The scale of the decline in milk prices this year has shaken the belief there has been a step change in commodity prices driven by the insatiable demand for product from consumers in emerging markets, says KPMG in its latest Agribusiness Agenda.
The report, which was released this morning at Fieldays at Mystery Creek, said the price decline had been about increasing supply, as exporters looked to boost production while importing countries focused on enhancing their productivity.
"The key learning from the milk price decline is that the primary sector in New Zealand has no exclusive right to sell its products in any market at a premium, to create value we need to understand the steps in the supply chain in detail and be taking proactive steps to manage how product flows through the chain to meet the needs of the ultimate consumers," said KPMG's global head of agribusiness Ian Proudfoot.
Competitors around the world were tracking the same market trends as New Zealand's producers.
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"Many have learned about the culture necessary to operate in a competitive market environment from studying the New Zealand system, and are now putting those learnings into play to become highly effective competitors in export markets," Proudfoot said.
He said New Zealand producers must find ways to maintain relevance.
"This presents major challenges to our producers, to the processors and exporters and to the wider community."
Proudfoot said there were signs of stress emerging in the industry including fears about the sector's environmental impact and concerns about foreign ownership of assets.
Proudfoot said several contributors to KPMG's Agribusiness Agenda expressed concern about whether industry players were doing enough to future-proof businesses.
"We should be worried about the lack of a big vision for the future of the primary sector," Proudfoot said, "particularly as our future role in the global food system is likely to evolve rapidly, driven by changes in demand and supply."