Monday, February 20, 2006

Sideswipe

A tight spot? Taken by a New Zealander in Paris; A Kissy face tree (see article below).
By Ana Samways

Nail these facial features to your 100--year-old Pohutukawa: A range of expressive faces for your favourite tree - a prankster face, grumpy face and glow-in-the-dark varieties. Facial features made of resin are tinted to blend into the natural crannies of tree bark and hang from nails.

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A Te Awamutu dairy farmer was having problems with his effluent sprayer - it was jammed and not distributing the animal waste cocktail from the cowshed on to the paddocks properly. He drove up to the end of the sprayer arm in his new ute and from the driver's seat fiddled with it. Somehow he managed to catch the towing strop under his ute, which pulled the sprayer arm around to jam in his window. This sudden jerk on the sprayer fixed the jam and effluent intended for the paddocks sprayed mercilessly into his ute. Unable to stop the flow, he eventually escaped out the passenger door and stopped the sprayer by the time the effluent had reached the top of the seats. (Source: Te Awamutu Courier.)

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A reader suggests it's rather droll that the Maxim Institute, whose director was in trouble after revelations of plagiarism, has at the end of its latest newsletter this warning: "If items are published elsewhere, Maxim should be acknowledged." Perhaps to be safe it should also read "and thanks to anyone Maxim copied this from".

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Reader Ian Porten of Green Bay realised how different the Australian and New Zealand accents are while working as a radiographer across the ditch. "A patient was lying on the x-ray table and I called out to her to hold her breath; as I looked over, she reached up with both hands and held on to her breasts. Another incident involved a different patient who I asked to take off her jewellery. I asked her if she'd mind removing the necklace that she'd left on. She hesitated, gave me a funny look and proceeded to remove her knickers."

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Taxman in the Sky: The British Government has advised tax collectors to use satellite photographs to monitor homes for additions or modifications that can boost the value of the property - and the taxes owners must pay. "Aerial photographs are particularly effective in rural areas where improvements are hard to see from the road," a manual for tax inspectors explains. (Source: reason.com)

Editorial: No future in a weak currency

As the stubbornly buoyant New Zealand dollar finally begins to ease, the Economic Development Minister has delivered a timely message. New Zealanders, says Trevor Mallard, will never enjoy the higher standard of living to which they aspire off the back of a low dollar. It is a worthwhile point to make to those who see some sort of economic salvation in a low-dollar economy, or those who, in the minister's words, may be thinking of building their business planning around an exchange rate of 50-odd cents against the United States dollar.

Mr Mallard said he hoped, and expected, that in the medium to long term the currency would be higher than it is now. For that to happen, however, the economy will have to undergo a significant transformation and strengthening. New Zealand must become much more efficient at using labour and capital, and become less a commodities producer than an exporter of high-value products.

A floating exchange rate and a reliance on commodities will always be a recipe for big cyclical swings, and periods of inconvenience for exporters. When the dollar is strong, they receive less when they convert their foreign earnings into the local currency. A strong kiwi should be incompatible with a high current account deficit and an economy dependent on commodities trading. But, as evidenced by the interest of foreign investors despite the present serious deficit, the exchange rate has lost much of its link to economic performance.

Economic transformation has, of course, been much discussed, but proved elusive. As much can be taken from the dollar's average value of about 57USc in most of the 20 years since it was floated. It signifies that this country has been far less smart than the US, and even the likes of Australia and Ireland, in fostering productivity growth.

Improving that level of growth has been touted as the centre-piece of the Government's third term. But its canvas is, thus far, short on detail. The key to that growth, and hence higher wage growth, lies, however, in a mixture of innovation, especially in the likes of IT and communications, a skilled labour force, improved infrastructure, significant investment and astute decision-making.

Some of that, such as labour upskilling and infrastructure development, lies with the Government, and it can enhance its role substantially by ringing changes to science and research spending in this year's Budget. And by offering every encouragement to the private sector to invest strongly. Impediments, when identified, should be swept aside.

If the Government's ambition comes to nought, Mr Mallard's hopes will also be dashed. In that case, it would be reasonable to assume that, for the foreseeable future, the dollar would sit around the 58USc to 60USc level, only a slight improvement on the historical average. It is worth noting the downside of this for importers, or for those who wish to travel or invest overseas.

Mr Mallard's statement was a reminder to such people of the benefits that accrued before the oil crisis of the 1970s when the exchange rate was around US$1.50. New Zealand's failure to quickly grab hold of inflation in the 1980s put paid to that, as, subsequently, has the higher productivity growth rate of the US.

