Tag Archives: exports

Investment and innovation needed for food export growth

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Steven JoyceMore investment and more innovative processed foods are going to be needed to double New Zealand food exports by 2025 according to a new report released earlier this week by Economic Development Minister Steven Joyce.

The report, Driving Growth in the Processed Foods Sector says that doubling export sales in the food sector by 2025 will require an export growth of 7.7 per cent to 9.3 per cent per annum for 15 years, leading to approximately $30 billion in new exports.

“The report says that doubling our foods exports by 2025 is achievable. New Zealand’s food industry has seen significant growth over the last 16 years – outperforming a wide range of our competitors – but there are still challenges to overcome if we are to reach our goal,” says Joyce.

The report suggests that with investment, the processed foods industry can build on New Zealand’s existing competitive advantage in food and agriculture, and growth can continue to be driven through developing premium, innovative and niche products that are well-branded.

“New Zealand has good food and beverage exports per capita but we need to move beyond our traditional mix of meat and dairy. Processed value-added foods, like infant formula, nutraceuticals and baked goods, have the best potential for achieving the growth we need.”

Petfoods’ potential is also pointed to in the report.

The project is part of the Government’s Business Growth Agenda, to build a more productive and competitive economy. The Agenda sets an ambitious goal to increase the ratio of exports to GDP from the current 30 per cent to 40 per cent of GDP by 2025.

Designed to prompt discussion, the Driving Growth in the Processed Foods Sector report, by Coriolis Research, is part of a suite of reports released under the Food & Beverage Information Project – the most comprehensive analysis of New Zealand’s food industry ever undertaken.

More support for TPP

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More business leaders are speaking publicly in support of the Trans-Pacific Partnership (TPP) trade agreement that is currently being negotiated in Auckland.

Business NZ chief executive Phil O’Reilly has said the TPP has the potential to raise living standards around New Zealand.

Speaking at the TPP Forum he said the trade agreement goes beyond the 20th century approach of simply seeking to reduce tariffs and border restrictions.

“It recognises the fact that industry now relies on complex supply and value chains involving producers in many different locations and countries. New Zealand is deeply involved in many international value chains and the TPP will enable more New Zealand businesses to trade effectively in more countries and that means increased growth and more jobs for New Zealanders.

“The particular value of the TPP is that it involves many of the fastest growing economies on earth. Economic growth in the Asia-Pacific region is surging and TPP will help unlock that growth for New Zealand’s benefit.

“It’s appropriate that New Zealand’s negotiators are focused on protecting and advancing our interests including public health, intellectual property, the environment and the Treaty of Waitangi and success in these areas will mean a high-quality trade deal that is sustainable in the long-term.”

Agreement vital to New Zealand economic success

Also speaking in Auckland at the Stakeholders Forum was Suze Reynolds, NZUS Council associate director who argued that the agreement is vital to New Zealand economic success.

“New Zealand has always been a nation of traders, but we need a level playing field to compete in competitive world markets,” she said. “As a country, we desperately need to grow the economy and grow employment. More trade means more jobs.”

International trade accounts for around two thirds of new Zealand’s total economic activity. In 2011, New Zealand’s merchandise exports totalled $48 billion, while service exports totalled $13 billion.

“These are big numbers, but we are not paying our way. We still spend more than we earn,” said Reynolds. “We can’t prosper by selling to ourselves, we can’t eat all we produce and we can’t produce all that we need. Free trade gives us more choice. It helps to diversify and deepen our economy. It exposes our businesses to innovation and makes them more efficient, it attunes them to international markets and exposes them to high value customers.

Research undertaken by the East-West Center, in Honolulu, states that the TPP could add around $2.1 billion to the New Zealand economy by 2025.

 

Value of exported goods, including meat, falls

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The value of New Zealand’s exported goods fell $423 million (11 percent) to $3.5 billion in October 2012, compared with October 2011, says Statistics New Zealand.

“Almost half of the fall in export values was due to the falling value of dairy,” industry and labour statistics manager Louise Holmes-Oliver says. “This was despite an increase in dairy quantities.”

The value of imports rose $70 million (1.7 percent). Contributors to this rise were capital goods, up $94 million, and consumption goods, up $64 million, while intermediate goods fell $83 million.

