A recent trip to visit one of KPMG's major agribusiness clients in the Middle East confirmed to me clearly New Zealand's well respected position in the global dairy sector. They were using ingredients New Zealanders produce in their products, technology New Zealanders invented to run their plants and New Zealand managers to lead key parts of the business.
The influence our dairy industry has on the company's production should have surprised me, given there is so little in common between the two dairy businesses (apart from milk) but it hasn't. Agriculture, particularly dairy, is what we do really well in this country, everybody knows this - or do they?
The industry leaders we talked to in preparing the 2013 KPMG Agribusiness Agenda are not certain the wider community does understand the global reputation of our agriculture sector or the economic contribution it makes to the economy. In particular, does the wider community understand the connection between our ability to supply high quality protein to premium consumers around the world, and the ability of the country to fund the schools, hospitals and roads we expect to have as a developed country?
So why is this an issue? The wider community probably doesn't recognise the extent of the contribution our other key export revenue earning sectors make to the economy either. Why should agriculture be any different?
I believe agriculture is different. Its impacts are more far-reaching on our environment than educating foreign students or tourism. Agriculture has shaped the physical environment we live in today. There are also a range of critical issues now on the table for discussion and decision which will shape our environment and economic future for generations to come:
Our approach to managing and storing water.
Defining how clean we want our streams and rivers to be.
How we approach more intensive farming.
Our approach to the use of genetically modified organisms.
The decisions we make around these issues will determine the extent to which our primary sector remains globally competitive and able to maintain the contribution it makes to the economy. The decisions that are taken by our Government, regulators, and the industry will reflect the views and perceptions of the wider population on these issues.
These views are often formed based on emotional reactions and opinions rather than being on an objective factual discussion founded on science. As our demographics have changed, an ever-decreasing portion of the population has a direct connection with agriculture and often only hears about the sector when someone has failed the industry or a controversy has arisen. The consequence of incomplete understanding of the sector could well result in policy settings that constrain the ability of our agriculture sector to deliver to its potential.
We are already seeing this in some of the policy settings being proposed by some Regional Councils. A number of councils are limiting the levels of nutrient run off allowed from farmland, however the proposed regulations will cause farmers to have to reduce production levels as the rules are taking a one size fits all approach. Without robust scientific input into investigating and establishing appropriate regulatory frameworks that balance economic, environmental and community outcomes, we get bad policy.
The bad policy we are seeing across the country is creating investment uncertainty and has the potential to constrain productivity which could restrict the contribution agriculture makes to the economy. Or put more simply, limit the ability the sector has to pay for schools, hospitals and roads.
The obligation falls on the industry to stand up and explain why we do agriculture in New Zealand and the benefits the sector creates for the economy. I believe that being able to concisely explain to the wider population why we do agriculture will result in better outcomes for both our communities and the industry. We will end up with policies that are based on a comprehensive, mutual understanding of what is most important to all New Zealanders in respect of the lifestyles we aspire to, the environment we wish to live in, and the returns we need the sector to achieve to support our society.
Let's consider the discussion around water quality in our streams and rivers. Most New Zealanders don't like what they hear about water quality; after all being able to swim in a river over summer is an archetypal part of our lifestyle. The issue is that maintaining pristine water quality comes at a cost to the economy, as farmers would have to significantly reduce production, meaning less money to fund the social assets we need to support our lifestyle.
Over this issue the industry really needs to engage with the wider community with an open mind on what a broad consensus could look like. The industry needs to bring its case to the table, explain the international assessment of our water quality and what farmers are already doing. It also has to acknowledge that some practices in the past have failed the community and must be stopped.
Now is the time for the industry to start a discussion with the wider community on why we do agriculture and what we as a nation want the primary sector to contribute to our country. This way the sector can really help fuel New Zealand's prosperity for the benefit of everybody.
Ian Proudfoot is Global Sector Leader for Agribusiness, KPMG in New Zealand