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Geek Man

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  1. MT, Astonishing. Even accepting the over-inflated asking prices of Britain in general, SA3 ($A£ ?) is a grotesque outlier. I grew up in SA3 and visit friends and family there once a year on average. On some of those visits I am joined by friends from overseas. Germany, Australia, NZ, France and America. I think their reaction to the area explains much of the price distortion. They find West Swansea and Gower nice enough, but would never consider living there for reasons that include: terrible employment prospects for skilled people, poor climate, too overcrowded in the tourist season, a bit tacky, a lot of litter, a cultural backwater with poor transport links, over-priced and under-sized mostly ugly houses, expensive/unpleasant/unreliable public transport. In short it does not stack up next to where they live overseas. I agree, which is why I left for NZ years ago. Sure, there are crowd-free corners of Gower that will impress most people, but that's not the only impression visitors go away with. Visitors see that the vast majority of the Swansea urban sprawl is much, much worse than SA3. The approach by road or rail has improved a bit but remains nightmarish. They wonder where the hell you are taking them. It puts them in mind of the poorest bits of eastern Europe where the scars of the soviet construction era remain. SA3 (Mumbles and Gower) and part of SA2 (Swansea West) seem like an oasis when they reach them. It's a relative thing. They would not choose to live in Swansea, but if they really had to, they would choose SA3; at almost any price. As with any urban area of similar population, when you look at the most desirable bits, it matters not that the majority are on state benefits or low-skill low-pay jobs; all that matters is that some of the population are employed in the same good jobs that you find in any western city: health, education, local government, bank managers, and even a few in private enterprise: lawyers, car dealers, manufacturing - the proportion is far too small in Swansea, but that's a different issue. Overall, Swansea is downtrodden and poor but there are enough of these ever-present well-paid to hold up demand in the only pleasant part. Supply and demand operating within a niche market. The wider Swansea urban area also includes many of the cheapest houses in Britain, and the price of these has fallen steeply. Because you don't consider living there, you don't ever post examples. I am sure many other British cities have this same distortion where a poor area makes an adjacent area more expensive than it might otherwise be, but in Swansea the proportion that is frankly, a bit grim, is exceptionally high. I'd wager that 90%+ of the population live in a house/flat that neither you or I (or most on this forum) would ever consider (no matter that you'd have nicer neighbours than in the wealthier bit). If you were looking to buy in a poor UK suburb rather than an affluent one, say sub-£100K, Swansea would score highly because over-abundance of poor properties suppresses prices at the bottom and you get to live next to Gower, perhaps enjoying lovely views over Swansea Bay and Mumbles. Geographically, the more northern poor parts have better access to the M4, whereas driving from West Swansea/Gower to Cardiff is excruciating because you have to go along the sea-front and through the city centre first. The stop-start of the first 10km can easily consume half of the journey time. Yet some people who work in Cardiff choose to live in SA3 and commute. An extra hour per day. Paying perhaps 50% more rent or with a big mortgage. This reflects how much they like SA3, but also how much they dislike the rest of Swansea. To see prices fall in Swansea West, you need to see those who can still afford them squeezed a bit more. Higher mortgage rates and/or cuts at the middle and top of public sector is how this can/should happen. Good luck! Alternatively, poor parts of Swansea might improve so much that pressure on SA3 is reduced. That happens when people like yourself give up on Mumbles and seek better value (and nicer neighbours) somewhere like Mount Pleasant. That's already happening to some degree. If that's not for you, fair enough, but consider moving to some other city where the median quality is much higher and there is less competition for houses that you would consider. Pretty much any other city will leave you feeling less tormented.
