Speech to the New Zealand Primary Sector Bootcamp programmePrimary Industries
It’s great to be here at the Roxy Cinema in Miramar, in the heart of New Zealand’s film industry. It’s a hugely successful industry with lessons the primary sector can learn from.
It’s also great to be able to speak in front of so many primary sector leaders. The Primary Sector Bootcamp for me is about sharing ideas, global awareness, and building connectivity between industry and the government.
It is also about long term friendships and not sweating the small stuff. Mind you, I did sweat running up Te Mata peak with some of you in February last year.
At that Bootcamp, you asked me to share a personal goal – it was to run a marathon. In April this year I ran the Great Forest marathon in four hours, fourteen minutes. It was an exhausting but rewarding challenge.
All of us have ambitious goals. As a Government, we want to double the value of our primary sector exports by 2025 and the Bootcamp participants have endorsed this aspirational goal.
What is interesting is that as I move around the country I see a number of industry organisations who have set their own targets out to 2025 based on this export double goal, which is really encouraging to see.
We’ve had a great start, but we need to do more.
Today I want to outline for you my vision of where I see the primary sector heading in the future, and my priorities as Minister to help you succeed.
I also want to challenge you to work with us as Government on achieving these big goals.
As you’ll be aware, we’ve had a very successful election result. What was interesting about that campaign was despite all the Kim Dotcom and Dirty Politics sideshows, the only ‘moment of truth’ was an overwhelming vote of faith in the John Key-led Government.
However: if there’s one thing that can bring down Governments, its arrogance and complacency and we can’t afford to be either.
From my point of view, this is not a time for business as usual. It’s a privilege to be back as Minister for Primary Industries, and I’m determined to make the most of every day.
I’ve always felt that my farming and public service background has given me the grounding to navigate the many challenges my job involves.
Farming has a lot in common with politics. Both are equally hard, but rewarding. There are early starts, and long days.
And through all the challenges and opportunities, it’s easy to forget the successes.
Let’s remind ourselves that primary sector exports have reached record levels – almost $38 billion last year.
Beef and lamb returns are at their highest levels in many years.
We are starting to see results from world-leading research and development, thanks to the Primary Growth Partnership.
We have major work underway on irrigation and water storage projects.
New roads, highways, and Ultrafast Broadband is being rolled out across the country.
And we’ve beefed up our biosecurity system, which will remain my number one priority. We have more front-line quarantine inspectors, new x-ray machines, a Foot and Mouth preparedness plan, and a new $65 million bio-containment laboratory is beginning at Wallaceville.
Also a priority will be Government Industry Agreements (GIA’s), with three industry groups signed up already and I am keen to see more.
We have the comprehensive Business Growth Agenda (BGA) which is making a real difference to our productivity and competitiveness.
More than half of the 350 actions across the six areas are either complete, or in the implementation phase.
Things like the 90 day trial period for new employees and tax cuts have made a difference, as has boosting our presence in China and other emerging markets. Further reform of the Resource Management Act will be a priority this term.
All of this work and investment is about laying the foundations for long-term growth and prosperity.
So what would the Export Double look like, when we get there by 2025?
My vision is that we’ll be a world leader in producing premium, value-added products that are in huge demand around the world.
The primary industries will be a highly desirable career choice for our best and brightest young people.
The regions will be booming.
Science will have helped us become a world leader in environmental sustainability, not just mitigating our footprint but actually improving things for future generations.
But to get there won’t be easy. From here on in, we’ll need to grow our primary sector exports by around 5% a year – not an easy challenge when we have years like this one when some commodity prices fluctuate so much.
So how exactly will we get there? What are the challenges, and opportunities, we need to tackle?
Today I want to outline three inter-related themes that I see in the years ahead: competitiveness, value and people.
Increasing our competitiveness
Competitiveness is about how we compete with our rivals around the world. And make no mistake, we have plenty of competition.
I genuinely believe we are already the most productive and innovative producers in the world.
But that doesn’t guarantee us anything in the future. The world is changing fast, it doesn’t owe us a living, and resting on our laurels will get us nowhere.
Other countries are intent on the same success as us, and are competing strongly for trade deals and investing heavily in research and development.
I read an article recently on how the dairy industry in the US is having a bumper year with the success of ‘mega dairy farms’. Land is cheaper than New Zealand, most workers are paid the minimum wage and their cows are producing double the milk solids of New Zealand cows.
Their domestic demand hasn’t increased, which means more and more is being produced for export.
Is there more we can do to collaborate to improve our competitiveness? The best recent example I’ve seen of collaboration is ServeCo, a new joint venture in Shanghai.
Some of the companies involved at this stage include Sealord, Silver Fern Farms, Synlait Milk, Villa Maria Estate, Kono and Pacific Pace.
