Opinion: We need a strategy to capture the maximum benefit for New Zealand

Opinion: We need a strategy to capture the maximum benefit for New Zealand

Conor English, Federated Farmers

By Conor English*

A while ago when I was in a Koru Club lounge I was stopped in my tracks by a sight that really struck me.

I pulled out my smart phone and took a photo of it and then emailed it to myself.

What I took a photo of was a phone booth.

The koru lounge had three very elegantly designed booths, with world beating phones stuck to the wall. No doubt after years of continuous improvement, they were world beating products. However, when I looked around the lounge, it was clear that this phone and its booth were missing the mark big time – the phone could not text, take photos, receive emails, keep a calendar or play games.

People thinking differently had overtaken the phone booth.

For New Zealand, for agriculture and for an organisation like Federated Farmers, it is critical that we don’t become like the phone booth - best in the world in our own minds, but not realizing that there is change a plenty and others are working hard to surpass us.

Right now we are enjoying an agricultural commodity boom, driven in part by demand and supply fundamentals, but in my mind, also USA monetary and fiscal policies. These policies have devalued the US Dollar by about 50% against an ounce of gold; that is, the USD gold price has doubled.

'Trillion' is an emerging word. That’s about the number of snowflakes that fell across New Zealand last week, and the number of dollars that will possibly be printed across the USA in the next while.

And what I don’t understand, is that if too much debt, like too much snow, is the problem, how can more of it be the solution. Is the USA at risk of becoming like the phone booth?    

So what about agriculture? Have we got a 'phone booth' mentality?

With increasing numbers of affluent buyers and not much to sell, there are some serious opportunities out there. But are we thinking differently and optimising the opportunity? Maybe. Our meat industry has made some great strides, wool a very mixed bag, and dairy has simply ridden the commodity wave.

But I am not sure that this is enough.

Recent speculation about the ownership of Fonterra perhaps misses the point. The real question is what is Fonterra’s strategy to capture the maximum benefit for New Zealand.

There is probably mutual agreement that Fonterra has generally executed its existing strategy pretty well. However, after the introduction of the Global DairyTrade online auction system, it is not clear what their next big move is to ensure Fonterra doesn’t become like the phone booth.

There are any number of possibilities.

Fonterra could forward integrate into infant nutrition and become the Coca-Cola of infant formula. They could broaden their milk supply base and further dominate commodity milk products through either merging with other farmer co-ops in other countries or by becoming a global dairy farmer and leverage New Zealand genetics, safe food and quality systems. They could broaden their current global dairy ingredients business into other food ingredients, offering a one stop shop to key customers, leveraging their expertise in global logistics. Perhaps they could deepen their consumer brands business or look to acquire other dairy supply chain assets in targeted markets.

Or they could keep on doing what they are doing right now, but just work at getting better at it.

Perhaps just like the phone booth manufacturer? The cost of the missed opportunities will eventually catch up on us as a nation.

I am sure Fonterra, and many others in the export sector are working on it. It is easier said than done, but we all need to roll up our sleeves and think like smart phone makers, not phone booth makers.

As Yogi Berra said, “the future ain’t what it used to be.”

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*Conor English is the chief executive of  NZ Federated Farmers

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31 Comments

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just remember that if the Greens, at 9% on current polling ,get any sort of leverage in the  next govt that NZ Farming is in for a rough ride - hobbling dairy farming and irrigation projects, a CGT, no more FTAs , high min wage , you name it - the Greens will mange it

Manage or mangle? My money is on the pinky greens going plonk on the night leaving mighty Norman wondering what happened to his glorious dream of being the BOSS and dictating how everyone alse will live their lives in his dominion under his command.

Lets see,

Farming, wanting farms to stop polluting and ruining our rivers and lakes....and to pay for the damage....is a bad thing....uh no.

Irrigation, this seems to be a move by some private entities to charge for water....at the expense of others, and some farmers said they dont want it but seems if they dont join in they get less water than they use now, its one huge can of worms and a scam....needs sorting.....

CGT, and pray why is it bad to tax an untaxed income? simple, you then lower taxes elsewhere....the richest in NZ go for capital gains and then pay no taxes while the rest of us pay 20~30% on everything....how is that fair?  Not just Green's but Labour as well, so its future is coming whether you want it or not....2014, sure, Labour is toast this time...but National wont deliver in the next 3 years on growth.....they will shoot themselves in the foot....

FTA's these benefit some at the expense of others, and the FTA's are not FTA's when you deal with the USA...and when you have produce the world wants you dont need FTAs....its bad for us all round.

So all the above seem to favour farmers and disfavour just about anyone else....and even allows farmers to damage the land in un-sustainable practices at the expense of the land....this isnt care its stupidity and greed...

