Wednesday, April 24, 2024

Innovate or cease to exist, industry told

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New Zealand’s primary industry players have been told they cannot afford to be complacent if they want to take advantage of rising global food prices.
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“It’s an exciting time to be looking at the food sector. It’s a time when we as a country have huge opportunities,” KPMG agribusiness head Ian Proudfoot told delegates at the New Zealand Primary Industry Summit in Wellington last week.

“But it’s also a time where if we get it wrong we could lose a lot of money very quickly,” he said.

With the global population set to grow at 225,000 people every day on average over the next 20-25 years, Proudfoot said growth was obviously going to be a key driver of food pricing. The geography of that population growth would lead to greater demand for food products different to those NZ traditionally has supplied.

“Most of those people are going to be in Africa, they’re going to be in Asia, they’re going to be in South America. They’re going to eat different foods to what we eat. In developed areas we’re going to be seeing flat or slightly declining populations.”

To maximise the value of the products, the right food needed to be going into the right markets, he said.

“These markets are changing very, very quickly, particularly in Asia, as they develop. The protein patterns in those markets are evolving.”

Combined with this increasing demand is greater competition for land use. Proudfoot believed there would be a reduction in land available for agricultural purposes over the next 15-20 years as urban areas expanded.

“Maintaining and holding the best land for agriculture relies on agriculture making enough profit to support the use of the land for agricultural purposes,” he said.

Change in the global political environment introduced further uncertainty into the mix.

Trade access was a moveable feast, with rules changing constantly. While explicit artefacts like free-trade agreements were rising, Proudfoot said he had observed an increase in implicit protectionism as food-supply security became a tool for governments to shore up domestic political power.

Common Agricultural Policy reform was scheduled for 2015 in the European Union and was likely to result in the reduction of the use of production quotas. Faced with greater exposure to market realities, Proudfoot said farmers would have two options – innovate or cease to exist.

“I personally believe that farmers are innovative people. They will want to fight hard to protect their businesses. They will move their business forward.”

He identified Ireland as one of the EU countries likely to compete with NZ’s dairy industry. After the meltdown of the Irish economy in the global financial crisis, the Irish government was looking to rebuild it based on food and agriculture.

“They look at NZ as the role model and they want to be 10% better.

“They’re not just going to be looking at the same markets, they’re going to be looking at the same product niches that we’re focusing on because that’s where the most money is.”

He identified water management as an area critical to the long-term future of NZ agriculture. Being seen as inefficient in a world where in many countries water is a scarce resource could hurt the image of NZ Inc. Investment in irrigation, particularly water storage infrastructure, was crucial.

“We don’t have sufficient water storage so we can use water in a really smart way … so that we treat water as it should be treated, the new form of oil.”

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