The trade balance for October 2012 was a deficit of $718 million (21 percent of exports). This compares with a deficit of $226 million (5.8 percent of exports) in October 2011.

Seasonally adjusted exports fell 14 percent compared with September 2012. There was a large fall in milk powder, butter, and cheese exports, following two large decreases in August and September. Seasonally adjusted imports fell 8.0 percent in October 2012.

The seasonally adjusted meat and edible offal commodity grouping fell by eight percent ($39 million), with quantities down 12 percent. This follows increases in both values and quantities in September 2012. Trends show that the group has been rising since its most recent low point of March 2011 and is one percent lower than its high of July 2011.

The trend for exports remains at a high level, but is 6.3 percent lower than its peak of November 2011. The trend for imports has shown little change in recent months, and is now 7.0 percent lower than its record high of September 2008.

Agriculture best trade advantage, says new green growth report

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A new independent report launched yesterday in Auckland and Wellington looking into ‘green growth opportunities’ for New Zealand, says that agriculture is where New Zealand has the best trade advantage. It also says that two of the best green growth export opportunities for New Zealand are sustainable, efficient agricultural products and services and biotechnology. Both are within the meat industry’s domain.

Green Growth: Opportunities for New Zealand, commissioned by a group of business thought leaders Pure Advantage together with the Green Growth Trust, takes a macroeconomic look at  New Zealand’s green growth economic opportunities within a global context. It identifies 21 ways the country can capitalise in a global shift to greener growth and includes specific recommendations for forestry, electricity, transport, agriculture, fisheries and tourism.The report has been prepared  by internationally renowned economists Vivid Economics of London in conjunction with the University of Auckland Business School.

Within a six-point summary, the report says that New Zealand could benefit from global green investment patterns in two main ways: by exporting to nations investing in green goods and services and by importing new technology and ideas to create efficiencies at home. It says that New Zealand should focus on sectors where it already has an advantage or where its natural capital is best suited to capturing future advantages and that the best green growth export opportunities for New Zealand include sustainable efficient agricultural products and services, biotechnology, geothermal energy and forestry, including second-generation bio-fuels, the report says.

New Zealand’s agricultural advantage, one of seven identified by the report, is where there is the biggest trade advantage.

“The future of farming will belong to those nations who own and adopt water efficient, energy efficient, low carbon and low resource intensity input technologies and practices. New Zealand is performing well now and with an integrated strategy to ramp up investment and commercialisation of sustainable and efficient agricultural R&D and commercialise our intellectual property, we’ll make sure we stay ahead,” Pure Advantage says.

Increasing R&D to the OECD average and high level support for New Zealand’s brand has been applauded by Professor Jacqueline Rowarth, professor of agribusiness at the University of Waikato. “The main recommendations in the report are spot on,” she says. “Anything less is economic treason.”

“People in agriculture already know this. They also know that farmers are the biggest investors in R&D in NZ, through taxes, levies and as shareholders of co-operative companies. Of further importance is that farmers take up innovations rapidly as shown by the Statistics NZ productivity data and the University of Auckland IBM Innovation Index – the primary sector leads.

“The result, as highlighted in the UK last week under headlines such as ‘buy NZ lamb to save the planet’, is that NZ production systems are efficient in terms of greenhouse gas production per unit of milk or meat,” she said, adding that water-use efficiency is also good where new technologies, such as precision irrigators are used. “Water quality is also rather better than in other developed countries.”

Affording the new technologies will be difficult for farmers with little money forecast for farmers to reinvest into their operations this year, she notes. “The challenge continues to be explaining to society that farmers can do what is required, but the impact will be increased costs of food production and that will lead to increased prices in the supermarket. Government leadership supporting agriculture, as well as the brand, is required.”

Pure Advantage is the brainchild of fitness industry pioneer Phillip Mills. Other Trustees, who have also provided charitable funding for the initiative, are Sir George Fistonich, Rob Fyfe, Chris Liddell, Phillip Mills, Jeremy Moon, Rob Morrison (chairman), Geoff Ross, Justine Smyth, Mark Solomon, Sir Stephen Tindall, and Joan Withers. Founding trustees also included the late Lloyd Morrison and Sir Paul Callaghan. The secretariat is managed by Rob Morrison (Chairman), Duncan Stewart (Chief Executive) and Hannah Wills (Project Manager).

