New Zealand farmers and the primary industry should not shy away from new opportunities because of a history of exporting commodities, says primary industry leaders.
Speaking at the recent E-Tipu agri summit in Christchurch, professor Caroline Saunders, from the agribusiness and economics research unit at Lincoln University, said, to capture more value, the primary industry needed to move away from a transactional commodity supply chain and become a chain that focused on value creation.
No food product should leave New Zealand shores as a commodity but should be exported as high-value products, Saunders said.
In the past, selling fresh produce and animal proteins provided the sector with massive returns but for real growth this needed to change, Saunders said.
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The sector should investigate what consumers valued and leverage that to create premiums for farmers.
A champion for a specific sector was often needed to enable such growth, Saunders said.
Zespri was a prime example of such a champion, as it created high value for kiwifruit in export markets through its marketing efforts. This value syphoned back to growers.
Research showed that the credence attributes of Kiwi goods was valuable to consumers in export markets, and that they were willing to pay for it. Credence attributes were things a person couldn’t necessarily touch, but that could be verified through assurance schemes. This included attributes such as sustainability, animal welfare and the health benefits of a product, Saunders said.
Different consumer groups in export markets often valued different aspects of a product. Their specific needs could be marketed to, she said.
Previous research on kiwifruit consumers in Japan, for example, showed that, depending on age group, some valued carbon-neutral food, while others might place the highest value on taste or biodiversity enhancements on farms, Saunders said.
Likewise, research in the UK showed that some consumers were willing to pay more for lamb that originated on farms owned by Maori. Such insights were valuable and Maori farms could be used in the supply chains and this attribute used as a marketing tool.
Wine buyers across different age groups in the USA valued different things. Older consumers wanted wines produced in the USA, while younger consumers placed higher value on organic products or ones that could demonstrate social responsibility on the farms they were produced, Saunders said.
Also speaking at the event, Arama Kukutai, chief of agritech company Finistere Ventures, said New Zealand’s farming legacy was dependent on a business model from the 1920s, when the industry grew food and exported it. The legacy was founded on the idea of the free global movement of capital and people. A stable geopolitical environment enabled the industry, but current tensions in the world could change this.
New Zealand had the opportunity to build new consumer markets if the future included a vision for indoor food production, Kukutai said.
Indoor farming provided new opportunities for growth in the primary industries because it used fewer resources than traditional farming. Indoor farming did not only mean vertical farms where crops like tomatoes and lettuce were grown, but included new technologies like precision fermentation technologies or lab-grown meats, Kukutai said.
To move to food production indoors, capital investment in infrastructure on a scale not previously seen would be needed. This would create opportunities for the primary sector, Kukitai said.
Globally over US$12 billion (NZ$19.17b) had been raised for indoor vertical growing, precision fermentation and meat cultivation. The scale of capital investment, the number of companies involved, and the progress made in a relatively short time suggested that the future was coming faster than previously thought, Kukutai said.
Jenny Cameron, chief transformation officer at the Ministry for Primary Industries, said many farmers and growers felt under threat from climate activism and movements such as alternative proteins, but there was currently an unprecedented amount of investment in the primary industry and there were opportunities everywhere. Risk came from avoiding change, Cameron said.
“When McDonald’s advertise regenerative meat and milk to their customers you know that change is coming,” Cameron said.
Janette Barnard, founder of the US-based firm Prime Future, said as pressures on farm margins increased there would either be an aggressive push to scale up operations and more attempts to compete hard in the commodities market, or farmers would focus on decommoditisation and on creating value. This was especially seen in the beef industry where some producers were moving to direct to consumer sales.
Within the industry there was often specific groups of farmers who innovated first. They were often classified as lunatic by their peers, Barnard said.
These farmers were often not recognized by their peers for their efforts and were seen as too unconventional and classified as such.
“The normal reaction to success from unconventional ways is that it would not work here. Most farmers will rather fail conventionally than succeed unconventionally,” Barnard said.
Unconventional farmers were often early adopters of technology. They often operated outside their bubbles, read about what their competitors did, listened to people others did not listen to, tried to learn from other industries and applied that learning in their own operations, Barnard said.
Such farmers created time and financial margin to experiment with new ideas and believed every incremental financial or production win can be incorporated into their system. They looked at their business as a whole that could be improved.
There was an increase of these type of farmers as markets became more volatile and pressures on the farming industry increased, Barnard said.