There is no quick way to ensure some of that ground is permanently retrieved. In the first instance, words need to be replaced by action. But Mr Mallard is right to at least point out where long-term prosperity lies.

Brian Rudman: Horse sense sadly lacking in our road managers

Do you sometimes get the feeling the lunatics have taken over the asylum? Late last week, Auckland City Council gave permission for an advertising agency to block off central city Albert St on Saturday to film a commercial.

Saturday morning shoppers were to be replaced by a herd of horses - that's right, horses - galloping up the busy thoroughfare.

Businesses were leafleted to assure them that the beasts would be carefully corralled during the shoot, which was very consoling I'm sure. The city council, for its part, was to receive just $700 for the inconvenience.

Now I admit, after the V8 car race fiasco, we should thank our lucky stars it was only an adman who'd come knocking at the Town Hall door and not some budding entrepreneur with a vision of Auckland as the Pamplona of the south. "You want to run bulls through city streets for a week? Certainly sir, that will be, shall we say, $500 a day, and don't worry about the manure, well use it on our flower beds."

As it turned out, the warning leaflets about the stampede had hardly dropped on retailers' doorsteps when the protests came flooding back to city hall pointing out that Saturday was a major trading day for retailers. It was also pointed out to city officials that the shopkeepers were already facing months of disruption as a result of the council's $100 million street upgrade programme and didn't welcome further annoyances.

After a day of flurry, sanity eventually prevailed and the planned horse business was cancelled. (As far as Albert St was concerned anyway, but I did see a public notice closing off the Hopetoun Street Bridge ... )

Talking bridges, Saturday's nightmare chaos on Mangere Bridge suggests that national road operator Transit New Zealand is no better than local road managers when it comes to ensuring that the road-user is the most important factor in its business.

This is particularly so in Auckland, where years of under-funding of both local and national networks means that a small blockage in one part of the system can rapidly lead to a heart attack, crippling the whole city for hours at a time.

Just a week ago I was suggesting that while we waited for the billions of dollars of transport projects the Government has promised for Auckland, it would be smart to better manage what we already had.

Now, in quick succession, two further examples. Saturday's blocking off the main route to the airport and the major route from the west to the south for six weekends in a row, with inadequate advance notice and hopeless detour instructions, is just unacceptable.

That taxis and Crown limousines - Trade Minister Phil Goff was one of those trapped for two hours in the snarl-up - got caught up is a pointer to the poor advance publicity. With adequate warning, and detour signage, at least people would have been able to make alternative arrangements - or stayed at home.

It's hard also, to believe the traffic planners couldn't envisage what was going to happen.

We all know that Auckland's road network is like a fat man's circulatory system - one blockage and it's good night nurse. Sure, bridges need maintenance. But how about in the quiet New Year period, when most people are on holiday?

Meanwhile, the Vector cableworks that I wrote about this time last week continue to delay traffic along Victoria St West out of the city.

I was assured that by the time of last Monday's column, the work would be over. As of last Friday, they were still snailing along towards College Hill, reducing outbound traffic to one lane. The most infuriating aspect is to finally get alongside the blockage to see no work going on at all, just a couple of diggers sitting there, all tucked for a good night's rest.

As for the five-hour closure of State Highway 1 north of Wellsford in mid-January after a fatal crash, there's still no explanation forthcoming.

Back in November 2002, the emergency services and Transit agreed to an "open roads" philosophy, committing themselves to make reopening the highways after a major accident a prime focus.

There was a recommitment to this in mid-July 2004, after a major crash closed Fanshawe St links to the harbour bridge for 3 1/2 hours.

Saturday's Mangere Bridge fiasco wasn't even an accident. Except as a euphemism for what was a totally self-inflicted injury.

It's time "open roads" was the policy of every road operator.

Liz Gordon: Rein in the power of the mega market

Reports that the supermarket industry is putting the screws on wine suppliers is the latest twist in a long-running saga. Since a group of grocers got together in Auckland in the mid-1920s and formed what is now Foodstuffs New Zealand, retailers have been looking for ways to force suppliers to reduce prices.

What has changed is that the supermarket industry is now dominated by two huge companies. It is a duopoly. Foodstuffs, a New Zealand-owned collective, has about 56 per cent of the market with Pak'n Save, New World and Four Square stores, and had an income of more than $6 billion last year.