  2. It's like Britain insofar as prices are not very far down of the peak if you take a national average, but if you leave out Auckland there are falls of order 10-20% in most areas. Also, as in Britain, you need to factor in an additional 10-15% of inflation since 2008. Even so, it is still at improbable multiples of salary; say 9 or 10, and housing quality here is internationally very poor with seismic risk being an excuse to throw up very light-buildings. Transaction volumes are very low, but interest rates at 2.5% are also at historic lows. Mortgage rates are about 6% and rising but banks are awash with foreign deposits so getting a mortgage is still quite easy. There is a widespread argument that material, labour costs and excessively expensive planning regulations mean that prices can't fall very far and there is no doubt that many of the skilled builders have already relocated to OZ for better pay. Also, I don't think NZ has ever really had a uk 1990s style crash, so there is a strong belief you can't go wrong with pine and plaster (whereas bricks and mortar go horribly wrong if you shake them a bit). Where it gets interesting is where you compare the cost of an average NZ house, currently about $400K, with what that $400K would buy you anywhere else in the world. £240K or US$350K. Ten years ago that same $NZ house would have cost $150K, and back then that would have been worth just US $75K or £50K, so NZ houses are about 2.5x more expensive in the native currency (a bubble) and about 5x more expensive when measured in £ or $US. Apart from the fact that a bunch of farmers have borrowed vast sums to convert everything to dairy, and the fact that the second city needs to be rebuilt, not much has changed. Salaries have gone from about $35K to $50K over this same period. About the only thing that has kept up with the crazy inflation of property prices is property taxes and, you guessed it, student fees. The one thing that has really crashed is farm land, down about 40% and sales volumes are on the floor. Most farms are NZ-owned but high dairy prices have not resulted in much of an economic boost because falling land values and low interest rates make paying off vast debts more attractive than spending $150k on a new tractor. If milk prices revert to anything like historical levels, many will fold. Lately, the buyers have been Chinese. In short, it doesn't stack up. There is no doubt that the Australian-owned NZ banks have been sitting on vast (Asian) deposits for a decade. The result of ZIRP in Japan and lately the same fiscal incontinence in Europe and America exporting inflation to places that really don't need it just so they can import some back. Higher interest rates in NZ, instead of fighting inflation, had the effect of attracting foreign deposits, which banks used to blow a property bubble, which is inflationary. We rent a $500K+ value house for $200/week so the yield calculation suggests something is wrong with the value. Rents being set by earned money subject to rising taxes and costs; whereas house prices are determined by loaned money. Landlords are happy because they think they are going to receive vast un-taxed capital gains. If and when the bubble busts. it is primarily Australian banks that will get burned. The PM is a former currency trader and with an election coming up, no doubt he has figured that average kiwis will be mightily grateful that they have been insulated from rising oil prices and that this years electronics and imported cars cost lest than last year. To hell with the fact that the only new jobs are in salerooms. Meanwhile he is piling on the government borrowing. Isn't this what Labour did in Britain? The next big plan is to sell off state-owned assets like power companies. The problem with that is that because kiwis only buy property, many assets in NZ are already foreign-owned, and the majority of dividends already flow overseas.
  3. How about the shorting the $NZ? This currency has out-performed even the mighty $OZ, despite sustaining two big earthquakes in Christchurch and a disaster taking out one of the bigger coal mines. Unlike OZ, NZ is not especially rich in minerals and just like Britain its (much smaller) oil fields are in decline. Besides timber, wool, meat and most important milk powder (already milk is 20% off peak prices) the main exports are young graduates who head to OZ for higher wages and low taxes. If $OZ is a play on China, and a chance to short the inevitable property collapse and banking crisis that will break there soon, then isn't $NZ even more exposed? It seems to me that small yield differentials have been sufficient to propel the $NZ to quite insane values. Nothing has changed here in 15 years. It is still a backwards economy that rarely adds value to its export and suffers the effects of a tax structure that overwhelmingly favours property speculation over productive assets. Odd. The high currency is hollowing out what was left of manufacturing and at these levels margins are vanishing.
