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Frozen beef leads rise in export value for meat

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Frozen New Zealand beef led an increase in export value for meat and edible offal in July 2012, compared with July 2011, according to Statistics New Zealand (SNZ).

The latest figures show export value for meat and edible offal grew by $25 million (6.9 percent) during the period led by frozen beef, which increased by $22 million. Exports of beef to the US increased by $19 million, leading a $35 million (11 percent) growth in overall exports to that market. This corresponded to a $19 million fall in the value of beef exports to Indonesia.

Meat and edible offal is still trending upwards in value since its recent low point of February 2012, but is still 11 percent lower than its record high point in July 2011, according to SNZ.

Overall, the value of exported goods rose $296 million (eight percent) in July 2012 to $4 billion, compared with July 2011. This was led by a rise in the value of milk powder exports, says SNZ.

Imports rose $383 Million (11 percent) to $4 billion, with all three broad economic categories – capital, intermediate and consumption goods – rising in value.

The trade balance for July 2012 was a small surplus of $15 million (0.4 percent of exports). This compares with a surplus of $103 million (2.8 percent) of exports in July 2011.

Seasonally adjusted exports fell 0.4 percent and imports fell 1.5 percent compared with June 2012. Most major export commodities fell, offset by milk powder, butter and cheese, which rose 20 percent, reports SNZ.

Channelling innovation

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The Government released the second of its six progress reports –  Building Innovation – under its Business Growth Agenda this week. The move has been welcomed by the Meat Industry Association (MIA).

Building innovation is central to building a more competitive and productive economy, said Prime Minister John Key at a business breakfast launch for the report earlier this week, adding that it gives a clear picture of the more than 50 policy initiatives the Government has underway to improve innovation, competition and the commercialisation of smart ideas and research into new products.

It calls for a doubling of the amount businesses spend on research and development, from 0.54 percent of GDP to more than one percent of GDP.

MIA chief executive Tim Ritchie has welcomed the report, saying that the meat industry is “all for anything that helps in that area.” Industry is very interested in innovation and already has a number of initiatives in place, he says.

“Individual members are involved with a number of Primary Growth Partnership projects, while the industry has also invested in Ovine Automation Ltd, a consortium of nine MIA member companies and the government that is looking at bringing a step change in sheep processing through the use of automation.”

This all adds to innovations individual meat companies are working on in their own workplaces, like Silver Fern Farms’ robotics projects, Ritchie explains.

New Advanced Technology Institute

Meat exporters will also benefit in the future from the new Advanced Technology Institute (ATI) that was announced this week will be named after the late Sir Paul Callaghan. It is to receive $166 million over the next four years and is one of the initiatives to grow business research and development further.

The Institute will be a one-stop shop that will help high-tech firms become more competitive by better connecting them with innovation and business development expertise within the institute, around the country and internationally, Steven Joyce, science and innovation minister says.

‘It will focus on industries with significant growth potential such as food and beverage manufacturing, agri-technologies, digital technologies, health technologies and therapeutics manufacturing and high-value wood products.

“The ATI will take over some business development functions that are currently within the Ministry of Business, Innovation and Employment. This will include the administration of some business research and development grants,” Joyce says.

A seven member establishment board has been tasked with having the ATI up and running by the end of the year. Chaired by Sue Suckling, who led the set up of AsureQuality NZ and NZQA, other board members include Industrial Research Ltd (IRL) director and former New Zealand Game Industry Board and Cervena Ltd chairman Richard Janes and Dr Michele Allan, who has leadership experience across many facets of the Australian food industry. They join IRL chair Michael Ludbrook, entrepreneur Neville Jordan, Auckland Transport director Paul Lockey and Plant and Food Research chair Michael Ahie.

Strong support in business community

Business NZ says that there is strong support in the business community for the Government’s systematic approach to building innovation. The ATI is a centrepiece of the innovation policy, says BNZ chief executive Phil O’Reilly.

“But there are many other initiatives including expanded TechNZ funding, better, government procurement policies, National Science challenges, more funding for the Performance-Based Research Fund, refinement of trademark and patents law, more investment in engineering at tertiary institutes, encouragement for multi-nationals to conduct research in NZ and others.

“It is up to business to innovate and grow and take up the Government’s invitation to keep the lines of communication open and provide feedback on how we are travelling towards a high-tech future.”

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.

Entries open for Prime Minister’s Business Scholarships

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Prime Minister John Key has opened the 2012 Prime Minister’s Business Scholarships and is calling for applications from ambitious executives looking to expand their international expertise. The scholarships are designed to build business capability and develop skills, particularly in management and international business leadership.

“As part of growing our economy we need to develop better management skills to get the best out of our workforce. Better managers mean more productive firms,” says the Prime Minister. “Getting access to the best knowledge from the world’s best schools can only benefit our senior executives and the companies to which they return.”

The scholarships give New Zealand’s senior managers, business owners and executives an opportunity to attend world-class learning institutions, and cover 50 per cent of costs associated with studying at an international business school, including course fees, airfares, accommodation, and other costs such as textbooks.

Applications close on 31 July 2012.

For more information go to www.med.govt.nz/scholarships.

Doing whatever it takes

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Adept beef clipOver 400 visits to meat plants here in New Zealand and around the world, up to his elbows and covered in blood and guts, have paid off for Adept clip inventor and managing director Murray Fenton.

Now used widely in meat plants throughout the world, the device reduces or eliminates contamination from gut contents during processing. The clips were first made in the 1970s after a call from a slaughter board supervisor at a local lamb processing plant. In 2009, the company announced that the billionth clip had just rolled off the production line (see Food NZ magazine, June 2009).

