Agrisector to grow but faces reset
STRONG commodity prices and global demand are still powering New Zealand’s agriculture sector but 2020 will not be without its challenges.
Total export revenue from the sector is tipped to hit $47.9 billion in the year ending June 2020, up 3.3% on the pervious year, according to the Ministry for Primary Industries. It is also optimistic about 2021, picking revenue to be up another 2.1%.
‘‘A lot of these gains can be attributed to rising global commodity prices and the drivers behind rising prices are likely to be sustained through 2020 and 2021,’’ the MPI said.
That is not to say there are no headwinds. Among other things, 2019 was marked by a series of environmental and regulatory challenges that will not be going away any time soon.
The recent Zero Carbon Act — passed unanimously by Parliament — aims for methane emissions to be 24%47% lower than 2017 levels by 2050. Those — coupled with the Government’s freshwater cleanup reforms — will cost the economy about $7 billion a year by 2050, DairyNZ has said. While that number may be too high — according to the Environmental Defence Society — it certainly will not be without cost.
The dairy sector is particularly in the line of fire regarding the methane emissions target.
The MPI warns the number of New Zealand dairy farms experiencing financial distress is increasing and the financial pressures ‘‘may constrain the ability of financially vulnerable farms to invest and adapt to the changes associated with increased environmental and other regulatory requirements on the sector over the longer term’’.
ANZ Bank rural economist Susan Kilsby said the sector’s biggest challenge would continue to be the ‘‘adjustment to the reset the agrisector is going through’’. This included adjusting to consumer demand and regulatory changes, which meant farmers now had to be able to prove they were farming in a way that was kind to environment, labour and animals.
It is ‘‘creating uncertainty and, combined with the reduction in bank appetite to fund unprofitable businesses, is causing a wave of farmers looking to exit. This in turn, along with uncertainty of future returns, is reducing land values’’, she said.
The latest data from the Real Estate Institute shows the median price per hectare for dairy farms has decreased 22.1% over the past 12 months.
However, ‘‘this cycle is also creating opportunities’’, Ms Kilsby said.
She points to opportunities for younger farmers to buy farms, advisers who can help farmers understand and thrive in the new regulatory environment, and technology that helps with decisionmaking and records what has happened.
‘‘Overall, there’s an opportunity to ensure we have a sustainable longterm agriindustry that is aligned with consumer expectations.’’
Julia Jones, head of analytics for the NZX and a member of the Primary Sector Council, said key sector challenges included climate change impact and food production sustainability, as well as infrastructure spending.
ASB Bank rural economist Nathan Penny said the major questions were whether the USChina trade agreement would help or hinder New Zealand food exports and whether the current ‘‘ruralurban divide’’ would widen or narrow.
Addressing this divide was a key factor for the Primary Sector Council, which launched a new ‘‘vision’’ for the sector at the end of 2019 that includes setting up a new partnership to add value to New Zealand’s food and fibre products as they contend with unprecedented change in the global market.
‘‘The corrosive dialogue that has emerged in New Zealand, pitching farming interests against environmental interests, town against country and, astonishingly, even sector against sector, is unfair and strategically anaemic. It is important for all New Zealanders that we reject this divisive framing of the dialogue,’’ council chairman Lain Jager said.
Synlait Milk chief financial officer Nigel Greenwood said he did not think the challenges could be isolated to a single year, but the key factors were ‘‘emerging challenges around the environment’’ as well as animal welfare.
‘‘The groundswell of pressure from the public is driving the Government quite rightly to put more pressure on the dairy sector to clear up its act. It’s not just a 2020 issue. It’s a very longterm issue.’’
Both the sector and Synlait were aware of the issues and significant steps were being taken, he said.
In June 2018, Synlait announced its refreshed commitment to sustainability with the release of its 10year sustainability plan. In the plan, Synlait made new commitments around water usage, greenhouse gases, nitrogen loss, palm kernel expeller and coal.
One of Synlait’s most recent efforts involves its Whakapuawai programme. The initiative incorporates the establishment of an industrial scale nursery to propagate native plants.
The 15hectare site at Synlait Dunsandel will be capable of growing more than one million native trees and shrubs annually, its goal being to plant four million native trees on farms and community land by 2028. — BusinessDesk
❛ The corrosive dialogue that has emerged in New Zealand, pitching farming interests against environmental interests, town against country and, astonishingly, even sector against sector is unfair and strategically anaemic