  4. This 1 in 10,000 years statistic turns up a lot. It lends credence to the idea that the designers were incredibly unlucky. Maybe they were not. Let me explain why 1 in 10,000 probably isn't right, and why even if it is right, it is still a significant risk. 1) This earthquake could have ruptured much nearer this reactor (it was 150km north of here) - the shaking could have been stronger at Fukushima. Not changing the magnitude, only the epicentre location could have made things worse (much worse for Tokyo too). Look at Christchurch to see how location trumps magnitude in generating destructive ground accelerations. 2) Japanese seismic and tsunami records would need to cover a vast period of history to know what the average recurrence interval really is. It could be 1000 years or it could be 50,000 years. We just don't know. Our seismic record of great earthquakes in Japan is orders of magnitude too short to say with any conviction that this was a 10,000 year event. Unusually, this event is going to lay down some very clear signals in the sedimentary record (distinctive isotopes) for future trench-diggers to ponder over, but in general nature is not very good at recording the magnitude of earthquakes and tsunamis, if indeed it records them at all. The brief historical written record is all we really have and only a few decades of instrumentation along with the observation of the rate of subduction and likely strain accumulation, subject to some guesses about the physics of rocks way below drilling depths. It is a dangerous extrapolation to go from this to claiming it was 1 in 10,000 years event. It may be our best guess, but it is still a guess. Previously it was based not so much on experience of similar magnitude events, just a brief absence of them. We are going to witness several more of these before we can talk about probabilities with any confidence. In a perfect example of boot-strap logic, seismic hazard is largely based on recorded earthquakes, so we have a few thousand years of nasty surprises ahead. 3) Every nuclear facility has to survive 50 years of such risk (and where we build replacement reactors on existing sites, or dither about decommissioning, much longer) so whatever the average recurrence interval is, needs to be divided by the number of years that the site will be vulnerable for. Taking 1 in 10K years as fact and 50 years occupation, the risk here was just 1 in 200 over the lifetime of the site. 4) There are several other sites along the long Japanese Pacific coast and exposed to different parts of the subduction zone. It is unclear if 1 in 10K years means "in Japan" or "at Fukushima". If it means at Fukushima, and I believe that it does, there is also a 1 in 10K risk to uncorrelated events along the coast facing different parts of the subduction zone - leading to perhaps 1 in 3000 year recurrence at "any" Japanese coastal nuclear site (because the rupture length of this earthquake was much less than 1/3 of the length of the subduction zone). So over any 50 year period when nuclear sites occupy 3 uncorrelated-risk regions, each with a 1 in 10,000 year risk to different events; the chances that one will be affected is just 1 in 70. At 1 in 1000, it would be 1 in 7. There is absolutely no way that the recorded history of Japan could rule out events like this occurring on average every 1000 years (or how about in clusters that are 10,000 years apart?). 5)we may have arrived at an equivalent failure at Fukushima even if the earthquake and tsunami were smaller anyway. We know things failed. We don't know how marginal that failure was. At what lesser magnitude would it have survived as intended? Above or below the design brief? For any conspiracy theorists reading, one more: 6)Maybe the earthquake and tsunami were not quite as large as eventually reported. The magnitude of this earthquake was revised three times upwards, initially 7.9 on the USGS site. The height of the tsunami was revised up several times too. Revisions are normal (but from 7.9 eventually to 9 is unusual). Note the enormous political benefit in such exaggeration, moving a 1 in 1000 year event that was actually within the design specifications to the realms of an "exceptional" 1 in 10K year one that was just a little too big to blame anyone and rare enough to be reassuring that nuclear is pretty safe. With so much to gain, one should be suspicious. For example, if a 7.9 event had brought us to this point rather than something exceptional, the debate would be totally different. Geek Man
  5. I have added wind forecasts for 1000m, 2000m, 3000m, 4000m and 5000m at these links. The higher dust goes, the more favourable the forecast becomes for the next week or so.
  6. A website I own provides weather forecasts for Fukushima (using the GFS model). I have just added the recent wind (and weather) history nearby from actual measurements. When (and where) the wind blows (and blew) if you like. It is forecast to mostly blow dust offshore for the next 10 days, apart from a period on Sunday. Hopefully, accompanying rainfall on Sunday will keep it local. I will add forecasts for various elevations next. Wind directions at height can be very different to the surface. Fukushima weather forecast Recent wind measurements from Fukushima Airport