OZ has a higher min wage and they are doing badly? uh no....So a higher min wage means the employers have to pay it and pass this on to their customers instaed of the poorly paid claiming benefits, ever heard of user pays? funny thing when its only one way its great...eh....

Good for you steven...your rivers and lakes indeed...but if you wanna pay a heap for for Dairy product and meat and bread..so be it. In which case why not raise the cost of all farm produced food in NZ by an extra 10% gst on top, and then have a new govt dept of oh say 5000 pointy heads decide on how they will use your money to make sure 'your' rivers and lakes are kept pristine clean for the tourists to pee in....as they do.

The future is coming whether steven likes it or not and it don't contain cgt because the punters don't want a bar of it cos the punters don't trust the pinky greens or Labour...how you like them apples steven?

Now when are you going to stop hooning round in your petrol burning smoke producing heap steven...don't you have any respect for the land...any at all.....cos if you did you would stop your dirty behaviour and take to walking everywhere.

Wol you can't deny that farmer are being subsidised re their water take/pollution.

Personally, I'd like farmers to pay for it, put their prices up and then let me decide if I still want to pay for their goods.  I reckon the crazy farm prices revved up by banks and real estate industry has put more price pressure on farmers than simply doing the right thing and planting riparian zones, which I'm sure Skudiv can tell you are a great asset to any farm and not all that expensive.

Isn't this more about some farmers (not all, but certainly some vocal dinosaurs) not liking being told what to do and just throwing their toys out of the cot? 

Indeed it is VL. But the toy throwing is also being done by towny hicks desperate to make a name for themselves as pinky greens and they scream at all farmers while also bitching about the cost of milk cheese and meat....usually out the window of their 4wd rubbish.

Wolly, us NZers pay the international market price for dairy....so if Fontera gets $10 a kilo for milk products off the US or Saudi or China we pay that price....irrigation costs do not impact the price we pay.....

Oh the future is coming Wolly, and the difference is all you do is whine.....and you will whine a lot more as that future appears...

CGT, actually it seems that isnt a negative impact for Labour or the Green's, time will tell.....just why you think a section of NZ and one of te richest shouldnt pay any tax while most other NZers do mystifies me....unless of course its your snout in te CGT trough.

"hooning"   yeah yeah.....whatever....

regards

 "you will whine a lot more as that future appears..."....hah...you mean wine and dine steven cos my pension date approaches!...

Give it up steven...Labour's cgt pipedream died the same day they launched it...and the pinky greens bubble of Norman is about to pop.

I'm a dairy farmer and I will definatly be voting greens.  Otherwise there isn't gonna be much left for my kids, economicaly or enviromentaly.  Why should making money be the only priority?

As Geroge W Bush said "I think we can agree, the past is over".

Skudiv: From one dairy farmer to another : What are your thoughts on the National Policy Statement on Indigenous Biodiversity?  Did you put a submission in on it?

 

Yes I agree with you goNZ. A far as I am concerned the biggest threat facing the New Zeeland economy in the next three years is not the GFC, European debt or a slow down in the USA, it's the Green party and it's turnip brains and lettuce heads. That is where the real danger lays.

LOL...a well researched, deductive and logical summary worth of a PHD, eh?

not...

regards

Have you been sucking those lemons again, Steven?

 David - how can turnip brains and lettuce heads be a danger for our society ? Do you not think that''s an insult on Kiwis ?

hehehehe....good point.....but then the voodoo economics believer is hollow when we look for content.....

regards

I think, David types a comment presses "SAVE" and switches the brain on later. But he's not a bad guy. David, you can always 'edit" - like I have to do.

Oh yes, I'm being attacked by Green Party foreigners, yet again. Of course I take that as a compliment that I am on the right track!

Gonzo -

It won't be the fault of the Greens, if your precious 'economy' falters. It will simply be the inevitable result of exponential growth hitting finite limits - but your kind are small enough minded to need to blame-shift, right?

 By the way, you didn't answer my question yesterday. Honesty a problem in your circles?

 I remember in Europe in the 80’ the greens were regarded by many as a "radical monster", not capable of contributing any sensible political work. Today it is different and even right wing parties are recognising how important the “green values” are, balancing economies, respecting natural environment and sustainability, which often by big lobby groups are ignored, even torpedoed.

No doubt - I can see some similarity here in New Zealand. With a number of unpleasant economic/ political situations, the “NZGreens” will play one day an important balancing role.

Where is the advantage to dairy farmers if fonterra does anything but sell milk?

The shareholders are farmers, not investors, most have bought the shares with debt, and the net profit goes to the bank.  Fonterra needs to stay focused on its core business, it is getting distracted by all these other things.  Top of the list is exporting cows to China, and buying them in NZ at double the market rate.

ho ho ho but  dont be fooled O Kunst  et al -  a leopard dosent change its spots. Check out their leaders backgrounds e.g anarchist,communist organisation roots -  all thats happened is they are more media savvy and are getting rid of the unelectable old warriors like Bradford and Locke to make them appear more palatable.

 goNZ- in general Green party members enter politics in young age – are rebellious, which is fine with me and later, as I commented earlier, when they are older make valuable contributions to societies.

