Assumptions that New Zealand’s current agriculture is highly productive, land use is ideal and optimal, and the animals produced in NZ are highly suited to the local environment are robustly challenged in a new report. Phil Edmonds reports.

A new Government-published discussion document that looks at the development of New Zealand’s agrifood sector suggests we need more, not less intensification on our productive farmland.

The document, prepared by Coriolis Research and published by the Ministry for Business, Innovation and Employment (MBIE), proposes NZ agriculture is now positioned on a cusp, with the future unlikely to mirror the past. The title poses the question ‘Is this the beginning of the end, or the end of the beginning?’, which presents a pointed challenge to consider what will shape the broader primary sector’s future prospects.

First, despite the projected uncertainty there is no suggestion NZ’s production of food is in retreat or in danger of diminished relevance.

The document notes that in 2017 the food and beverage category generated $33.6 billion in export receipts, almost half of the total goods and services shipped out of the country. Furthermore, it is the only sector that generates a significant trade surplus and in terms of net change to total exports over the past 10 years, had grown more than twice as much as the next best achiever, tourism.

At the same time, a consensus of casual wisdom suggests agriculture in NZ cannot continue to grow. The mantra ‘we need to produce less, not more’ emerged during the previous National-led era of government, partly as a way of placating those who insisted NZ is at the limits of its environmental capacity to produce food, and that chant has continued.

The document itself centres on dispelling this consensus thinking, and in doing so provides an alternative to the view that we can’t produce more, or that we must continue focusing on what we have erstwhile done well at.

For example, baked-in assumptions that NZ’s current agriculture is highly productive, land use is ideal and optimal, and the animals produced in NZ are highly suited to the local environment are robustly challenged.

The report notes NZ is in fact a minor food producer that uses a large amount of land to produce very little relative to output; current land use is the result of historical activity, and rather than being uniquely suited to the environment, the animals (and plants) farmed are a result of the thinking from previous waves of immigrants and their countries of origin.

Essentially, it suggests we simply overlook the fact that NZ is a large country with a natural environment and climate that varies dramatically across regions.

Amos Palfreyman, business development manager at NZ food science and innovation hub FoodHQ agrees with the premise – that there is a misguided general public belief that the problems experienced with dairy intensification apply across the entire primary sector and we’re already producing as much as we can.

Massey University agribusiness academic James Lockhart concurs with the sentiment, and readily agrees that NZ is nowhere near its optimal land use – far from it. But he says that before we beat ourselves up about appearing to have missed all the tricks to diversify, we do need to add some context around why we do what we do, and much of that comes back to our historically weak regulation and planning of land use together with our determination to continue the love affair with low-density housing.

“For best part of 1500 years, Europe has through various planning tools constrained urban areas and growth in a way that doesn’t impinge on the productive parts of their landscape. In NZ we have no constraint. In NZ we have simply urbanised vast tracts of class 1 and class 2 without giving any long-term thought to the productivity and capability of those soils.

“Secondly, we have pursued pastoral farming as being the land use of choice, and as a farming community we have got incredibly comfortable with that.”

It’s not surprising, given that until now it has more or less met our needs.

“Pastoral farming is easy to manage and we have done a fabulous job over 150 years of reducing both production and financial risks associated with that. But we have reached an inflexion point where we have passed peak cow, and this is forcing us to think about alternative uses.”

Looking at the options available to increase revenue and employment into the NZ agrifood chain, the MBIE document considers three options – (1) increase land in production, (2) ramp up output per hectare and (3) more dedication to improving the value on the output per tonne.

On the first one, the report readily accepts the country is unlikely to bring new land into agriculture. Food production already uses almost half of NZ’s total land area.

Not only that, the recent trend has seen land shift away from, not towards farming (partly due to the issues raised above). Between 1994 and 2019, 2.88 million hectares of land, or 17% of the total area on farms in 1994 has been lost.

If you think about where the debate on land use is, it’s clearly focused on marginal hill country, as the current Government has set incentives to turn this class of land into forestry. While it might be considered better purposed as forestry, it is being forced by environmental factors and is regulatory, rather than market-driven. This is not about improving our food and beverage export returns.

Turning to the potential to change the purpose of our higher-class land, Lockhart says “there are pockets in Hawke’s Bay, northern Waikato and to some extent Horowhenua where people are increasingly comfortable in pursuing alternative land uses. But broadly speaking we do quickly run into capital constraints and mentality constraints.”

Palfreyman is not sure farmers are mentally blocked from exploring different ways to use their land by wearing a pastoral hat.