  7. MT, I sympathize, I really do. I grew up near Bishopston but left 20 years ago. I recall that back then a detached Gower bungalow would set you back £70K and terrace in Sketty or Bynmill about half that. Graduate starting salaries in the oil industry in London were £14K (I stuck it at BP for a few months, then did a phd) which I think was close to the average Swansea salary. After 20 years, local salaries are at best 1.5x 1990 levels, whereas house prices are 5x higher. The tax take is much higher now. Due to family and friends I go back to Swansea from time to time, but as far as possible I try and meet up on the continent. Some place where the scenery and the weather are more conducive to good times, and where you can rent a better house for half the cost of a Gower Holiday cottage. Places like Brittany or the Swiss Alps that are still much better value, despite the pummeling that sterling has suffered. My mates who did not buy before the boom have since either left the area, or are still renting in their forties. The ones who were lucky enough to buy before the boom can't afford to move now that they have families because the rungs on the ladder moved so far apart. It's that simple. None has bought or moved in the last 10 years. There was no ladder. There must be ten thousand or more houses in Swansea and Gower that an estate agent would value at over the magic £250 threshold, yet the local job market is such that only a few hundred earn enough to raise a deposit and service that kind of debt - and these are mostly in the public sector. £250K+ houses are either not selling, or changing hands between these landed boomers, perpetuating a delusion. This is not just any old bubble, this is a bubble that has detached itself from reality and is now drifting above 95% of the local population. Something has to give. But when it does, might Swansea go back to being the crime afflicted city it was in the 80's and early 90's? What happens when they turn the benefits tap off and the public sector gravy train stops? Same city. Same divisions. A friend in Cardiff recently employed a 23 year old from Swansea West. This young chap mentioned that he was the only person he knew with a job. He's flatting with 4 guys on housing benefit who wonder why he bothers to work. Meanwhile all but a few of my mates in Swansea/Gower who have jobs work for the public sector. University, Schools, NHS, County Hall, Welsh Assembly. I'm thinking of 45 out of 50 people here so when I read that 40% of people in Swansea overall work for the public sector, I suspect it to be much higher in Swansea West. Swansea. A town where you need to take a taxi from the bus station to get to the train station. Where else would you turn one of your finest civic buildings into a curry house and call it the Patti Raj (if you are going to do that, at least have the wit to call it the Cha-Cha-Cha-Patti)..and then there is soul-less SA1 and that stupid tower - what's all that about?This phallus surely ranks (sic) alongside the follies of Dubai in defining malinvestment at the peak of a credit boom. I travel very widely and I can see that this is a profoundly dysfunctional and deeply delusional part of the world. The property market is the least justified I have come across bar none. MT, you seem to recognize perfectly what is amiss, but your posts read like the witterings of the me that never left. Get the hell out man.
  8. Artificially high you say. Sterling is hovering at multi-decade lows against all of the currencies that you list. I'm not saying that you are wrong, just that perceived sterling strength has been largely due to a period of engineered $US weakness and a modest recovery against the € because of the badly handled Greece crisis. The market never stopped being bearish about sterling; it just got briefly more bearish about the $US and the €. How far above its lows is sterling for the 5 hedges that you list? A few percent. What is it with goldbugs and their overwhelming urge to always sell the thing that has never been cheaper, and buy the things that have never been more expensive? That's only good advice, until it isn't. Property crashes take years. Gold and currency speculation can wipe out 10% of you worth in a matter of hours or days, and then do it again. Having made one lucky currency trade followed by one equally lousy one, all I learned about currency speculation is that you will lose some money making the round trip. I am just happy to get back to where I started, a little wiser than before. Having just returned to NZ from the UK I can make a few comments about that currency pair. £ used to trade in the 3-3.8 range for years, recently fell from 2.85 to 2.05 bounced to 2.2, now at 2.1 - so does that make 2.1 good value or does that make 2.1 historically expensive? I would say that this place is every bit as out of whack as it is in Britain: stupid property prices, crippling rents, bonkers private debt levels and arrears, terrible job security, low wages, long hours - only the govt. does better, but that's partly because it has negligible defence spending and negligible geo-influence too. Britain has far less to worry about when it comes to natural disasters and an oil spike could play havoc with the margins on exporting bulk goods across the ocean. Any bovine disease would be devastating. Selling $NZ and going long sterling was the Giant Squid's top tip for 2010, though I dare say, being evil, they expected the exact opposite. As a geophysicist I was intrigued when the $NZ rallied after Christchurch was hit by a massive earthquake. Keynesian spending to create boomtime was theme of the post-quake economic analysis. Then I was doubly curious how the $NZ didn't flinch when big oil pulled out of the Southern Basin last week. That was formerly the great hope for future NZ prosperity - call it 20:1 odds on gaining Gulf State wealth overnight. Surely that small chance of a massive gain was previously factored into the price of $NZ? Apparently it was not and neither does the market care that NZ will now follow Britain to become a net oil and gas importer. The reason bad news didn't matter was is that in this climate of $US ZIRP, yield commands a high price and in search of yield, bad news will be entirely ignored. In fact any news apart from IR's is almost always ignored inasmuch as the market only hears what it wants to hear, if it hears anything at all. At some point the mood will change and much more subtle negative news than these two body-blows will be quoted as as if it somehow "plainly caused" the currency to fall. In general, I rarely see any evidence that news gets in the way of the market momentum. If sterling or the US dollar rallied from here, economists would not find it difficult to come up with plausible reasons and if none were obvious they would simply claim they had been previously oversold. That either unfashionable currency could now rally and that gold could retreat may not seem likely but it is much more plausible than most on here will admit.
