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Guy: Speech to Beef + Lamb New Zealand AGM

Hon Nathan Guy

Minister for Primary Industries


14 March 2014

Speech to Beef + Lamb New Zealand AGM

Thank you for the opportunity to address you all today.

The last few years have been some of the more challenging in New Zealand’s history. In the space of five short years we have endured the worst financial crisis since the Great Depression, the worst drought in 70 years, and of course the devastating series of earthquakes in the Canterbury region.

But we have largely weathered this storm, and while there will no doubt be further hurdles along the way, the future is looking bright for New Zealand.

This year, GDP growth is tracking at 3.5%; exports for the primary sector are $5 billion ahead of forecasts; and the Government is on track to reach a surplus next year.

I believe the leadership of Prime Minister John Key and Finance Minister Bill English has helped to steady the ship, and bring the economy on a path to recovery.

But it is the people sitting here in this room that have pushed New Zealand along the path of recovery – farmers from all over New Zealand. Whether it be sheep, beef, dairy, horticulture, or any other primary industries, it is thanks to farmers doing their job, and doing it well, that New Zealand’s future is looking bright. I want to personally acknowledge this contribution you all make to the New Zealand economy.

You don’t get thanked enough for doing the hard yards and producing our fine meat products that are showcased and consumed around the world.

Today I’d like to do three things. Firstly I’d like to briefly outline some of the things this government is doing to help farmers to continue to thrive. Secondly, I’d like to talk about my vision for the red meat sector. And finally I’d like to address the on-going discussions around the structure of the industry.

The Government’s role

I am a firm believer that the Government’s role is as an enabler. The Government does things that help farmers to continue to prosper.

That is why we have set an overall goal to double our primary sector exports to $64 billion by 2025.

Once again it will be farmers that do the hard yards to enable this. But the Government can help.

I have a set of priorities to achieve this.

Biosecurity is my number one priority, and will remain my number one priority as long as I am Minister. A key focus for me in this area is to increase resources at the border, and we have added over one hundred positions over the last year or so with more to come.

We will also implement government industry agreements (GIAs), and ensure that MPI’s and the industry’s FMD preparedness programme is on track.

We are also continuing to develop export opportunities. I will talk a bit more about this later in the speech, but can I assure this room that we are doing everything we can to increase access for our products into a range of countries including the TPP countries (worth 45% of New Zealand’s total trade), and also Taiwan, Latin America, and the Gulf States.

Last week I was in the Middle East where we are developing an agribusiness service hub in Saudi Arabia to showcase Kiwi know-how and technology. There’s great potential for exporting chilled lamb into this region, and we will be pushing for New Zealand to become a supplier of choice.

We are addressing what has long been realised as a huge gap from successive governments in primary-sector innovation investment. I will talk specifically about the red meat sector later, but I am proud to say that together the government and a range of industries have now committed to invest over $700 million in 17 new and exciting innovation projects through the Primary Growth Partnership (PGP).

After last year’s drought there should be no doubt in anyone’s mind that as a nation we desperately need more irrigation infrastructure. What New Zealand has is a water storage issue, not a water shortage issue. That is why this government has committed to investing up to $400 million in irrigation infrastructure.

Yesterday I visited the Waikato and the countryside is looking extremely parched. I will be watching the situation over the next few weeks very closely.

We are also helping to realise Māori agribusiness potential. Iwi own 1.5 million hectares with 300,000 ha under full production. The remaining land has huge productivity potential which MPI is working alongside of Iwi to develop.

A recent report confirmed that lifting the productivity of this land could result in an $8 billion increase in exports and create a further 3,600 jobs.

The Red Meat Sector

There are many challenges and opportunities in the Red Meat sector.

This sector has been one of continual change, mostly for the good. This change has been as a result of innovations, new market demands, and changing environments.

By way of example, the massive change of deregulation and subsidy removal in the 1980s led to new efficiencies driven by farmers. So while we saw a reduction in New Zealand’s sheep flock from 72 million in 1984 to 31 million now, we produce the same amount of meat with less than half the flock size.

This confirms to me how farmers are innovators, adopting new technology inside the farm gate and lifting productivity and returns.

To provide more context of the scale of change we are facing - growth in our trade to China increased by 45% last year alone.

We need to be aware of these changes, and we need to adjust and adapt to make the most of them.

I’m aware that you are voting on whether remaining wool levies held by Beef + Lamb be used to fund a business case for a wool levy under the Commodity Levies Act 1990, to establish a new industry partnership called Beef + Lamb New Zealand Genetics, and support for additional funding for the Meat Industry Excellence Group (MIE).

I will be watching the voting results with interest.

So how is the red meat sector doing?

Not a week goes by where I don’t hear how dairy is taking over the sector; how the red meat sector is on a downward spiral; and how New Zealand is becoming one giant dairy farm.

This is not what New Zealand wants, and it is not what I want.

I am optimistic about the red meat sector’s future.