This is a great example of collaboration, and one that wouldn’t have come about if it hadn’t been for the primary sector Bootcamp.
I believe there’s a lot more potential for NZ companies to collaborate in markets like this.
Trade access is going to be a major priority to keep ourselves ahead of our competitors. I want to salute my colleague Tim Groser for the work he is doing on pushing for better access for our exporters.
Trade negotiations are never easy. They require incredible patience, tact, and fortitude. As a nation we’re very lucky to have Tim in our team.
Just 10 days ago we announced that we’ve completed negotiations with Korea for a Free Trade Agreement.
At the moment our exporters to Korea pay $229 million a year in duties. Under the FTA, New Zealand exporters will save an estimated $65 million in duties in the first year alone.
A couple of weeks ago I lead a trade delegation to India where a potential free trade deal was high on my agenda. I got a very strong indication that the new Modi Government is now keen to see some progress, which is very promising.
The Trans-Pacific Partnership has the potential of greater market access into countries like US and Japan.
And of course, we all know what a great success trade with China has been. Two-way trade between the countries has reached $20 billion and a new target of $30 billion by 2020 has been set.
I was very fortunate to host Chinese President Xi at an Agri Tech show case of 17 companies at Karaka last Friday. It was a great to confirm to our biggest trading partner that we have a proud history as a food producer, backed up by innovation and scientific development.
President Xi also noted at Premier House that we have little to concern us around the China-Australia FTA. As he said, “New Zealand will have to worry about the fact that there is more Chinese demand than you can possibly supply.”
I’m interested in what else industry and Government can do to help increase your competitiveness.
As well as being competitive, we have to keep adding value to what we produce to insulate us from commodity cycles, which will always be fickle.
We produce enough food to feed 40 million people and there is only limited scope to increase that volume. Therefore we need to be targeting the wealthiest 40 million individuals across the globe.
There’s no doubt we produce some of the best commodities in the world. The challenge now is to keep building those into the best products in the world.
In our favour is that New Zealand farmers, growers and processors are fantastic innovators.
If you look back at the 20th century, for a long time we made little to no change to the basic produce we exported. But once we were forced to innovate and compete, we proved incredibly good at it.
Whether it’s a potential new variety of red kiwifruit, or mozzarella cheese that can be made in a day instead of two months.
Or whether it’s bovine blood used in high-end nutraceuticals, or sheep placenta facials used by celebrities like Victoria Beckham.
We have smart people developing robotic tree pruners, and using the skin from hoki to create nanofibres for air-conditioning filters.
This is why research and development is so important.
Our flagship programme in recent years has been the Primary Growth Partnership, with 16 current programmes underway.
A total of just over $700 million is being co-invested by industry and Government, working together.
A recent report by NZIER shows the potential prize is around $6.4 billion by 2025 – with the possibility of up to $11.1b if the aspirational stretch of some of the programmes is realised.
We’ve already started seeing some fantastic results come out of these projects and there will be much more to come.
It’s not just PGP either. In total the Government invests around $400 million a year into R&D in the primary sector, including from MBIE, the Callaghan Institute, and CRIs like AgResearch.
This kind of innovation will help us realise the estimated $3 billion potential there is from lifting the average performance of pastoral farmers to the level of the top 25%.
The Government is working hard on progressing the New Zealand Story and the Fernmark brand, which we know has huge potential in our offshore markets. Connecting our story with high end consumers has to be a priority and we need to tell it better. It offers us a massive marketing edge that we need to take advantage of.
We also have great potential to increase the value of Māori agribusiness. Around 1.5 million hectares of land is in collective ownership, with some of it doing very well but also much of it under-developed. I have a close relationship with the new Minister of Māori Development, Te Ururoa Flavell, and we both want to see progress in this area.
Protecting value through social licence
One of the biggest challenges in growing and protecting value is our ‘social licence’ to operate.
My definition of ‘social licence’ is the ability to produce our products sustainably, bringing the community with us, and earning their respect and understanding.
We need to tell a better story to Kiwis about the importance of the primary sector to the New Zealand economy. In my view we are too reactive, and the challenge for all of us in this room is to get the positive stories out there on issues like environmental sustainability. People need to know that we are good stewards of our land and sea.
Environmental performance across the sector is no longer a ‘nice to have’ - it’s a necessity for the New Zealand public and our global consumers.
Farmers, growers and fishers have come a long way in a relatively short amount of time, but we need to do more.
The country is demanding more of us and so are our markets. Shoppers at Waitrose Supermarkets and Chinese mums are demanding high quality food that is produced ethically.
I’m confident we are up to this challenge.