  9. Rachel, Broadlands may be an area to avoid for a different reason. It is prone to subsidence. Deep soil over weathered limestone boulders is the cause. Prior to development, some of the collapses in this area were on a large scale - 30 foot deep holes and sinks are still visible in adjacent fields. The developers were aware of the problem, filled some holes in and undertook all of the precautionary geophysical survey work that was required. I was not involved in the survey, but I have done similar work very nearby. Strategic bits of green amongst the housing have been set aside because these bits are most prone to sinking. In theory, because the builder was on top of the problem, all houses here are now reasonably solid but a more cautious planning department would not have allowed this area to be developed at all. I for one would avoid such areas at any price, especially in South Wales where the risk is seldom priced in. In similar geological settings, problems can arise after a many years when broken drains and surface run-off from roofs, roads and driveways allow cavities to slowly develop in unexpected places where soil is washed into the voids in the bedrock below. Subsequent collapse is rarely catastophic, but it can be very expensive. GM.
  10. I happen to agree. However, it doesn't really matter what people think about the man who asked the question so much as the fact that it wasn't answered. These quotes cut to the core and they didn't deserve to fall off the front page so quickly. The name of this forum doesn't nearly embrace the scope of the debate any more - it is clear that our insane property prices are simply a local symptom of a deliberate credit boom, manufactured in the USA in collusion with Japan and Europe. That 0.5% US rate cut suggests that we have a financial system that can't even stomach pausing for breath, let alone a long overdue recession and a healthy re-balancing. The West can't tolerate anything but accommodative interest rates any more - it is effectively in denial of risk. My expectation is that these cuts won't avoid us following the Japanese experience and then some. Right now, US/UK rates should be approaching double figures but with rates so low after 10 years of growth the central banks don't seem to have enough rate cutting ammunition for the problems ahead. Helicopter Ben just fired two shots at once. That seems rash - desperate even. Before long perhaps he will be forced to do it again, and again, and then what? No more bullets and the US economic underbelly will be exposed to another terrorist attack or natural disaster.
  11. cgnao, I give you more credit than dstars does - I actually don't believe that you believe your own rants but I fully concur with dstars that you are getting in the way of the debate and leaving this forum open to ridicule. You have been smart enough to make some good calls (respect) but you are now abusing your credibility to endlessly ramp gold, something in which you have a declared vested interest. I dare say you and the other goldbugs will have some success because people think you have a 10% chance of being correct will no doubt figure that they should stick 10% of their assets in gold. Maybe you will get your bubble - I hope not because gold mining is destructive, polluting and a dreadful waste of hydrocarbons. Meanwhile, as dstars points out (and as ?..! probably would also point out if he could be bothered)...you are suggesting that sterling will hyperinflate against what exactly? How the hell can all currencies simultaneously hyperinflate? It's absurd, and you know it. As a geophysicist who has seen my fair share of both the gold and oil industries, I suggest that we are hurtling towards a period where people will gladly sell the former to buy the latter. One is a useless soft metal that can be made to look cheap by Argos and the other is something vital that is running out. A kilo of gold offers the potential to look pretty whereas a kilo of oil can make a humans vastly more productive. Since hardly any processes actually consume gold, we will never run out - long term, it it's more of a hedge against oxidation than anything else. The incredible levels of debt demand increased future productivity, not shiny and useless metals. Uranium, nickel, platinum etc are different beasts altogether. I see no chance that gold will break away against oil and other finite commodities, but a strong likelihood that these will soon break away against gold. The only question of any interest to me is when? Let's see some graphs of gold against uranium, oil and wheat and energy for a change. The great tragedy of our time is that under Labour we have spent 10 years investing our saved billions in unproductive items like property (or having our savings accounts do that instead). Geekers