Progressive Enterprises owns most of the rest. It is made up of Countdown, Woolworths and Foodtown stores. It has been owned by a series of Australian companies and since last year by Woolworths Australia, a $32 billion company.

As the supermarket industry has grown and consolidated, its power over suppliers has increased. In the old days, large suppliers like Watties were strong and could demand good prices.

But with growing competition from imported goods, and the constant threat that supermarkets will stop stocking their products, all suppliers are now under constant pressure to reduce prices.

The supermarkets make a virtue out of this. Foodstuffs Auckland heads its supplier information document with the following statement:

"We are the buying agents for our consumers. We make no apology for demanding your very best price at all times ... "

The idea that the supermarkets are somehow the watchdogs for consumers may be comforting, but it only tells part of the story.

Profits are going up, with Foodstuffs recording a 7.8 per cent increase in distributed profits last year. Woolworths Australia also had a bumper year.

The other group feeling the pinch from the duopoly are supermarket workers. While the CEO of Woolworths Australia earns a cosy A$8.5 million ($9.4 million) in pay, supermarket workers struggle to earn much above the minimum wage. The loss of penal rates in the 1990s led to a big drop in wages here, compared to Australian supermarkets where every hour worked above 38 each week is still paid at time and a half.

With Laila Harre as the new Secretary of the National Distribution Union, retail workers are gearing up for a challenge to their low wages and poor conditions.

But while supermarket workers have the opportunity to fight for higher wages through their unions, suppliers do not appear to have any national voice.

While a couple of organisations supposedly represent food manufacturers in New Zealand, they have been silent on the threat to their members posed by the aggressive supermarkets.

The main problem is that manufacturer organisations are based on the belief that competition is good, and the more players in the market, the better. But competition allows the supermarkets to pick suppliers off one by one.

If a supplier fails to comply with price demands, its products simply disappear from the shelves. There are less draconian sanctions, too. Products can be moved from eye height down to the bottom shelf, guaranteeing slower sales and fewer profits.

The duopoly's tactics could not work if suppliers banded together to protect their products. Can you imagine a New Zealand supermarket with no New Zealand wine on the shelves? Or where the baked beans were all made in Asia?

Suppliers could bargain effectively with the Big Two, if they marshalled their forces locally.

Now that Woolworths Australia owns Progressive Enterprises, we are likely to see this company screwing down prices paid to New Zealand suppliers.

While New Zealand consumers may benefit directly, the main beneficiaries will be the Australian shareholders of the company, as increasing profits are pumped over the ditch.

The losers will be New Zealand suppliers and the low-paid workforce. A company with the size and resources of Woolworths Australia has the ability to send hundreds of local suppliers to the wall. It is not in this country's interests that this happen but, with the suppliers so disorganised and the supermarkets so powerful, this is the likely outcome unless the suppliers get their bargaining act together.

The wider issue for the country is that the supermarket industry is growing worldwide, sucking in alcoholic beverages, pharmacies, gas stations and a range of general goods.

The new configuration is the megastore, a 24-hour, sell-anything shop under one roof. Tesco in Britain is trying to incorporate doctors' surgeries into supermarkets. The expansion opportunities are endless.

But, internationally, concern is increasing about the effects of this model, on suppliers and on lifestyles.

Most of us like browsing and shopping at a range of shops, buying our bacon from the butcher who smokes it, free range eggs from a local stall, coffee from the roaster and wine from the tiny shop on the corner.

The logical end of the expansion of supermarkets is that all the other shops will disappear. The British Government is so worried about the disappearance of owner-operated shops that it has launched an inquiry.

Whether looking at the issue socially, economically or environmentally, a society where there is no place left to shop but the mega market is not a healthy one.

Suppliers need to act while they still can, but wider action is also needed. We need to replace the race to the bottom mentality - where low prices are the bottom line whatever the cost - with a race to the top: well-paid workers, diverse suppliers getting a fair price, a balance between mega shops, micro shops and those in the middle.

It is probably time the Government launched its own inquiry into the supermarket industry here, before our suppliers, small shops, pharmacies, independent liquor suppliers, clothing, footwear, furniture, tools and all other retail groups disappear from our communities forever.

* Liz Gordon is a former Alliance MP.

Claire Harvey: Preening patriotism mocks the true Olympic ideal

No nationalistic strutting: that's the message United States officials have delivered their athletes at the Winter Olympics in Turin.

American athletes have been ordered to refrain from preening, prancing or otherwise showing off during these Games, and were strictly supervised by team officials as they marched into the Olympic Stadium for the opening ceremony to ensure there was none of the embarrassing exuberance exhibited by US athletes at previous Games.