Last month I released the updated MPI forecasts for primary sector exports. These figures show that the meat industry is having a pretty good year, with exports projecting $1.2 billion higher than initially forecast.

The main driver of the change in forecast values is the increase in lamb export value, which rose by almost 40% over the original forecast. This was primarily caused by increased demand from China.

An additional driver is that volume of production didn’t dip as much as expected as a result of last year’s drought. Basically pregnancy rates for ewes were higher than expected and lamb growth rates were impressive. Beef returns have also been very solid.

Having said that, I do want to acknowledge that the industry does have some serious challenges. I also want to acknowledge that times are tough for some of you out there. I’m not going to pretend that life is all rosy and well for everyone. What I do want to do though is focus on solutions and a plan to lift the performance of the industry as a whole.

So, here are my thoughts on how we lift the performance of the industry:

We will not improve the profitability of this sector by doing more of the same, or by simply by selling more of the same. We need to innovate, collaborate, and develop market opportunities.

Innovation

New Zealand has a proud history of innovation in this sector. But we need to do more. That is why this Government has committed the most funding of innovation in the red meat sector in recent history. In total through the PGP the government and industry are investing $326 million into the sector.

This investment is expected to generate around $2 billion in benefits to the New Zealand economy.

The range of projects is vast and exciting. From farm management systems in the Farm IQ programme, to turning traditionally low value offcut products into higher value added products in areas such ingredients and health products in the Food Plus programme.

These projects are cutting edge and are already showing great progress in delivering more profitability into the red meat sector.

Collaboration

We need to do a better job of collaborating as a sector. I know that commercial realities mean this is not possible all the time, but there is no excuse to not pursue NZ Inc approaches on certain initiatives, particularly in-market.

Once again the PGP has made a start on this. One programme has co-investors including the Alliance Group, Silver Fern Farms, ANZCO Foods, Blue Sky Meats, Greenlea Premier Meats, Progressive Meats, Beef + Lamb New Zealand, ANZ Bank and Rabobank.

Here we have in one collaborative project a large proportion of the key players in the industry sitting around the same table, including both cooperatives. This is very exciting and could be a great start for even more collaboration.

Developing market opportunities

We also need to invest in additional human resources in our key and emerging markets. I have taken on board the learnings of the last year and that is why MPI is putting six more staff into China, one more each into Jakarta and Dubai, with another four more positions to be announced.

It is vital that we have enough people in these markets to broaden our presence, to deepen relationships, and to be on hand should anything go wrong.

I am keen to see more industry representation in these key and emerging markets. The Government can only do so much for the industry, we need you to be working alongside us.

Before I move on I want to make one final point.

If we don’t talk about the good stuff we are doing no one else will. Just from scanning the rural publications I note that Silver Fern Farms are beginning online distribution in Shanghai, New Zealand cricketers are pitching in for marketing into India, and the Silere branded merino meat was a huge hit at the America’s Cup in San Francisco.

The best way to put a sector into a downward spiral is to consistently talk doom and gloom. It is not true that the meat industry is on the way out. This industry is capable of truly leading the world in its innovative and profitable approach to selling high quality meat.

I will continue to back this sector and I will continue to acknowledge the great success stories. We need to hear even more pride and passion from everyone involved.

The structure of the sector

Can I acknowledge and congratulate the MIE for the hard work and dedication they are showing, with members taking time out of their day jobs to pursue a cause they truly believe in.

Getting MIE farmers elected onto the cooperative boards has been a success that needs to be acknowledged. I wish them well with the remit vote.

I would like to say a few words on the structure of the industry.

My role as Minister is to listen to, to act on behalf of, and to support, this sector.

So I now publicly reiterate statements that I have made in a variety of forums. If a significant portion of the sector, and this means across the whole sector come together with a solution of how they want to better the industry, my door is open. I will listen and I will do what I can to support the sector.

Any substantial change needs to come with a very clear and very broad level of support. I am not prepared to interfere in the structure of a sector without the support of that sector. The Government doesn’t own the industry – you do.

I doubt that anyone in this room wants the heavy hand of government dreaming up bureaucratic solutions that haven’t come from the ground up.

This is an industry where farmers can have a say. For example, the two farmer run cooperatives have over 50% market share in New Zealand.

It seems very clear to me that if an overwhelming majority of people want change, there is the ability to bring it about.

Before I conclude I’d like to address the proposal of a meat industry summit.

I encourage all members of this industry to collaborate, to talk, and to resolve issues.

I don’t think anyone wants another talk fest or a meeting where only a few turn up and those that do aren’t prepared to fully engage. I believe any meaningful event must have the commitment of all the players of the industry including MIE, Beef and Lamb, MIA, Federated Farmers, the processors, and the banks.

If the MIE or any other group organises a pan-industry summit, committed to resolving issues in the sector I will commit to attending and engaging in this summit.

In fact, I will even offer to find a suitable venue.

Conclusion

This is your industry, and the industry’s future is vital, not just to us here in the room but to New Zealand. I am committed to doing what I can to support the industry’s continued success.

Thank you.

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