What is missing from this discussion is the understanding that consumers perceptions of New Zealand, New Zealand wine and how it relates to their wine experience determines the activity in the market.

My observation is the perception of New Zealand is very singular and pidgeonholed at one tiny space in the giant sea wine. This has the potential for the fashion police to say “been there done that” or ” I’m over that style”. While this is begining to happen in the USA within the trade, consumers are still happy. Beware of the fashion police.

I believe the challenge is to make every effort to connect directly with consumers and buyers and “put a name to the face” or “tell a story”. This has the potential to lift a wine brand to a different place and the purchase is no longer made exclusively on price.

Because this is missing many consumers stay stuck in one place and just buy on price. Interesting article in your National Business Review back in December about the importance of New Zealand businesses learning to tell their story. Right now too many are content on letting someone else do it for them or just expect it to happen. Not a good thing to outsource.

If it was perfect competition, then why isn’t all the wine selling at a lower price? That is the kicker for me – if they can sell the initial wine for different prices there must be some type of market power going on.

If you have an explanation for why this might be, and why it may still be perfect competition, then I would be interested in hearing it (I think I might have an idea – but I’m feeling a little to clogged up with the flu to realise if my idea makes any sense 🙂 )

“I would argue against the “perfect competition” argument for wine. Product differentiation is clearly standard practice for the wine industry.”

Completely agree – that is how I feel about the dealing as well.”

I disagree. Certainly in the retail market there is high differentiation, but we are talking about a wholesale market with a firesale here. In the wholesale market I am willing to bet it is almost perfect competition. See my above comments that people can’t tell the difference between low cost and high cost wines. Meaning that the increase in cost is all in the branding at the retail level. Additionally any winery that has particularly expensive/fancy wine is unlikely to participate in the wholesale market.

I suppose that the there must be a lot of concern surrounding the ETS as well – fears of a “tipping point” in the industry

I agree that lamb consumption in Europe is falling – but production levels have also collapsed. Even at $3.84 a kg for lamb prices would be up 60c on where they were a year ago. Add to this the fact that Aussie has been forced to destock over the last couple of years and the world price of lamb looks set for an upwards correction.

It is interesting that you say that this is well below production costs – surely meat farmers around the rest of the world must be feeling the same pressure, which would imply that there is further upside risk for meat prices.

“We have no advantage in cost of production, we used to have”

Our costs have risen heaps, but the cost of farming overseas has risen even more – this implies that our cost advantage is now greater.

“The UK is becoming a large dairy farm. More sheep and beef farmers are converting to dairy due to appalling returns”

Indeed, which is why I’m saying that Milk prices are going to ease – and why meat prices will get boosted (as these conversions have been happening for several years now).

“Matt farm Values are falling”

I agree that we will see them fall – but I can’t say they are falling without any evidence. You seem to have evidence of it happening in your area, and I’m glad that you have shared that with me 🙂

The dairy farmers I have talked to do not seem to be as pessimistic about the outlook, specifically given the fact that any fall in commodity prices would also see our dollar slump – which would help to buffer any reduction.

I also completely agree with you that there is a risk that some new farmers are relying too much on capital gains rather than productive farming activities in order to get returns. What regions do you think are most heavily concentrated in this sort of speculative activity – I would pick the East and South of the South Island myself.

Thanks for the information by the way 🙂