Key trends and demands in New Zealand’s farming sector

20 October 2014

Key trends and demands in New Zealand’s farming sector

Speech by Graham Smith is Federated Farmers Chief Executive, at the Future Farms New Zealand Conference 2014

Thank you for having me to speak to you this morning.

It is an exciting time to be in the farming sector, as pastoral farming lies at the heart of our economy and how we see ourselves as a nation.

We are a primary superpower that ranks among the best on earth in relation to production efficiency, environmental outcomes, and emissions. We are on the world stage and everyone is watching.

Federated Farmers has been a part of NZ Farming Inc. since 1899, delivering the farmers’ message from the back ends of the country to the decision makers and influencers in our capital city.

Federated Farmers plays its part in making farming in New Zealand profitable and sustainable, by representing the views of its members, the farmers, to central and local government. We give farmers a voice on the important policy issues facing agriculture and farming.

We may be a small country by population and size, but we hold our own as a primary exporting superpower, with agribusiness as our one true competitive advantage.

The key mega trends that we are seeing today includes; the rise of the consumer, the environment, increased competition and volatility (including biosecurity, and infectious diseases) and food security..

We now live in a world that is evolving at an unprecedented rate. China is a shinning example of this, in only 1978 China was one of the poorest countries in the world, but today China is now the 2nd largest economy in the world.

Consequently, China’s middle class is growing at a rapid rate, they have money to spend and their dietary tastes are changing. This will continue to present us with considerable export opportunities.

For farming to remain competitive; we need to attract more skilled people, we need to ensure that farming remains profitable and we need to invest more in science and innovation, to ensure we develop more valuable products and services.

Farmers clearly understand that farming does have an impact on the environment and that there has to be a balance with economic growth.

Farmers are “stewards of their land” and want to ensure that their properties continue to be improved for the next generation.

As Peter Kendall, president of the World Farmers Organisation (WFO), said

“Farmers, have daily interaction with the environment. Thus farmers are key drivers in the development of sustainable agricultural practices that provide food and renewable materials to support livelihoods. We must reposition farmers at the centre of the agriculture sector to become more resilient to climate risks.”

It is essential that farmers and environmental groups talk and work together, as an adversarial approach will ultimately not produce worthwhile outcomes.

For example, the Land and Water Forum has been a positive development and a well -recognised example of collaboration – but engagement and collaboration doesn’t just happen. It takes considerable time and effort.

While we are working to protect our waterways; part of the problem is that New Zealand is facing a water shortage crisis.

Farmers are increasingly looking to harness and store rain water to farm through drier periods mitigating the economic risk adverse weather events have on their business, rural communities and the national economy.

In some winters, we are getting more water from rain than we need.

This years’ flood in Northland saw Kaikohe, whose average July rainfall is around 180mm, drowned by 477mm in just one week, and that wasn’t even the wettest part of the region.

While during the hotter summer months, we often face dangerously low water levels.

NIWA’s research says ‘Of all of the threats posed to New Zealand by climate change, drought is the one which could have the largest effect on New Zealand's economy.’

So how we farm in the future is very much going to depend on how we tackle this issue.

When it comes down to it, our people are our most precious resource.

They deserve every opportunity to maximise their potential in the best possible working environment, but right now the industry demand for skilled labour exceeds the market.

If we don’t have the people we don’t have an industry.

Just the other day Federated Farmers received an Official Information Act answer comparing primary industry graduates at certificate, diploma and degree level, with those in a range of other areas.

Last year we graduated 20 more people with degrees in music than people with degrees in a primary industries discipline, with the primary industries graduating 365 people at degree level among all disciplines, with a further 287 at certificate and diploma level.

In general the trend to increase the number of graduates in the primary sector disciplines is moving in the right direction; however we have a long way to go.

The science disciplines are not easy but they are critical for our future prosperity and if we are to maintain our place in the world.

By 2025 it is forecast two-thirds of the primary industry roles will demand a post-school qualification. The challenge these figures throw up is whether we are moving fast enough?

Expert knowledge is vital to keeping our farmers competitive, but we also need to be attracting more people into the industry.

Young people need to believe that farming is an attractive career option in New Zealand. It’s why we need to encourage more schools like St Paul’s Collegiate in Hamilton, which has commenced an elite agri-business course, because the future of our industry needs a workforce.

The general economic trajectory of New Zealand remains sound with ongoing refinement but this is not being felt behind the farm gate, which will put farmers in a tough position going forward.

It should be a great time to be a farmer.

In 2013/14 agriculture made a direct contribution to GDP of almost $14 billion, or over 6 percent of total GDP. And for the period 1978-2012, agricultural productivity grew by an average of 2.7 percent per annum, compared to just 0.9 percent per annum for the wider economy, which determines our economic growth and standards of living.

Despite farming’s huge contribution to the economy and boasting a superior productivity performance, many farmers have been feeling under pressure.

Over the past decade there has been an insidious margin squeeze with farmers caught by remorselessly high inflation of their farm input prices. See recent results from our Farmer Confidence Survey.