 Look what happen in parliament today – 100 either nick yes, say no, sleep or do nothing and funny enough most at the same time.

Those who believe that the greens party will provide any sort of balance need to grow up. There Greens are run by some of the worst human beings to disgrace politics. Up there with 99% of politicians in Nz now and in previous decades.
Balance is not what they will ever provide, the green movement was hijacked long ago! Simply they are just another pawn in the corporate sponsored political scam.

Quite agree with the general thrust of what Conor says but haven't we been hearing this for decades now?

Good example; Chinese "entrepreneurs" exporting Kiwi infant formula for $100/tin. WTF is wrong with Fonterra. Get in there and make a killing - the Chinese parent is prepared to pay whatever for NZ made (and tripple sealed) baby formula.

Or timber; we used to sell our forest products as sawn timber, paper, composite board etc. Now it goes out as it left the forest - logs - no added value what-so-ever. We're going backwards Conor.

Or fisheries, why in Gods name do we have Korean owned and Indonesian crewed outfits catching our fish - what's the point of that. Think of the economic vaue that's added with NZ owned, crewed and serviced fishing boats. Now I hear they're exporting the fish to China and Vietnam for processing. Are we completely stupid?

Don't say "WTF is wrong with fonterra", Why should fonterra take up your idea?  This is a great idea and an oppurtunity for a small player to grab a niech market.  Don't expect fonterra to save the country, they are doing a poor job of the core business, they are doing worse with their value add.  There are opportunities out there, don't be asking for the big companies to squander them.

Does Conner English get paid for spending time in Koru Club lounge phone booths philosophising about the latest recycled high performance NZ Inc clap trap.

Anyway if he believes it's as easy as that, why doesn't him and the government galvanise NZ and get on with it. However I plead as a Fonterra supplier, please leave Fonterra alone. We have our directors, political leaders , media commentators Brian Gaynor, Bernard Hickey and all the leading thinkers in NZ and now Conner doing there upmost to tip Fonterra up as a supplier co-operative that has, does, and if left alone, will continue to perform well for NZ come, phone booths, morse code, telepathy whatever (provided we respect environmental, social limitations as mentioned by skudiv previously).

Our milk is worth what it is, at the moment it's considered a good food and is in demand. If you want to coca colarise it, be my guess. Pay going international market rates for the milk, and do it on your own back. Leave Fonterra as a co-op, it's good for rural communities and NZ in general.

Yes Connor's article is all very interesting, and it is correct to a point, but I think he’s missing one important matter when it comes to food. Food is not only an economic imperative it is a biological one and we are biological entities. We can no more do without food to eat than we can do without air to breathe. That is just a fundamental law of human existence. We need to remember what food actually is and what its purpose is for. And that won’t change. So getting the basics right in the primary industries is actually very profitable as New Zealand is now finding out. The need for evermore innovation and technological development in food is actually limited by what it is. However this is not the case with manufactured products and services where innovation and improvements are key. So yes, Conner English’s fable very much applies to phone booths and telephones, but does it apply to cucumbers or sheep?

In New Zealand we need both our primary food producers and our manufacturing sectors to be performing at their best. It’s not either or.  It’s BOTH. And when you have such a strong competitive advantage in a sector as New Zealand does in the food industry, why on earth would you want to change it? Surely you keep that going and you bank it as your insurance and then you use it to leverage off and support other industries?

As the American’s would say, if it ain’t broke, don’t fix it.

DavidB - it's broke.

http://www.parliament.nz/en-NZ/ParlSupport/ResearchPapers/4/6/a/00PLEco10041-The-next-oil-shock.htm

Some of us know how to fix it. I'll give you the tip - you have to be a tad past the denial stage, to percieve the need. Methinks you're starting from a back marker.

I've got news for you, you flat earther, and for your position, it's all bad.  Peak oil is a fantasy.

"However, when I looked around the lounge, it was clear that this phone and its booth were missing the mark big time – the phone could not text, take photos, receive emails, keep a calendar or play games.

People thinking differently had overtaken the phone booth."

However, it means there is a backup system available if your mobile dies, battery goes flat or a mobile network goes down....many ppl seem to think resiliance is an added cost they can do without....until they need it.

regards

Down where I farm (Southland) we do get charged for the actual water, whether it be for irrigation or stock.  We pay according to our resource consent allowance - whether we use it or not.

Up where I live, in the midst of kiwifruit country none of our kiwifruit neighbours pay for their irrigation/frost protection water.

The differences are as a result of differing regional council policies.

How about some rational debate about the variances in regional council policies and implementation.  This is the real issue.