Transcript New Zealand Agriculture Past and Future

Gavin Sheath – AgResearch, Ruakura, Hamilton
Frank Scrimgeour – University of Waikato, Hamilton
Alan McDermott – ANZCO Foods, Christchurch
Members of Agribusiness Research & Education Network
(www.aren.org.nz)
Supported by AgMardt
New Zealand Context
1980 →
 Starting point was a failed global and national
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economy and rampant inflation
Rapid movement to de-regulation of industry and a
free market economy
Shift of debt from the public to private sector
Diversification of alternative products and markets has
been emphasised
Increased expectation of NZ public and consumers
towards more sustainable resource management
Cases:
Dairy
Kiwifruit
Sheep meat Venison
Dairy Industry
 Emerged from the 1980s, seeking control and stability
 Evolved from a NZDB strategy to a dominant co-
operative (Fonterra)
 Development of new products, brands, markets and
international partners
 Farming is more efficient, operates at a larger scale and
has expanded
Fonterra dominates through ownership
of production-processing-marketing chains
Sheep meat Industry
 Industry without a strategy and highly competitive
both internally and externally
 New markets in EU, USA and Asia; and products have
changed from carcass to cuts and frozen to chilled
 Processing evolved through deregulation, market
compliance, new entrants and reduced capacity
 Farming moved from survival to intensification; and
an increasing dependence on sheep meat as wool value
declined
Alignment within chains is typically
weak – competition dominates!
Kiwifruit Industry
 Young industry that has experienced boom-bust
cycles, but now has a strategy providing transparency
and control
 Two perishable, niche products that are readily
substitutable. Branding, plant variety rights and
innovation have been critical factors
 Post-harvest handling has become concentrated and
efficiencies achieved through competition
 Orchard management revolves around demanding
specifications and contracting
Zespri’s strategy aligns industry players and a
global supply base satisfies year round demand
Venison Industry
 Young industry that was encouraged in the drive for
diversification
 Collective commitment to food safety, animal welfare,
etc., but boom-bust cycles continue
 Limited success in market development – products are
largely for the seasonal “German” game market
 Processing has become concentrated and farming
systems have been built on significant innovations
An industry that has been characterised by
opportunistic behaviour along the value chain
Drivers of Industry Performance
Demand - Supply
Policy Environment
Industry Structure
Business Conduct
Demand & Supply
 There has been increasing expectations from retailers,
consumers and public : food safety, consistently high
quality, regular supply, etc
 Demand has been responsive to price spikes and niche
products are readily substitutable
 Land use change has occurred in response to prices
and profitability – this will continue
 Seasonality of supply has been reduced – further
flattening is necessary
Policy Environment
 Government and industry co-operation has been
effective in gaining international market access
 Government has responded to industry needs such as
meat deregulation and dairy restructuring
 A free market economy has resulted in volatile
exchange rate and appreciation in land values
 Environmental regulations are now starting to impact
on “freedom to operate” on-farm
Industry Structure
 There have been cycles of consolidation and
fragmentation seeking stability and then opportunity to
innovate
 Restructuring has attempted to achieve an acceptable
balance between market co-ordination, economies of
scale and competitiveness
 Where chain ownership and structures are in alignment
then there is better industry cohesion
Business Conduct
 To maintain a competitive position there has been an
on-going need to create and protect a point of
difference
 Innovation is key to creating these points of difference
 Risk aversion is commonplace as businesses and
farmers deal with uncertainty and volatility
 The means of creating wealth has differed along the
chain and therefore conflicting objectives exist, e.g.:
capital gain versus operating profit
The Future
 Will significant changes in land use continue to occur?
Yes. The balance between financial return on investment
and sustainable resource use will
drive land use changes
 Will Government regulations significantly impact on
agricultural industries?
Yes. An emphasis will be placed on sustainable resource
management that meets public and market expectations
The Future
 Will cycles of industry consolidation and
fragmentation continue?
Yes. There will always be a desire to come together to
gain stability/control and then splinter to innovate
 Will market and price volatility continue?
Yes. This will need to be “collectively” managed by
business to avoid price spikes and over-supply; but
unfortunately our volatile exchange rate will remain
The Future
 Will value chains exhibit more horizontal co-operation
in supply and vertical co-ordination into the market
place?
Yes. Business relationships must be stronger and
responsiveness to market demands greater
 Will product and system specifications continue to be
more demanding?
Yes. New Zealand will need to supply high value
products into affluent markets
The Future
 Will innovations be needed to create new points-of-
difference in products and systems?
Yes. New Zealand is now on a treadmill of higher value,
differentiated products whether this is before or after
the farm gate
“So –
Lets explore the future
Know the potential impacts
Set the future direction”