The outlook is green for Primary Industries
29 June 2012
The outlook is green for Primary Industries
Speech by Bruce Wills, President of Federated Farmers, to Federated Farmers National Conference at the Crowne Plaza, Auckland
Today, I am going to take a look at where we might be in the year 2020 and touch on some challenges ahead.
A lot can change in eight years but much can also stay the same.
In 2004, eight years ago, the Iraq war was one year old and Afghanistan was in turmoil. Despite this petrol was under $1.10 a litre. Meanwhile exporters faced a Kiwi dollar that was US$0.67 in January but ended 2004 at $US.71. Some things never change.
For the year ending June 2004, our agricultural, horticultural and forestry exports came to around $18.5 billion. In the year to March 2012, exports for the primary industries came to almost $32 billion.
That is a remarkable increase of almost 73 percent.
I heard this described as ‘insane’ and ‘awesome, and it is. It is easy to forget just how far we have come.
On a lighter note, looking back, the biggest grossing film in New Zealand for 2004 was Shrek 2, Don Brash was Leader of the National Party, Ben Lummis won NZ Idol and Athens was busily getting ready for the 2008 Olympics…..except they were hosting it in 2004.
Our primary industries
2004 was the same year Gareth Morgan wrote the dairy industry was dicing with disaster:
“So far, the industry has simply morphed into a vehicle for generation of wealth for a class of land-owning, milk-producing suppliers whose deployment of capital is well below the potential the industry has to generate income for New Zealand.
Inefficient deployment of capital (too much on-farm, insufficient off-farm) condemns the industry to a state below its potential.
As a sheep and beef farmer much of that sounds like the wrong industry.
In 2004 dairy exports were not quite $5 billion, but today, are almost $12 billion. A staggering 240 percent increase.
Through Fonterra’s alchemy of marketing and supply chain logistics they are now on the cusp of smashing the $20 billion revenue barrier. Very few realise just how big or important Fonterra is as our one true world-scale corporate. Dairy alone is over a quarter of all this country’s exports.
The $20 billion revenue barrier is also corporate New Zealand’s equivalent to the four minute mile. It makes the debate over its future, the New Zealand business story of the decade. With TAF now voted let’s hope dairy farmers unite and continue to grow this very important company.
I also say Mr Morgan got the right prescription for wrong industry because in 2004, red meat, wool and hides generated around $5.5 billion in exports. Eight years on that has grown to $6.7 billion; a modest increase.
Explosive growth has come out of the horticultural sector when combined with wine is now a $3 billion dollar annual export. That’s up from less than $1.5 billion recorded eight years ago when wine didn’t even factor as an export category in its own right.
While people may look at logs and say ‘what’s the value add in that’, the value of those logs has grown a full third over where they were in 2004. That does not factor in the value add processing we do in New Zealand.
New Zealand is a trading nation so there are two things we need from governments of any colour. That is free trade access and an understanding of what these markets need from us.
We need only refer to the rapid growth of exports with China to see what I mean. Getting better trade access with other markets means reducing the fear those markets have of us Kiwi farmers.
This explains why we have, with our Australian counterparts in the National Farmers’ Federation, recently joined the World Farmers Organisation.
It guarantees the New Zealand farmer’s voice will be heard among international and United Nations bodies. It also means we truly represent farmers locally, regionally, nationally and internationally.
It also provides a means for farmer to farmer diplomacy looking at the big international issues of food security, climate change and trade. It is worth noting that some $1.5bn in tariffs is paid annually by our agricultural exporters, effectively a $1.5bn reduction in farm income.
We should also note that of the 41 member countries of the WFO, only 4 are supportive of free trade. Don’t plan on DOHA being settled anytime soon!
The land and water interface
The Land & Water Forum’s second report is a major one.
The emphasis is a call for national bottom lines and it is significant Federated Farmers is involved beside 65 other groups.
Federated Farmers stands for efficient resource use. By being involved in the process we helped tighten the focus of national bottom lines around safeguarding ecological health, mana atua and human health.
In language farmers understand, we’re not here to suck the rivers dry. We equally have an interest in looking after our indigenous fish because livestock, like us, cannot survive on fetid water. Farmers want clean water too, so do our animals, and so do our children.
The next eight years will see a growing recognition the environment is and will continue to be modified by human activity. We have been modifying the New Zealand environment for 100’s of years.
Crucially, these bottomlines apply equally to all and I mean urban as much as rural. While agriculture undoubtedly affects water quality, somehow, we seem to have ended up with much of the blame.
So these bottomlines will be established factoring in the current state of the waterways and the costs and time involved in achieving where we want to get to ‘as a community’.
The next few years will not be easy or painless but the Land & Water Forum process aligns thinking that we are all in this together.
As we are seeing at Lake Ellesmere and Wainono, it is possible to get the enthusiastic backing of farmers. Where things go astray it can be attributed to an expectation everything can be fixed in several years The environment has no respect for electoral timelines.
Farmers are practical people who like to have a careful and detailed conversation about the costs and timeframes to achieve where we want to get to as a community.
There will be pain but the ultimate goal is a sustainable farm system that has two legs; the environmental and the financial. Without one, the other will topple.
I would suggest that Agriculture is under more environmental scrutiny than perhaps any time in its past. There is no question that over the coming years some farmers will need to lift their game.
