Ray Smith Director-General of Ministry for Primary Industries.
Ray Smith is up for the challenge to deliver on the Government’s goal to double exports by value in a decade.
Smith is director-general of the Ministry of Primary Industries (MPI). He is a skilled public servant who has been in the role since 2018 dealing with hard “once in a lifetime” issues like the impact of the Covid-19 pandemic and the Mycoplasma bovis outbreak on our prime export money-spinner.
Already Smith (and his team) have formulated an eight-point plan to meet their next big challenge - turbocharging growth in the primary industries sector.
He notes the whole of Government ethos with its concentration on the bigger macroeconomics. But off the back of a restructure (part of the Government’s plan to slim down the public service), Smith says MPI is ready to push much harder and galvanise its own effort which includes the appointment of an associate deputy director-general to lead MPI’s international trade and market access team.
With New Zealand’s primary industry sector accounting for 80.9% of New Zealand trade, MPI’s focus is critical to meeting the export goal.
MPI’s latest Situation and Outlook report forecast annual agribusiness revenue at $54.6 billion for June 30, 2024 - down 5% on the previous year.
Smith puts that down to slower global growth particularly in New Zealand’s key export market, China. A correction in commodity prices has also had an impact.
The forecasts project that by June 2025, food and fibre export revenue will have rebounded 6% to $58.1b.
Strong gains in dairy and horticulture export revenue are driving the increase. Forestry is also expected to recover from supply side disruptions and meat and wool export revenue is expected to increase as prices recover.
“Our trajectory is still good,” says Smith, underscoring MPI’s 10-year trajectory is “still where we thought it would be. I’ve had a good look back through the forecasts. We’ve been pretty accurate because I think we’re pretty conservative.
“Essentially, we’ll see markets pick up, costs come down, a bit of price lifting in some areas with demand picking up again. We’re particularly picking that the dairy industry will grow back and then carry on. That’ll be the big one. That’ll be quite challenging.”
Smith says if the primary sector industry stays on its current trajectory it will hit $73b in export revenue in 10 years.
In order to double the value of sector exports it needs to get to $106b. While that seems a stretch, Smith says people lose sight of previous periods of exponential growth. “We have the potential to grow quite quickly”.
Maximising international market opportunities is key to the success of MPI’s eight-point plan.
New Zealand already has a bunch of lucrative free trade agreements with major trade partners like China.
Efforts are under way to increase the tally.
Smith says while Government-to-Government relationships with New Zealand’s biggest trading partners are pretty good, an increased focus on non-tariff barriers is required.
MPI has budgeted around $5 million this year to underwrite international travel engagement to support exporters in-market and to ensure officials are at all of the critical meetings to “push as hard as we can where we think there are still bits to gain from either the trade agreements we’re in, or where we think there are misalignments that are costing business in New Zealand and to reduce those barriers”.
Conversely, MPI will also be working to ensure that agriculture imports from counterpart nations are flowing well, subject to meeting New Zealand biosecurity standards.
Smith says to consider India as an example. The coalition Government has stressed it wants to forge a free trade deal with India.
MPI posted senior counsellor Melanie Phillips to India two years ago. “She has a very direct relationship with key government officials and key organisations,” says Smith.
India’s oldest dairy co-operative, Amul, and its National Dairy Development Board have also been out to New Zealand.
“That was very successful,” says Smith. “We’re looking for opportunities where we can support them to help their farmers and develop technical expertise in the dairy industry.
“So, when you look at India as being one of those really big opportunities across this next decade to help double exports, we’re committing resource capability, the skills of our people, and - critically on the relationship side - building the relationship so that we can find value in each other to begin to open up the trade pathway.”
China will continue to be a focus. Dialogue is important, says Smith.
Cabinet ministers have stepped up their presence with Climate Change Minister Simon Watts the latest to attend a major meeting in Wuhan.
Trade Minister Todd McClay will return in November for the China International Import Expo where New Zealand has been invited by Chinese Premier Li Qiang to be an “honour” country.
China is New Zealand’s largest market, taking 33% of all our primary industry exports (March 2024). Other markets in the top 10 include the United States (12%), Australia (8%), EU (excluding UK) (6%), Japan 5%, South Korea (3%), Taiwan (3%), Indonesia (3%) Malaysia (2%) and Thailand (2%).
