Farming under fire

Farming under fire

Farming has been the mainstay of the New Zealand economy since the 1840s. But a growing number of public figures are calling for the country to pair its agricultural economy with a ‘knowledge’ one. They say that while farming is important, its heavy use of natural resources is unsustainable. The issue came to a head recently over attempts to draw farmers into the Emissions Trading Scheme earlier than anticipated. Is this just the old ‘city slickers vs. country bumpkins’ horn-locking revisited? Or is there something more significant afoot?

Our most famous writers and poets have immortalised it; our artists have captured its wild moods on canvas; and even our modern day advertising agencies simultaneously poke fun at it and honour it: New Zealand as the farming nation.

It’s an integral part of our national fabric and character—but that hasn’t stopped some suggesting its time at the centre of the New Zealand economy is gone or certainly waning.

James K Baxter was just one of many Kiwis of his generation to have been raised on a farm, continuing to immortalize the lifestyle in verse long after he had left to become an urban social activist, poet and critic. His poem Farmhand paints a quintessential picture:

His red sunburnt
face and hairy hands
Were not made for
dancing or love-making

But rather the earth
wave breaking
To the plough, and
crops slow-growing
as his mind…

But ah in harvest
watch him
Forking stooks,
effortless and strong
–Or listening like
a lover to the song
Clear, without fault,
of a new tractor engine.

Certainly, in the days that Baxter was writing and up until the late 1970s, there was no question that New Zealand farms—and their hard-working, sullen farmhands and weather-beaten farmers—were the backbone of our national economy. And so it had been since soon after the country’s earliest entanglements with the British Crown, when it provided grain, wool, meat and dairy products to the Empire in increasingly large quantities as technology allowed.

From the 70s, however, the New Zealand farmer was faced with increasing roadblocks. The United Kingdom joined the European Economic Union in 1973, effectively closing many doors to New Zealand produce. A large number of protectionist measures introduced by the Government in an attempt to keep farming in hay were ultimately doomed, as world recessions and oil crises hit and economies had to retrench.

Finally in the 80s, came the call from a new Government to do away with almost all protections—a move that bankrupted and impoverished many farmers and saw close to one per cent of them walk off their land altogether.

The remaining farmers had to persevere through the rough times. Although agrifood had dropped from 90 per cent of the country’s exports to about 75 per cent over these two turbulent decades, it remained hugely important—despite voices of doubt—including then PM David Lange—branding agriculture a “sunset industry”.

By the 90s, farming profitability indices had steadied and those that adapted to the new global market, with the help of the large co-operatives such as Fonterra and the likes of the Meat and Wool marketing boards, once again climbed back from the brink.

Like a faithful servant, agriculture has kept producing, milk in particular supporting the lifestyle of the entire country. Our Institute of Economic Research has calculated that every extra $1 in dairy payout earns an extra $270 per New Zealander.

And still, the economic security of farming continues to be put under threat. Consumers see dairy in particular as too expensive, and have accused milk producers of creaming the domestic market. But the cost of farming in New Zealand is substantial, which is why its product attracts a premium in the marketplace.

And it’s set to get even more expensive. The Kyoto Protocol, which New Zealand has embraced with what some say is typical but untimely zeal, will see farmers paying for their animals’ farting and burping when the Emissions Trading Scheme takes hold. In 2015, or, if the Labour Party has its way, in 2013.

Since the heady days of the 60s and 70s, agriculture as a percentage of GDP has fallen to five percent of New Zealand’s total, and makes up just over 50 percent of total exports. Help from the Government to the sector has fallen dramatically—to less than three percent of total output, as opposed to 30 percent when protectionism was at its peak. As a result, the sector has had to become much more diverse in terms of products and market destinations, and is one of the most productive in the world—particularly in milk.

But New Zealand’s natural competitive edge—decades of agricultural expertise, over 20 years of adjusting to trade without the buffers of subsidies and tariffs, and a much-vaunted ‘clean and green’ operating environment—has not been enough to keep it sacrosanct. Farming’s centrality to the New Zealand economy is being questioned by those who see the country’s moribund economic outlook as having to extend beyond the farm gates. ‘High tech’ companies in particular, be they agri-tech, or just plain ‘tech’, are being vaunted as the great potential wealth bringers.

