Global IssuesInternational OrganisationsAfricaAntarcticaAsiaAustraliaEuropeLatin AmericaLatin America strategyNewsMiddle EastNorth AmericaPacific
Good morning and thank you for the warm welcome.
It gives me great pleasure as both a farmer and Minister of Agriculture to speak today and share with you some of New Zealand’s agricultural history and the future as we see it.
New Zealand’s agriculture sector has changed dramatically from subsidised farming to independence. Once upon a time, New Zealand agriculture was known for low prices – we were the cheapest producers of dairy, meat and wool in the world.
Those days have long gone, and New Zealand agriculture’s focus is now efficiency, quality, and innovation.
And its future will be built on sustainability and international partnerships such as the one we share with Brazil.
Agriculture and forestry are vital to the New Zealand economy – very simply New Zealand’s economy has been and will continue to be built on the land.
Agriculture and forestry contribute 12.5% to GDP when you include down-stream processing and services.
These industries employ more than 12% of our population.
Annual exports total $18 billion with around 85% of New Zealand’s agriculture production exported.
New Zealand’s plentiful supply of suitable land, combined with a temperate climate and abundant rainfall, allows grass to grow year-round in most areas, offering an affordable supply of local feed.
Production has traditionally centred on sheepmeat, beef, wool and dairy products while in recent years there has been an expansion of dairy farming, plantation forestry and horticulture, largely at the expense of sheep farming.
New Zealand dairy products, lamb, wool and more recently wine can now be found around the globe.
However, when I started out farming in the 1970’s, the situation was quite different.
New Zealand used to export most of its agricultural produce to the United Kingdom and during the 1950’s our primary industries were flourishing.
Indeed throughout the 1950s we called ourselves with some pride
Then came the oil shocks of the 70s and a loss of our preferential access into the British market when they joined the European Community. Many other countries also increased protection for agricultural products, closing off potential alternative markets.
The prosperity of New Zealand’s agricultural sector took a significant hit, as indeed did the prosperity of all New Zealanders.
In a misguided attempt to boost the economy, our government took an interventionist approach, increasing import barriers and in the early eighties, considerably increasing government assistance to farmers. To the extent that by 1983 the level of support was equivalent to 34 percent of farmers’ gross farm income.
The results in hindsight were a disaster.
Farmers became highly dependant on that support which stifled entrepreneurship and innovation.
They became isolated from market signals and as a result lost their international competitiveness.
There was a misallocation of resources with subsidies capitalised into land prices; intensive farming but low productivity; increasing negative environmental impacts and a situation where few young farmers could afford to buy land.
By 1984 a number of acute problems had to be addressed:
A sudden change in Government brought wide-ranging and radical reforms.
The economic reforms of the 1984 Labour Government were radical and wider-reaching.
All sectors of the economy were affected as support was withdrawn, artificial barriers removed and protectionist measures abolished. Agriculture was one of the first sectors affected and was exposed to some of the biggest changes.
Price support was abolished; capital and input subsidies were removed; tax concessions were withdrawn and interest rate and lending concessions were phased out Farmers became fully exposed to world market forces without the protection of Government interventions.
While the initial impact was significant, things were not as bad as many farmers had feared.
Within a short period, incomes and land prices had recovered; input costs decreased while farm sizes increased; productivity and economic growth grew, and poor quality grazing land was converted to better uses such as forests or vineyards Innovation became key to increasing income.
Our economic reforms of the 1980s wrenched away once and for all the protectionist blanket from our agricultural sector. As someone who farmed through these times I can account for how painful they were. When I subsequently analysed my accounts, I was astonished to find that 43% of my income was, in fact, government support. Taxpayers allowing me to farm.
The transition was tough. But 20 years on, I challenge you to find a farmer in New Zealand who would want to revert to being financially supported by central government. Rather, New Zealand farmers have become totally focused on rational economic decisions, and we have experienced 20 years of impressive on-farm productivity gains. Productivity of our breeding ewes has risen over 60% since 1991. Milk production from our dairy herds by over 20%.
Today the New Zealand government provides minimal direct support to agriculture and expects the sector to make its decisions based on competitive advantages.
Reform has given farmers a renewed sense of self-respect: they do not want a return to government hand-outs and are strong advocates for the market economy.
New Zealand has shown that market support does not lead to sustainable farm and rural incomes. Instead, when a government insulates its agricultural sector from trends in the international market, inefficiencies and loss of competitiveness are likely to occur.
The Government still provides assistance to the sector, just in different ways such as:
The New Zealand Government is keenly focussed on supporting farmers in meeting these challenges.
The last two decades has led to a huge change in the way New Zealand’s agricultural goods are now positioned in the world market. We are no longer a low-cost producer.
New Zealand’s brand has shifted to a higher cost, higher quality product aimed at a more discerning customer. A customer with a conscience who demands integrity. Let me expand on this integrity.
In the last 10 years, our customers, both domestic and international, have started to ask searching questions around the environmental impact of our agricultural systems.