More information and a full copy of the report is available at the Pure Advantage website.

Meat exports contribute to trade surplus

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Meat and edible offal export values – New Zealand’s second largest export commodity – have contributed to a seasonally adjusted trade surplus of $147 million,  led by an increase in exports, according to new merchandise trade figures released today by Statistics NZ.

The surplus follows trade deficits of $698 million in the March 2012 quarter and $581 million in the June 2012 quarter.

Exports rose by 5.1 percent to $11.9 billion in the September 2012 quarter, says Statistics NZ. While the increase was led by a rise of 16 percent ($450 million) in the value of milk powder, butter and cheese, meat and edible offal  was also up 10 percent in value ($128 million), with quantities up 14 percent. Value increases for fruit and wine also contributed.

The trend for exports is 1.8 percent lower than its record high of September 2011.

 

Greener pastures

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New Zealand has the potential to capture $1.3 trillion more in agricultural exports between now and 2050 if targeted actions are taken, according to a new report recently released by ANZ.

An ANZ Insight report Greener Pastures: The Global Soft Commodity Opportunity for Australia and New Zealand quantifies the size of the opportunity open to New Zealand and Australian agriculture as a result of the shift in global economic growth to Asia.

Key findings from the report are that rising incomes and changing diets in developing countries mean the world will demand at least 60 percent more agricultural output by 2050, compared with 2005-2007. New Zealand could stand to gain an additional $550 million, which could increase to $1.3 trillion with favourable conditions and targeted actions, the report says. However, intense competition from emerging players with countries like Brazil, Malaysia and Indonesia becoming major threats. It also determines that $340 million in additional capital is needed to drive production growth and support NZ farm turnover between now and 2050.

Capturing the opportunities offered to the potential “food bowl of Asia” will not happen of its own accord, says Graham Turley ANZ’s managing director commercial and agriculture. “Significant barriers exist that will have to be overcome at every step of the supply chain.”

Sourcing capital to find growth, attracting skilled labour, intensified focus on national agricultural R&D, improving supply chains and targeting key markets are among those barriers.

“The danger we face is that we are not alone in seeking to exploit the global soft commodity boom and countries, like Brazil with its highly successful soy industry, are leading the charge.”

“If we are serious about wanting to develop vibrant, globally dominant and highly profitable industries, we need all stakeholders in the industry to work together to bring about change.

“There are environmental issues and foreign and domestic investment comfort levels that New Zealanders also need to consider in making these choices. These are the choices facing policy makers as they strive to make New Zealand more economically successful,” says Turley.

 

 

‘Agflation’ to hit animal protein

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Skyrocketing agricultural commodity prices are causing the world to re-enter a period of ‘agflation’, with food prices forecast to reach record highs in 2013 and to continue to rise well into Q3 2013. Unlike the staple grain shortage 2008, this year’s scarcity will affect feed intensive crops with serious repercussions for the animal protein and dairy industries, according to Rabobank.

Luke Chandler global head of agri-commodity markets research at Rabobank comments, “The impact on the poorest consumers should be reduced this time around, as purchasers are able to switch consumption from animal protein back towards staple grains like rice and wheat.

MeatExportNZ covered this topic in a post last week ‘Global meat prices to surge’ but Chandler makes some additional points.

Firstly, that he does not anticipate the current period of agflation leading to the unrest witnessed in response to the shortage in 2008.

Rabobank estimates that the Food and Agricultural Organisation (FAO) Food Price Index will rise by 15 per cent by the end of June 2013. In order for demand rationing to take place, in turn encouraging a supply response, prices will need to stay high. As such Rabobank expects prices – particularly for grains and oilseeds – to remain at elevated levels for at least the next 12 months.

Chandler says that whilst the impact of higher food prices should be reduced by favourable macroeconomic fundamentals (low growth, lower oil prices, weak consumer confidence and a depreciated US dollar); interventionist government policies could exacerbate the issue.

“Stockpiling and export bans are a distinct possibility in 2012/13 as governments seek to protect domestic consumers from increasing food prices. Increased government intervention will likely encourage further increases in world commodity and food prices,” he warns.

