Barber’s Wire: That was 2018 – now for 2019

Allan Barber

Allan Barber takes a look at how many of last year’s key challenges will continue into the New Year.

From a New Zealand domestic perspective the attempt to eradicate Mycoplasma Bovis has had the biggest impact on farming, most of it focused on the relatively small number of properties forced to cull their entire herd, some of it directed at those properties under surveillance or Notice of Direction, and some of it on the agricultural service industry, including meat processors, cartage contractors, stock agents and saleyards, as well as calf clubs and A&P shows.

Following calving, the Ministry of Primary Industries is optimistic the disease may have been eradicated which would be the first time any country has achieved such an outcome. However, it is still too early to say with complete confidence the hitherto impossible has been achieved – 2019 will almost certainly be the year we know for sure, one way or the other.

Brexit continues to provoke enormous speculation about the UK’s future relationship with the EU. This saga has now dragged on for well over two and a half years, with little more than two months before the official exit date of 29 March. At that point, it looks increasingly unlikely the British Parliament will have approved Theresa May’s agonisingly negotiated exit agreement in spite of all the EU states having voted in favour of it. The Irish backstop which would see Northern Ireland remaining as part of the EU customs union until, or unless, the UK successfully negotiates all other terms is still the spanner in the works.

The deferred vote on May’s Plan A was defeated by 200 votes, the largest defeat for a sitting government since 1924. The current alternatives are: Parliament votes for May’s Plan B (likely to fail), EU comes up with some palatable concessions to satisfy all MPs (no chance), Britain crashes out of the EU without an agreement or gains an extension to attempt to renegotiate (either is possible), Britain decides to stay in the EU in spite of the referendum result or conducts a second referendum (both are constitutionally unacceptable).

On balance, I sense Britain will ask for an extension, while it tries to find a solution which is satisfactory to both EU states and a majority of British MPs. Even if that is the outcome, there is almost no chance a satisfactory solution will be found because the EU is fed up with Britain’s stalling and the Conservatives can’t agree among themselves let alone with Labour. 2019 may not see a solution. In spite of New Zealand efforts to protect its sheepmeat quota, this won’t be the most important issue on Britain’s agenda to resolve.

A third issue is the world trade and economic situation which poses potentially the biggest risk in the immediate future. The world is undoubtedly in the later stages of the economic cycle which has seen positive growth for nearly 10 years since the Global Financial Crisis (GFC). The largest global economies have printed money, known as quantitative easing, to recover from the worst effects of the GFC while reducing interest rates to stimulate economic activity, although the Federal Reserve has lifted rates recently. Unfortunately, if activity stagnates there are no further rate reductions available.

The US, EU and China have large amounts of debt sloshing around without little hope it will be repaid any time soon. Italy, among other EU members, is very vulnerable to any economic downturn and has no chance of being able to borrow more, nor can it take the traditional move of devaluation because it is tied to the Euro.

The trade war between the US and China is causing a state of global nervousness with all other economies subject to fallout. New Zealand has a large and increasing proportion of its agricultural trade with these two countries, while the EU and UK, although diminishing, are still very important as key export destinations.

One major positive is the CPTPP which New Zealand signed up to as one of the first six signatories with the agreement having already come into effect. This will have a positive impact on trade with Japan, notably beef exports, putting NZ on equal terms with Australia which stole a march by signing its FTA in 2015.

Another critical issue which came to the fore in 2018 was the growth of alternative or plant-based proteins which attracted a lot of investment funding, supported by a growing segment of first world society wishing to reduce the impact of livestock production on the planet. This trend will undoubtedly continue to exert an impact on traditional farming methods and gain an ever increasing share of global protein consumption.

The impact of farming, particularly livestock production, on the environment is a closely linked issue which gained huge traction during this year and 2019 will be no different. This will affect New Zealand as well as our trading partners, but it is almost certain that the deliberations of the Tax Working Group will result in the application of the Emissions Trading Scheme to agriculture. This is likely to be decided in 2019.

In summary, 2018 was a year of unexpected developments and a number of uncertainties. In an increasingly volatile age, whether politically, economically, financially or climatically, 2019 is likely to be even more challenging.

Allan Barber is a meat industry commentator. He has his own blog Barber’s Meaty Issues and can be contacted by emailing him at allan@barberstrategic.co.nz.

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