Red meat investment targets consumers, dairy move eyes new products, environment

(Update adds news of the dairy initiative, statement from Agriculture Minister David Carter).

Silver Fern Farms, PGG Wrightson, Landcorp Farming and the Ministry of Agriculture and Forestry (MAF) are investing NZ$151 million in the red meat sector in a seven year programme the New Zealand Institute of Economic Research says will provide a net economic benefit of NZ$521 million to farmers and the country.

The plan is to turm the meat industry's production-led approach into a market-led one focused more on consumer needs.

The dairy initiative will see NZ$170 million spent over seven years, with contributions from the government,  DairyNZ, Fonterra, Synlait, Landcorp, LIC, Young Farmers, Agricultural Services Ltd and Zespri. It aims to develop new products, scientific knowledge and capability in areas of food science applicable to New Zealand’s food and primary industries. It is also looking to help farmers "significantly reduce" their environmental footprints whilst boosting efficiency and agricultural education.

Read the statement below:

A $151 million landmark investment to transform New Zealand’s red meat sector was announced in Wellington today.

Silver Fern Farms, PGG Wrightson, Landcorp Farming and the Government (MAF) will jointly fund a programme to turn the meat industry’s production-led approach into one that is market-led and focused on responding to consumer needs through a ‘plate to pasture’ integrated value chain. The seven year programme will be run as a joint venture through a new company called FarmIQ Systems Limited.

Private sector partners will provide 61 per cent - or $92 million - of the $151 million total investment. Silver Fern Farms, as lead investor, is contributing 45 per cent ($68 million) of the total while co-funders PGG Wrightson and Landcorp Farming will provide a mix of capital, in kind skills and advisory, nutritional expertise and resourcing across the seven projects that form the programme.

The Government will provide the remainder of the investment through the Primary Growth Partnership fund. Silver Fern Farms CEO Keith Cooper says he is delighted the Government has recognised the critical importance of this collaboration to New Zealand.

“More and more of our markets treat red meat like a fast moving consumer good and demand that New Zealand, on the other side of the world, understands and responds to changes in consumer needs. Today’s landmark announcement is a big step in transforming our industry so we can become truly market focused and a global leader in this regard,” says Mr Cooper.

“Our own investment of $68 million over seven years is a significant contribution, however having Government support is just as significant. This provides Silver Fern Farms, our farmer suppliers, and the wider red meat sector with great confidence for the future.

“We will continue to seek wider industry collaboration in order to maximise benefits to the entire red meat sector,” he says.

New Zealand Institute of Economic Research (NZIER) figures used to support the private sector partners’ application to the PGP fund show the New Zealand farmer and the country as a whole stands to benefit as the programme is rolled out. NZIER CEO, Jean-Pierre de Raad, says its models show the programme will provide a net economic benefit of $521 million over the seven years of the planned investment programme.

Economic modeling for the project shows the potential benefit to farmers from on-farm production gains are significant, with gross margins per hectare potentially more than doubling after year two. If predicted gains from processing efficiencies and market returns are added, those margins would increase again. PGG Wrightson Managing Director Tim Miles says to truly transform the red meat sector, the industry must be able to take market signals and actively respond to them.

“We are traditionally very good at production, but we have been collectively poor at tapping into the benefits of true integration. This new market-led joint venture would ensure the long term health of the red meat sector and that of the farming community that operates within it.”

Chris Kelly, CEO of Landcorp, believes the project represents a new era in collaboration in the sector that will benefit farmers, New Zealand’s economy and our international reputation.

“Sheep and beef farmer returns will improve significantly as this vital collaboration improves on-farm productive capacity and Kiwi farms are more ‘vertically integrated’ into the supply chains of branded consumer products and global food service customers,” says Mr Kelly.

Silver Fern Farms’ Keith Cooper says FarmIQ Systems represented a strong commercial solution which would ultimately support the collective aims of an industry wide strategy such as that being devised by Beef + Lamb and the Meat Industry Association.