Rabobank expects that localised efforts to increase stockpiles will prove counterproductive at the global level, with those countries least able to pay higher prices likely to see greater moves in domestic food price inflation. This is a vicious circle, with governments committing to domestic stockpiling and other interventionist measures earlier than usual – recognising the risk of being left out as exportable stocks decline further.

On top of that, Rabobank warns that global food stocks have not been replenished since 2008, leaving the market without any buffer to adverse growing conditions. Efforts by governments to rebuild stocks are likely to add to food prices and take supplies off the market at a time when they are most needed.

Business Growth Agenda a big stretch, says Barber

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The Government’s Business Growth Agenda progress report on Building Export Markets specifies the target of increasing New Zealand’s exports from 30 percent today to 40 percent of GDP by 2025. It’s a big stretch, says meat industry commentator Allan Barber.

The progress report states that primary sector exports have outpaced the rest of the export sector, growing by half in real terms since 2000 at an average productivity growth rate of 2.1 percent per annum. To achieve the target of 40 percent of GDP, agriculture will have to maintain its growth rate for the next 13 years, while the rest of the economy must lift its game considerably. Manufacturing and services have been increasing by one percent a year and need to lift this to five percent over the coming decade, or alternatively agriculture will be required to expand further to bridge the gap.

This is an enormous challenge, equivalent to creating 250 more knowledge-intensive businesses creating $100 million from exports a year. The report cites Navman as an example of the type of business required. How many more like this can we think of? Not many, so it is highly improbable that these new businesses will emerge from areas totally unconnected with agriculture.

Primary sector exports will therefore have to increase by quite a bit more than the average of the past decade, if the target as a whole is to be reached.

Using a different report and set of figures the Riddet Institute in its recent Call to Arms report challenged the primary sector to treble its exports to $60 billion by 2025, equivalent to New Zealand’s total exports of goods and services today. However exports of $20 billion are only one third of the total. These figures emanate from the Government’s Economic Growth Agenda.

We can quibble with the different measurements and totals used to arrive at the conclusions (GDP, total exports, growth rates), but the fact remains, it’s one hell of a big stretch to see how to reach the target. The goal of the Boot Camp taking place at Stanford University this week is to see whether like-minded companies can develop the strategies required to bring agriculture up the value chain, enabling the sort of increase envisaged.

The question is whether the Government’s progress report on the activities of the Business Growth Agenda will contribute to the big goal and, if so, how significantly. It is a big ask, because it demands growth of between 5.5 percent and 7.5 percent, depending on the economic growth path, compared with Treasury’s forecast for the next three years of 1.8 percent.

The report says with a degree of understatement that “to achieve our target will require a concerted effort to develop more internationally competitive businesses in both the commodity and high-value technology-based sectors.” This may be official speak for ‘we know we haven’t got a hope, but we have to start somewhere.’

The key planks of the export growth development strategy are: Delivering a Compelling New Zealand Story; Improving Access to International Markets; Increasing Value from Tourism; Making it Easier to Trade from New Zealand; Growing International Education; Helping Businesses Internationalise; and Strengthening High-Value Manufacturing and Services Exports.

The progress report finishes with a summary of the strategies under each of these headings and Progress Indicators listing detailed actions underpinning the strategies. There is an enormous amount of work going on, notably in trade negotiations, removal of red tape for business, trade missions into key markets and tourism developments such as SmartGate at the airport.

But all work on developing a compelling New Zealand story is listed as a new project which indicates one of the major problems encountered in lifting our exports as a percentage of GDP. There is no agreed brand image under which all New Zealand’s exports and tourism experiences are promoted. The meat industry’s main brand has for a long time been New Zealand Lamb which has been very successful, but a major complaint has been the competition in export markets between exporters. Apart from North America, cooperation has been seriously lacking.

Part of the problem has been the complete lack of a generic New Zealand brand image. Development of this with a believable and compelling story to back it is an absolute priority, because brands take a long time or a lot of money to gain awareness, probably both.

This progress report is the first of six with the other five to come being Innovation, Skilled and Safe Workplaces, Infrastructure, Natural Resources and Capital Markets. Obviously these other areas will play an important role in achieving the export goal.

The Government deserves credit for coming up with a coherent strategy, but it will have to generate a tremendous response from the private sector if the goal is to come close to being realised. Another challenge is the high proportion of SMEs in New Zealand which must be inspired to pursue the new business opportunities capable of converting them into large businesses with the requisite scale.

