Speech by Gavin Middleton, Organics Aotearoa NZ

Published: Wed 18 Jun 2008 11:47 AM
The Future of Farming
For Immediate Release:  Wednesday,  June 18, 2008
Speech by Gavin Middleton, Organics Aotearoa New Zealand,
to the "Fonterra Organics Conference", Matamata, Tuesday June 17, 2008.
One of my favourite things about being involved in the organic sector is that we are such a close-knit community.  It's great traceability - I can shop at the supermarket but know precisely where my food came from.  Unlike many other city-dwellers, I can pick a product off the shelf knowing who grew it, the state of their farm and their animals, and then come to Fieldays - or conferences like this - and meet the people whose hard work I appreciate at dinner time.
Last week the organic sector presented a united front at Mystery Creek Fieldays.  For OANZ it was our most successful Fieldays yet, with the Organic Advisory Programme, certifiers and producer groups all recording new interest.
The Herald on Sunday reported that Fieldays sales could top their $300 million record.
But farmers aren't content to relax in the sun.  Faced with rising costs of fuel and fertiliser, the threat of tightening environmental restrictions and rising demand from international trading partners, many are considering their options.
Their interest in organics continues to convert into solid growth for the sector.
Fieldays highlighted particularly strong interest in organics from sheep, beef and dairy farmers - meaning that this impressive conference will be larger in future years.
Growth in organics, however, is not new - and this morning I'm going to highlight some of the reasons that producers, consumers, markets and systems have made organics the fastest growing segment in world food and beverage.
From Cottage to Corporate
Internationally, the trade in organic products is valued at more than US$40 billion a year, with the largest market - Europe - spending US$17 billion each year and Americans contributing over US$15 billion.
Sales of organic coffee - something which is always relevant for the first conference session of the day - passed US$1 billion in the United States this year.
That's a lot of extra-shot double-grande vanilla soy lattes.
Organic products are available everywhere.  In Britain, McDonalds coffee is served with organic milk.  The largest organic retailer in the US is Wal-Mart, while supermarket chains increasingly have their own "home brand" certified organic range.
The incredible thing is that - even with sales in the billions - organic products typically represent one or two percent of total food and beverage markets.  Even the leading countries in Europe are around 3.5% organic.
Some sectors are leading the way.  More than 5% of all fresh produce sold in the UK, Germany and Finland is certified either organic or "fair trade".  In Switzerland, the market share is over 10%.
Here in New Zealand, around 10% of apple exports, by value, are organic, as is almost 4% of Zespri kiwifruit.
OANZ is helping the Central Otago Winegrowers Association - representing more than 5% of national wine production - promote organic conversion to its members.
In dairy, Fonterra contracts 20,000 certified or 'in conversion' organic cows.  Last year more than 40 million litres of fully certified organic milk was processed.
And the global market for "green" food is forecast to almost double over the next three years.
Even if the world's economies continue to decline, that's not difficult to believe.
Moving from 40% to 45% market share would be tough - but moving from 2% to 5% would mean we were still only shifting the loose topsoil.
So where has this market come from, and why now?
Three causes are usually cited - that consumers are becoming more educated, that technology is bringing progress, and that up and coming leaders are driving change.
The first suggests that today's consumers are looking for companies to speak to them in a personal way - they are concerned about what their choice of milk means for themselves, the animals and the environment.
The second reflects that creating waste is expensive. Energy, rubbish disposal and landfills cost money - and businesses are always looking for smart ways to cut costs.
And the third proposes that modern business leaders are typically making their workplaces more environmentally and people-friendly.
New Zealand's contribution to the world market is small, but growing.  In 2002 our domestic market was valued at $70 million.  In 2007, research conducted by the University of Otago assessed it at $210 million.
That's a lot - even on current dairy payouts.
Our exports of organic products also grew - from $71 million in 2002 to $120 million in 2007.
Dairy products are playing an important role.  From nearly nothing five years ago, exports of organic cheese, yoghurt, milk powder, butter and milk powder concentrate - generated $6.9 million last year.
