NZ could miss ‘golden opportunity’

Agriculture in Focus 2014: Competitive Challenges, by agricultural banking specialist Rabobank, says New Zealand agribusiness is facing mounting competitive threats throughout the supply chain, which require concerted and aligned action from industry and government.

The report, which jointly examines New Zealand and Australia's agribusiness sectors, identifies six key challenges affecting the competitiveness of the countries' food and agribusiness industries. They are increasingly coming under threat from a growing group of highly-resourceful international competitors, including countries in South America, Eastern Europe and even Asia.

The report says the critical areas, which need to be addressed as matters of priority are:
• rising production costs both on-farm and beyond farmgate
• international market access
• logistics infrastructure (in) efficiencies
• regulatory pressures
• capital constraints and
• product innovation and development.

Rabobank general manager Food & Agribusiness Research and Advisory, Luke Chandler says "while the rising demand growth for food from Asia remains a golden opportunity, New Zealand and Australia both risk missing the boat without a more co-ordinated effort from industry and government" to address the factors which threaten to impact both countries' future competitiveness in world export markets.

"While the competiveness of New Zealand's food and agricultural sectors has generally compared favourably in a global context in the past, this situation is far from static," he says.

"Many of New Zealand's competitors in agricultural markets around the world are investing heavily and becoming much more productive, and this is very much raising the bar for New Zealand's agricultural industries.

"The potential of countries in South America and Eastern Europe is obvious, but even some major food-importing countries and regions, such as China and the ASEAN-5 nations are playing a greater role in shaping the export landscape."

Regulatory pressures – New Zealand dairy

The report notes other determinants of growth and prosperity for agriculture include the sector's ability to deal with regulatory pressures.

New Zealand's dairy industry needs to deal with significantly heightened environmental regulation, both current and pending.
"New Zealand's milk production growth is likely to be constrained over the next five years relative to the 2008 to 2013 growth period as the ability to change land use will become more difficult and expensive," the report says.
"The future growth of the New Zealand dairy industry will party depend on how efficiently producers adapt production systems to meet heightened environmental controls."

Capital constraints – sheepmeat

The growing need for new capital to rationalise and revitalise industry supply chains is another priority, the report says.
Lack of investment capital has been a particularly pressing for New Zealand's sheepmeat sector, Chandler says.
"Investment, whether local and/or foreign, is clearly required to improve efficiencies and productivity downstream in the supply chain. With the sheep flock halving since 1990,
the adjustment of both processing capacity and capability has not kept pace and is consequently impacting returns."

'Road map' forward

Chandler says a 'road map' that can guide industries to build a more competitive and sustainable base for the sector into the future.
"While some competitive factors such as exchange rates and wage costs are beyond the sector's control, many other issues can be successfully addressed through the concerted and coordinated action of industry and government institutions," he says.

"There is no question that a food and agriculture sector that has better access to global markets, ready access to capital, more efficient logistics infrastructure, higher value product and processes, a highly sustainable environmental impact, and more affordable production inputs will be better placed to capture the 'Asian dining boom'."