It might sound strange to issue a ban on patriotism at an event overloaded with so many trumpet-tootling anthems, but US Olympic Committee chief executive Jim Scherr says as the continuing carnage in Iraq and Afghanistan make America's international image ever more troubled, the nation's Olympic representatives must not present themselves in any way which invites accusations of arrogance.

"There's a sensitivity to how our country is viewed in the world today. If you're from another country, it might be overlooked, but we have to be careful what we do," Scherr says.

This overdue edict is the result of some appalling behaviour by American athletes in the past.

During the formal procession of teams into the Opening Ceremony of the Seoul Olympics in 1988, some of the more showpony members of the US team became so overexcited by the fun of flexing their steroid-enhanced muscles, pulling faces at the crowd and dancing in circles that they trampled over other nations' teams and delayed the entire parade.

At the 2000 Olympics, four male American sprinters - known (mainly to themselves, and possibly their mums) as the "Dream Team" - won their 4x100m relay then staged a victory lap more suited to the swimsuit-straining finals of a Mr Universe beefcake contest, clenching their buttocks and poking their tongues at the cameras while the defeated runners waited for the medal ceremony to start.

That earned a rebuke from USA Track and Field, which described the display as "disconcerting", forced relay team captain Jon Drummond to apologise and promised to ensure better behaviour in future.

Also at the Sydney Games, another bunch of Americans (also describing themselves as the Dream Team - there's a theme here) won the basketball final, then carried out a deeply unfortunate display of self-congratulation, tying American flags around their heads like bandanas, punching the air and pounding their chests like little King Kongs.

It's nice to see the USOC acknowledging the need for restraint, because the real point of the Olympics is not nationalism, or patriotism - and especially not all that waffle about the Olympic Truce and the "spirit of Olympism" that the puffed-up porkpies of the International Olympic Committee like to lecture about.

There are a record 2300 officials from the IOC and various national Olympic committees at these Games, by the way, to complement the 10,000 "sponsors' guests" and 1600 staff of the Organising Committee.

The real point of the Olympics, surely, is the celebration of the athletes' personal stories. The real Olympic ideal is individualism, but of a wholly positive sort; uncomplicated dedication to a goal, control of the mind, discipline of the body, effort over sloth, push-ups over potato chips.

It's not alchemy or world peace, it's just being determined enough to accomplish ridiculously difficult things while wearing very tight outfits.

One of the best individual stories at the Torino Games comes from within the US team. American skier Toby Dawson has just won bronze in the freestyle moguls, and he is hoping the publicity associated with his achievement will help him find his parents.

Twenty-four years ago, Korean-born Dawson was dumped as a toddler on the streets of Busan City, sent to an orphanage and then adopted by American ski-instructor couple Mike and Deborah Dawson, who took him to grow up in the snowfields of Colorado.

Today, he is an elite sportsman with a fortune in sponsorship deals and prizemoney, but he still yearns to meet his real mother and father, and has posted photographs of himself as a baby on the internet in the hope that they might come and claim him.

If everything goes right, this year might prove a partial redemption of the Olympic spirit. Maybe no more IOC members will be caught accepting kickbacks or greasing the gravy-train

Only one IOC member has been busted for embezzlement in the past fortnight, and the IOC Ethics Commission is actually considering ejecting him from the "Olympic Family", so that must be a good start.

Maybe we won't have too many drug busts. Maybe no American or other athletes will perform any cringe-making antics.

And maybe Toby Dawson's mum and dad will give him a call.

Christopher Niesche: Telecom now facing an uphill battle

There's no doubt the Government will crack down on Telecom later this year.

Following lobbying from business, New Zealand's woeful broadband performance is very much on the Prime Minister's radar screen and she is determined - both privately and publicly - to do something about it.

Unless Helen Clark can be persuaded otherwise, the Government will force Telecom to unbundle the local loop, opening up its network to competitors.

In theory, this would allow other internet service providers to set their own broadband speeds and prices, and the resulting competition should bring much better deals for consumers and a better result for New Zealand.

Telecom chief Theresa Gattung and her team now face an uphill battle to persuade the Government to maintain the status quo. They have only until the middle of the year when Communications Minister David Cunliffe reports the results of his regulatory review of Telecom.

It won't be easy. Telecom has few allies that the Government has to be worried about alienating, so faster and cheaper internet is likely to be something Helen Clark would want to deliver to business in the absence of tax cuts. And Government patience with Telecom has well and truly run out.

