NZ and Australia – future powerhouses in food

Media Release September 27, 2010 1

New Zealand and Australia – future powerhouses in food and agriculture

New Zealand and Australia will be powerhouses in the global agriculture industry in the long-term, according to a leading international food and agribusiness authority.

At a recent Rabobank Advisory Board meeting in Sydney, Mr Sunny Verghese, group managing director and CEO of Olam International, presented his views on the growth opportunities for Australia and New Zealand’s food and agribusiness sectors in the coming decade, with a strong focus on Asia.

Mr Verghese said New Zealand and Australia will play a critical role in supplying food to Asian markets. “Going forward, I don’t believe India and China, given their arable land and water constraints, will be able to produce all the food they need and could become significant importers of food,” he said. “As a result, there is great potential and opportunity for countries that have a comparative advantage to produce some of this food better and more cheaply, like New Zealand and Australia.”

Over the past 20 years, Mr Verghese and his team have grown Olam International from a single product exporter to a global agribusiness leader in supply chain management and processing. Today, the company generates revenues of over USD7.5 billion and operates in 64 countries.

Mr Verghese flew in from his base in Singapore to attend the annual Rabobank Advisory Board meeting, a specialist board comprising of food and agribusiness leaders from New Zealand and Australia and senior Rabobank executives from Australia and Utrecht.

He shared his perspectives on the key supply and demand-side trends in food and agriculture for the next 20 years. This included the anticipated shifts in dietary habits in developing Asian nations towards increased protein consumption supported by an increase in per capita incomes, overall population growth, impact of urbanisation and the challenge of water scarcity in driving patterns of demand and supply.

While these trends highlight the opportunity for nations like New Zealand and Australia to become key exporters to meet the demand in Asia, Mr Verghese also said many challenges remain. “The demand-side of the equation is much more predictable. The real challenge for Australasian producers will be managing the supply side of the growth in Asia and strengthening their competitive position and building a comparative advantage.” he said.

“Businesses must differentiate before they can grow. New Zealand and Australia will continue to develop their own technology and innovation around their agricultural industries, and that will be a key part to securing their comparative advantage going forward.

“The reason we put our money where our mouth is and have invested so significantly in Australia and New Zealand is because given our footprint, we have a particularly good sense of where the global supply chain arbitrage exists in the food supply chain and we see that Australia and New Zealand have a comparative advantage long term on a sustainable basis in being one of the most cost-competitive producers in certain agricultural commodities.”

The Rabobank Advisory Board is responsible for advising the bank’s Australasian operations on strategic agribusiness issues. Rabobank Australia and New Zealand CEO Thos Gieskes, a member of the board, said he had confidence there will be enormous future growth in the food, beverage and agricultural industries around the world.

“This growth is driven by the trends, which are inevitably resulting in an ever-increasing global demand for agricultural produce and products,” said Mr Gieskes.

“Chief among these trends is world population growth, much of which will occur on our geographical doorstep in the developing Asian nations, which will not have the resources or capabilities to satisfy their domestic demands. Populations will become more urbanised, resulting in consumers who have higher disposable incomes, and dietary habits will change to consume more meat, dairy and processed food.”

Based on such trends, Mr Gieskes said the prospects for Australian and New Zealand food and agribusiness industries is strong.

The Rabobank Advisory Board also heard from dynamic food industry leader, Gary Helou, who is chief executive officer of SunRice. Mr Helou said the strength for Australian and New Zealand producers lies in their reputation for safe, traceable, agricultural products that the world holds in high regard. “Innovation is needed on an ongoing basis to deliver differentiated, value-added food products rather than commodity exports,” said Mr Helou. He also stressed that operational excellence is needed within Australasian agribusinesses in order to compete successfully in Asian markets.

Additionally, chief executive officer of Silver Fern Farms Keith Cooper presented to the board on progress in marketing New Zealand meat overseas and said that product differentiation is key to success in Asia. “There is a need to promote health and well-being benefits to capture value from the ‘natural’ attributes of products we sell, and to create a brand that will command premium prices,” said Mr Cooper. Mr Cooper said product differentiation around meat holds significant prospects for an improvement in overseas markets, such as Asia.

Rabobank Australia & New Zealand is a part of the international Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 110 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 48 countries, servicing the needs of more than nine million clients worldwide through a network of more than 1600 offices and branches. Rabobank Australia & New Zealand is one of the region’s leading rural lenders and a significant provider of business and corporate banking and financial services to the food and agribusiness sector. The bank has 83 branches throughout Australia & New Zealand.

ENDS

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