  12. Santander = Cahoot right? I wonder, can these foreign owned banks with UK customers expect a NR style safety net if there is a run?! GM
  13. UK housing market set for a painful correction, Greenspan warns By Edmund Conway Economics Editor Last Updated: 12:14am BST 17/09/2007 Britain's housing market is heading for a painful correction, according to the world's most renowned economist and central banker. # Northern Rock crisis takes toll on confidence # Iraq war was about oil, says Greenspan Alan Greenspan, the former head of America's central bank, the Federal Reserve, issues the prediction in an exclusive interview with The Daily Telegraph today. advertisement He warns of "difficulties" ahead for UK home owners, as rising interest rates bring house price growth to a shuddering halt. The warning comes only days after the Bank of England was forced to bail out the mortgage lender Northern Rock, amid the escalating credit crunch in the City and markets around the world. Mr Greenspan, the central banker for a number of United States presidents from Ronald Reagan to George W Bush, also says that Britain's economy is even more exposed to the financial turmoil than that of the US. In a wide-ranging interview he also warns that: • Inflation will pick up dramatically over the coming years, as much as doubling from its recent lows. • Interest rates may have to hit double figures in the coming years to keep price rises at their current low levels. • Britain must overhaul its flagging education system or risk being left behind by other vibrant economies around the world. However, Mr Greenspan provides some reassurance about Britain's prospects in the coming decades, saying it will be one of the best-performing Western economies, thanks to the Thatcherite reforms of the 1980s and the strength of the City. The UK "may be one of the most competitive economies in the world", he adds. However, it is Mr Greenspan's warning on housing and interest rates that will cause most consternation. The 81-year-old economist, an adviser to Gordon Brown, said that recent increases in house prices - particularly those in London and the South East - were unsustainable. "There are going to be some difficulties," he says. "Can [the boom] last No. You're already beginning to see the mortgage rates are moving; a lot of the two-year fixes are beginning to unwind, and the teaser rates are going," he adds, referring to mortgages where rates jump after an introductory period. He says that banks are already being forced to write off billions of pounds of debt. "It's going to turn, it's got to turn," he says. Mr Greenspan also warns that Britain is more vulnerable to the effects of the credit crunch than the US. "Britain is more exposed than we are - in the sense that you have a good deal more adjustable-rate mortgages," he says, referring to the standard variable rate loans that many households have chosen over fixed-rate deals. The Bank of England has raised interest rates five times in the past year to their current 5.75 per cent. However, the instability in money markets has meant that the effective rate paid by millions of families - the so-called standard variable rate - has actually risen to heights it last hit when the Bank rate was a full percentage point higher at 6.75 per cent. "In Britain the housing [market] hasn't turned yet, and the consumer households are more subject to interest rate changes than in the United States," he adds. His warning comes with the UK banking system in a state of crisis. Worried customers have withdrawn £2bn from their accounts with Northern Rock since Friday, when it emerged that the high street bank has had to arrange an emergency loan from the Bank of England to prevent it from collapsing. There are also growing signs that after a decade of almost uninterrupted growth the housing market is slowing dramatically. Rightmove and the Royal Institution of Chartered Surveyors have reported a sudden dive in prices. Although he expects the housing market to take a turn for the worse, Mr Greenspan says the UK economy is well placed to deal with shocks, because the reforms following the miners' strikes in the 1980s made it a more flexible place to do business. "You [in the UK] haven't even had a taint of a recession for an extremely long period of time – and a goodly part of that is the flexibility that came out of the crush between Scargill and Thatcher," he says. "That was the defining moment, and to their credit Blair and Brown did not endeavour to unwind it. They recognised that there was something fundamentally good for British labour in having a flexible economy. "It's like tough love, as we call it. It's unhappy-making, but in the end it works."