Sir Paul Callaghan, New Zealander of the Year and one of the country’s top scientists, concurs that without the dairy industry, New Zealand would be “desperately poor”.

That’s the ‘good’ news for the agriculture pundits. Then comes the counter: “If we as a nation continue to think we can make a living by exploiting our resources, we are in serious trouble.”

To Professor Callaghan, the answer to New Zealand’s economic woes lies not in an expansion of agriculture but in the realm of largely obscure high tech innovation—the likes of Rakon, which makes crystal oscillators for products like smartphones, and Fisher & Paykel Healthcare.

“Why can’t we have more of those companies? They don’t produce greenhouse gas, they don’t use land, they don’t dump nitrates in our streams … [yet] they are enormously beneficial to New Zealand. The top 10 of them produce about $3.9 billion dollars in exports a year. What we need is about 100 / 120 of these types of companies.”

Businessman and philanthropist Owen Glenn is another who is urging New Zealanders to bolster their economic score cards by not only innovating more in processing primary products, but growing more Navmans and the like through a properly co-ordinated approach between Government, big business and industry sectors.

Few would advocate turning our backs on agriculture and becoming focused on high-tech innovation solely. But many would like to see more of a high-tech focus applied to our primary products, which are currently largely dependent on the fates of international commodity markets. While the threat of global food shortages and scarcity have ensured our commodities remain hot, many would like to see New Zealand expand further into actually proactively solving food shortage issues around the world.

Australian Julian Cribb, a journalist, academic and food security commentator, says New Zealand is perfectly poised to become the “Silicon Valley” of agriculture knowledge—a ‘value add’ that has almost nothing to do with primary products. “It could be New Zealand knowledge which fixes problems on, say, the North China Plain,” he says.

One person who watches the New Zealand economy from afar and concurs with Cribb’s analysis is Bridget Liddell, who is a general partner of the $150 million growth capital Fahrenheit Wellness Fund, based in New York. Bridget, a Kiwi, and her partners actively seek out firms interested in going global with value-added consumer products.

She laments some of the business models New Zealand agriculture has chosen to pursue. “I don’t believe we have fully developed our agricultural businesses to maximise the profit potential of our outstanding products from land and sea,” she told Primary.

Bridget says she sees “outstanding New Zealand meat and seafood products on the supermarket shelf” in the United States—but the products are hampered by their typically unassuming presence.

“Often the only branding is the term ‘from New Zealand’ in small lettering—this despite the fact that the characteristics which we offer—grass fed, hormone free, extremely lean product from a clean, safe environment—are characteristics highly sought by consumers in the United States and other offshore markets for which they are prepared to pay a substantial premium.”

She says the real innovation push should be developing and exposing the inherent characteristics of the country‘s highly specialised premium consumer products, but “there is no either/or here” she says of high tech vs. agriculture. “We need a thousand flowers blooming.”

The growing call for New Zealand to nurture industries that lie beyond our primary products has coincided with other calls that farmers pay more in taxation and more towards any environmental degradation their animals may contribute to. Not surprisingly, and certainly understandably, this call has gone down like a steaming pile of cow manure with the sector.

Phil Goff, already having riled the sector by suggesting farmers should pay more tax—including more under a Capital Gains Tax plan—and that they should be brought into the loathed Emissions Trading Scheme two years earlier than currently planned, further inflamed passions by suggesting at Fieldays that Federated Farmers were considered the “National Party in gumboots”.

So, is the chasm between country and city populations becoming wider? Bruce Wills, the new head of Federated Farmers, doesn’t think so, but he does agree there needs to be more understanding between town and country. In particular he is keen to spread the message that farming “pays the bills” to the tune of earning $24 billion a year and this mission is high up in his “to do” pile.

“Agriculture is basically going to be responsible for rebuilding Christchurch, repaying the country’s massive debts, and all sorts of other things we’re faced with that would otherwise be impossible,” he says. “But of course, the rural sector can’t do it alone—we need the full support of our country towns and urban centres to provide the services and infrastructure. It’s really about mutual understanding and respect.”

He says the perception that farmers don’t “pay their way” through taxation and other means is also “perception rather than fact. You can also see that clearly illustrated recently when the Commerce Commission decided not to investigate the price of milk to consumers—but the perception, rather than the reality, is still that dairy farmers make too much money.”