Incomes have been at the mercy of fluctuations in commodity prices, the exchange rate, and the weather, all of which are beyond famers’ control.

It is important to recognise that farmers are price takers, not price makers. As a result, when farm input prices rise when incomes are static or fall, farmers either have to cut spending, increase production, or increase debt.

The key challenges for New Zealand’s’ agricultural products to remain competitive on the world stage comes down to a need for further investment in Science, our Food Safety reputation, protecting our borders, and keeping us ahead of the trend in market exploration.

A huge challenge for the world will be how it feeds an estimated 3 billion people by 2050.

New Zealand, as one of the most innovative and efficient primary producers has a significant role to play.

But we are losing our traditional low cost agricultural base as developing countries’ agricultural sectors become more efficient and productive.

In order for us to remain competitive Federated Farmers has called on the government to increase its funding of science research by $600m over the next three years.

Science and innovation enables us to increase productivity, it provides us with the tools to mitigate our environmental footprint, increases the efficiency of our biosecurity effort, and increases our opportunities to add value to our products.

Agriculture has always been knowledge-led and there are opportunities for our world leading farmers to take this knowledge to the world if we keep on innovating and investment in science.

The primary sector exports over $35 billion a year. A significant part of the reason why agriculture earned 73 percent of New Zealand’s merchandise export earnings in 2013 was down to our science capability.

The formation of the Centres of Research Excellence (CoREs) has increased collaboration between institutions, contributing to vital strategic capability for the primary sector.

That is why the potential loss of funding for the three CoREs targeting biosecurity, food innovation and reproduction, would be such a strategic blow to New Zealand.

We also need to think about and review what we mean by Genetic Modification. During the last ten years there have been huge advancements in science and technology. For example, new gene editing technologies don’t rely on foreign DNA as promoters, unlike 10 years ago. Instead genetic material can now be cut in very specific places, to cut, edit and incorporate new DNA in very predictable ways.

Science and innovation plays a key role in feeding the world and how we add value to our products.

Consumer power is increasing. They are looking for quality produce that is safe to eat; in the past 20 years we have seen consumers take an unprecedented interest in the way their food is produced, with an increasing demand for transparency.

The challenge for our food value chain is to maintain food safety integrity to ensure our customers feel safe in consuming New Zealand products.

New technologies mean that products can now be traced back from the consumer to the paddock, with new food testing methods able to find contaminants in parts per billion, something unfathomable 20 years ago.

Get it wrong, as we saw with the botulism scare last year, and access to overseas markets can quickly be denied.

Whilst our products are largely sold overseas, we also import a lot of agricultural goods, both of which need to be protected. Our location and natural borders help protect our country, but we are still vulnerable.

Our reliance on agriculture means that we are more dependent on biosecurity than other developed countries.

Although the majority of focus for New Zealand biosecurity remains at the border, it is important to remember that biosecurity is more than just border protection.

It encompasses a whole framework inclusive of international treaties, readiness, surveillance, incursion response and pest management.

To ensure we stay on top of the pest problem, novel approaches to pest management are required.

This includes making better use of information technology, gaining a better understanding of pest biology, ensuring more research scientists and improving public engagement.

In 2001, the Reserve Bank estimated that a foot-and-mouth disease outbreak could cost the economy $10 billion over two years. Thousands of jobs would be put at risk, and the economy would take years to recover.

The Government Industry Agreement for Biosecurity Readiness and Response is essential, integrating the approach of preparing for and effectively responding to biosecurity risks through government and industry partnerships. The Governments planned foot and mouth scenario is something Federated Farmers fully supports.

Keeping our borders open to the growing demand for increased production is key for New Zealand as we are not the only country that produces food. We are competing against many other agri exporting countries, and our doors must stay open.

In our exports, we need to ensure we don’t become overly concentrated on a small number of markets. New Zealand needs to devote additional resources to international market development activities, especially understanding overseas consumers.

We cannot afford to rest on our laurels. We need to continue to innovate and grow, especially when it comes to agri technology.

Farmers embrace technology, becoming more and more efficient in the way they farm.

Precision farming is information driven, software orientated, networked using smart machines, automatic or remote controlled.

It can include:
• Data collection
• Remote sensing
• Precision navigation
• Spatial mapping
• Automatic record keeping

Examples include Ravensdown whose aircraft are equipped with state-of-the-art DGPS technology, meaning fertiliser is applied at the time, the right rate and in the right place.

Using Vodafone’s machine-to-machine network, WaterForce measures soil moisture and monitors water levels, giving farmers a powerful land management tool that also helps them meet environmental compliance requirements. They enabled the SCADAfarm technology, which monitors the irrigation pumps for pressures, flows and faults, and enables remote ‘on and off’ control of pivot irrigators as well as the ability to adjust the amount of water used.

On-farm innovation is becoming the new number 8 wire mentality. Innovation is improvement and modernisation and that is the future of the New Zealand farming sector.

Thank you.

ENDS

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