“As a strategy this is built on the bedrock of necessity and commercial reality.

The immediate benefits will be to the farmers who take part in it, but there will be substantial indirect benefits for the rest of the sector including diversification of national income streams, positive impacts on regional economies, the increased availability of scientifically validated elite breeding stock, the establishment of an industry-wide land and animal database and the availability of significant value chain infrastructure,” he says.

Read the DairyNZ-Fonterra statement below:

DairyNZ and Fonterra are leading a Primary Growth Partnership programme of work which could generate benefits for New Zealand through creating new products, increasing productivity on-farm, reducing farm environmental footprints and improving agricultural education.

Government-industry funding of $170 million has been agreed for the next seven years, with about half from the dairy industry – DairyNZ, Fonterra, Synlait, Landcorp, LIC, Young Farmers, Agricultural Services Limited and with ZESPRI as the first non-dairy partner.

The PGP is providing $84.6 million in funding to the programme.

The programme of work under PGP is aimed at transforming the dairy value chain through investment in new people, capability and knowledge. It would also significantly contribute to building two platforms in food research and training that can also be utilised by all New Zealand food and primary industries.

On-farm, the measure of success will be in enabling farmers to significantly reduce their environmental footprints while increasing efficiency, as well as substantially improving agricultural education.

Beyond the farm-gate the drive is to generate new products, and scientific knowledge and capability in areas of food science applicable to New Zealand’s food and primary industries.
It is anticipated that the programme will drive significant additional benefits across the New Zealand dairy industry by 2020.

Two examples from the programme:

The investment will result in a significant increase in food science capability which will sit within the Riddet Institute, one of seven New Zealand Centres of Research Excellence and a support party to this programme. This Institute has been established to support the food industry of New Zealand and this investment in partnership with the largest food producer in New Zealand provides an opportunity to build a platform to underpin the whole of the food industry with world-class research and technological capability.

Massey and Lincoln Universities with the relevant Industry Training Organisations will also collaborate to establish a centre of excellence in on-farm management resulting in farmers and farm managers having better training and skills to respond to the pressures of dairy farming including environmental issues, animal welfare and staff management.

The programme will develop a training resource for rural professionals and farm managers, and targeted undergraduate, graduate, post graduate and professional development courses.

By developing people, capability and knowledge the programme will:

enable dairy farmers to improve productive capacity through increased efficiency

enable dairy farmers to significantly reduce their total environmental footprint

accelerate achievement of key industry on-farm targets

improve fundamental understanding of key themes in nutrition, food structure, and health benefits, and

improve understanding of manufacturing and supply chain processes.

Read Agriculture Minister David Carter's statement below:

Two major investment partnerships announced today will take primary sector innovation to a whole new level and deliver directly on the Government's economic growth plan, says Agriculture Minister David Carter.

The Government's Primary Growth Partnership (PGP) is to fund nearly half of $321 million in research and innovation projects proposed by the dairy and red meat industries, our two largest primary sector exporters.

The two partnerships involve a DairyNZ/Fonterra-led programme ($170 million) and a Silver Fern Farms, PGG Wrightson and Landcorp Farming programme ($151 million).

"The Government's investment of $144 million in these programmes is what the PGP is about - a commitment to significantly boost economic growth through innovation," says Mr Carter.

"This is the biggest investment by Government in primary sector innovation in decades.

"The PGP aims to transfer great ideas into research, development and ultimately products, jobs and growth. It is exactly the business innovation that the Government has identified as one of the six drivers of economic growth.

"All New Zealanders stand to benefit from the partnerships announced today because the dairy and red meat industries are pivotal to the successful performance of our economy.

Mr Carter congratulated the industry groups on meeting the robust approval process and said the economic spin-offs for the country will be significant.

"This Government is making a serious investment in primary sector innovation because we recognise the crucial role it has in accelerating growth and delivering a brighter future for all New Zealanders," Mr Carter says.

For details of projects: http://www.maf.govt.nz/pgp/industry-initiatives.htm