As Fonterra moves closer to its goal of contracting 100,000 organic cows, that value will continue to increase.
Almost half - 46% - of New Zealand's organic dairy exports go to the US, which is easy to understand when Craig can proudly point out product after product in American supermarkets which contain your milk.
20% of New Zealand's organic dairy exports are sent to Korea, and 24% to other Asian markets.  Asia's search for safe, healthy protein sources will continue to benefit New Zealand - and provides a market which is much closer to home for those worried about the distance that food travels.
Meanwhile, the returns are coming back to family farmers and Kiwi communities.  Last year, 860 organic farmers were producing on more than 60,000 hectares - a 450% increase in organically managed land over ten years.
Supporting Our Sector
Growth in organic sales both in New Zealand and around the world shows that the momentum of history is on our side.
Recognising the potential in organics, the Government gave OANZ two and a half year's seed funding early in 2006, which has been administered through the Ministry of Economic Development.
This funding has allowed OANZ to maximize the sector's momentum, to bring New Zealand's many organic groups together and make information about the value of organics available to producers and consumers.
OANZ has thirteen member bodies - including the Organic Dairy and Pastoral Group - along with other producer groups, certifiers, exporters, traders, regulators, educators, Maori and community organisations.
We have three main work streams - "education, extension and research", "communications and advocacy" and "marketing and market access".
Our Education, Extension and Research team coordinates organic-based research - connecting the best practices learnt through organic and contemporary systems with farmers to improve sustainability.
As an advocate for organic production, OANZ publicizes the benefits of organics for health, the environment and trade.
And in market access, we promote New Zealand organics to the world, and work to ensure that Kiwi organic products retain their value internationally.
Our recent lunch with officials from the US Department of Agriculture, hosted by New Zealand's Ambassador to the United States, opened the door to our two countries discussing standards equivalence.
New Zealand is one of several countries which currently exports organic products to the United States under a recognition agreement.  We have an opportunity to be the first country in the world to achieve full equivalence.
That would mean New Zealand benefiting from better communication around changes to US standards, and could lead to easier market access in countries which base their standards on the US rules.
Part of our extension work is the Organic Advisory Programme, initiated as part of the Labour and Green parties' cooperation agreement following the 2005 election.
The Organic Advisory Programme runs Smart Start - an on-farm consultation for people considering making the switch to organic production. Smart Start is designed to provide people with the information they need to make an informed decision about going organic, and to link them into the organic community.
On World Environment Day we launched a new toll free phone number - 0800 FUTURE - to connect people thinking about making the shift to certified organics with information about Smart Start.
And the Organic Advisory Programme administers User Defined Package funding which will have invested more than $290,000 into dairy and pastoral extension programmes before the end of the next financial year.
This is a significant investment for OANZ.  We think it's significant for dairy, sheep and beef farmers as well.
Our funding supports organic focus farms in Taranaki and Waikato.  Yesterday's visit to Russell and Deanna's farm shows what a great job they are doing, and how their experiences can be used by people thinking about organics, in the conversion process or already operating a fully certified organic dairy farm.
User Defined Package funding is also helping the Organic Dairy and Pastoral Group mentor new farmers, hold field days and convene discussion groups.
The outcome will be farmers talking to other farmers about what works, what doesn't, and how they can take 'best practice' organic methods home.
For Health, Environment and Trade
Sharing these experiences and building this knowledge base is essential to maintaining New Zealand's advantage internationally.
Organic farming is especially knowledge intensive - as organic producers need to ensure that new technologies fit with consumer expectations.
It's good news that MAF's Sustainable Farming Fund have progressed a bid from organic dairy farmers to the second stage of their latest funding round.   This bid was supported by OANZ, and we hope that it emerges successfully from the funding process.
Kiwi research funders are investing millions of dollars into trying to find ways of reducing, denying or offsetting the greenhouse gas costs of agriculture - and of farming ruminant animals in particular.
As researchers focus on what happens inside the cow and behind the cow, the greatest benefit could come from looking at what's happening beneath the cow - in the soil itself.
