Why New Zealand’s fresh vegetable prices may spike without National Direction for Vegetables

Chris Nixon's calculations show broccoli prices could hit $27 a kilo if vegetable production is restricted. Photo / Duncan Brown

THREE KEY FACTS

• Horticulture New Zealand wants a National Direction for Vegetables to manage freshwater effectively.
• An NZIER report warns that without action, proposed nitrogen regulations could sharply increase vegetable prices.
• The report highlights the need for prioritising vegetable production within freshwater limits to prevent price hikes.

As the author of the New Zealand Institute of Economic Research’s report Making the economic case for vegetable production in New Zealand, I have looked into the regulatory framework required for commercial vegetable production to thrive in New Zealand.

In particular, the report, commissioned by Horticulture New Zealand (HortNZ), considered this in the light of the Government rethinking the approach to managing freshwater.

HortNZ is calling for a National Direction for Vegetables and the creation of a more workable regulatory pathway for freshwater management for growers.

It has warned that without such action, and as a result of proposed regulations aimed at reducing nitrogen run-off, fresh vegetable prices would rise sharply.

I used an options analysis approach to compare and contrast the various options.

This was the vehicle that led me, as an independent economist, to support HortNZ’s approach.

The report has demonstrated that a National Direction is both needed and viable, underpinned by the importance of domestic vegetable production for New Zealanders.

It has also highlighted that the way the National Policy Statement for Freshwater (NPS-FM) is being interpreted and translated into freshwater regulations by councils could severely impact vegetable production, leading to price increases.

I tested HortNZ’s concerns over potential price rises by taking broccoli prices for the last 10 years and calculating what prices would be if vegetable production had been restricted by 20% over that time.

This would have meant broccoli rising as high as $27 a kilo, or about $9 a head.

When informing strategy for biological industries, it is essential to have a strong understanding of the finer details.

A one-size-fits-all approach will not work.

Durable legislation requires an understanding of how such businesses go about these activities.

Without that, you cannot understand the impacts of policy.

It’s also important to recognise that commercial vegetable production in this country has some unusual characteristics.

New Zealand cannot import fresh vegetables at the reasonable prices we have at the moment.

NZIER principal economist Chris Nixon supports HortNZ’s call for a National Direction for Vegetables. Photo / Steve Unwin

Climate, soils and topography mean there are only a certain number of specific areas where production can occur, so these supply the entire country.

The report examined the options for freshwater management associated with commercial vegetable production (CVP) and the economic implications of proposed regional regulations.

It looked into the importance of CVP, the regulatory framework and contaminant measurement approaches adopted by councils and what the unintended consequences would be of restricting vegetable production.

It outlined how, for CVP to continue to grow and meet the needs of New Zealanders, priority needs to be provided for vegetable growing.

This will mean giving CVP priority allocation of the nitrogen contaminant load within the freshwater limits, supplemented with action plans, to meet targeted freshwater outcomes.

The NPS-FM can be largely retained.

However, greater specificity around priorities for human health, including vegetable production, needs to be provided to ensure councils take a consistent approach to applying public good priorities.

Legislation also needs to allow current and new vegetable production to be a permitted activity within a freshwater farm plan.

Growers often move growing from one piece of leased land to another.

Putting regulatory barriers in the way of typical industry practice is problematic – vegetable farming should not need a consent.

Where bottom lines are unlikely to be met by freshwater limits alone, action plans could be drawn up that work towards meeting those.

This could be achieved by a mixing of local solutions in specific areas and the central government, but it would also need to be resourced by the central government.

Following a Good Agricultural Practice Environment Management System Add-on (GAP EMS) framework would assure the safe and sustainable production of vegetables, focused on maintaining production and reducing the impact of nitrogen leaching and sediment discharges.

What is required is a mixture of top-down and bottom-up approaches.

We absolutely need a national freshwater plan, but we cannot ignore the implications of restricting vegetable production and what that would mean for New Zealanders.

Most businesses need certainty about where they are in terms of lead-in times, but that is particularly important where biological processes are involved.

Vegetable growers are currently having to consider whether regulations will allow them to grow vegetables.

I would argue that there is a need to put vegetables front and centre.

New Zealand needs a durable policy approach to this, one that does not need revisiting year after year – because if only some kind of side deal is achieved then there will be cost implications and consumers will have to pay higher prices.