and restaurant. He also specialized in upscale beef for his restaurant and is now exporting beef to Germany. Others converted to more specialized production. There is a tremendous growth taking place in agri-tourism as a result of the diversification taking place in the country.

“Not one farmer said they wanted to go back to subsidies. And many of these farmers were the same ones marching in the streets when subsidies were taken away.”
An example of what occurred in New Zealand is in the market for lamb. In 1984, New Zealand farmers were able to sell their lamb carcasses for $12.50 each and the government gave them another $12.50/carcass as a subsidy. Most of the sales were a commodity product sold to poor countries. That strategy didn’t work in a subsidy-free world.

Those farmers became innovative, developing a premium, bigger carcassed animal which there were selling for $30/carcass without any subsidy in 1989. Within 10 years there were selling it for $115/carcass and they have carved out approximately 50% of the world market for premium lamb.

Our research for my talk, “Hometown Entrepreneurs: Your New Paradigm Shift in Economic Development” showed New Zealand as the only developed country that had a higher level of entrepreneurship than the USA. I wonder if this rejection of subsidies 22 years ago is a factor on a more entrepreneurial spirit in rural New Zealand?