No Farming Subsidies?

One of the things I wanted to get a first hand look at on our trip was New Zealand agriculture. Even though we saw plenty of sheep, more than my wife says she ever wants to see again, we found the country to be the most diverse agriculturally that I’ve seen. Within a few miles drive it was not uncommon to see farms advertising honey, vegetables, llamas, wine, deer, fruit, cheese and of course sheep. New Zealand also has the second largest number of acres devoted to organic production, following only Australia.

One of our stops was at a wool buying station that also sold some wonderful sweaters where we bought too many to fit into our roller boards, shipping home one of two boxes on the trip. Gordon Riach has been in the business for 54 years. He buys from about 300 farms, each about 600 to 800 acres. He told me that 50 years ago the average was 200 to 300 acres/farm.

He told me, “Farmers used to shear twice a year but now the cost of shearing has gotten so high that they only do it once a year. Shearing is a very physical profession. The only thing worse is coal mining. You can get about 3.5 kilos (7.5 pounds) per sheep and we’re buying for NZ$2.40/kg (US$1.70). The shearer gets NZ$3.25 and with everything it costs about NZ$4.00 to shear. That only leaves a little over NZ$4.00 to the farmer. Of course he also can sell for butcher, which helps.”

In 1984 New Zealand made the radical decision to do away with all government subsidies, which at the time would cause over 20% to exit the profession but in fact only 2% did so because they adapted and diversified. At the time New Zealand lambs were worth $12.50/carcass with the government giving then another $12.50/carcass subsidy. Even with the subsidy it was a hand-to-mouth existence. Farmers were scared and many marched in the streets fighting the cuts.

Today, over 20 years later, we didn’t find any of them that wanted to return to the pre-subsidy days. Lamb was worth $56/carcass when we were there with a better, bigger carcassed animal and New Zealand having over 50% of the premium lamb market worldwide. They are doing the same thing with deer today.

Gordon Riach said of the experience in cutting the subsidy, “It has been good for us. Our farmers have learned to stand on their own and it has made them more self-reliant. We have also diversified our agriculture as a result which has been good for the countryside.”

“It has made farming more competitive and caused those who weren’t stepping up to the mark, to do so. The outlook for New Zealand ag is very bright. But, we’ve got to stay on the cutting edge by continuing to improve our efficiencies.”

I wondered what American Agriculture would look like if we were able to wean ourselves away from our very expensive subsidies. Might it help to resurrect many rural towns by helping to diversify what we produce?