Accurately measuring carbon levels in soil is difficult - but that's no reason to ignore it.
Trees, plants and vegetation account for only 18% of the land's carbon sinks. The other 82% of terrestrial carbon is held in soil - meaning that farmers manage the biggest carbon sink we've got.
The way you farm determines how much soil carbon you sequester.  Organic systems - which focus on returning organic matter to the soil and encourage active humus - are especially good at storing carbon.
Some people talk about dairy farming as actually being grass farming - reflecting the impact that the quality of your pasture has on the herd and its milk.  In that vein, organic producers are actually carbon farming, with a richer soil meaning better pasture.
And carbon in the soil can mean cash in the hand.  The Chicago Climate Exchange and Australian Soil Carbon Accreditation Scheme both allow for trade in carbon credits generated by soil.
Better quality soil also means better quality water.  Active humus can store up to 20 times its own weight in water - meaning better drought resistance, and reduced erosion from wind and rain.
Retaining water also means retaining nutrients.
The runoff of nitrogen and phosphorous, which contributes to the poisoning of Kiwi waterways, was identified by this year's "State of the Environment" report, along with greenhouse gas emissions, as being New Zealand's greatest environmental challenge.
With many local and regional councils looking to get tough on nutrient runoff, organic dairying should again be recognized at the leading edge.
The cost of allowing pollutants to leach into our waterways was shown earlier this year, with the Government announcing it would spend more than $72 million to clean up Rotorua's polluted lakes.
Although this pollution was by no means all the fault of farmers, mitigation - through adopting systems which rely less on fertilizer and hold onto soil nutrients more effectively - would be preferable to future expensive rehabilitation efforts.
Healthier water and healthier soil lead to healthier ecosystems.  Organic farms record higher levels of biodiversity - both above the ground, in terms of bird life, and beneath it, by encouraging active microorganisms.
And organics is good for people, as well as the planet.  One of the key concerns driving organic sector growth is the consumer perception that organic products are healthier.
In fact, few people might choose conventional food if they really thought about how many poisons they chose along with it.
Data from the United States shows that cabbages can be sprayed with herbicides, insecticides and fungicides up to 26 times.  Squash could have been treated up to 27 times.
Coffee - returning to my favourite conference tonic - is the third most heavily sprayed crop in the world, after cotton and tobacco.
It seems reasonable to say that, like choosing the right kind of petrol for our car, what we use to fuel our bodies has an impact on how we perform.
Shane Heaton's evaluation "Assessing organic food quality: Is it better for you?" concludes:
"[T]he available valid scientific evidence reviewed here supports the view that eating organically grown food is likely to improve one's intake of minerals, vitamin C and antioxidant secondary nutrients while reducing exposure to potentially harmful pesticide residues, nitrates, GMOs and artificial additives used in food processing".
In short, the answer was definitely 'yes'.
And the fuel analogy is particularly apt for milk.
Just last week, a study by Britain's Newcastle University showed that organic milk contains significantly higher levels of beneficial fatty acids, antioxidants and vitamins.
Breastfeeding mothers who drink organic milk pass on higher levels of beneficial CLAs to their children - helping them fight cancer and diabetes.
While the environmental arguments have traditionally driven consumer demand for organic products, health concerns are increasingly playing a role - with food allergies, cancer, uncertainty over genetic modification, and the decreasing nutritional content of many staple foods all pushing people to consider alternatives.
And not only are consumers concerned about eating or drinking these poisons, but also about the farmers who have to live with them in their fields, homes and bodies.
But as you already know, the benefits of organics don't all go to the consumer.
Fonterra's organic premium of $1.05 per kilogram of milk solids - or 45 cents per kilogram during conversion - is one way of recognising the value that your herds provide.
While conventional apple orchards have been struggling for the past three years, price premiums mean organic orchards have generally been able to keep a positive cashflow.
And many sheep farmers are considering their options, with organic lamb returning a hundred percent premium last year, while conventional farmers were struggling with rock bottom prices.
But for our farmers, and our country, the value that organic products bring to the table isn't purely financial.
