Fresh Thinking On Producer Boards

As the new Minister of Food and Fibre it is great to be here at your Meat and Wool Council. Firstly let me say that your contribution to the economy is substantial. With combined export receipts of around $4.3 billion or 21% of total exports, the meat and wool sectors are very important to New Zealand's economy.

Over the next couple of days you will be debating the future of the Meat and Wool Boards. Your organisation plays an important role in the rural sector. It is vital that you get involved in this debate on producer boards and have your say.

You have asked me to talk about the topic "Life after the removal of the statutory Bodies", but I am not going to.

While I presume that the statutory bodies you are talking about are the producer boards, I am not going to talk about their "removal", because that is not what the Government industry plan process is about.

Instead I want to talk with you about the "fresh thinking" approach of this Government. The fresh thinking approach that has provided you, as farmers, the first genuine opportunity in three generations to get your Boards to demonstrate to you their vision and strategic plan for the next century and how they can put more money in your bank accounts in return for the money they take out.

I also want to cover what happens next, after November 15.

Despite what some say in the cities, agriculture is the backbone of our economy. When times get tough, it has often been the rural areas that have rolled up their sleeves and produced the foundation of the export lead recovery. And as everyone knows in the provinces, when the farmers are doing well, people in the cities do O.K. as well.

But it is getting tougher to make a good living from the land.

The Department of Statistics tell us that in real terms $1000 worth of beef is now worth $347, wool $203, milk solids $410, and the best performer lamb at $764. Commodity prices have and will continue to decline over time, and this has had a significant impact on the rural economy. We simply need to get out of producing commodities and adding more value than costs to our food and fibre.

As we look forward to the new millennium, we can see that tomorrow's market is in new products and ideas, most of which probably have yet to be invented. We do need fresh thinking.

Fran Wilde, Chief Executive of Trade NZ was quoted as saying in last weeks' Herald "New Zealand must be seen as a producer of high quality niche products and services or it will become a banana republic. If we don't take our own futures into our own hands our kids will blame us and so will our grandchildren. New Zealand's declining gross domestic product and overall export performance were major warnings for the country which have been talking about a global economy for several years," she said.

She went on, "We can't take it easy. Markets are increasingly competitive and there is huge demand and competition for resources - people, technology, directors investment and customers."

Gary Smith, in last year's Apple and Pear Board Annual report simply said, "It is a hugely competitive market and international pressures are giving us two choices : we stay where we are - where the situation can only get worse - or we change, and change immediately. "

Both these people are saying we need fresh thinking. And they are not alone.

And we have seen some good progress in some areas. Despite initial resistance by some, Merino NZ has added an alternative way on doing things for some wool growers. As we can see from those Department of Statistic figures, lamb has been the best performer of our agricultural products. Lamb has gone through a transformation.

In 1990, 80% of lamb sold was in carcass form, today 78% is in added value finished product form. In 1985, farmer's average weight was 13.7kg, now it is 15.4kg . This is impressive by anyone's standards. Progress has been made on both sides of the farmgate.

How can Government assist in allowing innovation to become an even greater driving force in our agricultural sector? How can we facilitate change in response to technology and the market place. Technology like the internet means changes in selling and distribution channels. For example, I can now purchase all of my fruit and groceries on the internet and have them delivered without going near a supermarket or shop.

A small beverage maker in Scotland now sells worldwide without an overseas agent. Amazon Books provides worldwide access to literally millions of book titles. This is just one example of the challenges, irrespective of politics, to the status quo.

It is in this context that the government has provided growers and farmers with the opportunity to have their boards present a vision and strategic plan for their future. Government has simply said, lets have some fresh thinking.

The Government has sought a vision for your industry in the future that is sustainable, competitive and profitable. To deliver on this vision each industry will need a viable long-term strategy for the future.

The outcome must ultimately ensure that those within the agriculture sector, where we have a production comparative advantage, who wish to use alternative approaches or exercise a bit of fresh thinking to

promotion, research and development, processing and marketing are accommodated within a reasonable time frame.

The outcome for non trading board's needs to be a structure where farmers are satisfied that they are getting value for the money they pay to whatever the organisation is that they ultimately want and provide opportunities for alternative approaches.

At this stage of the process I don't want to comment too much on likely or possible outcomes for your sector except to say I hope you take full advantage of this opportunity.

I would note in passing however the reported comments of the Wool Board on the possibility of having one, rather than two Boards, and some reported comments from the Meat Board on possibilities of getting closer to the Game Industry Board. It will be interesting to see the extent that these prospects are covered in the Boards November 15 strategic plans.

I know there are some issues of concern being expressed by some about the process that this progressive Government has set in train. I will just comment on one and that is the allegation that this opportunity is solely driven by ideology. I again want to make it quite clear, that is wrong.