There is also no question that the global ‘Food Security’ dilemma presents New Zealand farmers with enormous opportunities. The world is hungry and growing and we are very good at producing high quality food the world wants.
Our challenge is to produce more food from a reducing land area and with a smaller environmental footprint.
Where will the ETS be in 2020?
The Emissions Trading Scheme as we know will be very different by 2020.
There are seven billion mouths to feed on our planet and this is expected to grow to over nine billion by 2050. In 2011, the United Nations concluded that to keep pace with global population growth by 2050, developed countries will need to produce 70 percent more food.
For the developing world that figure is 100 percent and failure risks unprecedented global disorder. The Arab Spring after all didn’t start over rising sea levels in the Gulf of Tunis, but the price of bread.
This pressure to increase food production comes at a time when the land area available for food production is in decline due to desertification and urban sprawl.
According to Landcare research ten percent of our high quality farmland has been lost to ‘lifestyle blocks’, many of which are not particularly productive. In land terms, it is equivalent to well over 100 CraFarms or more than half the land area currently in dairy production.
In 1960, the world had 0.44 hectares in food production for every single person but by 2050, this is forecast to have fallen to 0.15 hectares. Lazy urban planning, not one-eyed rampant environmentalism, is arguably our biggest threat.
The pressure of this global population bomb means to maintain social cohesion, the primary production of food, I think, is almost certain to come out of global treaties dealing with climate change.
To be clear, this relates to the primary production of food only. Tertiary manufacturing and distribution will continue to be captured if countries choose to maintain emissions trading systems.
On the upside for New Zealand, the past two decades has yielded lower carbon footprints averaging 1.3 percent each year.
Continued research through the Greenhouse Gas Research Consortium locally and internationally is arguably where New Zealand will grab the high frontier and a competitive advantage.
We already have a reputation of farming excellence internationally. We ought to be aiming to become the Palo Alto or Oxbridge of agricultural learning and research.
So let’s give science a chance
When I mention ‘green revolution,’ many will think about the Green Party.
Of course, I mean the1960’s, when pesticides, fertiliser and new hybrid seeds combined to supercharge agriculture. These were not New Zealand inventions but New Zealand farmers and scientists adopted and adapted them to create global leadership.
The world needs a second green revolution and New Zealand is ideally placed to lead it, provided we can overcome self-imposed limits.
That the human race is growing by two people every second creates immense opportunity for the biological economy. We need to use all our skills and knowledge in the biological and the physical sciences to increase our production and the value of our products.
Innovation and not deprivation will be the future shaped by biological and physical sciences. We also have lessons to learn from organics but this must be led by science rather than PR.
As William Rolleston has previously noted, ‘sustainable products will be those which underpin our reputation for safe, reliable and high quality food and backed by science using methods, which in themselves, are environmentally responsible’.
The qualitative opportunity for New Zealand comes from greater affluence as well as smaller but more numerous families.
The good news is that China and Asia are growing richer and will demand a higher protein diet. We grow protein and fibre of the highest quality and therefore, are well positioned.
I would think this provides a sound strategic footing and hope the Opposition will come to appreciate our economy is a biological one.
Then again, if we choose to, we could easily follow Australia and Norway’s path to greater national wealth by mining the land and ocean floor. If we choose to, being the operative words here.
Parents of fewer children will prioritise their spending on quality food and fibre for their children as well as products to prolong their own quality of life.
Sciences, such as biotechnology, provide the means to multiply the value of the commodities we excel in producing
If we are to be true leaders in agriculture in leading a second Green Revolution, we mustn’t constrain ourselves to old technologies. We should instead be prepared to consider new technologies such as genetic modification and nanotechnology but only when we can be certain it will benefit our economy and of course, our environment.
The right science ecosystem for New Zealand would allow for research and its outcomes to be commercially realised right here.
Agriculture provides the economy with its skeleton but it is up to the physical, but especially the biological sciences, to make the most of our core competitive advantage represented by land, soil, water and people. LanzaTech being a fine example of this blended future.
So what’s ahead…?
My experience as a farmer and with the Ballance Farm Environment Awards tells me good environmental practice does lead to bottom line improvement. Building resilient, sustainable, and profitable farming systems is what we must do.
So long as we don’t trip ourselves up environmentally, there is no reason why yields and value should not rise further. By June 2020 my crystal ball predicts that primary industry exports will well exceed $40 billion.
This would be a 25 percent increase over the next eight years but well below the 73 percent over the past eight years. The combination of an indebted local market as well as troubled European and American markets will prove strong headwinds. Thankfully Asia will support much of our new growth.
There will also be some slow down due to environmental constraints but I hope not too much.
Having recently returned from overseas I get the impression that while the rest of the world is worrying how to feed a growing population, some here talk of capping production. While the rest of the world seems focussed on growing their economies, some here talk of winding back the clock.
As a country we can’t afford to lose another 53,000 of our people across the ditch next year in their search for better jobs. We need to grasp new opportunities here.
The growth of our economy and our ability to offer more and better jobs comes from growing our businesses, not halting agriculture. A profitable and growing farming sector is the best way we can support good environmental practice.
The future for New Zealand to 2020 and beyond is exciting. Our challenge is to ensure a sensible balance between growth and the environment.
Our aspiration should be to significantly improve both.