Dr Andrew West, CEO of AgResearch, said last week that "we need to be in high value add and high value capture".  It is not enough for New Zealand, as he pointed out, to rely long term on being the cheapest producer.
Our international trading relationships increasingly rely on being able to show action on sustainability.
To reposition New Zealand from being a commodity supplier to a provider of high value food and beverage products will take leadership - on the farm, in the boardroom and in our marketing - and organic farmers are natural leaders.
It was encouraging to hear at Fieldays that Dairy NZ is making an effort to include organic farmers in their Regional Leadership programme.  The skills and experiences of our best organic farmers have a lot to offer producers who are searching for better ways of farming.
But winning recognition as a producer of premier foods will also mean actively promoting our premium production methods.
While people around the world already think about New Zealand as "clean, green and pure", a premium brand needs to be recognized as such by consumers if it's to appeal to them on a deeper level than dollars and cents.
It will require more than fencing rivers, recycling, or using trains instead of tankers.
Although these things make a difference, they will not be enough to satisfy discerning consumers who want to see a long-term plan for environmental sustainability.
That's why Fonterra's organics programme is critical, and why it's so important to all New Zealand dairy farmers that your ambitious targets are met.
Organic production is the only eco-verification system which is instantly recognized, and retains its value internationally.
Organic products are a flagship, reinforcing the "clean green" image that all our exports trade on.
In a market swamped by the multitude of environmental claims and counter-claims, organics has a distinctive brand, backed up by independent certification and international standards.
And there are non-financial benefits outside of the boardroom.  Organic farms are more than an equation - they're a living system, providing a lifestyle, as well as an income.
Without the conventional biocides, it's a healthier lifestyle for your families, your animals and your communities.
Organic farmers also love the challenge of forming a relationship with their land - learning how to understand what their herd needs by the way it acts, the health of the pasture and the presence or absence of different birds, organisms and plants.
That's the art of organic farming - managing the system as a whole to prevent rogue elements, and working with nature, rather than struggling against it.
It's that system, as well as the product, which consumers are prepared to pay for when they put organic milk, vegetables or eggs on their shopping list.
And since consumer demand is what ultimately drives the organic market, it's useful to look at who is taking organic products off the shelf - and why.
One In Three
Simply put, it's a decision that people make for their health, the environment and the taste.
Many of the ethical, high-value consumers who are choosing organics are known as "LOHAS" - or "Lifestyles of Health and Sustainability".
This is a market segment focused on health and fitness, the environment, personal development, sustainable living and social justice.
These ethical consumers cross traditional lifestyle groups - many earn above-average incomes, while for many others pure food is something they prioritise even though it means sacrificing elsewhere.
Some are urban singles, others rural families.
They cross the political, age and ethnic spectrum - but share a belief that the way food is produced is as important as how it is cooked, or how good it tastes.
Internationally, around one in four people fit this profile, making purchasing decisions at least in part on environmental criteria.  In New Zealand, LOHAS consumers are thought to be one in three.
That means more than 1.2 million Kiwis measuring the impact of what they buy on the planet, as well as on their pocket.
Making the choice to buy organic is one of the easiest "green" decisions that people can make.  It is simple, affordable and "mainstream".  Organic food is available in supermarkets and cafes, as well as organic specialty stores and farmers markets.  Last year, 71% of Kiwis who bought organic milk did so from a supermarket, along with the rest of their regular shopping.
For a clever consumer, organics will not break the bank.  And it is worth remembering that while people are looking for ways to help the environment, they do not want it to cost the earth.
That's why we recycle.  Buy Energy Star appliances.  Switch off the lights when we leave the room.
There's little cost.  But premium products at premium prices mean that organic options are often more expensive.
The research suggests that, while 68% of Kiwis are concerned that organic products are sometimes overpriced, those consumers buying organic see the value of what they're paying for - and what they are not.
Value is added when herbicides, pesticides and fertilizers are subtracted.
There's also value in the preservation of lakes and rivers, maintaining healthy soil and letting healthy animals live in decent conditions.
These factors are important to ethical consumers - more important than paying a few cents more.
