December 2, 2005

Australia, New Zealand gain from farm reform

By Michael Byrnes and Gyles Beckford

SYDNEY/WELLINGTON (Reuters) - Vast, dry Australia and
compact, lush New Zealand may be worlds apart in terms of
landscape, but they share a recipe for farming success -- they
have both abandoned subsidies.

A dispute over support for farmers will be at the heart of
world trade talks in Hong Kong starting December 13 with many
countries blaming an impasse in efforts to agree a global trade
deal on a rift over European Union farm subsidies.

Australia and New Zealand scrapped farm supports 20 years
ago to become two of the least protected -- and most successful
-- farming countries in the world.

Both are also at the head of a band of free traders pitting
themselves against some of the most entrenched supporters of
subsidies to wring agricultural trade reforms out of the
148-member World Trade Organization in Hong Kong next month.

"I feel some sympathy for the small European farmer, but
they won't survive in the long run. They're holding up their
own development," says Charlie Pedersen, the head of New
Zealand's farming lobby group.

In sweeping, flat fields in the Australian outback,
harvesters are already moving south following a golden tide of
ripening wheat. Dust plumes rise high in the empty distances of
the land.

Australia, the second-biggest wheat exporter in the world,
is much bigger than any country in Europe -- 14 times larger
than France, one of the most intractable opponents of further
concessions on farm support by the European Union.

But economies of scale are not the only reason for success.
New Zealand is half the size of France but is the world's
biggest exporter of dairy products and sheep meat.

Peter Corish, a cotton farmer from southern Queensland and
head of Australia's National Farmers Federation, says farmers
in both countries have been forced to innovate, to adopt best
technology and, in many cases, to invent it.


Better Australian cotton varieties and production
techniques set a world's best yield of 3.7 bales per acre last

Australian grains growers are at the forefront of
minimum-till and stubble retention technology, which conserves
moisture and improves yields.

They have also developed satellite navigation to guide
tractors to knife-edge precision in plowing fields, saving
land, time and money and allowing work through the nights.

Productivity in Australia's grains industry had risen by an
average of 3.3 percent a year from 1977/78 to 2001/02, the
Department of Agriculture reported recently.

In New Zealand, farmers now get one-third more milk from a
dairy cow than 20 years ago, while lamb production is up 12
percent even though the national flock is down 40 percent, with
better breeds producing more meat and offspring.

"(These) are all examples of how unsubsidized industries
can compete with subsidized production in other parts of the
world," Corish said. "We've had to become efficient."

Just 4 percent of farm income in Australia and 3 percent in
New Zealand comes from state support -- $1.1 billion and $300
million respectively in 2004.

By contrast, the U.S. government spent $46.5 billion in
2004 to provide 18 percent of farm income. The EU spent even
more, $133.4 billion or 33 percent of farm income.

Yet farmers in Australia and New Zealand have carved out
markets in parts of the world they would not have dreamed of
entering 20 years ago.

Australia is the world's top exporter of beef, barley and
wool, the second-biggest exporter of wheat and canola and is in
the top handful of exporters of sugar, cotton and dairy

Australian and New Zealand winemakers -- part of a global
tide of New World vintners -- have raided markets with such
effect that thousands of French winemakers took to the streets
last year to protest declining income.


Farmers say the reforms have come at a cost, but not as
great as feared. Both countries did away with farm subsidies in
the mid-1980s as part of economic reforms which also saw their
currencies floated.

Australia dismantled farm supports in a step-by-step
fashion, but New Zealand did so virtually overnight.

"When we went cold turkey, although it was very difficult,
it forced us to make the changes we needed to make," said

New Zealand farmers lost 40 percent of their income when
they abandoned subsidies and also had to cope with weak
commodity prices and a rising currency.

A sheep and dairy farmer, Pedersen came close to losing his
farm to debt, but in the end only about 800 farmers out of
80,000 went under.

"A 1 percent loss for the strong benefit of the 99 percent
that survived is not a very high price to pay," he said.

New Zealand's farm productivity has risen around 6 percent
a year, while farming's value to the economy has risen 40

Australian Agriculture Minister Peter McGauran says
protection in other countries reduced their incentive for

Now Australia, New Zealand and the United States want EU
farm tariff cuts of more than 54 percent. France will barely
accept even the 39 percent cuts on offer.

"A low level of protection has not hindered our development
of a competitive exporting sector," says McGauran.

"It's had quite the opposite effect."