The practice of farmers diversifying their business is not as straightforward as it sounds.
A University of Otago Agriculture Symposium was told that premium returns from alternative products such as oat milk have disappeared as they have become commoditised, and others suffer from boom and bust cycles.
Anna Campbell, a former agricultural scientist who recently co-founded biotechnology company Zestt Wellness, gave the example of blackcurrants, which her respiratory bioactive business uses for their anti-viral and anti-oxidant properties.
The blackcurrant industry was decimated some years ago when Ribena started using overseas-grown fruit, but Campbell has been working with a South Canterbury grower.
Recently, fruit prices spiked and Zestt had to fund two years’ supply to provide certainty for its business.
When she was working at agribusiness consultancy AbacusBio, Campbell said, it was contracted to analyse the opportunity for oat milk production in Southland.
Oat milk demand was growing and the crop was considered an environmentally favourable alternative to dairying, but Campbell said the economic reality was quite different.
Just 1200ha of new oat crops were needed to supply the market and the retail product has since become commoditised by large multinationals, removing any added value payment.
The economics of growing oats are therefore not as favourable as initially believed. Currently the returns for farmers are about 7c/litre.
The research is a few years old, but measured as effective farm surplus per hectare, spring oats were $800/ha, superior to sheep and beef finishing at $650/ha, but less than spring barley at $1000/ha and winter grazing at $1600/ha and substantially less than dairying at $5120/ha.
Campbell said our ancestors should be praised for the courage in developing processing and manufacturing companies, not an easy task as she has discovered as a co-founder of Zestt.
South Otago farmer Simon Davies said given current returns, he is looking for alternative income sources but is unsure which way to go.
“Farmers are looking to diversify but they need a bit of help.”
Campbell said agriculture must be part of the solution to problems facing the sector, but it has become too easy for others to point accusatory fingers at farmers without knowing exactly what the problem, is let alone solutions.
“Farmers and food systems are part of the ecosystem. We need to think of agriculture as part of the solution rather than the problem.”
For decades farmers have been encouraged to increase production but they have also proven to be responsive to market signals.