Telecom staved off local loop unbundling in 2003 by promising to deliver 250,000 new residential broadband connections by the end of last year, one-third of which were to be wholesaled through other providers.

It is clear now that this has been a failure: Telecom missed those targets and then disowned them and New Zealand seriously lags the rest of the developed world in broadband.

This time around Telecom has a two-pronged strategy to persuade the Government not unbundle the local loop.

First, it has announced lower broadband prices and faster speeds for residential and business customers. Its competitors will be offered the same terms. This should boost broadband uptake in the next few months and allow Telecom to claim that the status quo is working.

Second, Telecom is currently negotiating what it's calling a "Wholesale Charter" with the other internet providers. Essentially, this means that anything by way of speeds and prices Telecom can offer its own customers, it must also make available for its competitors to sell.

In theory the charter should level the playing field, even though Telecom would retain control over the pace of any changes to the market.

These two initiatives are attempts by Telecom to dress itself up as a good corporate citizen. In reality, they're nothing more than naked self-interest, nothing more than another attempt to keep the Prime Minister and the regulators at bay.

The irony is that Telecom's solutions - if they are adhered to - might actually be the best solution for New Zealand, at least for the next two or three years.

Local loop unbundling could take years to implement. If the Government decided to further explore the option then the Commerce Commission would likely be asked to conduct another - in fact, its third - review into local loop unbundling.

If after that the Government decides to go ahead, then there's the crucial issue of putting a price on access to the local loop for competitors. The price will ultimately determine the success of unbundling.

In Australia, the Australian Competition and Consumer Commission has been wrestling with this issue for two years and is yet to find a solution.

Also, it's expensive for internet service providers to install their own equipment, which is required to turn local loop access into the best available internet services. This raises questions about how viable it would be for internet service providers in New Zealand's small market.

In Australia - which is ahead of New Zealand - most of the improvements to broadband offerings have come through wholesale agreements in a fiercely competitive market, not through local loop unbundling.

New Zealand might be better off with Telecom continuing to wholesale broadband access to rival internet providers, in conjunction with the beefed-up powers for the Commerce Commission that the Government is planning. These powers could be used to force Telecom to give better deals to its competitors.

Still, deciding against local loop unbundling carries a huge risk. If Telecom doesn't deliver then the country will have lost two years for no progress and be even further behind the rest of the world.

Before the Government decides against local loop unbundling, it has to ask itself one crucial question: Can it trust Telecom?

On past experience, the answer has to be probably not.

Kevin Armstrong: Bull in the sushi shop - but for how long?

With the turmoil in the Japanese equity market, questions are being asked as to the viability of, and prospects for, the current bull market.

Given the many false starts that have been seen in Japan over the last 15 years, these concerns are understandable. Clearly, a new bull market is overdue after such a protracted period of dismal performance, but just because something is overdue it doesn't mean it is imminent. Nonetheless this current move and the improving fundamentals raise one's confidence in this being the start of something far more enduring than any of the recoveries during the 90s.

The move in the Nikkei has been impressive; it rose 45 per cent last year and is now more than 100 per cent above the levels seen in mid-2003.

These moves are welcome, and have clearly rewarded investors who were bold enough to attempt to catch what many thought was the falling knife of the Nikkei. But compared to the magnitude of the enormous bear market that preceded this rally they become less significant.

The Nikkei is still down more than 60 per cent from its high achieved on the last trading day of 1989. This doesn't mean that a new bull market can't be declared until after a new high is recorded, but that manic 1989 peak still casts a shadow over the history of the Japanese market.

Whilst this rally has been healthy in the Nikkei, it has been dazzling in the more speculative parts of the Japanese market. The Tokyo Second Section, an index of smaller, lower-quality companies, has literally soared over the last three years and has now risen to an all-time high (a level equivalent to Nikkei 39,000).

This move is concerning on two fronts: firstly the Second Section now sports a P/E of 130 and secondly the nature of the move highlights the magnitude of the speculation that has been present in this Japanese bull market. Rampant speculation with near-vertical rises should raise cautionary flags for investors. But it does not necessarily mean that a new, longer-term bull market is coming to an end; far from it. A similar picture was seen at the start of the last great secular bull market in US equities.

