In March 2008, then Prime Minister Helen Clark announced a Bold New Plan. Called NZ Fast Forward, the Government was to spend $700 million and industry up to $1.3 billion over 15 years transforming our big primary agricultural producers into “smart, innovative, and high value” suppliers to global markets.
“NZ Fast Forward will have a strong focus on making our pastoral and food industries environmentally and economically sustainable,” Clark said at the launch. “That is both the right thing to do for the environment – and the smart thing to do, as we have much to gain from being viewed by our trading partners as sustainable producers and suppliers.”
The problem for New Zealand was our major farming companies were still stuck in a high volume, low value mindset, said then Agriculture and Fisheries Minister Jim Anderton. While there were examples of small producers where R&D and innovation “have seen profits leap to millions of dollars a year”, a move to sustainable pastoral systems and economic transformation needed to become “a very high priority for our large primary sectors”.
That would change over the 15 years of the NZ Fast Forward programme, said Economic Development Minister Pete Hodgson. “We have tended to be low-key in trumpeting our talents for smart environmental solutions, but we can now capture global opportunities as the world becomes more aware of sustainability.”
Of course, by the end of that year the Labour Government was gone – and so was NZ Fast Forward and the $2 billion of funding for science, research, product development and business capability building in the agriculture and primary produce sectors.
Fast forward to 2022
Ironically, had it not been axed by National under John Key, NZ Fast Forward’s 15-year timeframe would have seen it coming to an end around about now. What it would have produced is anyone’s guess. Maybe major transformation, maybe not much.
Instead, what we have this week is publication of five years-worth of research, case studies and market reports which suggest New Zealand’s primary sector is, tbh, struggling with pretty much the same issues we were facing in 2008.
Small companies are being innovative, the case studies suggest, but by and large big producers are failing to take advantage of opportunities to get more profit from producing higher value products for a environmentally-conscious market. Neither are they very good at flaunting overseas even the sustainability attributes their existing products have.
It’s kinda depressing.
The newly-published research comes from the Agribusiness and Economics Research Unit at Lincoln University, funded between 2017 and now by the ‘Our Land and Water’ part of the National Science Challenge. The two relevant funding streams for the studies were worth $3.7 million between them and the material is gathered together on a portal with the title The Value Project.
“New Zealand is great at producing food,” the headline page says. “And we’re getting better at doing it sustainably. So how can we capture that value and be rewarded for even more sustainable practices? Welcome to The Value Project – exploring how Aotearoa New Zealand can generate greater returns from sustainable production.”
Many of the research findings centre around what’s called “consumer willingness to pay” – whether different segments of the population in different countries are prepared to pay extra for various positive sustainability, health or social product attributes. It might be organic food, or produce from a particular country of origin; environmentally-friendly or animal welfare-focussed production.
The results are cautiously optimistic.
Customers overseas are prepared to pay a price premium for sustainability and other attributes. And this premium has the potential to increase returns to New Zealand producers enough to offset the costs of providing these sustainability attributes.
Take carbon neutral dairying, for example. The farm system changes needed for the average Waikato dairy farm to cut its greenhouse gas emissions would be expensive, the research found. “But the price premium obtained from the market may cover the cost and is likely to create a profitable outcome.”
It’s a similar story for low-nitrogen beef production. European consumers’ willingness to pay a 32 percent price premium for beef could offset the cost to farmers of reducing nitrogen emissions – something that’s being forced on them in some places.
“Combining an environmental life cycle assessment with an economic analysis revealed the consumer willingness to pay could compensate for the environmental cost of protecting Lake Taupō, which is currently being borne by farmers,” the research said.
What is more frustrating is how far behind New Zealand is in terms of ‘willingness to pay’ research, let alone using this data to provide reliable information to producers so they can alter their production, marketing – and potentially profit.
SME companies still lead the way
Many of the success stories featured on The Value Project site are relatively small players. Manawa Honey, Pegasus Wine, Reefton Distilling Co, Ngai Tahu’s South Island pounamu and Mea fragrance companies.
Zespri gets a mention here and there, but the main case study from a bigger section of the industry is the Taste Pure Nature campaign from Beef + Lamb NZ. It’s a relatively new initiative – development goes back to 2016, and the results aren’t proven – that piece of work is still to be done.
Still, early findings are promising that farmers might be able to achieve up to a 20 percent price premium in the US by focusing on a Farm Assurance programme, identifying consumers and markets prepared to pay a premium, and selling the New Zealand product story to them.
These sorts of initiatives need to become the norm, not the exception, says Associate Professor Peter Tait, one of the researchers at the Agribusiness and Economic Research Unit.
Tait has spent years studying shifts in consumer preferences and worries New Zealand is not doing enough to address environmental standards, and because of that is in danger of missing out on the economic benefits that come from more sustainable production.
“How long can we go on still staying in the same old way of thinking? New Zealand is vulnerable. It’s a form of risk that isn’t being factored in.”
Tait has spent his career trying to get businesses and government departments to incorporate environmental and social outcomes into their decision-making – and, importantly, to prove that looking after the land, water and people that are essential for a vibrant primary sector is not a cost, but an opportunity.
He says a lot of farmers feel stuck in an industrialised process, and some of New Zealand’s big players in the agriculture sector have been more of an encumbrance to the shift to high value, sustainable production, because of short term thinking about the costs involved.
“Once you become huge, there’s a lot of inertia.”
Beef + Lamb NZ’s global market intelligence and research manager Hugh Good says roll-out of the Taste Pure Nature brand has seen more than 8000 beef, sheep and deer farmers certified under the farm assurance programme. In California, preference for New Zealand grass-fed beef is up 5 percent, while preference for grass-fed lamb is up 4 percent since March 2020, Good says. Awareness of New Zealand beef and lamb is up 19 percent over the same period.
But there is so much more potential upside for New Zealand, he says.
In 2021, 89 percent of New Zealand’s beef was shipped frozen, mostly as ground beef, which sells for around $8,000 per tonne.
Three percent was prepared and processed meat, and 8 percent was chilled premium cuts. The latter sells for around $40,000 per tonne.
“You can get so much more if you can prepare and process it domestically. That’s about innovating here, developing brands here, and moving up the value chain in terms of how we do things.
“The other annoying stat I use is that Singapore doesn’t produce much food, yet it exports more processed food than us. Yes, they’re closer to export markets, but it drives me crazy.”
It probably drove Helen Clark and her 2008 Cabinet crazy too.