17 April 1986 Market conditions discussed by visiting US academic Professor Schaffner

Dealing with the new market environment could be positive or very frustrating, Professor David Schaffner, of the California Polytechnic State University, said during a visit to Lincoln College.

"The new environment can be positive if you deal with this in a creative way.

"But it can be very frustrating if you are just sitting around saying 'My God, what'll I do,'" he said.

Professor Schaffner said that he felt New Zealand was heading in the right direction economically.

"I don't think you could have survived in the outside economy going in the direction New Zealand was going."

New Zealand was having the least government involvement in agriculture than any other country or bloc of countries.

"Look at the United State. Look at the E.E.C., and so forth,' he said.

"The unique thing about agriculture is that saying 'guys go out there and play the purely_competitive game' is pretty tough."

Professor Schaffner said New Zealand producers and exporters had not had to deal with volatile commodity prices.

"As I look at the prices charged for past New Zealand products these have been pretty flat."

One of the unique aspects of agriculture in the United States was in managing the price risk, and having the tools to deal with fluctuating commodity prices, he said.

Professor Schaffner said that government and others in the United States, as in New Zealand, gave signals to producers that the "world market was ours."

This had put a lot of marginal land into production.

He said he had seen some of the hill country land in New Zealand, and the "only way that is going to stay in production is with lots of inputs."

That was very intensive farming which required prices to compensate.

"God didn't ordain that those hills were going to be pastured by sheep," he said.

"The economics don't warrant that kind of intensive farming, so let the land go back to the bush."

Professor Schaffner said the same thing had happened in the United States.

"We had high commodity prices, so intensive irrigation was being brought in to pump water."

However, energy prices went up and commodity prices went down, so the land was not economic any more.

New problems and new challenges would come about in New Zealand with organisations such as the Wheat Board going out, he said.

Professor Schaffner said that the biggest frustration for New Zealand producers had been marketing.

"What hasn't been done is effective and efficient marketing, particularly of sheepmeats.

"There has been the whole rigmarole of the Meat Board doing the selling, and problems of inefficiency in the
meat processing plants.

"There is present frustration, and frustration over .the whole history of the meat marketing thing," he said.

Professor Schaffner said a lot of things were coming together now: "such as commodity prices on the
 world scene."

Agricultural producers in all the developed countries were in the same situation.

Markets, for various reasons, were declining and commodity prices were down.

New Zealand was in this situation, and this was compounded by high interest rates and high inflation.

This was being further exasperated on the outward side by not getting new technology in meat processing plants, and other sectors of the economy not being floated free, or the sequencing of this.

"There is still support protection for many industries in the input side for the producers," he said.

"So they are really getting crunched over like an American footballer ; every once in a while you see some guy getting hit from about three different directions at once.

"The New Zealand farmer feels he is getting creamed from two or three different directions."

Professor Schaffner said there had to be deregulation of input industries, a competitive meat industry with the latest technology and concessions from labour unions for such technology to be introduced.

"Otherwise opening up agriculture to free market forces could be disastrous," he said.

Professor Schaffner, from the California Polytechnic State University School of Agriculture at San Luis Obispo, is in New Zealand on study leave.

He is at present based at Massey University, in the Department of Agricultural Economics and Business.

Professor Schaffner was at Lincoln College to present a seminar on incorporating agribusiness into the graduate and undergraduate curriculum.