PGP delivering major benefit, says report

NZIER Primary Growth Partnership Analysis of Potential ImpactsAn extra $6.4 billion a year will be added to the New Zealand economy by 2025 as a result of PrImary Growth Partnership (PGP) activities, according to a new independent report.

Welcoming the findings of the New Zealand Institute of Economic Research (NZIER) report, Primary Industries Minister Nathan Guy says it, “Further concludes that the PGP has the potential to achieve an additional $4.7 billion per annum by 2025 if all the R&D is successful, the aspirational stretch of PGP programmes is achieved, and the innovations are widely uptaken.

NZ Minister for Primary Industries, Nathan Guy“This would add up to $11.1 billion per annum to New Zealand’s economy by 2025.

“The PGP is about supporting innovation in the primary industries, which are the backbone of New Zealand’s economy – accounting for over 70 percent of our merchandise exports. There are currently 18 announced programmes jointly funded by industry and government.”

The $11.1 billion per annum figure is made up of:

  •  $2.2 billion – GDP projected growth from government investment
  • $4.2 billion – GDP estimate from industry investment
  • Other aspects adding to $4.7 billion (i.e. from increasing the success of R&D, achieving the aspirational stretch of programmes and improving uptake of the innovations).

“The long term 30-year benefit cost ratio (BCR) for the government funding alone is 32, which confirms what a good investment this is. Clearly this will be a big part in achieving the Government’s goal of doubling primary sector exports by 2025.

“Science and innovation are key drivers of economic growth and international competitiveness, as noted in the Government’s draft National Statement of Science and Investment.  Boosting productivity in New Zealand’s primary industries will mean more exports, more jobs and an improved standard of living for New Zealanders.

“NZIER estimates extra income per year of $270 per hectare for hill country farming, $600 per cow for dairy, $370 per tonne of exported seafood, and $190 per hectare for forestry.

“It’s also worth noting these figures don’t include wider benefits the PGP will deliver, such as environmental sustainability and improvements to health and safety,” Guy says.

The Ministry for Primary Industries (MPI) commissioned NZIER to carry out independent research into the economic impacts of the PGP and provide a robust analysis of potential export growth, GDP growth, and other economic measures.

As at 30 April 2014, the total government funding paid to the 15 programmes currently underway was $99.8 million.

There are currently five meat industry PGP programmes in place, with different parties working with government on programmes aimed at improving aspects of the industry. These include:

  • The B+LNZ Ltd-led Red Meat Profit Partnership, which is bringing a collaboration of bodies together to focus on improving returns to sheep and beef farmers
  • Silver Fern Farms/PGG Wrightson/Landcorp’s FarmIQ programme, which has already resulted in new genetics technology and the company’s new Eating Quality Master Grading system for beef
  • ANZCO Foods’ Foodplus programme focusing on new food, ingredients and healthcare products from low-value parts of the beef carcase
  • Grass-fed Wagyu Brownrigg Agriculture/Firstlight Foods are working on ways to improve marbling in New Zealand grass-fed Wagyu beef, and
  • The Sheep Industry Transformation Project using the premium ‘Silere’ brand to lift merino lamb into a luxury food bracket.

(In addition, a business plan for the deer industry’s Passion2Profit programme is being submitted to MPI for consideration in the PGP programme).

In its report NZIER noted that all of the five current red meat sector participants said that the PGP programme would not have gone ahead without government funding.

“A good reason to believe this response is the poor performance of the red meat sector over the ten to twenty years. Poor performance means that it is less likely that research money will be made available by the industry to develop such comprehensive PGP-type innovation programmes,” the authors wrote.

Looking at potential gains by 2025 from the total PGP investment by sector, NZIER’s approximate estimates for hill country farming – where the majority of the red meat producers are situated and where a number of PGPs will have an effect – show that the estimated impact on GDP will be a lift of $2.6 billion, or $270 per hectare (compared to the dairy industry’s $2.8 billion and $600 per cow).

“Significant environmental benefits are also expected as class 7 and class 8 land is used for more sustainable economic activity.”

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