Charting a Path

For many, the summer break is a time to rest and reset before returning to the fray, sometimes coming back with a fresh perspective and new plan. Along those lines, you’ll see we’ve turned our pages over this month to industry experts to give us a slice of what they’re thinking about, in the hope it gives you something to consider in reference to your own business.

It’s one of the nicer peculiarities of the primary sector that hard-earned knowledge and best practices are shared widely across the industry for the collective benefit (you don’t often see that in other sectors). We’ve also added some ‘things to watch’ – some external factors we think might be relevant to New Zealand primary producers.

New Zealand’s primary sector has been an economic keel over the years, most notable in the fall out of the Global Financial Crisis (2008/9) and, again, in the post-Covid world. Suffice to say, when the storm gathers pace, your grass roots resiliency has been on display.

When operating a business, there is an interplay between captains and tides; the external market forces and the actions of operators navigating their way. The tides can change, often driven by technological changes or economic cycles, and it’s down to the captain to survey the environment and chart the best course you can, which is most important during challenging times.

THE SHIFTING SANDS OF POLICY

Representing 25% of global economic output, it’s often the case that where the United States goes, so too goes the world, and the incoming administration is setting itself up to alter the status quo. With two particular operators within the administration, United States policy towards farming and food supply could change substantially and may have far reaching impacts on global policy. It is this particular policy stance that will be one to watch closely over the next four years.

In the next administration, with one likely in cabinet and the other in an advisory role, are Robert F. Kennedy Jr. and Elon Musk. While they will have differing focuses, both have repeatedly commented on food and environmental policies.

For his part, Musk has spent the last two decades (via Tesla) driving the world towards the sustainable generation, storage and usage of energy. On multiple occasions, Musk has given his view that livestock do not “make any difference” to CO2 concentrations in the atmosphere, and have “zero” impact on global warming. In essence, Musk is pointing to the difference between the ‘biogenic’ carbon cycle [atmospheric CO2 photosynthesised into plant life, eaten by livestock, converted into livestock products with methane as a by-product, which breaks down into CO2 and water within 12 years; a circular / carbon (atom) neutral process] versus the ‘anthropogenic’ carbon cycle [whereby prehistoric carbon atoms are released from below ground (fossil fuels) into the atmosphere; an atmospheric carbon (atom) additive process]. In Musk’s view, it is only the anthropogenic carbon cycle that requires attention.

Should Kennedy be confirmed to his role in cabinet, a large part of his focus is expected to be on food supply within United States. Kennedy is a strong advocate for ‘regenerative farming’, viewing it as a solution to many of the perceived issues within the US food system and believes regenerative farming can improve soil health, sequester carbon dioxide, and ultimately lead to a healthier population by reducing reliance on ultra-processed foods. For one example, he’s pushing for McDonalds fries to be cooked in beef tallow as opposed to canola oil; a return to McDonalds’ original cooking methods and, according to some food scientists, a return of the “world’s greatest French Fry”. While ‘regenerative farming’ can be quite broadly defined at times, when held up against the “industrial” feedlot operations that are common across the United States, it would seem likely Kennedy is driving at something akin to the grass-fed model common here.

It would be safe to assume the policy grounds in the US will shift one way or the other and it will be important for policymakers here at home to understand the direction they’re going.

PRECISION AGRICULTURE

Since the early 1980s, the primary sector has shown impressive gains in what’s known as ‘multi-factor productivity’. That measure essentially asks, when taking all inputs into account (including labour and capital), how has the level of output changed over time? Changes in outputs could be the result of improved research and knowledge, or leading edge production techniques, and an increasing number signifies an increase in raw economic efficiency. Many economic commentators lament New Zealand’s stagnating productivity, a genuine issue for the country’s economic wellbeing, but the agriculture sector is bucking that trend, showing improvements over four decades that are second only to the IT sector.

Productivity gains such as these is how your produce competes so well on the global stage, even when up against a country’s own domestic produce half way around the world.

The key in years to come will be keeping an eye on the next horizon. ‘Precision’ agriculture will be an evolving beast, with tools and techniques coming to market that build on the sheer innovation and efficiency already prevalent on your property today. Seeking to address economic, environmental, and supply side challenges the precision ag industry is expected to grow to $25b USD by 2030.

Some of these areas may include:

- Autonomous drones, which could routinely survey the property, identify weeds, spot spray, track dry matter coverage, and report back.

