Key Points:

Forest mushrooms are being grown in commercial quantities in New Zealand for the first time, targeting a $5 billion global market.

Gisborne-based First Light Mushroom has worked with Crop & Food Research for six years on the project, with investments totalling more than $10 million.

The saffron mushroom, known as the saffron milk cap in the Northern Hemisphere, is being grown and harvested from pine forest in the Gisborne area.

First Light general manager Sheldon Drummond says it is the first time forest mushrooms have been grown on a commercial scale.

"While it will be unfamiliar to New Zealanders, it is sought after in Europe and Northern Asia where it can only be gathered from the wild and so commands a high price," Drummond said.

The Saffron sells for US$50 ($63) a kg, while other varieties can fetch more than US$1000.

"World demand for this type of mushroom continues to increase, yet the worldwide production has fallen dramatically over past decades due to deforestation, acid rain and consequent over picking."

The first harvest is considered a significant achievement given specific needs in terms of soil, water and climate and although only a few hundred kilograms, next year it will be tonnes.

First Light plans to invest more than $10 million during the next five years, supplemented by Crop & Food and the Foundation for Research, Science and Technology.

Ectomycorrhizal edible mushrooms are found in association with the roots of particular trees and form a symbiotic relationship with the host plant, helping with the uptake of essential minerals from the soil in exchange for carbohydrates. There are limited plantation areas inoculated to produce the gourmet crop and with the latest success the company will expand the area to produce for world markets, Drummond said.

"It's a perfect marriage of long- and short-term cash flows, presenting an additional revenue opportunity for our forest business."

Crop & Food started research into ectomycorrhizal mushrooms about 15 years ago with the aim of securing a second income stream for foresters. In early 2003 Crop & Food formed a joint venture with First Light - who subsequently went on to buy properties for the programme and infected pine trees.

Crop & Food business manager Graham Smellie says the goal of the crown research institute was to help develop a large-scale high-value export industry during the next 20 years.

"The progress we have made over recent years has enabled this development and we are looking forward to commercial-scale fruiting of other edible mushrooms in coming years," Smellie says.

Ectomycorrhizal edible mushrooms are a delicacy in Europe, Asia and North America, with a global market worth US$5 billion a year.

Some varieties do not preserve well and were best eaten fresh, Smellie says.

"So there's potential to supply international gourmet food markets when our fungi are fruiting, and nothing is available locally in the Northern Hemisphere."

Minister of Agriculture and Forestry Jim Anderton says he is optimistic there will be more such developments when the $700 million New Zealand Fast Forward fund is up and running.

BIOSECURITY BOOST

The Government in March announced its $700 million NZ Fast Forward fund aimed at pastoral and food industries so not much was expected from last week's Budget but there was something in the kitty for biosecurity.

The Budget included $10.1 million to set up a national animal identification and tracing system, and a farm register - plus another $13.2 million for operating costs over four years. Meat & Wool New Zealand, which is a member of the National Animal Identification and Tracing governance group developing the system for cattle and deer, welcomes the funding.

Chairman Mike Petersen says food safety issues are top of mind for consumers in Japan, Korea and Taiwan.

"This enhanced traceability system reinforces the message that our natural grass-fed products are safe, something that is becoming increasingly important for health-conscious consumers," Petersen says. "While this system might not deliver premiums to farmers in the short-term, it is an important risk management tool to protect ourselves in the future if our food safety is questioned."

However, Federated Farmers says it has always been sceptical about the idea and is questioning the value of the Government investing in the system. President Charlie Pedersen says the initiative risks loading more cost onto farmers for no tangible benefit, with the value for attracting a price premium in overseas markets or improving food safety not proven.

"The reality of the situation is that once the animal is in the works, the tag is gone, so there is no way that an individual cut of meat can be accurately traced to the plate," Pedersen says.

"I look forward to the day when a restaurateur in New York can wave his cell phone over a lamb chop, and on the screen will appear a picture of the farmer who raised this animal."

The system probably would be beneficial for biosecurity but was a Rolls-Royce approach, he said.

"There's all sorts of things we could do but is it practical and are we able to bear the cost?" Pedersen says. "Forcing it on to all farmers we think the case needs to be made a hell of a lot stronger than what it has been at the moment."

Dunedin-based meat processor PPCS has expressed concern at what it calls a kneejerk negative reaction from Federated Farmers.

Chief executive Keith Cooper says the investment is very positive.

"Our markets are acutely aware of issues around food safety and animal welfare, and we have been working on ways to implement effective traceability measures for some time in response to customer demands," Cooper says.

"Large international customers, within the European market in particular were becoming impatient with the livestock industry, which they feel is dragging its heels in comparison to other food industries in terms of identification and traceability."

WELFARE STATE

A proposed Universal Declaration on Animal Welfare could be a marketing tool for New Zealand, says the World Society for the Protection of Animals. World Society programmes manager Bridget Vercoe said the declaration was yet to be drafted and was at a concept stage.

It can be a long process getting something through the United Nations but the society hopes there will be a declaration ready to sign in the next two or three years. New Zealand is a global leader at the forefront of animal welfare while many countries have no legislation at all, Vercoe says.

"Obviously we're not perfect. There's improvement that can be made when you look at some of our industrial farming practises with the battery hens and the pig sow crates."

The declaration is probably something that could be used as a marketing tool, she says.

"I think with consumer buying habits, especially in the UK and other parts of Europe, they're really watching that now and it's of quite big concern to a lot of consumers. They want to buy their meat and other animal products from animals that have been raised in a really healthy kind of, for want of a better word, happy environment."

The declaration would be a non-binding agreement recognising that animals are sentient, can suffer and to respect their welfare needs. It has an inter-governmental steering committee including representatives from Kenya, India, Costa Rica, Czech Republic and the Philippines.

Other countries including the UK, Australia and Canada have expressed support and New Zealand has representatives in Washington and New York appointed to a contact group.

Federated Farmers president Charlie Pedersen says he is satisfied the standards of welfare for commercial animals in New Zealand are the best or equal to the best in the world.

"So long as its about animal welfare and not animal rights I think there can only be opportunity for New Zealand."

Federated Farmers supported the animal welfare processes in New Zealand.

"Over time we'll find those codes changing to encourage farmers to move to the best practices that we can find and that will increasingly mean, I think, animals having more opportunity to display natural behaviour," Pedersen said.

Egg Producers Federation executive director Michael Brooks said there are appointed regulatory bodies that set up codes of welfare.

"We as an industry support the codes, we ask our members to meet the standards in those codes and we do not support any member who does not meet the standards in the codes," Brooks said.

The New Zealand Veterinary Association has signed a proposal for the declaration and is urging the Government to do the same.

Association president John Maclachlan says animal welfare is the prime concern of veterinarians.

"We believe that New Zealanders will agree with the principles of the declaration and want to see our Government and other countries getting in behind it," Maclachlan says.