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Buenos Dias/Tardes a todos! [Good morning/afternoon to everyone.] Que bien de estar aqui con ustedes hoy [It is fantastic to be here today.]
I know there have been tough times here as you have been through a terrible drought.
While it will not make it any easier to cope here in Uruguay, as a farmer I understand your situation as back home we have experienced severed droughts for the last three years, the most recent of which cost our economy at least $3 billion.
As a fellow farmer and as Minister of Agriculture my thoughts and sympathies are with you.
I’m here to talk to you today about dairying in New Zealand – a sector that can be as rewarding as it is challenging.
The dairy industry is a major contributor to the New Zealand economy, and it’s our biggest private sector employer.
Annually our dairy industry produces around 15 billion litres of milk. This is tiny on a global scale, at only 2% of total world milk production.
But while others concentrate on their domestic markets, New Zealand’s focus is on our global customers – we export 90 percent of our dairy products.
In 2008 dairy exports were valued at $NZ 11.35 billion, making up more than one quarter returns from merchandise exports, and making our largest dairy company one of the ten largest in the world.
This focus on exports defines the industry’s outlook, in terms of our commitment to food safety, the high priority placed on biosecurity and our constant efforts – alongside Uruguay and other countries – to remove protectionism and market distortions from global trade.
New Zealand is the largest trader of dairy products on the global market, with a 30% share.
That’s amongst a small volume of globally traded dairy products however – since only about 6% of total production makes it onto the world market. As such we are highly dependent on global dairy prices and exchange rates.
Like Uruguay, New Zealand dairy farmers have suffered from the recent plummet of dairy prices.
Our dairy sector has had to decrease their budgets for feed, fertiliser and repairs and maintenance, while at the same time, many who came into dairying from sheep and beef farming have significant levels of debt to repay.
However, the industry’s ability to reduce costs at tough times has been its saving grace. New Zealand farmers are resilient, and see this as just another business cycle.
Unfortunately for both our countries’ farmers, not all dairy trading nations have responded in this way.
We were extremely disappointed by the European Union and United States’ moves to reintroduce dairy export subsidies.
While export subsidies may help quell unrest in the producing nation, they do nothing to increase global prosperity, or improve the underlying problem of price volatility. In fact such actions only further distort prices and therefore delay the recovery of the global dairy market.
That is why New Zealand and Uruguay understand the importance of multilateral trade rules through the World Trade Organisation.
New Zealand and Uruguay have a long and close relationship working together on trade matters at the WTO. We are close allies against the most protectionist economies, working together in the Cairns Group of agricultural exporters aiming for a more level playing field in the world of agricultural trade. We look forward to continuing those close ties.
Until the Doha Round is concluded, and export subsidies are eliminated, we will always have uncertainty about the conditions we trade in.
And until we can lock in tariffs at lower levels, and make substantial reductions in domestic subsidies, some economies will remain sheltered while the rest of us do our best to make a living in a distorted world market.
The global economic recession poses an even bigger challenge to the conclusion of the Doha Round.
The Doha Round is just one way New Zealand and Uruguay have worked together. My country has worked very closely with the Uruguayan dairy sector and the wider agricultural sector in a range of areas.
This makes sense, since, like Uruguay, New Zealand dairy farms are pastoral based with cows being kept outside in all seasons – we have much in common.
In New Zealand we have developed over a long period a high level of technical expertise in grassland based dairy farming systems and in the processing of fresh milk into storable products. This flows naturally into our pattern of foreign direct investment.
New Zealand Farm Systems Uruguay is one example of a large dairy farming development taking the sort of investment typically done in the past by individual farmers with a passion for the industry, and boosting it to a commercial scale. Another example is the Latin American investments in milk product processing and marketing by our largest cooperative dairy company, Fonterra.
This type of investment by New Zealand interests in Uruguay brings not only New Zealand capital but also our technology and expertise.
There is clearly great potential for shared benefits for both New Zealand and Uruguay with the creation of new jobs and access to new ways of doing things and new technology. But we are still feeling our way.
New Zealand agricultural science is highly respected in Uruguay, with a history of involvement in Uruguayan farming stretching back fifty years. INIA [Instituto Nacional de Investigación y Tecnología Agraria y Alimentaria – Spanish institute for agriculture research and development] has close links with our two agricultural universities (Massey and Lincoln) and government research institute AgResearch.
New Zealand firms have also been involved in upgrading Uruguay dairy processing facilities. Other areas of mutual interest include pasture development, where Uruguayan plants have been used in New Zealand drought research, herd and bull progeny testing, and agricultural training.
I am pleased to hear positive reports of the working holiday scheme involving Uruguayan dairy farmers. I’m sure those involved have enjoyed their experience in New Zealand and have returned to Uruguay armed with new ideas and skills. In my mind there is no better way of building linkages between our nations than schemes such as the working holiday one.
One area where New Zealand is keen to advance our expertise is in the area of greenhouse gas emissions and carbon footprinting.
Consumers today are becoming increasingly sensitive to issues around food safety, environmental management as well as ethical considerations like animal welfare and religious practises, such as halal.
Our access to international markets depends on our credibility in providing products which meet these rigorous requirements.
At the same time, consumers are demanding a higher level of certainty about their food – what’s in it, as well as how it is made. This presents challenges for New Zealand as it does Uruguay.
New Zealand has responded on a number of fronts. In anticipation of increasing demand for consumer information on the emissions used to produce goods, the New Zealand Government is playing a leading role in developing international standards for lifecycle analysis of products.
Fonterra and our Ministry of Agriculture and Forestry have worked together on a greenhouse gas footprint study of dairy products, which has set the benchmark for other producing nations to follow.
We are also investing in research on ways to reduce the impact of emissions from ruminant livestock. In New Zealand, close to half all greenhouse gas emissions are from agriculture. As such the current lack of mitigation options for agricultural emissions poses some serious challenges to New Zealand.
To this end we have recently established a Domestic Centre for Agricultural Greenhouse Gas Research to focus primarily on mitigation research.
To compliment this domestic effort, New Zealand has also proposed the development of a Global Alliance on agriculture greenhouse gas mitigation research.
New Zealand has been actively promoting the Alliance as a means to address the urgent need for more international research and investment into new technologies and practices to help reduce emissions, and for better co-ordination of existing efforts.
We have been delighted at the level of interest and support shown so far and we will continue to work with others, including the Uruguay government, to ensure its success. I truly hope that Uruguay can play a significant role in the Global Alliance initiative,
It is our intention that the NZ Centre will be a major player in the Global Alliance and will provide leadership in the pastoral livestock sector – reflecting our previous commitment to this work.
New Zealand and Uruguay have a long and fruitful relationship and many areas in common in the agriculture sphere.
We share many interests, and while our similarities make us competitors in one respect, as small countries dependent on the world market for a large part of our incomes, we are better off working together.
We have been doing that very effectively already in the WTO context, as well as in the sphere of greenhouse gas mitigation research through New Zealand’s LEARN network and hopefully in the future via the Global Allaince.
At the commercial level too we have been a ready partner, and we stand ready to build on those existing positive relationships. I look forward to continued cooperation such as this in the years to come.
Uruguay and New Zealand enjoy a good bilateral relationship which has been founded on similar production systems, common trade interests, commercial investments, and personnel exchanges between universities and research institutes.
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.