This article has also appeared at interest.co.nz.

Building Export Markets, government releases progress report

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The Government has today unveiled its first Business Growth Agenda Progress report on actions to boost New Zealand exports. It is a timely appearance as the Primary Sector Boot Camp reaches its halfway point in the US.

Launched by Finance Minister Bill English and Economic Development Minister Steven Joyce, the Building Export Markets report from the Ministry of Business, Innovation and Employment (MBIE) confirms the Government’s target to increase the contribution of exports to the economy from 30 percent to 40 percent of GDP by 2025.

English says this a challenging target and achieving it will require a concerted effort by New Zealand over many years. It will also require the continued development of new and expanding export markets.

“It is only through exporting that New Zealand, with a small domestic market, can deliver the growth and productivity required to enhance the wealth of our country and create more and higher paying jobs,” he says.

“Committing to this ambitious goal means the Government will stay focused on supporting firms to grow their exports.”

Steven Joyce says the report highlights the significant shift in economic power from the West to the East that is expected to happen over the next 20 years.

Building Export Markets is the first of six progress reports on the government’s Business Growth Agenda. Others will address innovation,skills, capital markets, infrastructure and resources. The reports lay out the work programme government agencies are implementing. Each has an informal portfolio group of ministers specifically grouped around the work streams, to drive the Business Growth Agenda forward and focus on what matters to business and companies.

Government intends to see three additional cross-cutting themes to be reflected across the Business Growth Agenda workstreams. These are: Maori Economic Development, Greening Growth; and Regulation. Better telling the ‘New Zealand Story’ is another Government priority and work is already underway with key stakeholders on “developing a compelling and consistent narrative about our country’s special qualities that work for a range of exporters and sectors,” according to the Ministers.

Actions contained in the Building Exports report include improving access to international markets, making it easier to trade from new Zealand, helping businesses internationalise, increasing value from tourism and high-tech manufacturing, growing international education and strengthening high-value manufacturing (including food and beverage manufacturing) and services exports.

“This first report is important, as it lays out the challenge for achieving growth – which is about being much more closely linked into the rest of the world and taking advantage of our opportunities,” says Joyce.

“While the world is going through tough times, the growth in Asian incomes will occur over the next 20 year. So there will be job growth, New Zealand’s challenge is to ensure it occurs in New Zealand, not in Australia, or somewhere else.”

The report shows that beef, lamb and wool accounted for 13 percent of New Zealand’s total $47.7 billion goods exports in 2011.

The Building Export Markets report is available here.

Carter in US for boot camp

Because of its size and importance, New Zealand’s primary sector, which currently accounts for 55 percent of exports is “critical” to achieving the government’s desired growth, the report says, so the outcome of this week’s Primary Sector Boot Camp at Stanford University will also be critical.

Minister of Primary Industries, David Carter, is part of the nine-strong Export Markets ministerial group, which also includes Prime Minister John Key, Steven Joyce, Murray McCully and Tim Groser.  Carter is travelling in the United States this week to attend the Boot Camp and also to talk with US agriculture sector political leaders and officials.

“This is an excellent opportunity for the leaders of some of our most forward-thinking primary sector companies to collaborate on formulating a plan to leverage New Zealand’s competitive advantage globally,” Carter said before he left.

“It’s not often that we can get a powerful group like this representing over 80 percent of New Zealand primary sector exports around the table, and I am confident of a positive outcome.”

About 20 leaders from New Zealand’s dairy, meat, seafood, wine and horticulture industries are among those attending the week-long camp alongside top government representatives from MPI and NZ Trade and Enterprise. The group will be hearing from first class speakers to inspire and motivate their thinking. The event has been supported with a $100,000 grant from AGMARDT.

Among the range of agricultural organisations the Minister is meeting with separately to discuss common New Zealand–US primary industry interests are the Tri-Lamb Group and US Cattlemen’s Association.

“These meetings further strengthen the New Zealand-US bilateral relationship and give our two countries the opportunity to canvass a range of issues in the primary industries policy area.  It is an opportunity to highlight the excellent collaborative work we already have with the US though the Global Research Alliance on agricultural greenhouse gases,” says the Minister.

