New Zealand

Details

  • Service: Advisory
  • Industry: Agribusiness
  • Type: Business and industry issue
  • Date: 29/05/2012

Contact us

Ian Proudfoot

 

Ian Proudfoot

 

Head of Agribusiness

+64 9 367 5882


Ross Buckley

 

Ross Buckley

Executive Chairman

+64 9 367 5344

 

Agribusiness and Food

Our Agribusiness group can help you improve the efficiency and profitability of your businesses through our wide range of advisory services.

Agribusiness Agenda: A state of the nation 

Agribusiness Agenda 2012

New Zealand's primary sector

In Agenda 2011 we stated that there were great opportunities in international markets as demand for safe, sustainable, high quality food continues to grow around the world. 

 

Nothing we’ve heard during the 2012 interview round suggests that the size or scale of the opportunities available to the industry have changed. So what has changed?

 

There is now a clear realisation that the world will not spoon feed us opportunities; that nobody owes us a living. 

 

Agenda recommendations

  • Take all necessary steps to accelerate the delivery of rural broadband infrastructure so producers can embrace future technology solutions that drive productivity improvement.

  • Create broad collaborations of agricultural entrepreneurs, processors, government and long-term capital investors to facilitate the development of commercial scale irrigation projects.

  • Prioritise the funding of student loan schemes to direct students to courses of study that are most valuable to the economy.

  • Encourage industry-wide collaboration to find sustainable solutions to secure the long-term economic contribution made by New Zealand’s bee population.

  • Define the baseline sustainability standards producers are required to meet to maintain the natural reputation currently enjoyed by New Zealand primary sector products globally.

  • Establish a stable legislative platform to provide certainty to foreign investors looking to make an investment in primary sector assets in New Zealand.

 

Rather, success will be earned ‘customer by customer’ through the hard work, imagination and passion of talented people. The kind of people who maintain a wider perspective of the world we live in – while producing highquality food, fibre and timber products that embody the best of New Zealand’s resources and abilities.

 

They are willing to collaborate when it’s commercially appropriate, and they continually innovate to exceed their customers’ expectations. These are the people who’ll be successful in creating value for themselves, their stakeholders and the wider New Zealand economy

 

This shift in perspective is critical to realising the global potential we’ve discussed in the last two Agendas. It is also timely – as the recent feedback from industry leaders suggests that market conditions in the short to medium term are unlikely to be as favourable as we have enjoyed in recent years.

 

The 2011/12 year has clearly demonstrated the sheer volatility that lies at the heart of an agricultural-based economy, with various sectors being impacted in dramatically different ways.

 

Cooler temperatures and regular rain across much of the country over summer has provided some of the best grass growing conditions in recent memory, and driven strong production in the pastoral sectors.

 

Yet the very same climatic conditions have made life much more difficult for arable farmers and grape growers. The Avocado industry achieved a record crop, only to see export prices collapse as the key Australian market was over-supplied.

 

The kiwifruit industry has managed to identify a path back to prosperity from the devastating Psa-V incursion that hit the industry in 2010.

 

The financial outlook has been similarly changeable. The exchange rate has continued to apply pressure on the margins of exporters, while the prices of key commodity exports have all corrected downwards over the last year.

 

On the positive side, many industry leaders have reported a strong focus by farmers and growers on paying down debt over the last couple of seasons.

 

There are a number of factors likely to impact farm gate earnings in the next couple of years. These include:

  • attempts by the Chinese government to cap their speed of growth
  • the ongoing debt issues being experienced in Europe
  • increasing global product supply coming on line as farmers respond to the strong prices achieved over the last two years.

 

The prospect of returns below breakeven levels in the coming season raises the spectre of more business failures across the industry. There has also been a slowing of investment in innovation projects, which may impact on future productivity.

 

Our conversations with industry leaders have highlighted the need for the sector to take a longer term view. Yet tough financial times are driving many companies, by necessity, to take a shorter term focus in order to preserve cash flow and ensure their survival.

 

Read more:  download pdfAgribusiness Agenda 2012 - Part 1 [PDF: 2.3MB]

Field notes - Weekly news update from KPMG Agribusiness. 

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Field notes

Feature image
Weekly news update from the KPMG in Zealand Agribusiness network.