Bernard Hickey: Deal closes gap on map

Our commodities can be difficult to get to market, but dealing direct can earn millions. Photo / Sarah Ivey

Farmers have dreamed for centuries of breaking out of the commodity trap, and none more so than in New Zealand.

We are as far away from our customers as almost anyone can get and the things we produce can't be easily consumed in the form we produce them.

These fruits of the land - milk, meat, wool, fish or wood - have to be processed, packaged, marketed and presented to customers overseas. In the past that meant we usually sold our commodities raw, in bulk to an intermediary, which kept us disconnected from customers.

That meant farmers, and the nation, have had to grin and bear the wild swings of commodity prices. We became hostages to the wrath of the market and weather gods.

That's largely still the case today. Apart from exceptions such as wine and kiwifruit, we sell in bulk into a faceless and volatile market that gives us little sense of the consumers of our wonderful food.

Most customers don't know the cheese on their pizza is grass-fed or the wool under their feet came from the greenest of rolling hills under the bluest of clear skies.

But a few examples have cropped up of New Zealand farmers and businesses trying to "close the gap on the map".

The best example is the relationship between New Zealand Merino Company, Landcorp and a Danish company that makes indoor shoes out of calf skin and a special type of woollen felt.

Glerups will sell almost 200,000 pairs of these shoes globally this year from $189 a pair. Started as a hobby business in 1993 by Nanny Glerup using wool from her Gotland sheep, the company prides itself on its "passion for felt" and strong connection "from farm to feet".

Glerups had been buying New Zealand wool through a British broker for years to mix with local wools, but New Zealander Bill Carrig of Design Denmark convinced it to buy direct. Glerups wanted a reliable source of quality strong wool that was ethically and environmentally sourced.

In March this year Glerups signed a two-year deal with New Zealand Merino Company and Landcorp to buy 90 tonnes of wool a year for $1.5 million. The deal has been so successful and Glerups is growing so fast that it upgraded the long-term contract this month when Jesper Glerup Kristensen visited several farms producing the wool in New Zealand. Glerups increased its contract to 120 tonnes for 2017 and enthused about the story behind the wool in the all-natural shoes.

The drive by New Zealand Merino Company CEO John Brackenridge for longer-term contracts and investing in quality and standards to break out of the tyranny of the commodity is paying off for farmers.

He reported in the company's annual report these contracts earned farmers $9m more in value in the past year than if they had simply sent their wool to auction.

Increasingly, new technology is making it easier for New Zealand farmers to close the gap on the map. Mobile phones, for example, are the type of asymmetric power tool that allows small businesses to connect to many customers in ways they couldn't in the past.

It is time New Zealand farmers took these sorts of opportunities to break out of the commodity trap and for them to realise that connecting New Zealand's 100 per cent pure reputation with our products can generate more money.