New Zealand Farmers Feel Pinch of European Policies

CATTLE rancher William Blair and his neighbor, Stewart Tempero, a dairy farmer, have cut their fertilizer use in half. In addition, Mr. Blair has reduced his use of a farm hand to a few hours per week and Mr. Tempero is deferring maintenance. ``You've got to save someplace,'' says Blair as he supervises the construction of a fence which will increase control of his pasture land.

Both Blair and Mr. Tempero are tightening their belts because the farm sector in New Zealand is getting squeezed - in large part because of the farm policies of the European Community. In negotiations to revise the General Agreement on Tariffs and Trade (GATT) by a December deadline, the EC offered a new proposal Nov. 7 to cut subsidies by 30 percent over 10 years. But the offer may not be enough to satisfy New Zealand and 13 other nations that had threatened to quit the international trade talks by mid-November unless progress is made on agricultural reform.

``The market is being distorted by our trading partners,'' says Nigel Mitchell, executive manager, external policy division of the New Zealand Dairy Board in Wellington. Mr. Mitchell calculates that the Netherlands pays its dairy farmers $4,100 (US) per ton for butter. However, the world price is now $1,400 per ton. When that butter is exported, the EC pays a subsidy of $2,700 per ton. The situation is similar throughout the 12-member EC.

New Zealand's 15,000 dairy farmers, who annually export 80 to 90 percent of their milk products, receive no subsidies. This year the Dairy Board, the major marketing arm of the industry, is paying them $1.09 per pound compared with $1.55 per pound last year. With the market deteriorating, the Dairy Board is considering reducing prices a second time this year.

The meat industry faces similar downward pressure on prices. Britain is the major market for New Zealand lamb. However, governments in both Britain and Ireland are encouraging their own farmers to increase flock sizes.

Cattle farmers like Blair are disappointed because meat markets in Japan have not opened up as quickly as expected. ``Many farmers bought livestock to fatten up expecting to sell the meat to Japan. But, they paid too much money for the cattle,'' Mitchell says.

Many farmers are cutting back on expenses such as fertilizer. However, this ultimately will cost farmers in lower productivity, since they rely on pasture land to feed their animals. ``The fertilizer walks out the gate in the form of proteins,'' Tempero says.

Farmer Richard Vallance in Masterton has decided the solution is diversification. On his 2,000 acre farm he raises 6,000 sheep and 350 cattle. In addition, Mr. Vallance and some of his neighbors are seeking a foreign partner to help them sell dressed beef and lamb. ``Our objective is to shift our investment off our farms and into value-added products,'' says Vallance.

The wool industry is depressed as well. Last year the New Zealand Wool Board paid an average price of $1.68 per pound for wool. Today, it is paying $1.13 per pound. ``The farmer is being dragged down by Australia,'' explains Roger Buchanan, general manager of product market and development.

The Australians greatly increased wool production, resulting in a glut on the world market during a time of decreased demand. Also, China, a major buyer of New Zealand wool, stopped buying in April when it ran low on foreign exchange.

Unlike in Australia, the Kiwi Wool Board has no government support. This also means there is no government interference, notes Pat Morrison, the Wool Board's chairman. ``It's a blessing in disguise.''

The New Zealanders were also fortunate that their farmers had been reducing the size of their flocks because of a drought. This year production will be down 2 percent after a 10 percent reduction last year. In Australia the flock size has increased by 40 million sheep over two years. So far this year about 80 percent of New Zealand wool has been purchased commercially at auction or through private sales compared with less than 40 percent in Australia.

Most New Zealand wool is used in carpets. However to try to expand its markets, the Wool Board is trying to develop new products. A recent attempt is a blend for men's tropical suits. ``It has a crisper handle, it sits on the skin and it has excellent breathability,'' says Mr. Buchanan. The product is selling well in Japan, which helped with the development.

Another new product is ``Insulane'' - balls of wool which have been treated with silicon. Like down feathers, the product provides warmth without weight. Buchanan foresees markets for comforters and pillows.

However, new products and markets take a long time to develop. So, over the short term, the farmers are hoping they will get some relief from the subsidy wars with a successful conclusion to the GATT talks.

If the talks break down, the Kiwi farmers will do what they have always done: grit their teeth and dig in. ``You have to survive,'' says Tempero.