A good example was an article I saw yesterday on Wellington seafood company Yellow Brick Road, which supplies premium product to top restaurants. They provide clear information on exactly when and where the seafood was caught, which adds value and tells a story of sustainability.
Issues like nutrient management, riparian planting and animal welfare are all an important part of social licence.
It also has an impact on attracting people into the primary sector, which I’ll have more to say about in a minute. Young people are not going to want to work in an industry they think is dirty, degrading to the environment or cruel to animals.
We need to sort out the poor performers, because they will drag our reputation into the mud.
The compliance teams at Regional Councils or Government Departments will continue to deal with the cowboys, but my preference is that industry takes a tougher stance.
During the campaign we announced a new policy to bring in compulsory exclusion of dairy cattle on waterways by 2017. I heard a few grumbles from industry, but my message is: you need to get used to higher standards and ambitious targets.
Of course I acknowledge the huge progress already made. Dairy farmers have fenced off over 23,000 kilometres of waterways and greatly improved how they manage nutrients. Banks are also playing an important role by offering loans at a reduced interest rates for on farm environmental improvements.
Food safety is a major part of protecting our value and integrity, because around half of our exports are food products. We need to have strong systems that are trusted and respected.
That’s why I’m very pleased to have Jo Goodhew as the Minister of Food Safety and Associate Minister of Primary Industries, with the very important responsibility of forestry.
Attracting the best people
My third and final theme is people, and it’s potentially the most important because without top people we won’t be competitive or increase value.
We know the challenges ahead in attracting the best and brightest young people into the primary industries.
To reach our export double target we will need an additional 50,000 workers by 2025 and over half of these workers will need a Tertiary or Level 4 Qualification.
This is particularly important to the regions where the primary sector accounts for one third of all jobs. It’s also a concern given the average age of a farmer is 58 years.
We are facing a major skills shortage. We have 10 years to fill the pipeline, and this needs to start today. The government can’t do this on its own, and nor should we.
My challenge to Bootcamp attendees is to form a working group to work closely with me and my officials to help deliver practical solutions.
One idea might be a ‘New Zealand Primary Sector Skills Fund’ where the industry runs high profile scholarships to top up the Governments tuition subsidies and student loans. Or Primary Sector Ambassadors who can talk up our industry in the classroom and create stronger partnerships between schools and industry.
There is no shortage of work underway already, but the potential is there to achieve a lot more by collaborating.
MPI, MBIE and the Ministry of Education have already started working together to consider what skills are needed, and how we can make education and training more responsive to the needs of industry. We also need more clarity for teachers and students on where resources can be found.
The primary sector is increasingly sophisticated with the use of new technologies like robotics, which gives us an opportunity to appeal to a wider audience.
One example is the EPIC challenge which involves Year 10 students developing a marketing plan to convince their fellow students to consider careers in the primary industries. The winning project could be replicated and used around the country.
In the Budget this year the government boosted tuition subsidy rates for degree level and above for agriculture, horticulture, viticulture, forestry studies and other agriculture, environmental and related studies.
There is a lot more we can do to develop our human capability and I want to hear your ideas. I know some of you have started sharing employees between your companies which is a great way of understanding different industries and upskilling.
Challenge for industry
So to summarise my message: the export double goal is my vision and the way we’ll get there is through improving our competitiveness, value and people.
To do that, we need to keep building our social licence to operate. Environmental sustainability is not a ‘nice to have’ – it’s a ‘must’.
As a Government we are determined to help industry succeed and tackle these opportunities and challenges. I want to use my reappointment as an opportunity to reach out to industry.
So here’s my request for members of the Bootcamp programme today:
Your summer homework is to put together what you think are the three biggest obstacles and opportunities for your industry in reaching the export double target. These will be collated into themes and presented at the February Bootcamp get-together.
I really want you to focus on issues the Government can help with, rather than things we can’t directly control like the exchange rate.
I mentioned a few ideas today that you might want to consider, like a skills working group, and maximising the returns from our R&D investment.
I’m sure some of your ideas will challenge me.
I want to finish on a positive note.
Let’s not forget the outlook and potential for our primary industries is incredibly exciting.
The world is still growing at a remarkable pace, and this growth is happening on our doorstep.
For example, within a generation, China’s middle class will grow to four times the size of America’s.
Recently I’ve had a Briefing to the Incoming Minister, prepared by MPI. It’s worth quoting the second paragraph in full:
“At a high level, New Zealand’s primary producers face a bright future. By the year 2025, some forecasts predict global food demand may increase by 40-45 percent, driven by a rising global population and the emerging middle classes of Asia.
Let’s not let this opportunity pass us by.
The sun is rising on what many once thought was a sunset industry, so now’s the time to make hay.