BNZ’s head of Agribusiness Richard Bowman says talk of a city vs country divide is “provocative” but agrees that with the average New Zealander’s links to agriculture becoming more tenuous, there is room for misunderstanding between urban and rural folk.

As the man heading up the bank’s service to the farming community—which includes not just finance but strategy, planning, recruitment and sponsorship help to the sector—he’s an unabashed cheerleader for farmers. He is adamant New Zealand is faced with a “wonderful opportunity” to step up to the plate and feed a world looking for safe, cost-effectively produced food.

One area where he sees room for movement is in R&D investment—“but financing R&D is a challenge, because it is hard to quantify a return in a time-frame that would please outside investors. Much of the R&D that currently happens takes place on the farm, and so a bigger commitment to funding the right kind of science and technology is one way we can ensure this sector’s future growth and prosperity.”

Jacqueline Rowarth is another champion for farming and says, in short, the sector just isn’t appreciated enough for, among other attributes, its enormous skill in turning the sun’s energy into animal protein.

Professor of Pastoral Agriculture at Massey University, Rowarth says far from more red tape and taxation of the agricultural sector, there needs to be a more supportive business, trade and regulatory environment. She has even mooted the idea of a guaranteed return for commodities to shield farmers from the uncertainty of global markets.

She says much is being done to increase productivity—such as the growing of maize for silage—and on plans to eventually house animals, which will help curb greenhouse gas emissions and boost milk production (even though 'city slickers' may still baulk at the idea).

“Our advantages are plenty—high quality ingredients from a country with a good environmental record—despite constant press reports of ‘dirty dairying’ which have done untold damage to the reputation of the industry,” she says.

“We also have a huge boon in the form of offseason production and supply to the Northern Hemisphere. But we do need more science—more agricultural science—and that science needs to be co-ordinated, high quality, and aimed at improving the overall industry’s prospects.

“Farmers and scientists know what is needed and what can be done, and allowing them to get on and do it—rather than tell them how to manage their affairs—would make a big difference.”

Bruce Wills agrees that the sector needs science. “No farmers are asking for a return to subsidies, but when you look at the level of R&D spend in New Zealand on our biggest, most lucrative industry, it pales by comparison to other countries. That’s a concern. We’re still dragging the chain—but in order for us to maintain our position as a productive, cost-effective producer of some of the best food products in the world—and keep New Zealand earning to its maximum—that will have to change.”

Into the breach, once again, goes agriculture.

Bruce Wills, the new-elected president of Federated Farmers, fired one of his opening salvos in July when he criticised the Labour Party in the Herald for proposing a capital gains tax.

It didn’t take long for his comment piece to attract over 100 comments, many of them scathing of the farming community in general.

“The history of farming in NZ is one of protectionism and taking the easy money,” wrote one commenter. “[D]espite having huge taxpayer funded support over the years, this industry has failed to take advantage of its opportunities, preferring to ride the international commodity markets.”

Another had this to say: “suffice it to say that in the breast of most farmers beats the heart of a speculator …[i]t so often seems that farmers are intent upon privatising all the gains and socialising all the losses.”

The seeds of antipathy between town and country, according to political commentator and historian Chris Trotter, comes from rural folk themselves. “It was in the early years of the 20th Century that New Zealand’s farming community first began to conceive of itself as something separate and distinct from the rest of the population,” he wrote in his Bowalley Road blog last year. “They construed the dominant role of agriculture in generating the nation’s export wealth as proof not merely of farmers’ economic centrality, but of their moral superiority.”

The idea that farmers are the “real New Zealanders”, and that they are the ones bringing home the bacon for the country, are ideas that prevail—and continue to rub the urbanite up the wrong way. Townies have also seized on concerns about the environment and perceived special treatment of the sector—especially by National governments - to keep long-held, simmering tensions alive.

To the Chris Trotters of the world, and those who still see the sun setting on primary production, it must stick in their craws that that dairy and milk powder account for $350,000 of GDP per job per year; technology-based companies bring in an equivalent $240,000 of GDP per job per year; and farming and fishing $125,000. And so the battle rages...and for New Zealand's future it mustn't.

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

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