Feeding the world

New Zealand is leading the way in sustainable agriculture, and that presents an opportunity to cash in

Ending world hunger is now considered a realistic goal. A Brookings Global Economy and Development Report released last month states that ‘the international community must shift from a pattern of erratic political attention and inadequate measurement of the underlying issues to a sustained, strategic and evidence-based commitment to food and nutrition security (FNS)’.

The report suggests that the developed world has a role to play in progress for the developing world. In particular, it stresses that food security is about quality as well as quantity – an adequate diet today and assurance of one tomorrow.

New Zealand features in the Brooking report, despite small size and population. New Zealand ranks number one (followed by Australia) in having the best agricultural policies in the world, defined as ‘distorting global trade the least’. We are rated as much better that other developed countries because we do not have producer subsidies such as government transfers and the subsidisation of biofuels which compete for land with food crops and thus distort the agricultural markets. Nor do we impose trade restrictions (except for biosecurity reasons) ‘that impede trade and distort global markets.

Despite this approval from an international body, there are concerns about policies in New Zealand. A recent report ‘Resolving Conflicts between Agriculture and the Natural Environment’ published online by Plos Biology was released with a press statement by senior author Andrew Tanentzap: ‘However, simply removing subsidies alone fails to reduce environmental harm, and incentives for better farming practices are still required. In the case of New Zealand, where there are no subsidies or mitigation schemes, much of the country has been transformed into a massive dairy farm for China’. The authors described New Zealand as having a laissez-faire approach to the agricultural sector which does little to safeguard the environment.

The facts are that dairying occupies 1.7 million ha of land in NZ, which is approximately 6% of the total, most of which is in New Zealand ownership. In addition, a Federated Farmers report released this year indicated expenditure by farmers of over $1 billion dollars in fencing waterways, planting natives and upgrading effluent systems. This has been noticed in Environment Aotearoa 2015, released by the Ministry for the Environment and Statistics New Zealand last month. Improvements in water clarity at two-thirds of monitored sites, and a decrease in phosphorus were attributed to ‘the management of erosion along river banks and surroundings, tree planting near waterways, reduced effluent discharges from industry, and a decrease in phosphorus fertiliser use from 2004 to 2014’.

Certainly other countries have been 'removed' from market forces by Government subsidies - but the NZ farmer has responded to domestic and international signals to the benefit of the country in economic growth and the benefit of the environment through adoption of new technologies as they have been developed.

The value of what they have been doing has been recognised in the new deal between Silver Fern Farms and Shanghai Maling.

Shanghai Maling has valued Silver Fern Farms (SFF) at $311 million, and is subscribing to shares at $2.57 before dividend payment; this compares with current trading at $0.35 on the Unlisted platform. This is a remarkable validation of Silver Fern Farms’ branding based on New Zealand’s farming and processing capabilities.

It is also recognition for New Zealand’s reputation for the production of high quality safe food.

Recent research indicates that over 70% of people in China now regard food safety as a matter of concern. People in the very concerned bracket have increased 20% since 2008 – from 12% to 32%.

Despite the higher costs of processing in New Zealand than in China, conditions of the investment include packaging and processing of the meat being completed in New Zealand:

Shanghai Maling is focused on achieving premium prices, and knows the value of the SFF New Zealand origin. The reputation for quality product is also why overseas companies such as Olam, Bright Dairy, Vinamilk, and Friesland Campina have invested in dairy companies in New Zealand.

Safe, high quality meat and milk is what New Zealand does best and increasingly the world is prepared to pay for this animal protein.

Disruptive technologies in creation of protein have not yet created a threat, and the latest on insect protein research has revealed that in order to grow crickets big enough to harvest, good food input is required. When given products such as ‘straw and bad waste’ 99% of the crickets died before they were big enough to eat.

None of the new technologies can match the ever-present consumer focus on ‘cost’ and the increasing focus on farm-to-fork, free range, pasture-fed… at which New Zealand excels.

However, as the Ministry for the Environment and Statistics report Environment Aotearoa 2015 indicates, increasing numbers of animals, including humans, is having an impact on the environment.

New technologies can and have mitigated effects on sediment, phosphorus and E. coli. Now the focus is on production of food for least loss of nitrogen and carbon, the latter because of greenhouse gas commitments.

Environment Aotearoa 2015 identified greenhouse gases as an area of concern because of increased emissions. New Zealand contributes only approximately 0.1% of emissions globally, but there has been a 42% increase between 1990 and 2013. During that time agriculture has increased by 14% and now contributes 48% of the total. The energy sector has increased 32% and now contributes 39% of the total; industrial processes account for 6% of the total and have increased 55% since 1990. (These figures show the dangers of examining percentages without knowing the starting point, thresholds of concern or relativities. The 55% in increased emission is still very small… as is New Zealand’s overall contribution to global emissions despite the 42% increase.)

In a global comparison, New Zealand’s cost of dairy production is best practice. Research by the International Food Comparison Network released last year categorised New Zealand’s costs of milk production in the US$30-40 per kg ECM (energy corrected milk), whereas the EU, Middle East and China were US$40-50 per kg ECM and the US, Canada, Austria, Norway and Switzerland were greater than US$60 per kg ECM. South American countries and Belarus rivalled New Zealand in costs of production.

In nitrogen use per unit of production, New Zealand is also a model of best practice. Dr Stewart Ledgard, recipient of the New Zealand Grassland Trust Ray Brougham Trophy for 2014, has calculated that whereas beef in the USA uses almost 600 g N per edible kg of meat, New Zealand beef uses only 200 g… and that figure is more than halved if the beef originated in the dairy herd.

Also of note is that milk production requires even less N per edible Kg. Similarly, milk creates fewer carbon emissions than meat per unit of edible energy or protein.

For global FNS, New Zealand’s role might be production of high quality animal protein – milk and meat. The milk would be processed and packaged in New Zealand on the Shanghai Maling model, but processing would be in extending shelf life, not dehydrating to powder. The dairy herd would be partially housed, allowing access to pasture, but keeping animals off pasture during inclement weather, thereby keeping them comfortable whilst protecting pasture, soil and water. Integration of the dairy herd with beef production would effectively reduce environmental impact on a global scale, whilst allowing New Zealand farmers to reap the benefits in premium markets. Dairy goats and sheep are likely to be part of the new scenario.

In all cases the focus will be on the consumer.

In October, Harvard Business Review published an article by Eddie Yoon (The Cambridge Group) and Michelle Stacy (former President of Keurig) entitled The billion-dollar opportunity in single-serve food. They suggested that ‘the single-serve experience is a powerful intersection of great business (higher margins, incremental sales) and increased customer benefits (more choice, more customisation)’. They point out that people will often pay more for smaller quantities. On-line sales and the New Zealand hub in China are making new thinking possible. New Zealand farmers have always been innovative; the processing companies are catching up. With Food Nutrition Security on the horizon, we should be making the wave, not just catching it.