In this regard, my message to New Zealand farmers is clear - no farmer has a right to pollute.
Animal welfare is also critical. In this debate, science may well be overshadowed by emotional perceptions. But at the end of the day, the customer is always right.
The third leg to integrity is an absolute assurance of food safety. Purchasing food is an act of faith. Breach that faith and expect no mercy from the market.
With the New Zealand economy so dependent on food production and international marketing, you can imagine our focus on these issues.
While the economic reforms of the mid-1980s led to an increase in productivity in the agriculture sector, today productivity gains are driven by innovation and new technology.
We need innovation to expand our industry – to produce more high value products, faster, better and at a lower cost without the negative downsides such as environmental degradation. It also has to be done in a manner that is acceptable to consumers in New Zealand and international markets.
The New Zealand Government is a significant investor in on-farm research and innovation that is market and industry driven. As part of this we have recently announced a major primary industry research and development initiative, known as the Primary Growth Partnership. It is a true partnership with our primary industries and will result in an annual spend of $140 million on primary sector innovation.
My determination to deliver this programme was based on a personal recognition that the productivity gains of the last 20 years, though significant, would not be enough to sustain us through the next 20 years.
This applies particularly to the area of climate change and how we manage greenhouse gas emissions.
Like Brazil, New Zealand faces some significant challenges in regards to how we address climate change.
New Zealand produces just one fifth of one percent – 0.02% of the world’s greenhouse gas emissions – but half of our total emissions are attributable to agriculture, primarily methane from ruminant livestock. This is a unique challenge.
The bad news is that there is currently no silver bullet to mitigate methane emissions from livestock that will enable us to maintain productivity.
This means that if New Zealand decreases production to meet our Kyoto commitments, alternative production will likely occur in other countries which, with more energy-intensive farming methods, will likely lead to a global increase in greenhouse gas emissions, achieving absolutely nothing for global warming.
The good news is that the New Zealand Government is not waiting for others to come up with the answers and is taking the lead in the area of agricultural greenhouse gas research.
We recently announced the establishment of a Domestic Centre for Agriculture Greenhouse Gas Research to focus primarily on mitigation research.
We have always envisaged that the Centre will need to have strong international linkages and we hope that the existing connections with Brazil through the Livestock Emissions & Abatement Research Network (LEARN) and other science networks will be enhanced through the establishment of the Centre.
However, New Zealand also sees an urgent need for scaled-up international research and investment into agriculture mitigation solutions, and for greater coordination of existing efforts.
To that end, we have proposed a ‘Global Alliance’ on agricultural greenhouse gas mitigation research.
The aim of such an Alliance would be to co-ordinate international research efforts, facilitate increased global investment in research, and drive more rapid commercialisation and diffusion of agriculture mitigation technologies.
We have begun talking to key countries about this idea and Brazil, as a large agricultural producer with significant research capacity and a strong interest in climate change outcomes, is one of the countries we are talking to.
The Global Alliance is something that I am very passionate about it and it was a key focus of discussions in my meetings with Ministers yesterday. I hope to see Brazil playing a major role in this initiative as it develops.
Mitigation options could easily be adopted and adapted by livestock farmers anywhere in the world – and particularly in the developing world where 27% of emissions are attributable to agriculture.
I am convinced that with time and investment in research, solutions will be found to reduce emissions from agriculture without reducing productivity and production.
Given the similarity between our two agricultural sectors and our like-mindedness towards agricultural trade liberalisation it makes much sense for New Zealand to be working closely with Brazil to meet common challenges.
New Zealand and Brazil have a long history of partnership. As fellow Cairns Group members, our countries continue to stand together in attempts to remove distortions in international markets.
As nations that rely on agriculture, we have both rallied against the heavy subsidising nations like the EU and the US in the context of the WTO agriculture negotiations.
And we have collectively managed to weld a lot of influence, already achieving a commitment to end export subsidies, and exerting significant pressure on the heavy subsidisers to reign in their trade distorting subsidies.
New Zealand was disappointed at the failure to reach agreement last year; a lot of progress was made and a deal was clearly within reach. We appreciate Brazil’s efforts to help advance issues in the agricultural negotiations and we look forward to working closely with you in the negotiations again, this time with a more successful result.
I am also confident that the Global Alliance that I mentioned earlier will mark a new chapter of partnership between Brazil and New Zealand.
New Zealand and Brazil have much in common when it comes to agriculture and we face many of the same challenges. We both must walk a fine line between protecting the economic viability of our agriculture sectors, and recognising the opportunities for competitive advantage that lie with each new challenge. While we are also both grappling with the challenges posed in mitigating agricultural greenhouse gas emissions.
I certainly don’t claim that New Zealand has all the answers, but our history has shown that our primary sector is capable of rising to the challenges before it.
As new issues emerge, and new solutions are found, we look forward to continued co-operation and partnership with Brazil. I am confident that our relationship will continue to grow and evolve in the positive manner it has for many decades and deliver increased benefits to us both.
Thank you very much.
