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Time for primary industries to expand beyond the farm

Time for primary industries to expand beyond the farm
It's clear that our primary industries need to be less commodity, more market, writes Peter Kerr. The question remains how.

It's clear that our primary industries need to be less commodity, more market, writes Peter Kerr. The question remains how.

A forum organised by the NZ Institute of Agricultural and Horticultural Science in Wellington reinforced that our economy is just as much as ever living off our ability to convert sunshine, soil and fresh air into protein products.

(Indeed, David Lange was ‘thanked’ for suggesting back in the 1980s that agriculture was a sunset industry – perhaps changing the mindsets of a potential generation of would-be scientists for the sector!). Some audio recorded by SciBlogs' Kent Atkinson is here.

But, as Rod Oram pointed out when crunching some numbers for the 120 attendees, agriculture ain’t sustainable. We are not a low cost place to produce milk or meat. Our land is very expensive.

Oram said that even the family interests of Fonterra chairman Henry van der Heyden have bought land for dairying in Missouri. Its price is a third that of New Zealand’s and their milk price is higher. (Fair enough to take our technologies over to America, but shouldn’t NZ brand our key comparative advantage – a responsible pastoralism method?)

Oram said the price ceilings for milk powder and meat are probably being reached. Substitutes such as soy powder become more attractive, permanently given the costs of changing inputs for a manufacturer, beyond current levels.

New Zealand shouldn’t then expect a continued run of ever increasing agricultural prices.

The number of young people studying primary industry science is way below replacement requirements for our major industries – agriculture, horticulture, forestry and aquaculture.

Universally the speakers, from former agriculture minister Jim Anderton to Royal Society of NZ president Garth Carnaby, Fed Farmers vice-president William Rolleston and before-mentioned Oram, all said we must add more value to what we produce.

According to Carnaby, we should be able to create additional competitive positions in high technology engineering in the clusters that have sprung up around traditional agricultural commodity businesses. More angel and venture capital will drive this – and if they can be further leveraged with Technology NZ funding once they are cashflow positive, "we can expect them to keep innovating”.

“There are other high-level public interventions available to New Zealand Inc which will accelerate innovation. The first and most obvious one is the roll out of faster broadband … it is particularly relevant to the group of business services companies. There is no other single intervention more likely to get more of them exporting services and software more quickly.”

Anderton made an analogy about ‘cracking’ milk (much as crude oil if refined to its constituent ‘bits’). But later, questioner Kevin Marshall and speaker Oram both agreed that Fonterra’s (mostly off-farm) R&D spend of about $125 million a year out of total revenues of about $20 billion is not really enough. It was pointed out that Nestle has just announced an incremental investment in nutriceuticals of US$500 million!

Because, at the heart of what everyone is talking about, is it is only off-farm; more cleverly using the raw materials produced from our land, water and brains, that we can create more value.

We’ve failed, so far, to make ‘invention’ at this level seem sexy. We’ve failed, so far, to show potential investors (including farmers) that there’s money to be made in some of these areas. And we’ve failed, so far, to partner up with those (usually overseas) entities who could help take products to market – and share the value-added component.

The forum in a sense was too stuck on the farm, even though it didn’t want to be.

We’re good, even world-leaders, at the growing. Yet in spite of agriculture’s current commodity boom, a sustainable economic and environmental future is only possible by becoming world-leaders at transforming the raw materials we naturally produce into products that manufacturers and consumers need or desire.

This post originally appeared on Sciblogs.