Speech to Federated Farmers National Conference
Hon David Carter
Minister of Agriculture
Ascot Park Hotel, Invercargill

Thank you for inviting me to speak to you today.

I would like to acknowledge your President Don Nicolson, Vice-President Donald Aubrey, Chief Executive Conor English, provincial presidents and delegates.

Before the 2008 election I attended your manifesto launch at Wellington Railway Station.

At the launch, Don Nicolson told politicians and media the three key priorities for farmers were:
* to ensure the next government controlled its expenditure;
* getting water storage on the list of infrastructure projects;
* and getting an exemption for farm animals from the New Zealand Emissions Trading Scheme.

So let's consider progress on these. With the change of government you definitely got the first two.

In regards to the ETS, given the political and economic realities, we have delivered a pragmatic and balanced solution.

This Government is doing what farmers have asked for.

Of course we won't agree on everything but the sum of our disagreements is no match for our shared interests.

This National-led Government and Federated Farmers share many of the same hopes and concerns.

We are both acutely aware of the vital contribution agriculture makes to our economy.

We're both relieved to be seeing the back of the recession and we can both credibly acknowledge that it was agriculture that led our recovery.

We both want to see a more productive New Zealand.

This Government's over arching goal is economic growth.

With the primary sector responsible for 66 percent of our export merchandise earnings, profitable, sustainable farming businesses are essential to achieving that growth.

We want farmers to prosper because that means every New Zealander prospers. In this regard, Government and Federated Farmers' aspirations are exactly the same.

In my speech today I want to share with you my view of where the New Zealand economy is headed.

I also want to focus on costs versus investment, and the need to view some apparent 'costs' as an essential investment in the growth of our sector and your personal income.

For instance, it has cost Federated Farmers and each of you a significant amount to attend this conference. Do you view this expenditure as a cost or as an investment in your farming future?

I, for one, certainly hope it is the latter.

Now, in order to talk about where we're going, we need to understand where we are right now.

A recent KPMG report echoed a line I've been saying for some time. New Zealand is no longer a low cost producer of dairy, meat or fibre - and neither should it be.

Take your Meat and Fibre section's aim of $150 a lamb.

Whether you believe this is realistic or not, I can tell you it's unachievable if our focus is on being the cheapest producer. Instead, our product must be marketed to customers prepared to pay $150.

Yes, there is a need to reduce costs within the value chain but equally there is a need to add value to our produce and invest in its future. This need will only grow larger over time.

Another fact about the here and now is that while agriculture is extremely important to New Zealand, we are small in global terms.

We produce just over a third of the world's exported milk production, but our share of total world milk production is just over two percent.

Globally, much more pork and poultry is consumed than beef and lamb.

Sheep meat makes up five percent of world meat consumption and New Zealand's sheep meat exports only account for three percent of that total consumption.

The plus side of this is that as a small country we export a lot. By meeting consumer requirements we will continue to have the luxury of an increasingly wealthy, middle-class market, particularly in developing Asian economies.

This is why the OECD forecasts world meat and dairy consumption will increase by almost 20 percent by 2018. And that is only 8 years away.

This means an improved outlook for prices and an opportunity for New Zealand to expand its export markets.

The challenge we have in New Zealand is to position ourselves to take maximum advantage of this.

It is this shift which makes an all encompassing focus on reducing costs and regulation simplistic and outdated. Yes, still important, but other factors must be considered.

This is reinforced by another fundamental of the current global trade situation which is a change in what consumers are demanding.

In turn, retailers are outdoing themselves to meet this demand by being ethically and environmentally responsive.

Simply, the consumer via the retailer is the new regulator.

Earlier this year Marks & Spencer announced its objective of being the most sustainable major retailer in the world by 2015.

Tesco, the third-largest grocery retailer globally, is aiming to be carbon neutral by 2050.

Walmart wants to eliminate 20 million tons of greenhouse gas emissions from its global supply chain by the end of 2015.

The Ministry of Agriculture and Forestry in New Zealand has been approached by a Chinese furniture company supplying Walmart seeking assurances of the legality and sustainability of timber it imports from New Zealand.

In both Japan and Taiwan, they are presently implementing voluntary carbon labelling schemes.

Dr Mike Cherrett, the UK Deputy High Commissioner to New Zealand, recently said that in light of all these trends, New Zealand farmers ignore climate change at their peril.

New Zealand farmers have been good at adapting in the past and these new challenges are no different. We must rise to meet these new challenges.

We have a lot going for us as a country. Already we have a robust international reputation for safe and high quality commodities from a clean, green environment.

To protect this reputation farmers and organisations such as Federated Farmers must realise that some regulatory activities are a necessary investment rather than just another cost to comply with.

Traceability and NAIT is an area that fits neatly into this box.

