The Future Of Agriculture And The Role Of Agribusiness

  • Wyatt Creech

Thank you for the opportunity to talk to you today, about the future of agriculture and the role of Agribusiness in that future.

When one talks about the future nowadays, it's essential to begin by standing back from the detail, and looking at the big picture.

New Zealanders, in response to every public opinion survey for a decade, lament continuously that they are fed up with change. They forget that the industrial revolution shook the civilised world continuously for 50 years in the 19th century.

We live on now the brink of a knowledge revolution likely to have an equally profound impact, and to hit us a lot faster.

Everyone today lives on a moving pathway, like the ones you find at big airports. You can stand still if you like, but in minutes, you'll find the landscape around you has, without your permission, changed entirely. New Zealanders can keep pace with the rate of global change, or slip gradually into third world status. It's up to us.

New Zealand is, along with every other nation, evolving into a knowledge society where those who are well-educated, self-motivated and linked into information networks are the most likely to live prosperous and fulfilling lives.

Enterprises, to succeed, must more than ever be attuned to customer requirements, employ educated workers, encourage innovation through their workplace organisation, and know more and learn faster than their competitors.

We used to turn silica into glass. Today, we turn it into semi-conductors. Today, it's the investment of know-how, not raw material or even capital, that accounts for most of the quality and value produced. Globalisation has fuelled competition, and competitiveness is increasingly achieved through technological innovation. Each new discovery creates a platform for further discovery, generating a potential for rising rates of change.

A month ago, for example, I was at the Jet Propulsion Laboratory of NASA in California. They designed the Mars Rover vehicle, that drove round the surface of Mars last year, sniffing rocks to establish their composition.

Slide One: Minister Holding Nano-Rover

I actually held the next generation Rover in my own hand. It weighs two pounds. In 2003, that nano-rover will drop 100 metres out of a Japanese spacecraft on to the surface of a near-earth asteroid called Nereus. It can function in any position, and by bringing its legs together fast, it can even leap like a flea in 50 metre jumps, across the surface of the asteroid.

This spacecraft carrying it will run on solar electric power. Its motor will use sunlight to generate electricity that accelerates positively charged atoms from four thrusters at more than 108,000 kilometres an hour. The total power generated by this rocket motor is 120 millinewtons, or 27 thousandths of a pound, equivalent-get this!-to the pressure of a single sheet of paper held on the palm of your outstretched hand. But that minute amount of power, applied consistently, is enough to drive the spacecraft to Nereus in 17 months, land it, collect samples, and return them back to earth again, by January 2006.

Slide 2: JPL Scientist Holding Nano-Spacecraft

This chap is Barry Herbert, a JPL scientist from their Advanced Spacecraft Design and Studies Division, and that gadget in his hand is the body of a spacecraft they are now designing.

Not a model. You are looking at the actual spacecraft, full-size. The propulsion unit fits in the centre. They hang solar panels and transmission antennae from it. The completed craft will weigh about 5 kilograms, and be fully operational on 3 watts of power.

I said, "what kind of instruments can you fit in something that big?' "Nowadays," he said, "a full-size camera is the size of a dime." That's the world we live in today. You, and me, and every farmer in the country. I am not, myself, an expert on farming. But I listen to people who are. What they say is interesting, and rather disturbing.

John Loughlin, chief executive or Richmond, said last month: "New Zealand lamb has high brand recognition in Britain as food for the working classes. You are not going to produce sustainable income," he said, "selling out of chiller bins to the bottom end of society." Wools of New Zealand chairman Dr Richard Janes told woolgrowers last month:

"The main problem is that the price of your wool is set in developing countries, with 42% of our clip sold in these markets. They don't pay enough."

The success of New Zealand as an agricultural exporter was built on refrigeration, a favourable climate, and out-of-season production, galvanised by investment in continuous technological development. As a matter of record, it was private enterprise capital, not producer board capital, that established those industries. And it was technology, not producer boards, that drove costs down, to help our farmers remain competitive.

So I found it a matter of concern to read Rod Thomson, formerly of the Meat and Wool Boards' Economic Service and now Federated Farmers secretary in Amberley, saying in the Christchurch Press a week ago: "The problem with sheep and beef farming at present is not so much that prices are low, but that the ability to change seems to have been lost.

"Average farm size is stalled at an uneconomic level, and few farms have improved livestock performance enough to boost returns." In New Zealand, the Government is blamed for a lot of things, but agriculture is an area where I think you have to say: The Government has done its bit well, in laying the foundations of an internationally competitive industry:

The Employment Contracts Act The reform of accident compensation The splitting of ECNZ and lines and energy businesses The modernisation of the telecommunications industry Our programme for the complete elimination of tariffs The Reserve Bank Act, which laid the foundation for an economy where inflation no longer continuously erodes our competitiveness Port reform The huge funding we provide for public-good scientific research, including currently $61m a year for animal industries and forage, $51m for horticulture and arable, $23m for forestry and $7m for fish. The transformation of meat inspection on to an SOE basis, with major reductions in cost for farmers Food safety, where our people benchmark the highest standards in the world, then build programmes to ensure that we exceed them. It was soil scientists who discovered Martinborough, and laid the foundation for huge gains in wine exports.

DNA typing, genes for large muscle, low facial eczema and twinning are among areas of work being developed by New Zealand scientists and will all contribute on-going gains in productivity.

Kiwifruit yields have risen in the past 10 years or so from an average 3250 trays per hectare to 6000 trays plus. There has been huge growth in controlled atmosphere storage to control quality. Packhouses are now on industrial scale.

In the United States, by applying genetics and hybrid breeding to chickens, new birds have been developed that reach market weight in 7-8 weeks instead of 14-16, and halve the feed input per pound of weight gain.

Drought cost farmers $260m at the farm gate in 1996-97, another $200m equivalent to 2.5% of total farm gate returns in 1997-98, and is expected to reduce farm incomes by a further 1.8% in 1998-99. But right now, spurred on by improved weather forecasting, there are New Zealand farmers planting damp-resistant maize based on forecasts of a coming La Nina pattern. Farmers are starting nowadays to be able to plan for climate.

Information I picked up from John Luxton says we already have cows in New Zealand producing milk with antibodies useful to human health. Potential exists to produce drinkable Chardonnay 20 days after the grapes are processed.

Slide 3: Real Export Earnings, $bn, Constant 1998 Dollars

When you look at the nation's real export earnings however, in constant dollars, the picture is mixed. Since 1985, real earnings have increased by 51% for forest products, 42% for fruit and 35% for dairy products. They have, however, fallen by 32% for meat from $4.2 billion in 1985 to $2.9 billion in 1998, and fallen in the case of wool by 68%, from $2.8 billion in 1985 to $907 million in 1998. Many farmers are running to stand still.

Slide 4: Real Export Prices in Constant 1998 Dollars

Real export prices for dairy products have fallen by 32% since 1960-61. Real export prices for meat have fallen by more than 50% in the same period, and real wool prices have tumbled by almost 70% in the same period.

Slide 5: Commodity Prices, 1990