New Zealand

Details

  • Type: Press release
  • Date: 8/06/2011

 

 

It's about time 

KPMG logo    Media release, 8 June 2011

 

  • For commercial collaborations and market integration with customers to create transformational innovation.

 

  • To recognise that strategic foreign co-investment in our agricultural sector has the potential to unlock significant economic value for New Zealand.

 

  • For the Government to consider preferential funding mechanisms for students wanting to pursue subjects critical to the economy, like agricultural studies.

 

  • For a reasoned and informed debate on issues that will define the future of New Zealand agriculture, such as genetic technologies and farm intensification.

 

  • For funding pro-active research into biosecurity threats to maintain our predominantly disease free status.

 

  • To invest in technology to maximise productivity and value realised behind the farm-gate.

 

New Zealand agriculture must stop dwelling on factors it is unable to influence and instead focus on actions companies in New Zealand can take, in order to grow their global market-share and reputation, according to the KPMG Agribusiness Agenda 2011 released today.

Ian Proudfoot, KPMG Head of Agribusiness says,

 

“Gone are the days when it was sufficient for a country to export good products and services. To be commercially viable in an internationally competitive marketplace, businesses and countries need to be great at what they do. This need is especially important for small island nations like New Zealand.

 

“To achieve this there are important conversations we must have now – about the intensification of agriculture, the adoption of genetic technologies, the role of foreign capital in the development of New Zealand agriculture and global sourcing of product.  All these issues can only be resolved when there is broad understanding of the issues from the urban New Zealand population. Consequently the onus falls on the industry to educate and inform the rest of the population on how agriculture operates and its contribution to the NZ economy.”

 

Titled, Realising global potential, the second edition of the KPMG Agribusiness Agenda provides a detailed analysis of the sector, focused on ideas to enable New Zealand agribusiness to capture the potential that exists for the sector in global markets.  It follows interviews with more than 80 agribusiness industry leaders. Many interviewees also completed the New Zealand Agribusiness Survey where they rated the significance of a number of issues concerning the future of the New Zealand agricultural sector.

 

According to the report, many industry leaders stated that there is a need to have a comprehensive conversation on the adoption of genetically modified technology. 

 

“The adoption of genetic technologies remains an emotive issue in New Zealand. Internationally the use of these technologies is moving into the mainstream. Thus there is a concern that if we are not open to discussing the issue the industry could be left behind. No one views this as an area New Zealand should lead in but it is a technology we cannot afford to ignore,” says Mr Proudfoot.

 

The report also states that the ability of the industry to realise its potential relies heavily on the pipeline of talent that enters the industry from schools and universities, or those who can be attracted into rural areas from our cities.

 

 “Students currently receive significant subsidies from the Government through the student loan scheme, and are able to use this to pursue whatever course of study they choose. Worryingly, student numbers entering programmes that directly benefit the agricultural sector have been in long-term decline, despite the economic value that these programmes generate for New Zealand. An idea raised in the report is to restructure the student loan scheme so that only students entering programmes that directly benefit the economy receive the full advantages associated with interest free loans. This will enable the Government to give clear guidance to students as to where it perceives there to be a shortage of graduates, and flag areas in New Zealand with better employment prospects.”

 

As a small country with a restricted amount of equity available, we will always need foreign capital in order to take advantage of good ideas.

 

“Overseas ownership of agricultural land is also an emotive issue. New Zealand has always had foreign ownership since the British arrived in the 19th century. Many industry leaders were concerned about our processing assets falling into foreign ownership as has happened in Australia in the last two years, but considered that co-investment with foreign investors has the potential to create significant value for New Zealand through access to capital for investment, markets, innovation and management expertise.”

 

Targeted government support is also vital for the industry to succeed. Mr Proudfoot says, “For instance, we welcome the government’s seed funding for irrigation. Without this a great natural asset would not become a valuable economic asset.”

The potential for the Primary Growth Partnership (PGP) to drive collaborations that could transform the industry was also highlighted in many of our conversations.

 

According to the report, the brutal facts the industry needs to acknowledge are that our customers have significant market power; we are a small producer on a global scale; the world does not owe us a living; markets continually change and our earnings rise and fall with that volatility; and a free, floating currency moves constantly.

 

“Accepting these and focusing on our customers, our innovation pipeline, our production methods and the infrastructure that supports the industry will enable an already good agricultural industry to become great,” Mr Proudfoot added.

 

 

 

ENDS

 

OTHER MAIN ISSUES FACING NZ AGRIBUSINESS

 

Some of the main issues facing New Zealand Agribusiness identified from KPMG’s conversations with industry leaders include biosecurity, customer integration, defining the ‘clean-green’ brand, on-farm investment in productivity improvement, governance and market access.


New Zealand cannot afford not to have biosecurity [p 16]:  Industry leaders identified biosecurity as the highest priority issue, reflecting the potentially catastrophic impact a severe biosecurity incursion could have on the economy.

The impact was graphically demonstrated in the last year as the kiwifruit sector had to respond to an outbreak of PSA disease in orchards in the Bay of Plenty, while the oyster industry has had to combat a herpes incursion that has wiped out around 50 per cent of the breeding stock in the North Island.

 

There can be no compromise on protection. However there is concern that the Biosecurity Reform Legislation currently before Parliament is trying to pass the funding burden for biosecurity from government to industry, raising much discussion around whether the spending is a public or private good activity.

