Primary sector diversity is the way to go
One of the themes to come out of the Agri-Summit Conference in Napier last week was diversity. For the continued prosperity of the primary sector, and New Zealand’s entire economy, mixed land uses will need to be adopted in coming years; this was one of the propositions put forward.
A key driver is reducing our emissions, as recently agreed in Paris. There are a number of ways to achieve this; one, put forward by London based consultancy Vivid Economics, would see 1.5 million hectares of pastoral land converted to horticulture, with a corresponding reduction in livestock numbers of 20% to 35%. Climate change will also have an effect here, with the possibility of new areas of New Zealand being opened up for growing.
Spreading the risk of an economic downturn, from something like a biosecurity incursion or a market closure, is another important factor. Figures produced at the Summit by Con Williams, Agri Economist for ANZ, showed an intriguing return on cash invested in the growing and farming businesses; in the past five years, pipfruit’s cash return has been between 15% and 20%, Sungold kiwifruit between 10% and 14%, but dairy, meat, and forestry were all under 7%. The cash return changes with the fortunes of what is farmed and grown, so having a diverse farming and growing operation protects against downturns, and is ideal risk management that maximises profitability. And, at the same time, it addresses the issue of emissions.
The world’s growing demand for high-quality, fresh, healthy food, and the reducing demand for meat based products, was another theme to come out of the Summit. New Zealand has a very valuable role selling high-quality meat products to the wealthy of the world, but with lessening demand for meat and increased demand for quality fruit and vegetables, we need to adjust to meet this demand and grow more fruit and vegetables. The growth in horticulture’s export value has only partially been due to increased production. The majority of this growth has been through increased value; our overseas consumers are paying more for their high quality produce.
The primary sector should move to this mixture of farming and growing to maximise returns, and to meet New Zealand’s international commitments head-on.
- Mike Chapman, CEO