Today, KPMG made a worrying announcement – New Zealand agriculture has “as little as five years before underdeveloped agricultural regions such as South America, Western China and Central Asia’s large scale intensive farming practices erode New Zealand’s cost advantage in producing bulk”.
Not for the first time, it is a warning that our reliance on bulk commodities will be undermined by places that can do it cheaper. Add to that, is that a number of NZ companies are making a good living selling our efficient farming practices around the world. And add to that the fact that the Chinese and others are really adept at taking existing technology and improving on it (do we really think agriculture is going to be the exception?) and our bulk commodity trade looks really serious in the medium-long term – undermined by efficient farm practices combined with cheaper labour costs.
Yes, as John Key and others note, there is a growing demand for food and protein out there. But there is also an increasing supply.
Two possibilities may maintin our edge. One is branding – NZ’s clean, green image – that distinguishes us from other factory farmed, less high quality products from elsewhere. The other is the development of high end processed products from our commodities that we develop through our R&D.
Currently the bulk of our R&D in the agricultural sector, for example, goes towards improving farm output. While this has made our farmers amongst the most efficient and profitable globally, much of this improved farm technology is open-source. In other words, the product of our publicly funded science can be replicated by others.
Increasing our prosperity means getting smarter. We’ve talked about it for a couple of generations, time to up the R&D around increasing value from our primary products.
Five years, isn’t a very long time. We need bold action.