Agricultural sector committed to meeting realistic targets

The negative reaction to the methane target range in the Climate Change Amendment (Zero Carbon) Bill should not be taken as an indication the rural sector is at all opposed to the purpose of the Bill, nor does it suggest unwillingness to be part of the solution. Industry bodies, including DairyNZ, B+LNZ, MIA and Federated Farmers, are fully committed to seeing their members do all that is realistically possible to achieve the overall greenhouse gas reduction target.

Cooperative model not ideal for all business types

Cooperatives emerged in the 19^th century as an important business structure designed to protect the interests of a group of members, based on the principle of equitable distribution of benefits related to use or supply. The first New Zealand cooperative was formed in 1871 by eight cheese making settlers on the Otago Peninsula; by 1890 40% of dairy factories were cooperatives and by 1925 there were about 500, of which only three remained after the formation of Fonterra in 2001.

Fonterra – right question, wrong answer

Fonterra’s trials and tribulations have led to a rising crescendo of criticism of the cooperative’s performance since the release of the 2018 annual report. Declining share value and dividend payments, fluctuating milk price, inadequate return on capital, failure to match international and domestic competitors’ financial performance, failed investments, rising debt ratio and overpaid staff are the most notable criticisms.

World not yet falling apart

Much to a lot of people’s surprise, the global economy is resisting the dire predictions of many commentators, just as the New Zealand economy continues to perform much better than businesses are prepared to accept. But it is far from certain whether this just a question of timing or the genuine possibility the predictions are exaggerated. Speculation, based on suspicion and anecdote, appears to be an unreliable guide to what is actually happening, so, while planning for an uncertain future is essential, it would pay not to ignore present realities.

China presents opportunity and complexity

Rabobank’s China expert and GM Food and Agribusiness across Australia and New Zealand, Tim Hunt, provided Red Meat Sector Conference attendees with an in depth analysis of the enormous opportunities that China offers agricultural exporters, as well as the complexities of doing business there.

Essential to keep close watch on alternative products

This is the year when plant based alternatives to dairy and meat have suddenly started to pose a more serious threat to the traditional animal based products on which New Zealand farmers, and our economy as a whole, depend. There is no danger these alternatives will suddenly take over the world, leaving dairy and sheep and beef farmers wondering what to do with their stranded assets. But, to prevent being taken unpleasantly by surprise, it will be necessary for the dairy and red meat sectors to keep a close watch on these competitors and track their progress with global consumers.

Ham-fisted definitely, incompetent possibly

Fonterra’s succession of ultimatums to its suppliers smack of ham-fisted bullying and incompetence. The company’s first ultimatum was to push payment terms out to 90 days for a ‘small percentage’ of its New Zealand suppliers in line with its global practice , followed by an invitation to attend Dragon’s Den type negotiating sessions in which it has served notice it will demand 20% price reductions.

Fonterra makes best of a bad job

The PR spin has been pretty active signalling a much improved half yearly result which was duly delivered this morning. The company confirmed a 40 cent dividend for the full year with the interim dividend being paid next month as usual and the final dividend being paid in two tranches in May and August instead of October.

MPI’s food safety responsibility still causing major problems

In January this year I wrote a column which argued the Primary Industries Ministry risked losing focus on two of its core responsibilities, namely food safety and biosecurity, as a direct consequence of merging MAF, NZ Food Safety Authority and Bio-Security New Zealand into a single mega government agency.

I cited the Fonterra whey protein botulism scare as an example of the new agency dropping the ball.

The WPC80 report into that incident stated “overall there was a lack of commitment to ensuring readiness to deal with a food safety event” quoting a senior official as acknowledging nobody had taken ownership of food safety.

The report went on to say the gap had since been closed.

Recent events like the Hepatitis A cases from frozen berries from China, antibiotic-resistant campylobacter in chickens distributed by three of the four largest North Island producers and last year’s outbreak of gastrointestinal bug yersinia suggest the gap remains open.

In the meantime, MPI maintains weeks or even months of secrecy before it discloses information about the identity of suppliers or the source of the problem.

Even worse, sometimes, as in the case of the yersinia outbreak, the named culprit is found not to be the source after all.

I argued at the time MPI’s four key areas of focus, as listed in its 2014 annual report, were as follows: maximise export opportunities, increase sustainable resource use, improve sector productivity and protect from biological risk.

It seemed then and still seems staggering that the most important role of all, protection from biological risk, should come last instead of first in this list of priorities.

In case people think this is just semantics, consider the benefits of the previous structure when NZFSA was split out from MAF in 2002 and run as a sole-purpose government department between 2006 and 2011.

NZ’s food safety reputation was at an all time high among our trading partners and I struggle to remember any serious food disease outbreaks, although I might not be entirely correct.

The food safety performance of the red meat sector still demonstrates the excellence of the standards put in place under MAF and NZFSA.

 

Unfortunately, the performance of Bio-Security NZ under MAF control was not as impressive during the first decade of the 21 st century, as kiwifruit growers hit by the Psa virus would testify.

The value proposition for the creation of MPI argued there was a risk of divergence in areas of regulatory policy and standard-setting, cost recovery and international standards.

Given NZ’s unique biosecurity and trade needs, the regulatory programme was not considered optimal for creating economic advantage for NZ.

However, the most important point of protecting NZ’s borders from biosecurity risks and consumers from food safety events appears to have been taken as a given, rather than disciplines requiring single-minded focus.

The National Government’s main objective has been to achieve greater efficiency and cost-effectiveness of outcomes by means of structural changes but there is a danger this focus might result in the baby being thrown out with the bath water.

I have read one comment which calls for the responsibility for food safety to be handed back to the Ministry of Health because its sole focus is public health.

The same writer also argues MPI has a conflict of interest between its priority to protect consumers and protection of food producers.

I would argue MPI’s main focus is not on producers but on economic gain for NZ, as shown by its first three areas of focus – export growth, sector productivity and sustainable resource use.

It is very easy to claim this is absolutely consistent with maintaining first-class food safety and bio-security but the point is MPI does have a conflict of interest.

Which of the four areas of focus should they concentrate on?

If the Government insists on doubling exports by 2025 while improving sector productivity and resource allocation, it isn’t difficult to see where food safety and bio-security sit in the queue.

I spoke to Labour’s primary sector spokesman Damian O’Connor about this issue in January.

He was adamant MPI is too big and has a conflict of interests between its regulatory and compliance responsibilities as well as its goal of maximising exports while the increasing quest for trade freedom is at variance with the protection of NZ’s biologically-based economy and reputation.

He wanted to see separate food safety and biosecurity agencies established outside MPI.

 

Unfortunately, I can’t see this happening before the next election at the earliest but it looks to me more and more as though we should evaluate this as an option.

At the very least we should assess the risks to NZ health and reputation of continuing as we are.

Silver Fern receives an offer it can’t refuse

No wonder the deal between Silver Fern farms and Shanghai Mailing took so long to conclude, but from all appearances it was worth waiting for. Not that you would necessarily think so, if you read about the disappointment of some shareholders and the MIE group about the board’s unwillingness to give serious consideration to an alternative farmer offer of $40 million or some of the business commentary.