Peak milk?

Peak oil is so last year. Milk is the new oil.

This is driven firstly by a tightening of supply, for example due to the droughts in Australia and rising food prices in the US, and secondly due to rising world demand as the world develops & simply gets richer and thus can afford to get in on the west's favourite sources of protein and fat – milk products like cheese, chocolate, cream, and icecream.

Basically… in western culture – and all the other cultures that are taking up a lot of our attitudes (and foods) – milk means prosperity.

BTW, fun fact from Wikipedia's milk page:

South Australia has the highest consumption of flavored milk per person in the world, where Farmers Union Iced Coffee outsells Coca-Cola, a success shared only by Inca Kola in Peru and Irn-Bru in Scotland.

Anyway, with demand likely to keep rising, and food production coming increasingly under pressure, it seems certain milk prices will continue to rise.

What that means for New Zealand

As the article mentions, that's great news financially for New Zealand, the world's third-largest producer (after India and the US).

We shouldn't be too quick to congratulate ourselves though. Rising milk profits means accelerating the rate of farms converting to dairying, already a significant trend over the last decade or two.

Why is that bad? Cows produce greenhouse gasses in big quantities, and converting from pine trees to cows has caused the bulk of the increase in NZ's greenhouse gas emissions over the last 1-2 decades.

As a result NZ, where we so pride ourselves on our clean green environmental attitude and our large well-preserved national green bits that we generally assume we're doing great environmentally, has in fact swung so far over our Kyoto allowance that current estimates put our liabilities at $708 million.

To international visitors that number (US$545m) will sound like nothing, but NZ's GDP is only US$106b – so to us although it's not enormous it's still not small money… And every farm that converts from farming plants to cows makes it worse.

So really the problem is that we still, as of the end of 2007, haven't put in place any system for making the dairy farmers who will be generating this liability themselves responsible for covering the costs of offsetting the greenhouse gas emissions from their now-extra-profitable business.

This isn't just a matter of figuring out the mechanics of calculating and allocating/compensating/trading the gas equivalents, it's a political issue – getting the powerful farming voting bloc to accept big financial impacts is going to be tough.

Until we do that, the rest of the country is effectively sponsoring dairy farms to score this windfall – and we are distorting the market for farmers by not financially acknowledging the additional value that NZ (and the world) gets from growing greenhouse-gas-eating plants.

(I'm personally very disappointed Labour hasn't tackled this in their current term – climate change is the #1 big issue affecting our future, and Labour should be the party making the future-looking short-term-unpopular changes; National, with it's traditional core support from farmers, wouldn't have historically seemed more likely to do it.)