This is just one facet to growth.
Smith contends the Government’s changes to the Resource Management Act and introduction of fast-tack consenting will allow for more growth and opportunity in New Zealand economy.
An example is acquaculture: seafood export revenue was expected to increase 5% to reach $2.2b for the June 24 year.
Looking out to 2024/25, demand is expected to remain strong and improvements in aquaculture productivity are forecast to boost export revenue to $2.5 billion. It’s forecast to reach $3b by 2035 but, says Smith, that could easily get to $6-8b by 2040 if the right consents were put in place.
“There are people who want to invest in the bottom of South Island, where the waters are cold, yet it’s been impossible to get through those consenting hurdles.
“You know why that’s important: because you begin to build an industry that’s the same size as forestry, close to horticulture, and we get another business that over a lengthy period starts to look like another $10b enterprise. That’s really important for New Zealand, and can we not take advantage of that great sort of sea space that we’ve got?
“Another issue is the diversification of land use to make give farmers and growers the opportunity to diversify into higher value enterprises.”
When it comes to investing for growth (which is another target), MPI’s Sustainable Food and Fibres fund invests in smaller projects that cost less than $100,000 through to multimillion-dollar, multi-year programmes.
A Sense Partners report estimates the fund’s 320 investments would produce $$1.1b in benefits over the next 10 years, rising to $4.3b after 30 years.
“It’s one of those programmes that gives a startup or something that would not otherwise be bankable the chance to grow,” says Smith.
Investment is also going into the Māori agribusiness economy.
MPI holds the pen for the Government’s 50% investment in AgriZeroNZ - a public-private partnership focused on developing technologies to reduce methane.
Says Smith, “they’ve invested in a range of promising looking initiatives to try to find a breakthrough for our New Zealand way of farming. There’s been some products being used internationally, but of course, they’re not designed for extensive farming systems. And so we have some particular investments being made here that look promising.”
MPI also has a major investment in the NZ Agricultural Greenhouse Gas Research Centre which is a working to develop a vaccine that reduces methane emissions from ruminant livestock such as dairy cows.
“If we can crack it, that vaccine will have application worldwide.
“So yes, our farmers first. But if you think about developing countries like India, like Africa where there are many livestock roaming, the potential to reduce methane is huge. We’ve got excited about that.”
Smith is very optimistic (“barring the capacity of world leaders to kind of throw us off course”) that the New Zealand primary industry will thrive and grow over the coming decade.
“The great thing about New Zealand is that we have grown through climate change,” he says.
“Funnily enough, we will still have an advantage through climate change.
“Yes, it will affect us, but it won’t affect us as badly as others.
“Across this next 10 years, as the world heats up, New Zealand will be in a better position to produce food for the world. So there will be more demand for our products.
“It’s not a great thing that the world’s heating up, but that New Zealand is better positioned to be climate-ready, so that we can manage those kind of floods and disasters and recover from them as well as possible.”
He underscores this prediction by noting that East Coast production grew by 1% even in the wake of Cyclone Gabrielle.
“When you look at kiwifruit growth - if you look at the years out they’re going to achieve down about $3.2b and it will just keep on growing. So I think the double export programme is a real boon for us, it’s a call to arms for me, and my colleagues.”
MPI is developing plans to deal with an outbreak of the highly pathogenic avian influenza virus should it arrive in New Zealand.
Australia and New Zealand are the only countries yet to report outbreaks - probably because we are so far away, says Smith.
“We think it’ll eventually get here. The biggest impact will be the poultry industry. If it gets into a poultry farm, that basically wipes out the entire farm through early culling, disposing and disinfecting. So, we’re working very hard with the poultry industry.”
MPI has two study tours under way, one to the UK which has been dealing with various avian influenza strains for four years, and also to Australia.
Smith says over the years MPI has been very overwhelmed responding to biosecurity incidents, so it is building in preparedness should the avian influenza arrive.
The poultry industry is small but it still posted $18m in export earnings this year.
“If you’re looking at big risks to the doubling exports strategy, a major biosecurity incident is up there,” says Smith.
MPI is an advertising sponsor of the Herald’s Agribusiness & Trade report.
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