  14. Drought, oil send food prices soaring Asa Wahlquist, Rural writer | September 15, 2007 IT'S called agflation and it's coming very soon, propelled by climate change and drought. Grain prices have hit record levels, and those prices will ramify through the feed chain - beef, dairy, pork, eggs and chicken -- and reach consumers. The nation's food bowl, the Murray-Darling basin, does not have enough water in the system to keep 150,000ha of citrus, apples, pears, apricots, plums, cherries, table grapes and winegrapes alive, let alone in production. Fruit production in the basin is worth more than $1.5 billion and accounts for 60 per cent of Australian-grown fruit. Australian Horticulture Council chief executive Kris Newton says the severe cutback in irrigation water could result in price rises, as seen with bananas after Cyclone Larry. "But that will be across all the commodities," Ms Newton said. "We are facing a disaster unprecedented in Australian history. I can't think of anything in agriculture that comes even close." Dairy prices are skyrocketing, too, although that is little comfort for those farmers having to pay high grain prices. Australian Dairy Farmers policy director Robert Poole says agriculture is going through its most profound change in modern history. "The whole oil price, climate change, food for fuel scenario -- that has changed the world forever," Mr Poole said. "The linking of agriculture land and its use to the price of energy, in the medium to long term, will radically change the way the world works. "We will see land use change, which will change the supply pattern of all products, including dairy products. We will see the run-down of stocks, we will see the increasing of food prices. It will bring the issue of food security back on to the table." Those with good wheat crops, and there are patches in most states, or dairy farmers in coastal areas where there has been good rain will have a very good year. But the dry winter over the Murray-Darling basin has withered crops and forced intensive livestock farmers into the rising grain market. In June, ABARE forecast a 22.5 million tonne wheat crop -- if there were normal conditions. There weren't. The next forecast is out on Tuesday, and will probably be between 14 and 19 million tonnes. Grain prices are rising due to increased demand from the biofuel sector, along with a series of weather events leading to crop failures this year, which have resulted in world grain stocks being at a 30-year low. Australian Lotfeeders Association president Malcolm Foster has been campaigning against mandated ethanol in petrol. "It is putting extreme pressure on the world grain prices, because of what the US has done," Mr Fraser said. "Our concern was Australia would do it and put pressure on Australian prices, but it is happening in the US anyway. The impact is going to be quite severe on food prices around the world." Along the Murray River, irrigation allocations have been slashed. On the NSW side of the Murray they are zero, on the Victorian side 5 per cent, and in South Australia 13 per cent, rising to 16 per cent next month. Only on the Murrumbidgee do growers have enough water to survive, with 60 per cent of high-security allocations. Ms Newton said around 48 per cent of normal allocation was "required to simply keep them alive -- not produce a crop, just keep them alive -- and we are not going to get that, with the exception of the MIA (Murrumbidgee)". She said that, even with above-average spring rains, "there is not going to be enough. Basically between now and Christmas they will die". Blair Trewin from the National Climate Centre says 2007 has been the worst post-drought year on record. "Not only was 2006 a severe drought year, but 2007 in many areas is unprecedentedly poor." Dr Trewin says climate change, particularly rising temperatures, has made climate forecasting more difficult. "Our outlooks are based on historical relationships between sea surface temperatures and rainfall and temperatures," he says. "We are not as confident as we once were that those relationships are still stable." He says there are signs a La Nina is developing, although it is late. "There is still hope for decent rainfall, particularly in the summer rainfall areas," Dr Trewin said. Ms Newton points out that horticulture is a huge employer in the regions, in food processing, winemaking, farm and irrigation services, transport and even wine and food tourism. Dairy also has a big multiplier effect. Milk production since the drought began in 2002 is down by nearly 2 billion litres. Mr Poole estimates that has cost "about 15,000 jobs and approximately $3 billion to the economy". Australian Farm Institute executive director Mick Keogh says: "The thing that scares me this time is when you add the widespread nature of the drought to the lack of water. "There is not a sector of agriculture, with perhaps the exception of some of the coastal fruit and vegie and the northern beef industry, that are missing out. I can't recall that sort of widespread impact before." The grain industry is full of rumours about grain growers, new to hedging, being badly caught out. Risk management consultant with regional NSW company MarketAg, Colin Lethbridge, explained that "because AWB hasn't been there, growers have had to do their hedging themselves this year". Many locked in a prudent one-third of their crop at the beginning of the season at what were very good prices. Then prices soared and the crop failed. "Now they are facing a $US120 to $US150 loss a tonne. They might have sold forwards only 1000 tonnes, but that is $US150,000 which is perhaps $200,000 on top of your input costs. There are a lot of blokes around here who are still short and who may lose a property," Mr Lethbridge said. Ms Newton is worried that if permanent plantings die, many farmers will not be in a position to replant. The average farmer is over 55, "and you have to wait eight to 10 years (for income), assuming you have the confidence to replant, or you can afford to". "People are going to throw their hands up and go, 'well that's it, I'm out'," she said. Ms Newton says many of the best operators, and the most innovative, will be the hardest hit. The most water efficient, computer-controlled method of growing fruit trees results in a dense root ball. "The intention is to reduce the amount of water it needs, but it means it has no deep tap roots so the moment irrigation goes off and there is no rain they will die in about two weeks. "Most of these people are extremely efficient farmers. We are not talking about the marginal or the vulnerable who may have been caught up in the drought." Ms Newton says the effect of the dry will be felt in the cities. "Whether it is in the hip-pocket nerve, whether it is in terms of unemployment in regional communities, it will be felt across the nation," she said. Mr Keogh said: "I don't think anyone in their wildest dreams would have imagined a problem on this scale."
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