Fed Farmers' Bruce Wills points out exports by primary industries are NZ$32 billion in 2012, up a 'remarkable' 73% in eight years

By Bruce Wills*

Last week was frustrating as fog again closed Auckland airport. I was due in Auckland for some meetings and even an interview with Rural Delivery, but, as it turned out, I got to admire airport terminal design instead.

Like fog closing airports, there is a fog of sorts clouding discussion of the value-add in our primary exports.

In eight years time it will be 2020 yet if we go back eight years it was 2004; what has been the agricultural state of play over the past eight years?

In 2004, as Bernard Hickey would appreciate, there were some strange but disastrous financial innovations taking root.

The U.S. subprime tsunami was three years old and lending for it would peak in 2005.

Locally and abroad we went on a debt-fuelled binge.

Sadly, agriculture embraced debt with gusto as well.

Eight years ago the Iraq war was one year old, Afghanistan was in turmoil and despite it all, petrol was under $1.10 a litre. For exporters, we faced a Kiwi dollar that was US$0.67 in January but ended 2004 at $US.71. Some things never change.

In the year ending June 2004, our agricultural, horticultural and forestry exports amounted to some $18.5 billion.

In the year to March 2012, exports for the primary industries came to almost $32 billion.

That is a remarkable increase of almost 73 percent.

I heard one of our younger staff describe it as 'insane' and 'awesome' and it is. It is all too easy to forget just how far we have come over the past eight years.

In 2004, dairy exports were not quite $5 billion but today are almost $12 billion; a staggering 140 percent increase.

Fonterra’s global alchemy has it on track to crack the $20bn revenue barrier.

In 2004 by contrast, red meat, wool and hides generated exports of around $5.5 billion and eight years on these have grown to $6.7 billion. It is an increase yes, but of a more modest scale.

Explosive growth has come out of the horticultural sector when combined with wine is now a $3 billion dollar export. While people may look at logs and ask, ‘where's the value add in that?’ the value of those logs have grown a full third since 2004.

Then there is the value implosion of wool. If we go back to 1990, wool was a $1.7 billion export, which, over 22 years, has fallen to around $800 million today. Wools implosion is remarkable because this green fibre has lost value during the ‘green awakening’ we are repeatedly told about. There has to be a thesis in this examining the reasons why.

As New Zealand is a trading nation there are three big things farmers need from government to support export growth.

These are trade access, better understanding of what markets desire and the means to add value to what we produce, or will produce.

Getting better trade access starts by reducing the fear those markets have of Kiwi farmers. While government works the government-to-government side of things, Federated Farmers joined the World Farmers Organisation to do just that. Around $1.5bn in tariffs are paid annually by our agricultural exporters, reducing farm incomes by effectively the same amount.

Put another way, it represents just under five percent of the current value derived from our primary exports. This doesn’t take into account the value better in-market access could open up either. It is why we are working the farmer channel but it is a tough row to hoe; of the 41 member countries of the WFO only four are fellow free traders.

Getting useful market intelligence is another key aid government can give exporters. Last year the old MAF, now the Ministry for Primary Industries, became the first body from a non-Muslim country to win an award for Halal certification. That is a start because we need to know more about not just Asia, but a global Islamic market estimated to be worth over $3 trillion.

Then there pockets of economic activity starting to emerge out of Africa.

My point is the world is much larger than our immediate Anglo-European dominated view of it.

Then there is that $64,000 question about how we add value to what we currently produce, or will produce in the future. This is infrastructure like water storage, broadband and a science ecosystem tied to our core competitive advantage of producing food and derivatives of food.  It is something my Vice-President, William Rolleston, has a much better handle on than me but it is vital.  Farmers through their levies already invest directly in science research but collectively as a country, we need to do much, much more. 

While we cannot predict the future we can certainly help to feed it.

Doing that creates added opportunities for those well outside our farm gates too.

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Bruce Wills is the President of Federated Farmers. You can contact him here »