- Enhanced use of data and sensors, tracking moisture content, soil nutrients and weather conditions, to allow more granular decisions about which inputs to apply and where.

- Variable rate application technology, which would see the likes of irrigation, pesticide and fertiliser inputs responding to data in real time and adapting to the conditions on the ground.

- A deeper understanding of the ability of microbes to produce fertiliser, make nutrients bioavailable, turbocharge carbon sequestration, and improve general soil health.

For many of these technologies, the proof will be in the pudding. It will take some pioneering farmers giving them a go and soon finding out what works and what doesn’t. With that said, you’ve proven over time that you can do more with less; that’s why a country of 5 million feeds 50 million worldwide.

CONSUMERS SEEK NUTRITION

Capturing a share of the consumer’s mind is the perennial challenge. Consumers are juggling several factors, with price usually top of mind. While they are hunting for products that meet increasing environmental standards, rising higher in their mind is health targets; increasingly discerning customers are seeking out diverse nutrients in the right quality and quantity instead of mere calories. As we’ve discussed before, consumers are looking for the link between better environmental practices and better health outcomes i.e. “it is made naturally so it is good for you.” This is the sweet spot for your produce.

There is wide ranging research into the nutritional advantages of grass-fed vs grain-fed, especially relevant when compared against ultra-processed alternatives. Grass-fed meats reportedly have better fatty acid composition (the balance of omega-3 to omega-6), higher levels of vitamins (such as vitamin E and the precursor to vitamin A) and other phytonutrients, and are generally leaner. Many of the ultra processed alternatives are found to be lacking nutritionally, particularly when assessed against consumer perceptions.

“Grass-fed wholefoods” is the story of New Zealand agriculture, and it’s a powerful one.

To that end, it’s encouraging to see the recent ‘Taste Pure Nature’ campaign launched in Shanghai, including a range of exports (like beef, lamb, honey and dairy products). A specific part of the campaign is educating wealthy consumers in the Chinese market about the point of difference of New Zealand grass-fed products. The CEO of the Meat Industry Association described the pitch as being “surgically focused” on the high-paying customers who are seeking out the nutritional benefits. In noisy, well-supplied markets, it will be our national branding and the associated halo effects of natural production methods that cut through.

We would think that nutrition will become an ever larger focus for consumers in the years to come. Research, branding, and telling the story of the positive effects of your production methods should sit at the centre of a national food strategy. If we get it right, New Zealand’s basket of nutritional power packs will be in high-demand with high-paying consumers.

LOOKING FORWARD

We know that a tree is strongest when battered by the harshest winds over time. Wooden products arriving at your property, after nearly three decades of growth, have been strength tested by the elements you expect it to face. In a similar vein, New Zealand farmers are the best in the world because, for the last few decades, you have faced the realities of the market, without the Government subsidies that most other countries rely on. It means that Kiwi primary producers are nimble, effi cient, and like keen sailors, you tack when the conditions call for it.

Over the years many countries, fearing the sheer competitive advantage (France with cheese, India with dairy, Australia with apples, amongst others), have held up barriers to protect their domestic industries, but relentless negotiators and consumer demand has seen your produce ending up on more shelves worldwide. Consumers are seeking out nutritious produce from sustainable supply chains; when they read “produced in New Zealand”, they know that’s what they get.

As you start the year, we’d be pointing to two things:

- You can be proud of the primary sector’s importance, New Zealand’s brand on the global stage, the tangible economic and environmental improvements made each year, and the part you have played

- With all of the above, we would think the best is yet to come

In the global marketplace, New Zealand has an incredible story to tell; your story. There is no more important global problem than solving for nutrition and food supply; it sits at the base of a person’s hierarchy of needs. New Zealand’s exports are a crucial part of the global supply chain and, with the way you go about your business, New Zealand produce is best-in-class for nutrients, efficiency, and environmental outcomes. Consumers can hold your produce in high regard.

To say the least, the last five years have been testing times and we’ve all had to navigate choppy waters. Yet we think there is reason for long term optimism. The global population continues to grow, the global middle class continues to expand, and consumers are seeking out sustainable, nutritious produce; the marketplace for your products will be bigger in years to come. The key will be hunting down the right customers, in the right markets, with a story they trust.

As you embark on the new year ahead, don’t forget to pause and reflect on the good work you do each day. Over the last five decades and onto the next, we’ll be along for the journey, cheering you on from the fencelines.