Comment: Nobody seems to be keeping track of all the national, local, and processor "nudges" that are impacting on the ability of individual farmers and growers to create a vibrant business, writes Dr Jacqueline Rowarth.

Farmers and growers are receiving signals about how the world and New Zealand wants them to operate.

Some of these signals are overt through regulation. Some are covert through carrots and sticks. Fonterra's latest initiative on differential milk payment is the latter.

Not all analysts appear to have realised that the positive 'up to 10c per kg of milksolids' comes from the bulk milk price (the overall pool of money to be paid to farmers is limited), which means that some farmers will be paid less than they might otherwise have expected - "more stick than carrot" said an on-the-ball journalist.

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But others have said that it is a way of indicating the right way to operate. For an average supplier, the analysis goes, "it is not a lot of money - only $14,000 to 15,000 dollars, but still is nudging farmers in the right direction".

"Only" is an interesting modifier.

It is being presented as a bonus, but for those not getting the money, and having to cope with a lower milk price, the money is a negative on the budget. Household drawings? Repairs and Maintenance? Wages for staff that can't be employed? The money has to come from somewhere.

Of concern is that nobody seems to be keeping track of all the national, local, and processor "nudges" that are impacting on the ability of individual farmers and growers to create a vibrant business that will attract good people into the industry and support prosperous communities.

The KPMG agribusiness agenda launched at the end of June gave voice to various groups in New Zealand. Farmers and growers, women and emerging leaders all emphasised "community prosperity" as a priority.

The emerging leaders (brought together by Jack Keeys, KPMG's relatively new research and insights analyst) included "financial stability" as the underpinning driver for their other four goals – community prosperity, comprehensive collaboration, environmental integrity and multi-tiered perception.

The emerging leaders recognised that sustainability in agriculture is about economics as well as environment.

Multi-tiered perception is a new goal, and the Emerging Leaders indicated that it required internal industry pride, nationwide understanding and international recognition of excellence.

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Tackling the middle one is likely to have benefits in both directions. Expert in the branding field, Wharton Professor David Reibstein, has stated that "any country that wants to improve its brand must offer a superior quality of life, with a high degree of cleanliness and safety, and a progressive business environment".

He suggested that efforts for improvement should be targeted internally as people's perceptions of their country affect how it is perceived externally.

Improved domestic understanding of New Zealand's environment, production systems and economy in comparison with the rest of the world is vital.

New Zealand ranked 11th overall last year of 75 countries in the Nation Branding Rankings. Post-Covid, New Zealand's branding ranking is likely to increase ... as long as we achieve economic recovery to support community prosperity.

Dr Jacqueline Rowarth. Photo / Supplied
Dr Jacqueline Rowarth. Photo / Supplied

Environment is already included in the Branding rankings, and we are 19th of 180 countries in the Environmental Performance Index from Yale University.

The regulations around farmers and growers are designed to protect environment, reputation and consumers, but they are associated with a cost. Although the rationale for some regulations is clear, the benefits of others have yet to be shown.

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Last month the organic growers were vocal that the new regulations would mean that they wouldn't be able to continue in business. This month the raw milk suppliers have hit the news because they are not complying with new rules – because doing so will "send them broke". Both groups have argued that the regulations are overkill.

Conventional farmers abide by the same rules on food safety through processors.

The result for all farmers and growers, organic or conventional, is that costs of production are increasing as more nudges are applied within increasing regulation.

In contrast, in overseas countries farmers and growers are being supported through subsidies.

The 2020 OECD report indicates that by 2018, producer support in EU countries had increased to 20 per cent of gross farm receipts, up from 17 per cent in 2014.

In China subsidies were 14 per cent, and in the USA they were 12 per cent. New Zealand was less than 0.5 per cent.

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These subsidies are for market price support, budgetary payments (such as low interest rates) and the cost of revenue foregone … the latter because of regulations restricting operations.

Listen to Rowena Duncum's interview with Dr Jacqueline Rowarth on The Country below:

The frustration for New Zealand farmers, growers and many scientists continues to be that food is produced more sustainably and safely than in other countries.

We do so in a cost competitive way despite having to compete with subsidised systems overseas. And the natural environment in which we do so is ranked highly globally.

All of these positives should be recognised before any more nudges and regulations are imposed.

Agriculture Minister Damien O'Connor has said that the primary sector is key to economic recovery.

The KPMG Emerging Leaders have emphasised the importance of financial stability to underpin other goals.

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The sector could do with more understanding and encouragement, not more nudges.

- Dr Jacqueline Rowarth had the pleasure of working with Jack Keeys at University of Waikato. She is a farmer-elected Director on the Boards of DairyNZ and Ravensdown. The analysis and conclusions above are her own. jsrowarth@gmail.com