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Anderton: Agriculture ITO

16 May, 2008
Agriculture ITO

Last month I had the pleasure of going along to a graduation from this ITO.

It was an enjoyable experience because the future for young New Zealanders starting out in agriculture and related sectors is very exciting.

As I said to them at graduation: I think most New Zealanders would struggle to comprehend the sophistication of our primary industries today. Many would know that primary sector earnings are the backbone of our economy.

But I suspect there are many who think the primary sectors are sunset industries.

Most New Zealanders think there can’t be much that’s scientific about catching a fish or cutting down a tree, or in milking cows or herding sheep or beef cattle.

The truth is very different.

In reality, our primary industries are our most science-based, our most research and development-based, and our most innovative industries.

There is as much science in landing a fresh gold kiwifruit or lamb chop in a foreign supermarket, as there is in a flat screen television set.

And our primary industries are more productive than the average of the rest of our economy and they have been since the 1980s.

That growth is based on the increasing sophistication of the sector. Our primary production depends more and more on our creativity, our science and research, and our high skills.

As we look to the future, we are only going to prosper on the basis of more creativity, more science and research and higher skill levels.

I want to take a moment to consider why that is so.

For most of New Zealand’s early history we managed to get by just by selling low cost commodities. We baled up our wool and sent it away on ships. Refrigerated vessels carried frozen carcasses, bulk butter and cheese.

When our products arrived in the market, they sold because we were a cheap supplier and our competition was limited.

Nearly everything about that story has changed - and the change has only just begun.

Take wool. Wool has gone from being our highest export earner (49 per cent of our export earnings in the early 1950s) to comprising only two percent of our export earnings now.

And the sector that is showing the most confident growth is high value wool like merino. It was only a few years ago that we stopped selling our merino wool bundled up with wool from other countries not branded it as our own, even though our merino is some of the highest quality, finest wool on the planet. Today we have sophisticated Italian fabric companies like Loro Piana coming here to buy our wool and market it in partnership with some of the world’s leading fashion houses.

And we have home-grown companies like Icebreaker that have taken the excellence of merino and created a high-fashion wear business.

There have always been skills involved in producing wool - the legend of the Golden Shears tells us that! But how many more skills have we developed in the production chain now? At one end, there is a sophisticated international fashion business marketing to global consumers. And at the other end, Crown research institutes and universities are investing in new and better raw materials. I opened a conference last year that brought experts from all over the world to discuss a breakthrough in ‘endophytes’ - bugs in the grass that affect sheep. It took innovation here in New Zealand to discover a way to separate desirable endophytes from undesirable ones - and a grass seeds business already worth tens of millions of dollars a year has developed as a result.

Or take our meat industry. We are not just sending carcasses to a protected market in London any more. We are sending all over the world chilled lamb chops, that might be served with a glass of Marlborough pinot noir and a side dish of New Zealand olives.

But we can overstate how far we have come, too. We are still more reliant on commodity exports than any developed economy.

If we want to achieve the standard of living of other countries we like to compare ourselves to, we have to find ways to achieve a premium for our products.

If we want to attract and retain our best and brightest in New Zealand, we have to offer them a future. Their future has to offer the chance to earn global incomes. It has to provide the chance to work in industries that are connected to the exciting opportunities the world offers.

We won’t achieve the premium for our products, or the global incomes we aspire to, by competing on price with emerging low cost, quality producers.

We won’t succeed by making our products the same as those from economies based on low prices and wages and the exploitation of natural resources.

We tried that approach for a while in the eighties and nineties. There are plenty of people who would go back to it. But I said then that you cannot increase New Zealand’s national income by reducing the individual incomes of New Zealanders.

Achieving a premium for our products requires a strong commitment to meet the requirements of consumers in every market we supply. It requires products that are distinctively made from our unique environment. It requires products brought to market not by the cheapest workforce, but by the most skilled.

So the work that a training organisation like this one does - and educational organisations throughout the land do - is crucial.

Let me give you one example.

Consumers in first-world countries will always want the cleanest, freshest, most environmentally responsible products. If we can become the world’s first sustainable nation, we will have an incredible competitive advantage. Our products will be more in demand and we will have a better chance of setting our prices for them.

But a sustainable economy and responsible environmental practice requires a broad span of skills.

It takes skilful knowledge of best practice use of nitrogen for example. It involves the work of people who come here to learn about water management, because our water is as crucial as our land.

A sustainable economy requires us to do our bit to reduce the effects of global warming - that’s why we have an emissions trading scheme before parliament now. We don’t have a choice about global warming, but we do have a choice of whether we pay attention, or whether we get crushed by it. Ask farmers whose incomes were destroyed by drought this year how much global warming they would want. We also have a choice of whether taxpayers or polluters will pay the cost of emitting globe-warming gasses.

The only fair and logical choice, though, is to put the costs where they will help change behaviour.

That’s why agriculture will only come into the scheme, after enough time has passed for the sector to adapt and/or have mitigation measures available to them.

Change will not be easy for our agriculture sector, but it will be a giant opportunity for us too. Our products will arrive in markets able to carry labels declaring them to be sustainable. Consumers thinking about the planet will find our products attractive, particularly if they are wanting assurance that their products are safer, traceable, and grown in rich, clean soil.

All these qualities require an investment in skills, in underlying research and knowledge and in innovation.

Two months ago the prime minister and I announced the New Zealand Fast Forward Fund. The government is putting $700 million into the fund. It’s dedicated to research and innovation in the pastoral and food sectors.

Because it is a fund, it can be invested, so it will grow over time. Over the next ten years, the fund will likely be worth around a billion dollars. With matching contributions from industry, that will be an extra two billion dollars of research aimed at improving our competitiveness.

This is the chance to achieve a step change in our economy. The truth is that only our primary industries have the scale, sophistication, global reach and capital backing to develop global businesses in the near future that could transform our economy.

So Fast Forward is our shot at it.

I am sorry the opposition has declared it would axe the Fund. There are times when it would be worth moving beyond playing politics and thinking about the best interests of New Zealand. Axing innovation is not going to help move us forward.

When I think of the innovation and potential for our primary industry that the Fund can open up, I am excited about the career opportunities that will be available.

Some of our rural industries have had a hard time attracting young people to farming.

It’s required thinking about isolation, incomes, the strength of regional communities and about regional economies. Agri-businesses have to compete with everyone else for skilled staff.

But we are also seeing that the days are long gone when industries like science, agriculture, horticulture, and food technology were mainly rural-based.

Today we’re seeing a demand for skilled people which is being generated by record growth and profitability in a number of sectors. Much of this stems from the dairy sector, but the demand for skilled people is strong across the board – including the arable sector and rural support industries.

The bottom line is we need many more people to meet the demand from primary sector industries.

For the work this organisation does in helping to meet the demand, I congratulate you. I believe you are helping New Zealanders gather the skills they need to lift our industry to the greater heights our primary industries must reach. And that is good news for the economic, social, and environmental wellbeing of our economy.


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