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Farming: new rules for an old game

Farming: new rules for an old game

Mary has a little lamb—now what? The answer used to be simple: slaughter it, sling it in a muslin bag and then ship it ‘home’ to Mother England. But how times have changed.  And we've had to change with them.

While you’re drenching, milking, mustering, spraying, shearing, docking or picking, do you really have time to contemplate issues to do with food miles, changing fads and dietary fashions or any number of matters that are ‘out there’ versus down on the farm?

Yet along with all the other changes that the world has dished up, what is happening on the other side of the world has now parked itself right in front of your farm gate. Some can be ignored while others, if left unconsidered, might come back to bite the hand that feeds them.

Again, the original supply chain used to be relatively straightforward. Today, many more are involved in the process so the law of diminishing returns can come into play.

In terms of the share various farming groups receive, much depends on the commodity in question and the ‘savvyness’ (or otherwise) of those controlling the brand development, pricing and overall distribution.

Professor Jacqueline Rowarth from the University of Waikato makes the point that being the ‘biggest’ on the block isn’t necessarily how one can leverage pricing and position. Though New Zealand produces only 2 percent of the global milk supply, New Zealand milk accounts for approximately 35% of the global export market.

Though elements of the ‘old fashioned’ co-operative model are still in place, Fonterra is an example of how a commodity blended with a touch of branding and underscored with a global approach can be a very rich mixture.

The New Zealand Institute of Economic Research sees this ‘milking’ of opportunity in a particular sector does spill over into benefits for the average New Zealander. By its calculations the country’s almost 6 million cows earn $10.4 billion in exports. As prices rise so do returns. For every $1 payout, there is $270 more for every Kiwi. Put that way, increased cost of a milk shake isn’t so hard to stomach.

Jacqueline Rowarth believes that others—most particularly Zespri—will soon be creating their own version of this ‘benefit to kin and country’ analysis.

Again, depending on what you farm, your returns may vary (see Fig. A). Though the data is a little past the ‘best by’ date, the trends seem to be holding up as evidenced by comments from Federated Farmers. The question will always be ‘who’s making the profit? Supermarkets say 4 percent, but on a daily stock turn like milk, that’s still a significant amount. As Lachlan McKenzie, dairy spokes person for the Federation calculated, in the last milk rise ‘debacle’ he receives approx 30 percent of the milk dollar. Yet the telling statistic is that in all this food has become a smaller component of the weekly expenditure from household income. When inflation is then factored in, milk is actually cheaper than it was in 1999.

This sort of ‘good news’ is not often the ‘stuff’ of headlines.

So as we see with much in our changing world, things are not quite so straightforward. Primary producers can no longer control or influence the outcomes of our labours as much as we’d like to. The world beyond the farm gate can be both a field of dreams and a labyrinthine nightmare. More of the former and much less of the latter is where we should have our focus.

To show how quickly variables can change, and how an issue can suddenly rise to almost hysteria levels wiping out years of dealings and relationships, think of the United Kingdom, one of our so-called ‘traditional’ markets, and the matter of food miles.

It wasn’t quite out of left field, but in March 2007 one of their best known retailers, Marks & Spencer, took up the practice of labeling imported food with ‘food miles’; that is, the measurable cost to the environment of importing the product from its country of origin. As a stand alone piece of information, this of course didn’t look great for New Zealand. The tyranny of distance disadvantage suddenly went even more haywire.

The world beyond the farm gate can be both a field of dreams and a labyrinthine nightmare. More of the former and much less of the latter is where we should have our focus.

Rather than cry ‘foul’ it was up to us to show that there were much more complex issues that had to be considered. This was a case in point when various parties in the agribusiness arena rallied together to face facts and also dispel fiction.

The interesting thing is that once some ‘facts’ were put into the equation, the story looked somewhat different (see Fig. B). For dairy producers, the ‘reality’ was more than a little revealing (see Fig. C).

If this weren’t enough to contend with think also about organisations like the United Nations Environment Programme (UNEP) who currently promote an international reduction in meat consumption to help curb global warming.

Add to this unnecessary meddling is the trend among some to actually dictate who has the right, or consent, to farm. Consumers are putting more and more ‘restrictions’ on what they will accept and are enforcing their stands with their wallets. They are also positioning themselves as the true champion and voice of the animals and making overtures that they are more simpatico with husbandry, pastoral and environmental matters than farmers.

Before anyone really realises it this can quite easily be translated into legislation by regional and national government, which then—because compliance costs are so high—it puts them out of business. The irony is that the majority of consumers, driven by price rather than passion, will opt to then buy from the cheapest source which, inevitably, is from overseas where restrictions are not high.

People are pretending they are more simpatico with husbandry, pastoral and environmental matters than farmers.

Then there is the potential problem of a ‘disconnect’—judging consumers not by what they say but what they actually do. On the one hand consumers say that they want hens to be free-range, but over 80 percent of eggs traded in NZ are from battery hens. In the United Kingdom when sow stalls were removed in 1999, half the pig famers went out of business because consumers bought cheaper imported bacon.

The fundamental concern is the lack of understanding in the general public about what it takes to farm. It also demonstrates that the work of keeping our produce in the hearts, minds and mouths of the world will never rest.

Fortunately for us, much of New Zealand’s agriculture, meat and dairy industry already operate at a level of sustainability and environmental stewardship that would leave many of their European counterparts in the dust, so we’re ahead of the eight ball there. We’re also becoming much savvier in ways to add value—clever branding; cut through packaging; compelling story telling that also links with other parts of the bigger Brand New Zealand focus.

Apples and grapes are a case in point—for those concerned about water usage, and when confronted with the facts, are more likely to reach for our produce than, for example, our Australian neighbours.

Again the fact we’re both farmers and business people mean we can clearly see, and take advantage of, opportunities and synergies that in the past we might have ignored. The challenge, however, is getting our voices heard in the right places and in the right ears.

As the world becomes increasingly aware of the value of sustainable environmental farming practices, and more and more motivated to make purchases accordingly, clean, green and sustainable will be the driver at the world’s supermarkets, whether the customer is in London, Beijing, Abu Dhabi…or even Auckland for that matter. As grocery shopping becomes a more emotional exercise, it behooves us to make sure we’re pushing the right buttons to help enact the purchase. Price will always be a factor rather than the defining ‘make or break’ element to a buying decision.

Going forward into 2011, Primary predicts that these are some of the trends and phenomena that will become factors to consider for those in agribusiness.
• Greater consumption of seasonal foods versus imported options out of season.
• Greater scrutiny of evidence of humane farming and production practices.
• Greater use of ‘on site’ information for decision making—I-pad wine lists are but one example of an emerging trend.
• Greater amount of cooking at home.
• Greater debate on key commodities as being ‘essentials of life’ (in terms of pricing) vs. part of the global marketplace (in terms of pricing). Think MILK.

This story originally appeared in Primary magazine. Click here to subscribe.