“I particularly look forward to discussions on the mutual benefits that will be realised through the Trans-Pacific Partnership free trade agreement currently under negotiation.

“The TPP is important to New Zealand’s trade future and this visit will provide the opportunity to take political level readings on its progress.”

Food’s changing world and demands

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Hyperglobalisation, China, mega cities, urbanisation and water are some of the big issues that will play their part in the future of the New Zealand and global export meat industry, according to several Red Meat Sector Conference speakers.

In his presentation about the political and economic environment facing the industry, Colin James of the Hugo Group said it is becoming more and more difficult for a nation to act independently these days. ‘Hyperglobalisation’ refers to the increasing global interdependence and interconnectedness, which make protection from global economic forces more difficult, he said.

We can expect more of the same over the next 20 to 25 years, he explained. “It’s going to need a fair amount of resilience.”

Water, along with fossil fuels, will be the big issues, he predicts. Multinationals are rebranding and adopting a “fresh, clean, natural” stance rather than ‘clean, green’ approach to capitalise on the emergence of an affluent middle class in emerging markets. This growing middle class around the globe is calculated to encompass more than 210 million new households with income of US$20,000 or more by 2025, which he believes New Zealand is well placed to serve.

Four percent global GDP growth predicted

New Zealand’s top ten trading partners are projected to grow roughly four percent a year in 2012 as weighted by the goods trade. “Modest, but not boom time,” James commented.

Four percent in global GDP growth also stood out for Richard Brown of market research company GIRA, who admitted to being surprised that the forecasts were so positive. The leader is China, whose GDP is anticipated to grow in 2011/2012 by 8.5 percent, “not as good as expected but still OK”, followed by Indonesia (6.5 percent). He anticipates similar growth in 2012.

In his detailed look at the outlook for various meats, including beef and sheepmeat, he said that global prices for meat are generally, “fundamentally more exciting than they have been.” He was reassured with the direction of the trends, which he said were, “very good news for the producing sector.”

In 2011, prices had gone up boosting producer morale, because total global meat production was down – largely as a result of the outbreak of the pig disease PRRS in China, Brown explained. “What that illustrates is the Chinese effect on global trade is profound.”

This point was echoed in a later presentation from McDonald’s senior director and head of strategy for China and Hong Kong Arron Hoyle, who said that China is having a dramatic effect on global commodities.

“We don’t sell beef at McDonald’s, we sell a burger, so other commodities have to be taken into account.”

Rise of the dragon

Both James and Brown pointed to the current difficulties in the US and in Europe, which is facing big problems with the Euro. Europe had a “spectacularly fragmented meat industry,” Brown said and pointed to problems with the region’s biggest meat company, Vion, which is now in trouble after a period of rapid acquisition. This reflects a lower rate for now for global corporate processor consolidation “with a long way to go and an unproven success record.”

Arron Hoyle also pointed in his presentation to the ‘rise of the dragon’, the lean away from the west to the East, with McDonald’s choosing to target consumers in what it calls the APMEA (the Asia Pacific, Middle East and East Asian) region.

Unprecedented urbanisation

Hoyle talked about urbanisation in those emerging markets, such as China and India, “like we’ve never seen it before.” In the APMEA countries populations are moving from rural to urban settings in a similar manner to Britain’s Industrial Revolution, “but it’s happening 20 times faster and involves about 800 times more people,” he explained.

“We’re living in an era where we’re seeing different dynamics to the previous 50 years,” he said, adding that volatility will be more extreme than ever before.

‘Mega Cities’, those with populations of more than 10 million, are on the rise and currently count Shanghai, Mexico City, Sau Paolo, Beijing, Mumbai and Delhi as the top six.

“In addition, emerging market cities will be a key driver of global food demand with key 440 cities identified across Asia. With this explosion in urbanisation we see many ‘tier two cities’ with populations over one million evolve: By 2020 it is projected China will have 221, India 50, Indonesia 15 and Korea nine.”

With this trend comes a “massive” transport and infrastructure need, but also a forecast quadrupling of per capita of GDP by 2020, said Hoyle.

“It’s a world of opportunity for years to come,” he said cautioning that it also comes with higher rents and increased pressure on costs for McDonald’s stores or other businesses that target Asia as a key future growth driver.

This article appeared in Food NZ magazine (August/September 2012).