 

Ensuring that the funding burden is correctly allocated between the taxpayer and industry participants is critical to ensuring that robust protection is maintained. If the balance is wrong, and a risk is consequently ignored, the impact on the industry could be potentially catastrophic.

 

Our recommendation - Introduce a biosecurity levy on passenger and product arrivals in New Zealand to fund public good research on incursion threats [p 17].

 

Closer integration with our markets [p 18]: To succeed in our international markets our exporters must be fully integrated with their key customers so the best ideas are being identified in market to align with consumer trends rather than being created in New Zealand and then pushed to the market. We must supply ideas and products that already have a customer base.

 

Gone are the days when one big budget advertising campaign was enough to attract customers. Customers world-wide today expect tailor made solutions that add value. To achieve this, a key priority for New Zealand agribusinesses is the need for industry sectors to understand their customers intimately, preferably from within the markets where they operate on a day-to-day basis.

 

Being on the inside means opportunities are understood faster enabling a product solution to be geared to the customer’s requirements, rather than trying to sell them what we have always produced.  It also enables market signals to be passed right back to the farm-gate and facilitates the creation of an integrated value chain from the plate to pasture, so the farmer understands their role in maximising value.  Without intimate and integrated relationships with customers the industry will always struggle to add significant value beyond a commodity return.

 

Our recommendations – Create International food and innovation incubators/ innovation centres; Structure value chains to meet and exceed customer expectations; Develop strategic plans to maximise the ‘whole of production’ value.

 

‘Clean-green’ image [p 26]:  The 21st century, health conscious customer needs proof and evidence of our ‘clean-green’ claim and New Zealand agribusinesses need to be able to do this.

 

 What is sustainable in agricultural production remains an issue that needs collective industry action. Our competitors are getting the same messages from customers that we are on sustainability and are investing to meet customer expectations. We need to ensure our ‘clean-green’ image is backed by substantive practices accepted by our customers.

 

Our recommendations - Standardise commercial sustainability requirements into a generally acceptable code; Set aspirational carbon budgets for each sector of the NZ agricultural sector; Review and align the government’s carbon related initiatives in an integrated strategy; Carbon neutral proteins – a unique market position for NZ premium products? [p 27 - 28].

 

We need to use innovative technology on our most productive farms [p 32]: The industry is failing to maximise value creation behind the farm-gate. We must focus on the highest performing farmers to drive a change in culture around adoption and use of best practice precision agricultural techniques.

 

The recently released Red Meat Strategy identified that one of the biggest opportunities for the red meat sector lies behind the farm-gate, through improved farming practice. This theme has come through loudly - not just from the red meat sector leaders, but most of the industry leaders.

 

Our recommendations - Debate the role of more intensive farming techniques in NZ agribusiness; create proactive extension mechanisms with a focus on the best performers; create globally relevant education programmes for farmers [p 33-35].

 

We must ensure that the right skills are around the boardroom table [p 36]: The complexity of a modern agribusiness, be it a farming company operating multiple farms across a number of locations, or a processor or marketer exporting around the world, means that businesses require their leaders to have a greater diversity of skills and knowledge than has historically been required. These skills are necessary to deliver growth and returns for their investors, and the wider New Zealand economy.

 

There is an urgent need to get talented young leaders to take on governance roles in the industry, meaning greater consideration should be given to the level of compensation for directors within the industry.  Also with the increasing focus on international markets there is a growing need to get more international directors on the boards of our key exporters, so they have access to up-to-date, in-market information.

 

Our recommendations - Include offshore directors on the boards of major agricultural exporters; Create shadow director positions on boards to create a pathway to leadership [p 37].

 

New Zealand Agribusiness exporters must develop strategies that will help us leverage the opportunities created by the Ministry of Foreign Affairs and Trade through Free Trade Agreements (FTA) and Trans Pacific Partnerships (TPP) [p 38]: In our view TPP and FTAs are a positive thing for our country. However, the government must follow through on its commitment to only enter into TPP if it delivers high quality, appropriate trade conclusions for all New Zealand’s exporters.

 

It is also important that the industry takes every opportunity to engage with the TPP negotiation team to ensure all parties clearly understand what constitutes a high quality trade agreement, and what would be unacceptable exclusions from the agreement.

 

Our Recommendations - Really understand the competitive advantages our competitors have in key sectors; Realise the Indian market opportunity; Define the difference created by a products New Zealandishness [p 39 – 40].

 

 

More information, or for an interview: 

 

Ian Proudfoot

Head of Agribusiness, KPMG

021-656-815

iproudfoot@kpmg.co.nz

 

(Or)

 

Sneha Paul Gray

KPMG Communications

021-243-8997 snehapaulgray@kpmg.co.nz

  

 

Alternatively, please contact Tara Bowker, KPMG Communications on 09-363-3676 or tbowker@kpmg.co.nz

Press releases - KPMG press releases. 

KPMG Agribusiness Agenda 2011

Agribusiness Agenda 2011
A comprehensive report on the 38 key recommendations for New Zealand agribusiness.

More information, or for an interview:

Ian Proudfoot

Head of Agribusiness, KPMG

021-656-815

iproudfoot@kpmg.co.nz

 

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