Back in the early 1980s US shares had been marking time in a frustrating, broad trading range for about 15 years. Then, in March 1980, in the midst of a recession, US equity markets began to rally and the biggest moves were seen in the smaller, more speculative companies. The Russell 2000, a broad index of the companies below the largest 1000, soared from a low of 45 to a high of 127 by mid-1983.

High-quality companies also rallied, just not as spectacularly, with the S&P 500 rising 70 per cent. Smaller companies outperformed larger companies by over 60 per cent over this 27-month bull move.

This spectacular blow-off in smaller companies did not mark the end of the bull market; in fact it was only the beginning. No enduring bull market ever went up in a straight line.

Following that first three years of bull market action in the US, there was a cyclical bear market, lasting just over a year. Understandably, the biggest correction was seen in the previously dominant smaller issues; the Russell 2000 index fell by more than a quarter while the lagging S&P only suffered half that decline. The S&P, which had underperformed dramatically in the early stages of the bull market, took over the leadership role in the first decline and maintained that dominance for much of the rest of the lengthy bull market, with smaller companies only moving back to the fore in the last five years.

In a remarkable echo of the start of the last secular bull move in the US, Japan is currently exhibiting many of the same characteristics, with the smaller companies in the Second Section outperforming the Nikkei by over 60 per cent.

Neither the current volatility nor the speculation in smaller companies should be seen as the end of Japan's bull market. But it is reasonable to question whether smaller companies will continue to dominate and also whether, after three years of advance, some consolidation in the broader Nikkei index is not overdue. If the parallels with the US 20 years ago were to continue it is possible that any period of consolidation could last a year or more, even while the longer-term bull market remains intact.

The reasons for owning Japan for the long term are still very much intact, but, with the region appearing to be everyone's favourite, it is possible that the first-up leg is now over. Further purchases of Japan, from a long-term perspective, are warranted, but it will likely pay to adopt a more opportunistic approach, with the aim of buying on weakness, during any cyclical correction.

* Kevin Armstrong is chief investment officer at ANZ National Bank.

Allan Barber: Lamb producers, exporters facing a long, cold winter

A year ago lamb was riding an apparently irresistible wave, with European demand for New Zealand chilled and frozen product hitting an all-time high.

Now the market has turned soft and prices have dropped by an average of 17 per cent, and the currency is responsible for only part of that.

So what's gone wrong and when will the market recover are questions that many would love to be able to answer, as it looks like another case of the meat industry going from boom to bust.

Coming into the new season, processors were briefing their suppliers, saying that demand for product was still good, despite the strength of the dollar, and while prices wouldn't be as good as last year, they would only be down by about $3 a lamb.

Unfortunately the schedule price for a 17.5kg lamb is closer to $13 lower than last year and, in the North Island at least, $20 less than three months ago.

There's no doubt that farmers have contributed to this state of affairs themselves, although exporters haven't been blameless. Last season delivered particularly good growing conditions and as a result there were far too many heavy lambs for which processors paid too much and everybody - processors, exporters, importers - got severe indigestion. At the same time the bottom fell out of prices for by-products, such as wool and pelts.

A further consequence of high prices for lambs to slaughter is an inflated price for replacement or store stock. This then locks in the farmers' expectation that prices will remain high and will bail them out for paying too much in the first place.

Inventories in the overseas markets were too high at the end of last year and, once the chilled Christmas sale period was over, there was nothing left to prop the price up.

Economic conditions in the United Kingdom and Europe are less buoyant than before, meaning the pound and euro have hardly strengthened at all against our dollar. Too much inventory was, and still is, in the heavy grades, which the market simply doesn't want and can't absorb.

If you have more inventory than you can afford to hold, the first and most obvious solution is to encourage somebody to take it and to do that, you have to drop your price. Exporters have been guilty of trying to push too much of this stock onto the market.

The general view round the meat industry is that it's too soon to panic, although it's always the other company that's been guilty of putting downward pressure on the market.

Chilled product remains sought after, particularly during the lead-up to Easter, but frozen lamb demand is erratic.

After Easter there is the prospect of a long six months, during which another big kill, estimated to be one million more than last season, will have been processed. A large proportion of this will be sitting in inventory in New Zealand and in overseas markets.

Although overseas demand for our lamb will still be good, we must recognise that the price must remain affordable and the product must meet market specifications.

In the past year New Zealand producers and exporters may have got too cocky, believing the market would continue to pay top dollar for a product which wasn't exactly what it wanted.

We have to remember that the customer is always right, otherwise it will be a long, cold winter.

* Allan Barber is a freelance writer, business consultant and past chief operating officer at Affco.