Why we need an agricultural intellectual capital strategy

Why we need an agricultural intellectual capital strategy

By Conor English
 
There are points in time that make a strategic difference. 

Hindsight identifies decisions that are made or not made that can have lasting impact. When Britain joined the old EEC in 1973, we failed to respond quickly. Thirty seven years later our meat industry is still ‘eurocentric’ with its associated concentration of risk.

In 1975, the incoming National Government threw out Labour's compulsory super scheme and replaced it with “pay as you go”. In my personal view, 35 years later, our capital markets and economy are suffering from a resultant lack of savings and capital depth.

In the mid 1980s we had a Government which said agriculture was a sunset industry and Wellington would become a Zurich of the South Pacific. Over quarter of a century later, Wellington’s airport is incapable of handling long haul aircraft. Wellington has been asleep at the wheel. 
 
Internationally, the fall of the Berlin Wall in 1989 saw a seismic shift in European geopolitics – a strategic turning point for the globe. Similarly, events on September 11, 2001 further changed the world.

Yet it was the strategic response to these events, particularly the monetary and fiscal policy response, which has had a lasting impact on New Zealand’s farmers today.
 
Former US Federal Reserve boss, Alan Greenspan, was heralded by many as a financial wizard.  He was the architect behind a loosening of monetary policy, significantly after September 11. This, when combined with Bill Clinton’s loosening of banking regulations in 1999, saw the afterburners glow on a sub prime fuelled credit growth throughout America and other economies.

Asset values climbed and everyone felt wealthy and confident.
 
But this largesse couldn’t last and the bubble burst with the fall of Lehman Brothers on September 15 2008.

Europeans and Americans who had borrowed and spent way beyond their means now have to face up to the unwelcome reality that there is no free lunch – if you borrow money, someone has to pay for it and someone has to pay it back.

At the same time Asian economies had generally lived within their means and saved, instead of spending like there was no tomorrow. 

This has led to a big shift from the West to the East in terms of wealth and economic power.

This is not a new thing. Last century saw a similar shift from the British to the American ‘empire’.
 
Right now the demand channel for protein is strong and in this, the trend is our friend. However, the credit channel is weak.

We need capital to grow and develop but our capital markets here in New Zealand are shallow, thin and expensive.

Players from other nations are right now looking at the convergence of these two issues and what opportunities it may present for them.

But what about for New Zealand?  Are we asleep at the wheel?
 
I believe we are at another point in time where we need to take a strategic view. 

Our challenge is not just how we can capture more wealth for New Zealand from the physical products we produce and sell, but also from the Intellectual Property (IP) around our systems and the know-how involved. 

What can we patent? How can we monetise our systems? That’s what many who seek to invest in New Zealand agriculture system are after. Like Xero, or Microsoft, they are looking at how they can leverage that IP for greater profit. 

I believe we need to formulate an ’agricultural intellectual capital strategy’.

Currently our Government funded research capability is under ‘renovation’.

We’ve already lost Nufarm to the Australians and John Nathan’s Glaxo in the 19th century to the British. Both started in Bunnythorpe out of physical primary production. Are we selling genetics IP without thought to how we get a long term return?

Overseas capital is now looking at assets here. Maybe it could be beneficial if it enhances our ability to implement an Ag IP strategy that captures benefit for New Zealand and our farmers.  Finland’s Nokia, with 123,000 employees in 120 countries, is an example of what success might look like.
 
We need to focus on the strategic issues that matter. Are we asleep at the wheel, like Wellington was when it forgot to extend its runway for long haul planes? Only waking up to realise the world has passed us by and a real opportunity lost? 

Let’s not sleep. Let’s find a solution so that our future generations can benefit from our Kiwi ingenuity.

---------------

Conor English is the Chief Executive of Federated Farmers of New Zealand

   

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

13 Comments

Brian - agreed. I went to same Fabians preso in ChCh early June and the economist you are referring to I think is Rick Boven of New Zeaaland Institute:

 

http://www.nzinstitute.org/

 

http://www.fabians.org.nz/index.php?option=com_content&view=article&id=89:what-will-fix-new-zealands-economy&catid=1:latest-news&Itemid=54

 

I think Rick's report on NZI's research in this area will be out soon, this month maybe and it will be interesting to read it in more depth. In terms of a vision f0r NZ's economy it was similar to Paul Callaghan's, 2007 RSNZ Distinguished Speaker lecture, "Beyond the farm and the theme park"

 

http://macdiarmid.ac.nz/news/video/rsnz.php

 

I also liked Rick's illustration of Denmark, in that they haven't regarded ag. as a 'sunset sector', they have nutured their ag. as best they could according to it's capacity, but they encouraged development of other sectors, and that has broadened, deepened and reduced risk in their economy. So I like what Conor is saying here, but think we need to take a more Danish approach to things as well.

