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

The impact of losing farm support

• n New Zealand agriculture.

Mike Petersen – NZ Special Agricultural Trade Envoy

UK Onion and Carrot Conference East Midlands Conference Centre 14 November 2017

• 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. Before everything else…

Producer Support Estimate New Zealand Agriculture

5 10 15 20 25 30 35 40 45 50

1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Percentage

New Zealand has a history of domestic support

• 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 what happened??

So where is New Zealand today??

Planted Production forest 1.8 m ha (7%) Natural forest 6.5 m ha (24%) Other non- forested land 18% Pasture & arable land 51%

27 million hectares 4.6 million people

Land use in New Zealand

Very Low Levels of Government Support for Farmers

OECD Producer Support Estimates for New Zealand Agriculture

• 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

Some sector numbers…

• 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.

.

Agriculture remains the key driver for our economy

• 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.

Horticulture sector

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.

• Farm businesses.
• Production decisions and market returns

are dictated by the domestic and

• verseas 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.

Modern farmers/growers post reforms in New Zealand is business driven…

• 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.

Success not just due to growers and farmers

New Zealand in context

Product

% World Production % World trade Share of domestic 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 (coniferous) 2.3% 14% 75%

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

• 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. Lessons from New Zealand

• 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

• ther 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.

An example - the sheep industry

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

• 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
• n individual markets
• Barriers to markets are barriers to

innovation, progress and prosperity. The importance of trade and market access

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.

Bilateral and plurilateral FTAs have been important for New Zealand

• 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.

Strong and visionary farm leaders

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

• nly 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 .

Summary

The impact of losing farm support

• n New Zealand agriculture.

Mike Petersen – NZ Special Agricultural Trade Envoy

UK Onion and Carrot Conference East Midlands Conference Centre 14 November 2017