Ethical consumers recognize that cheap food is a fraud on people and the planet.
LOHAS are also more concerned than ever about their health and wellbeing.  We go to the gym.  We go to the doctor, the naturopath, the nutritionist.  And we choose carefully what we eat.
According to Roy Morgan research, more than 105,000 New Zealanders read "Healthy Food Guide".  With all the publicity given to rising levels of obesity, frequent health scares and questions over food safety, it's no wonder that we're becoming more conscious of how many people are eating themselves sick.
So we want to know what is in our food, where it's produced - and how it was made.
If one in three people in New Zealand are ethical consumers, open to the health and environmental advantages which organic products provide, it could be easy to ask why organics are still seen as a niche, rather than a substantial potential market.
The key is promotion - recognizing that organic is a special added value which enhances, rather than detracts from, a main product line.
That is why OANZ intends to work with producers to explain how promoting the organic label adds a new dimension of sustainability - while offering on-farm knowledge and market opportunities which can benefit all.
The organic label to our primary production sector is like the logo on the front of a Mercedes.  The vehicle would still have merit without it, but the total value is only recognisable when the badge is prominently displayed.
The Future of Farming
And if we are successful - if we continue to see booming growth in organics in New Zealand - where will the future lead us?  Michael Pollan's books see organic farms at risk of becoming little better than conventional ones - with a set of chemical inputs merely replaced by certified alternatives.
That is not the experience of organics in New Zealand, and it is not likely to be.  We are a small country of family farmers, with standards and certifiers which are internationally recognized and respected.
It is important to ensure that these world-leading standards keep pace with the expectations of our markets.  We also need to ensure that consumers can remain confident products sold as organic live up to their claim.
In a sector which will continue to be both dynamic and diverse, there is a place for 'cottage' and 'corporate' organic production - for farmers markets and Fonterra.
Some people will continue to convert to organics for philosophical reasons, and others for the economic premiums. Either way, people usually end up seeing the value in both - true sustainability includes economic and environmental aspects.
All our differences are worthwhile - just like the few extra cents you might pay for an organic product.  When you choose to buy organic you're not just buying milk, or fruit, or soup, but paying the true cost of sustainable farms, and sustainable communities.
But there are some substantial challenges ahead.  The High Court and Environmental Risk Management Authority have both signaled their willingness to push ahead with genetic engineering field trials.
It's not a question of being "for" or "against" science.  To me, it's not even a question of science - it's a question of nature, and human nature.  Genetic modification will keep New Zealand competing against the rest of the world to produce more, for less, and satisfy consumers who have loyalty to nothing but the lowest price.
But "Brand New Zealand" is at a crossroads - we can pursue GM, along with everyone else, but that will not produce a premium food, or sit consistently with New Zealand's environmental reputation.
New Zealand has a great story to tell.  We are nuclear free. Champions of renewable energy, and have nearly 30% of our land mass covered in forest - largely indigenous species.
As well as our land, and potentially our health, genetic modification puts our reputation at risk.
By contrast, organic production supports and enhances Tourism New Zealand's "100% Pure" label. As many as 13% of Americans and 8% of Brits want their next holiday to be an ecotourism experience.
Perhaps the biggest challenge we face is understanding.  Markets need to understand the value of organics, promoters to understand that organics provide an opportunity, and farmers to understand that - like it or not - New Zealand's traditional export markets will soon demand to see government and businesses taking action to support environmental sustainability.
We want decision makers to understand that it is time for New Zealand as a whole to walk the talk.  In our personal capacities, at least one in three of us already are.
And those of us in the organic sector need to understand that the world is not divided into a small group of "us" and a large group of "them". We are many, and we are working together - across the organic and conventional sectors - to improve the position of New Zealand for the benefit of everyone.
Like the soil foodweb, organic production and the future of New Zealand's primary sector as a whole is intertwined.
Organic producers today are the leaders - the best practice - in sustainable production.  You will stay at the forefront, through research, through education, and through the courage of decision makers to back a market which has great potential.  The people in this room truly are the future of farming - our organic future.

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