 

The only thing I don't like about what Conor has said here, is what he hasn't said about monetary policy and exchange rate dymanics negatively impacting all our fx earning sectors. However, it hasn't pissed me off as much as an earlier article by Conor:

 

'You cannot implement a problem – only a solution'

http://www.infonews.co.nz/news.cfm?l=1&t=0&id=53064

"We have worked with the Reserve Bank to ensure that the speed of implementation has been slowed down on their new “prudential measures” and capital asset ratio requirements of banks. While there has definitely been a tightening on availability of capital, the implementation of these new policies will now be at a far slower pace than originally planned, thus reducing even more stress among the farming community. We argued that speed on implementation was not the solution New Zealand needed."

If the RB were being more robust in using said prudential measures we'd not have had to hike the OCR as we just have and the projected neutral would be lower than it presently is, thereby bringing NZD to a more appropriate value and volatility for 'real economy' trade, instead of speculative 'casino economy' trade.

Conor hasn't done the wider ag. sector and the remainder of the real economy any favours by leaning on the RB to slow down on their new prudential measures.

Cheers, Les

www.mea.org.nz

Brian - Rick Boven's research report has been released today on the NZI website, address in my post above. A thought provoking title as well: 

'A goal is not a strategy: Focusing efforts to improve New Zealand’s prosperity'

Rick has some useful comment on exchange rate and monetary policy. Not surprising given the feedback offered at the Fabians talk I attended. Doing all else and ignoring this issue is simply relying on wishful thinking as a strategy for NZ's economic development. 

Cheers, Les.

www.mea.org.nz

So true : Walter : Get it sorted , man , or people will think that  you went to Rangiora High School instead of that private academy in Lucerne , Switzerland !

[ RT ]

LucaD..... Unless you are being ironic, you need to sort out your grammar and spelling.

As ever , you are most welcome , dear friend . How is the trading environment in Kaikoura ? Air NZ & Akld Airpit are claiming a  record influx of tourists into NZ . Any evidence of that in your business ?

 

Forgive the ignoramuses who decry your English . I too , received harranguing during my 16 year sojourn to OZ . Irregardless that my message had been understood  ;  pedantic plonkers insisted that my diction and accent mirror theirs' . ................. Struth , cobberdiggermate , stone the flamin' crows !!!!!!!!!!!!!!!

Do you require a pool room nickname ? ....................... " Crusher Kunzie " immediately springs to mind !  Or " the Swiss Miss " , is you're no good at the game . Ha ha de ha !

Goodnight Walter .

Conor would have more credabillty if he instead of cutting and pasting the comments of others regarding Greenspan,Lehmann etc he gave us his view of the waste of  capital in the dairy industry ,   the  unsustainable prices paid for land for SI converstions,  Fonterras'inept attempt at trying to list, and his view of the current situation  with concern to the DIRA which sees NZ Farmers providing capital to overseas' interests.

Unfortunately the Feds have found themselves another parrot

Ray : Are you intimating that Lancorp's stripping of 10's of 1000's of ha. of central N.I. radiata pine forest , along with the Selwyn County Council's conversion of old pine stands north of Ashburton , .............. were a mistake ? Then why did the Greens say ............ nothing ? Too busy with squiggly light-bulbs and anti-smacking legislation   to worry about the environment . And the catalyst for this wholesale clear-felling and dairy conversion , was one Jim Anderton , future mayor of Chch ! The prize plonker who as Minister of Agriculture , single-handedly set back the forestry industry of NZ more anyone else in our European history .

among other things the Feds seem to be part of the problem(always) not part of the solution.I stopped paying my sub a couple of years ago. In regards to Conors comments above nothing has improved-they still a bunch of ignorant parrots!! They dont seem to understand that some time soon all the window dressing will come home to roost!! It is still jobs for the boys at Feds HQ and lack of intelligence, foresight and understanding of the issues is a prerequisite for a desk. Things like you intimate above are the tip of the iceberg.

Thanks John had a good read. Would like to ask Conor why it is Feds never makes sense on the hard issues and why they have not commented on the Dairy Land ponzi scheme which I must say is intertwined to the nth degree in the Hubbard issue in which some Feds members stand to lose a lot.

Ray - see my 7.29pm today. Comments? (Except on my lazy editing!)

What was he thinking?

Who's side is Conor on?

Cheers, Les.

www.mea.org.nz

Thanks Les. Good read. Will do some study on Denmark.

I suppose farmers want more 'regulatory subsidies' too huh? (a la Fonterra)