If this was the case I would have supported Winston Peters in his budget bid to deregulate the Kiwifruit board on Budget night. I didn't support that because I thought it was important that we make these important changes in an evolutionary rather than revolutionary way and enhance our position in a commonsense and careful way.

Instead Government has asked for some fresh thinking. We have given the boards the opportunity to present to you, the growers, and the government their thinking of their vision for the future and their strategic plans.

Your two Boards are not "single buyer" boards. However they do play a significant role in your sectors. For a start, by your own Federations estimation in 95/96 they levy around 15% of profit before tax. Last year the Wool Board reported expenditure of $85.3 million and the Meat Board about $36 million in 1997.

At over $120 million in anyone's language that is a lot of farmers money. For example, with that money you could build a new Wellington stadium every year in a provincial town like Dannevirke, Dargilville, or Dipton. Or you could build roughly one and a half 328 metre Auckland Sky Towers in Napier, Nelson, Cambridge or Gore. So it is important that farmers are happy they are getting value for money.

It has been good to see some debate on the roles, functions and accountabilities of your two boards as this Government initiated process has progressed. And while some were not happy with the extent of it, it was good to see the Meat Board re-examine their activities and actually cut their levies.

Post November 15 So where to now?

When the Government receives the Boards strategic plans and future visions, it will view each plan separately, and carefully work with each

Board individually on the detail, the stages and consider the timetables proposed. The plans will be tested against criteria that cover the degree or extent to which:

the plan provides the opportunity for the maximisation of returns to producers and to New Zealand as a whole;
the proposed commercial structures are flexible and future-oriented (with respect to the industry and their markets);
innovation and alternative marketing strategies are encouraged and accommodated (eg. Branding, organics and new products);
new investment is encouraged; and
existing investment is protected.
there is increased transparency from producers' perspective;
accountability and governance structures are improved;
ownership issues are clarified (including intellectual property rights);
commercial objectives are enhanced and facilitated;
there is a separation of the regulatory function from commercial operations;
the potential for domestic competition is accommodated;
the plan maintains the effective management of tariff quota;
legislative provisions required to give effect to the plan are identified;
the changing international trading environment is recognised and New Zealand's international trade interests and obligations are met;
This list is not exhaustive. But it will work in well with some of the strategic planning already underway in most Boards.

It will require a major team effort to work through these plans to evolve and benefit the fruit sector. Government has set up a Ministerial Oversight Group of Ministers and a Producer Board Project Team to work with the Boards. A Ministerial Advisory Group will also provide me with a different perspective on the Boards visions and strategies.

By November 15, all nine boards will have delivered their plans. But as I have said many times before, nothing will change overnight.

After November 15, Government will sit down again with the Boards and identify firstly, the areas where there is quick agreement and possible implementation; secondly, the issues where we will need to work jointly with the Boards, to negotiate the more complex and difficult issues to get a sensible outcome in the best interest of farmers and growers.

Since becoming Minister of Food and Fibre a little over 2 months ago I have had several ongoing and constructive meetings with the various Boards. In these regular meetings it has been clear that they are putting in an impressive effort to deliver plans which they think will improve your future.

A key concern that I have is, rather than the Government making sweeping changes over night, as some assert, the reality will be that Government may not be able to deliver changes as quickly as some of the Boards want.

While it is important what Government thinks of these plans, what I believe is most important is that you, the growers and owners, are satisfied with the strategic direction and vision which your Board is proposing to take you in to the future.

After you see the plans of your boards, are you satisfied that the fresh thinking of the Boards on their vision and their strategic direction will help meet the challenges of the future for you and your industry? Are you satisfied that you will be receiving value for money and accountability?

Irrespective of who is in government, the international market for meat and wool looks challenging.

Quite simply we cannot continue the downward trend of returns to growers and rural communities. We must take this opportunity for fresh thinking, and ask can we do even better.

And as you know, change, like rust, never sleeps. The recent edition of the Business Weekly says how Edward De Bono tells people around the world that "competence, information and technology - historically the main building blocks for enterprises -have become commodities. In former years you could gain a break on your opponent by cutting costs or adopting new technology. Now everybody is doing roughly the same thing, and the new information systems are available to all. The creative wealth of the future will be innovation."

We can't afford to continue to constrain and outlaw innovation and fresh thinking in a world of increasingly rapid change.

It is vital that the Boards can show you, as growers and owners, that their visions and strategic plans are going to mean that you can take the maximum advantage of the exciting opportunities into the future, and how they are going to turn them into dollars in your bank account.

I know there are some who may disagree with what they believe the Government has set in train.

But rural people deserve this opportunity to have some fresh thinking.Thank you.