Appearing in a video interview alongside three other plastics industry leaders in the latest offering from Leaders Review, Murray says the first plant managers initially didn’t even bother dragging themselves out to see what he was doing. So it was a matter of standing there by himself, getting covered in the worst substances imaginable, stoically applying his new design to the carcases. That was until the the result and the effect on the production process became obvious. “Gustsy! Literally,” says Leaders Review‘s Peter Anich.

“Three out of the four plastics leaders made a point of not calling themselves ‘sales’ folk of any shape when when they started out. In fact, they described how downright awkward about this crucial process they had been. Innovation and product conviction pushed them forward anyway.”

Adept’s website states that of its meat industry products, meet EU and FDA Food-Contact requirements and are compatible with all rendering systems.

View the interviews at Leaders Review – Plastics Industry.

 

 

Glimpse of NZ economic growth, hold firm

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The latest figures from Statistics NZ show a glimpse of improvement in economic activity, with a rise in gross domestic product (GDP) of 1.1 percent in the first three months of 2012, helped in part by primary food manufacturing, including meat. However, economists say it won’t necessarily result in a cut to New Zealand’s OCR anytime soon and the NZ government is intending to continue on its current course.

Compared with the March 2011 quarter, economic activity in the March 2012 quarter was up 2.4 percent. For the year ended March 2012, economic activity was up 1.7 percent compared with the year ended March 2011.

The main contributors to the increase were: manufacturing (1.8 percent), primarily primary food manufacturing and metal product manufacturing;agriculture (up 2.3 percent) mainly driven by an increase in milk production; and business services (up two percent), which include professional, scientific, technical, administrative and support services.

“Continued good growing conditions have been a major factor in the growth this quarter and it is reflected in both the milk production in agriculture and in meat and dairy manufacturing,” says Statistics NZ’s national accounts manager Rachael Milicich.

The expenditure measure of GDP was up 0.8 percent in the March 2012 quarter, due mainly to investment in fixed assets, a $416 million build up in inventories as supplies of goods produced exceeded demand and a small increase in the volume of spending by NZ households.

Picking up the pace, “right on cue”

Westpac economists say the bottom line is that the pace of growth is picking up in 2012 “right on cue after a prolonged recession an the disruption of several earthquakes.” Senior economist Michael Gordon comments, however: “The composition of growth is likely to change in coming quarters, as exports slow and reconstruction activity picks up, but we are on track for an acceleration in overall activity this year.”

He says interest rate markets are now pointing to a one-third chance of an OCR cut later this year.  “We broadly agree with this pricing, although we don’t think today’s figures really shifted the odds much – the Reserve Bank made it clear in its June Monetary Policy Statement that the case for cutting rates depends on a nasty turn of events in Europe.”

While the figures represent a major upside surprise to RBNZ’s forecast of 0.4 percent growth, Westpac thinks that today’s result will not prompt the RBNZ into raising interest rates any sooner than it was already intending.

Government holding course

The government is maintaining its firm hand on the tiller. While the economy grew more strongly than expected in the quarter “despite ongoing economic and financial uncertainty in other parts of the world,” Finance Minister Bill English says: “What’s important for the Government is taking a long-term view of building New Zealand’s competitiveness and productivity, which will help us deal with headwinds from the uncertain global environment. That’s the focus of our economic plan.”

Kiwi companies fitter, faster and better able to take advantage, says ANZ

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Kiwi companies have emerged from the Global Financial Crisis (GFC), fitter, faster and better able to take advantage of a growing economy according to a major survey from ANZ National Bank Ltd.

“The GFC really put Kiwi businesses through the mill. Most have come out the other side leaner, tighter and more focused,” says ANZ’s managing director for commercial and agri, Graham Turley. “They have adapted to the new normal, are ready for growth and their expectations are now more realistic and more sustainable long-term.

This is in stark contrast to other places, such as Europe, Asia, the US and Australia and is critical to New Zealand surviving the current international economic turmoil.”

Availability of staff, falling consumer demand and making red tape simpler and less time-consuming continue to concern business owners, as does opening new markets internationally and balancing family and work.

The ANZ has released the findings of its Privately Owned Business Barometer 2012, which provides insights into a key sector of the New Zealand economy. Now in its sixth year, it questioned 4,870 business owners from different parts of the economy, including agri-businesses, about the issues affecting them and their views on the challenges ahead.

Key points found:

  • 88 percent of businesses expect positive growth in the next 12 months; 96 percent expect it in the next three years. Though just 14 percent of respondents expect growth of more than 26 percent over three years, compared to 55 percent in 2008.
  • 39 percent of businesses turning over more than $1 million a year cited availability of staff as an area of concern
  • 31 percent of non-agri businesses turning over more than $1 million a year are operating internationally and a further 11 percent aspire to.

 

Asian consumers emerge as driving force

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Consumers, rather than politicians or regulation will determine the future of New Zealand farming, according to ANZ New Zealand.

“Demand for safe, high quality agricultural products from the growing economies of China, India and Asia will increasingly determine what agricultural products are produced by New Zealand and how we produce them, says ANZ’s managing director commercial and agri, Graham Turley.

“Supplying these markets will be the lifeblood of the New Zealand economy for the foreseeable future. It is crucial that the focus of the farming sector now is producing the right products at the right price and getting them to those markets.”

Turley’s comments were made to coincide with National Fieldays 2012, for which ANZ New Zealand was a strategic partner. The event was held at Mystery Creek, near Hamilton (12-15 June 2012). Over half of New Zealand’s farmers bank with either ANZ or the National Bank, the bank says.

Nearly 128,300 visitors attended the 44th New Zealand National Agricultural Fieldays this year. Organisers say 40 percent more people went through the gate on the final Saturday, compared to the previous year. “Overall attendance was a nine percent improvement on the 2011 event, leaving exhibitors and organisers exultant with the four days effort.”