I know this has been an issue of contention with Federated Farmers but I do acknowledge that your opposition has become a lot less vocal over the past 12 months.

I've already talked about consumers wanting to know where their products have come from. That is why many buy local.

I've seen this trend in supermarkets throughout the world. And don't for a minute think this is just an overseas trend. Most of you would choose a New Zealand tomato ahead of an Australian one, all other things being equal.

This new way of shopping is about a connection to food.

We already know what an asset New Zealand's reputation for food safety is.

Consumers are simply asking for another level of connection; to know that the food or fibre is safe, as well as ethically and sustainably produced.

We have the ability to provide this through strong verification of our credentials and enabling consumers to trace their products back to the paddock.

New Zealand is moving in this direction with the National Animal Identification and Tracing scheme, which will also provide a significantly improved biosecurity response capability.

International demand for lifetime traceability of individual animals is growing.

Already we are behind the European Union, Australia, Japan, South Korea, Canada, Argentina, Uruguay and Brazil.

Federated Farmers is right to seek assurances that costs to farmers, industry and government are kept to a minimum.

But to delay its implementation until traceability is a prerequisite to overseas market access is too big a risk, and would put our competitive position at stake.

Now I want to address the Emissions Trading Scheme.

In your manifesto you called for an exemption for farm animals from the New Zealand Emissions Trading Scheme.

Since then Federated Farmers has delivered to Government a number of mixed messages.

Some of you deny climate change.

Some of you want production animals excluded.

Some of you call for Government to drop the ETS all together.

Some of you threaten to form your own political party.

And the more realistic of you say the National Government's changes are a pretty good pragmatic solution given the political and economic realities.

Whether you like it or not, whether you believe the ETS will help climate change, or whether you believe in climate change at all, the reality is there is legislation for an ETS passed by all except five votes in Parliament.

Forestry has been in the scheme from January 2008 and a number of other sectors will join the scheme from July 1.

When the National Government came into office we did as we promised and amended the scheme to ensure we have a system that gives us the right balance between our environmental responsibilities and our economic needs.

There were strong reasons to continue with the ETS.

Customers expect us to take climate change seriously and may shun our products if they feel we are not.

It provides a point of difference to New Zealand products in the market place.

We delayed agriculture's entry by two years to 2015. We capped the price of carbon to limit costs to all businesses and homes, and we slowed the rate at which free allocations of units decrease.

This gives industries like agriculture longer to begin utilising lower-emissions technology.

Also in the scheme is a built-in regular review.

The first review is legislated, under Section 160 of the Climate Change Response Act, for 2011. And the Prime Minister is on record promising a second review in 2014.

So there will be two reviews before animal emissions may enter the ETS.

As part of these reviews we will consider how New Zealand is positioned in international negotiations, as well as what other countries, including our competitors, are doing with respect to agriculture.

I agree with you completely, there's no point in disadvantaging New Zealand farmers while agricultural producers elsewhere are causing more emissions.

You have my absolute assurance that agriculture will not come into the ETS in 2015, if our major trading partners haven't taken steps to meet their own obligations.

The third area I want to cover today is just some of the many steps this Government has already taken to kick-start economic growth.

In considering this list, it's clear not only how much we have achieved in 20-odd months, but how many issues of major concern to Federated Farmers we have moved to address.

RMA reforms are continuing at a pace.

Numerous Free Trade Agreements have been completed or are underway - China, Korea, India, Trans Pacific Partnership, to name some.

Significant money has been invested in innovation projects to benefit the agricultural sector and to ensure New Zealand is a leading figure in international initiatives.

And perhaps most important of all, real progress is being made on water storage and infrastructure.

Let me be clear - I am working harder on this issue with my Cabinet colleagues than almost anything else.

In my role as your Minister of Agriculture, I have a responsibility to promote ways in which agriculture can play a greater role in delivering this Government's economic growth agenda.

A most obvious way to do this is by accelerating reliable irrigation.

But we want to get water management right. As you know this is not only about storage. It's about efficient distribution, better allocation and better utilisation.

Get it right and we will experience significant economic benefit for generations to come. But in doing so we must maintain high environmental standards.

To sum up, the future of New Zealand farming is as a producer of high quality, value-added product.

And quality has become synonymous with sustainability.

New Zealand farmers must be clean, green and providers of high quality produce.

If we do, farming in this country will enter a new era of profitability.

If we don't, someone else will, and their prosperity will come at our expense.

Federated Farmers' role as a leader in this area is important.

As a Government we want a strong, relevant and respected Federated Farmers that provides leadership for the primary sector.

Throughout this speech I have been talking about cost versus investment.

The challenge I have for Federated Farmers is that at the end of the year when I, and many other farmers, stump up with $500 for our membership sub, will we see it as an investment in our farming businesses - or will we see it as an unnecessary cost?

I want it to be an investment.

Thank you very much.

ENDS

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