“Farmers are aware of the increasing opportunity to make plant-based food and sell it to developed markets. The key issue is not about ‘we can’t do this’, but more practical concerns – if they want to grow quinoa to diversify their income for example, who do they sell to? Should they build a brand and go to customers? Should they band together and build a processing co-op?… Those are the sticking points, rather than the mindset.”

If land use change is thorny and slow moving, there is plenty of scope to act on the second driver – higher output perhectare – given that only a small amount of NZ’s land is currently used intensively.

Leaving aside specific physical and wider environmental limits faced by various primary sectors, the report reveals there are two ‘star’ performers creating high value per hectare – aquaculture and kiwifruit, where the latter average farmgate value per hectare is $79,400, compared with $7900 for dairy and $750 for sheep and beef.

How then to turbo-charge the push for higher output on better-quality land, and who should be responsible for driving this?

For a start, the report reminds us we aren’t starting from scratch. NZ has intensified its production systems. Imports of animal feed have soared since the mid-2000s, indicating a greater willingness to get more from those animals that still occupy our farms. At the same time NZ’s low density/extensive animal systems are in decline. Sheep, beef cattle and deer numbers have all fallen with long-term downward trends, but especially in the last 30 years.

Not only have we begun to intensify conventional farming, there has been significant growth in the production of other animal protein – poultry meat has continued to climb sharply for example, to the extent that if we look at simplistic long-term production trends, poultry will exceed the volume of lamb produced in 2028.

We do however have plenty of room to move on expanding and intensifying our production of plant-based foods. The report points out that NZ’s profile on plant-based foods mirrors that of ‘desert’ countries. In 2015 the proportion of total area in grains, vegetables, fruit and nuts in NZ was slightly higher than Saudi Arabia, but short of Yemen. NZ’s 2% is negligible and contrasts with Japan (11%), Ireland (12%) and Italy (30%).

In terms of who takes charge of driving this change, Lockhart is weary about government stepping in with a size 13 gumboot. “Governments typically come from a position of control.”

He says much is often made of the Netherlands government being an enabler of successful land use transition towards higher-output/higher-value crops, but they have been able to develop a balanced partnership with their research community and commercial sector.

“The problem in New Zealand is that the Government has an enormous influence compared to the other critical partners. Mobilising the research community, which is relatively small, and commercial operators who tend not to have scale, is tough. Essentially, we are missing the five or six large multinationals that we ought to have, who can really provide some partnership clout.”

Palfreyman pinpoints the formation of partnerships between NZ farmers, or groups of farmers and food companies based overseas who want to get closer to the raw material, as a potential instigator of change.

“The part of the growth story that is missing – that middle level of capital investment in processing – doesn’t seem to be available to farmers, and food companies in New Zealand don’t appear to want to invest. There is then an opportunity for larger offshore food companies to invest in the New Zealand supply chain to develop solid supply or develop a New Zealand-based brand.”

Palfreyman says there will of course always be a trade-off – that investment will create jobs, but some of the final value will be shipped offshore.

“But when big players start to get active, local investors tend to have a lot more confidence. And there is no reason why venture partnerships can’t succeed, with local farmers and a company providing investment capital in processing, channels to market and distribution in exchange for supply.”

On the third identified driver of agrifood revenue growth, we all know NZ is well behind other countries on the metrics indicating production of value-added food products. The profile of our agrifood exports is over-weighted towards unprocessed ingredients.

The MBIE document makes the familiar case for directing more of our raw materials into categories that generate high returns in export markets. For dairy that means more advanced or medical infant formula, dairy-based nutritionals, non-cow dairy and specialty cheeses. For red meat it means more focus on meat-based snacks and consumer-ready meals.

Palfreyman says the value-add mantra is slowly sinking in. “We are buckling down and doing it. And it is a no brainer.

“The good thing for New Zealand is that value-add is not just about creating more processed foods. There is new market opportunity by diversifying the actual land use, and as we don’t have a lot of land in plant-based foods, we can move better in that area.”

Looking forward, Palfreyman says the Holy Grail for smaller economies like Israel, Denmark, Switzerland and NZ is to develop technological processes and technology-enabled food products that are very difficult to copy, can command a high premium and are scalable. Overseas partners bring money and provide strategic connections.

“Ultimately the aim is to apply some of the research you have strong capabilities in by exporting it as a software or hardware product to international markets. This enables the production to be undertaken in another country with all the associated risks, rather than focus on producing it here.”

A final thought from the report for those defending NZ’s dedication to pastoral farming as the be-all and end-all; green fields sporadically dotted with cattle and sheep is not a prerequisite for NZ to maintain its reputation for being picturesque and pure. There are countries all over Europe known for the same attributes which intensively farm their animals, intensively crop their land, and in general, make intensively more cash than us.