The impact of losing farm support on New Zealand agriculture. Mike - PowerPoint PPT Presentation

The impact of losing farm support on New Zealand agriculture. Mike Petersen – NZ Special Agricultural Trade Envoy UK Onion and Carrot Conference East Midlands Conference Centre 14 November 2017

Before everything else … • There is no recipe of reform from the New Zealand example. – Only lessons and experiences learned. • New Zealand was in a unique position in 1985 that necessitated action. – An imperative is a powerful incentive. • No-one in New Zealand wants to go back to where we were before reform.

New Zealand has a history of domestic support Producer Support Estimate New Zealand Agriculture 50 45 40 35 Percentage 30 25 20 15 10 5 0 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

… so what happened?? • 1985 reform of the agricultural sector saw all subsidies removed from farming. • Huge challenge and upheaval. • Also wider economic reforms. – Labour market, imports, financial markets. • Set scene for unprecedented drive for efficiency and innovation.

So where is New Zealand today??

Land use in New Zealand 27 million hectares 4.6 million people Natural forest Planted 6.5 m ha (24%) Other non- Production forested land forest 18% 1.8 m ha (7%) Pasture & arable land 51%

Very Low Levels of Government Support for Farmers OECD Producer Support Estimates for New Zealand Agriculture

Some sector numbers… • Pastoral farming dominates – Sheep: 28.5 mill. – Beef cattle: 3.8 mill. – Dairy cattle: 6.5 mill. (4.5 mill. of which are in calf or in milk) – Deer: 1.1 mill. • Horticulture is increasingly important – Apples: 9500 ha – Kiwifruit: 15000 ha – Wine grapes: 35000 ha • Arable farming – Barley: 65,700 ha. – Wheat: 54,800 ha. • Fisheries – Commercial fish catch: 418,307 tonnes

Agriculture remains the key driver for our economy Agriculture is one of NZ’s largest • employers (11%). Annual agriculture exports £22 • billion, 70% total goods exports. New Zealand has population of • 4.8m but produces enough food for about 40 million. Dairy is NZ’s largest single • export sector worth £7 billion and 27% of total goods exports. .

Horticulture sector Fastest growing sector – now £3 billion • export earnings. Kiwifruit, wine and apples 75% of exports. • Innovative research with ongoing • development of new varieties and new technologies. Disease and pest management key. • Sophisticated cool store technology to • ensure produce quality from afar.

Did you know – The New Zealand province of Canterbury grows: 50% of world requirements for radish seeds • 35% of world requirements for white clover • seeds 33% of world requirements for carrot seeds. • 30% of world requirements for Bok Choi • seeds.

Modern farmers/growers post reforms in New Zealand is business driven… • Farm businesses. • Production decisions and market returns are dictated by the domestic and overseas markets , not the government. • Sales depend on meeting customers’ expectations of price and quality. • Production is efficient, profitable and sustainable. • Farms bigger - but fewer of them. • Family ownership still dominates, but professional management and governance.

Success not just due to growers and farmers Strong ecosystem of professional, service • and support industries. – Business management advice. – Crop inputs and care. – Crop health and quality control. – A strong banking and finance sector. – Strong focus on development of new varieties and cultivars. – Fertility and irrigation advice. – Tools and software.

New Zealand in context Product % World % Share of domestic Production World trade production exported Dairy 3% 33% 90-95% Beef 1% 8% 82% Sheep meat 3% 49% 87% Wool 14% 27% 98% Venison n/a 50% 65% Kiwifruit 21% 32% 93% Pipfruit 1% 5% 65% Wine 0.5% 2% 70% Fish 0.3% 1% 73% Roundwood 2.3% 14% 75% (coniferous)

So what did New Zealand learn from losing farm support for agriculture?

Lessons from New Zealand • The pace of reform is important. – Urgency encourages faster adaptation. • Reforms must be all encompassing. – Avoids artificial distortions and false incentives. • Independence is a wonderful thing. – Regulatory and policy making becomes more collaborative once the Government no longer pays your wages.

Lessons from New Zealand • Increased diversity through land use change. – Dictated by market returns. • An unprecedented drive for efficiency and innovation by farmers, growers and support sectors. • Financial and banking sector that works with farmers through volatile times.

Lessons from New Zealand • The imperative in New Zealand drove overnight reform. – Greater planning and transition could have been helpful. • Rural communities take time to adapt. – But are very resilient and bounce back. • Change is stressful and a strong support network is required.

An example - the sheep industry 1985 sheep population was nearly 70 • million. Incentives promoted numbers instead of • productivity. – Numbers versus quality. – Production irrespective of market demand. – Farm practices that compromised the environment. – Sheep farming on land best suited for other uses. –

An example - the sheep industry • 1985 removal of subsidies. – Sheep flock down from 70m to 28m. • Same amount of sheep meat from 53% less sheep. • Per head performance gains • Lower emissions – climate change. • Producing product suited to market demand. • Land use optimised.

Other important elements to successful reforms of agriculture in New Zealand.

The importance of trade and market access • New Zealand’s success relies heavily on food and beverage export sector. • An active and enthusiastic participant in international trade talks. • New product development, new markets and global value chains fast moving. • Need diversity and reduced reliance on individual markets • Barriers to markets are barriers to innovation, progress and prosperity.

Bilateral and plurilateral FTAs have been important for New Zealand FTAs or EPAs concluded with: Australia (1983) Singapore (2001) P4-Singapore, Chile, Brunei • Darussalam (2005) Thailand (2005) China (2008) ASEAN & Australia (2010) Malaysia (2010) Hong Kong (2011) Chinese Taipei (2013) Korea (2015), Pacific Islands Pacer Plus (2017) Negotiations concluded, awaiting ratification: Gulf Cooperation Council (Kuwait, Oman, UAE, Bahrain, • Qatar, Saudi Arabia,) Negotiating with : India, RCEP (Japan, India, Korea, China, Australia, ASEAN), • and.... Immediate priority: TPP Future priorities: EU, UK (following Brexit), Pacific Alliance. •

Strong and visionary farm leaders • Leadership through reform is vitally important. • A tough and bruising place to be. • Accept change is coming and drive the agenda. – Help develop and deliver the solutions. – An opportunity to gain more than lose. – Defending status quo untenable in a time of considerable change.

Summary

Summary • New Zealand reforms in agriculture have delivered efficiency and innovation. • Strong growth in horticulture sector to continue. • But – plenty of opportunity for the UK. – New Zealand is a small producer and can only feed 40 million people in an increasingly hungry world

Summary There is no recipe from the New Zealand • experience of reform. – But there are some lessons learned. Change is stressful. Planning and support • is required. Trade drives innovation and prosperity. • Strong farmer leadership is vital. • And finally – There is no appetite in New • Zealand to go back .

The impact of losing farm support on New Zealand agriculture. Mike Petersen – NZ Special Agricultural Trade Envoy UK Onion and Carrot Conference East Midlands Conference Centre 14 November 2017