Speech - The rising sun: unlocking our primary potential

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9 October 2011

Basking in the rising sun: unlocking our primary potential

Speech by Dr William Rolleston, Federated Farmers Vice-President, to the New Zealand Institute of Agricultural & Horticultural Science in Wellington on 4 October 2011.

It is my pleasure to speak to you on research priorities for agriculture and horticulture.

Before I begin to outline some thoughts that will be challenging at times, I first wish to make comment to you on the research priorities according to New Zealander of the year, Sir Paul Callaghan. I quote:

“We are brilliantly successful at dairying, but sadly we cannot scale up this industry because of the risk of further environmental damage.”

What’s more, apparently, “our dairy industry exports milk powder, rather than developing new products. Our forestry industries send raw logs offshore and despite the past capacity to invest in processing, have shown no inclination to do so”

So there you have it.

We can all pack our bags, go back to our offices, send dismissal notices to our staff and report to Ministers, the scientific community and the public, that biologically, we are as good as we can ever possibly be.

On TVNZ’s Back Benches, I was asked if we could have a vibrant agricultural sector and other exporters. It was a simple question that demanded an equally simple answer.

Of course we can.

This is not a question of ‘either or’, yet that thinking tends to bedevil our approach to research and to economic development.

I know Sir Paul has low regard for the biotech sector. In fact he wrote in the Herald:

“I saw the waste of the last 10 years when we biased our science “system” to chase the Biotech fashion. We should not make the same mistake again”.

However, isn’t he making the exact same mistake in his dismissal of the biological economy and his promotion of the physical sciences economy? What I would call, “tricks and gadgets”.

Sir Paul is passionate about physics every bit as I am passionate about agriculture, biotechnology and science in general.

I celebrate that our top 100 technology companies collectively export around $5 billion per annum; a quarter of Fonterra’s revenue.

I would celebrate even more if 500 more technology companies existed to match what we export each year from the primary sector. We don’t have to have a ‘tricks and gadget’ or a purely biological economy, we ought to have both.

I will take it as a given that this audience has a view that our biological economy is worth investing in, so before we address the issue of priorities, let us try and put our agricultural production in a global context.

Population and food security
As a species we currently face our largest challenge ever. That is the two people who join humanity every second, of every minute, of every hour.

In the time my session takes today, the human race will have grown by around 3,600 people. That sobering number represents an enormous challenge to international order and our modern civilisation.

Our rate of population growth means 1.2 million more people are born each week. By the end of 2012, there will be something like 64 million more people on earth than at the beginning of the year.

At the Cairns Group meeting in Canada recently, food security was the dominant issue because it influences global security. Future wars could flare over access to land, water, food or energy. Or even the freedom to gain from their use.

There are those in the environmental movement who consider population can only be brought under control though resource limitation; in other words starvation. We have seen in countries like Haiti, that overpopulation coupled with resource and technology limitation, leads only to environmental destruction.

Perhaps those statues on Easter Island are the oldest warnings underscoring this point.

It is quite clear that economic prosperity and the increased certainty for survival that prosperity brings, are key drivers for smaller families and population control.

Market demand
The second global issue is that, as families reduce in size, children become more precious to their parents who become more risk adverse. They want safe food for their children and life prolonging products for themselves.

The environment
Third, there is a concern, in the first world at least, for the environment.

This is manifested in numerous forms the most notable being organic foods, opposition to genetic modification and climate change. Locally, the pressure on our waterways and biodiversity is a concern for many.

Land
Fourth, while the population expands we are not making any more land. The number of hectares available for food production per person has steadily dropped from 0.44 hectares in 1960 to 0.26 hectares in 1999. By the time world population is expected to peak at 9-10 billion in 2050, the number of hectares available per person is predicted to be 0.15.

The green revolution of the 1960s, with the use of pesticides, fertiliser and new hybrid seeds, gave us a quantum lift in production. These were not New Zealand inventions but New Zealand farmers and scientists adopted and adapted them to maintain our agricultural leadership.

It is obvious that the world needs new technologies to make similar quantum leaps.

The competition
Fifth, New Zealand also exists in a competitive market. The developing sophistication of agriculture, in places like South America, is a competitive threat. The rapid deployment of genetic modification around the world is eroding our competitiveness through increased productivity and reduced environmental impact.

Location
Finally, we live in a globalised world. Technology allows the ready movement of people, capital and ideas across borders.

Physical technology companies can be based anywhere there is a skilled labour force, sufficient energy and capital. Technology, in the physical sense, is fast moving and highly mobile.

Out of the top 10 technology kiwi high fliers, Fisher and Paykel Appliances, Fisher and Paykel Healthcare and Rakon have moved significant manufacturing offshore. Of “NZ's technology top 20”, Fisher & Paykel Appliances is partially overseas owned, Navman is partially Kiwi owned while Nextwindow is no longer New Zealand owned at all. Allied Telesis is a Japanese company.

By contrast, the global population growth curve demands solutions from those economies with the vital resources of water, land and people. In that respect, New Zealand’s geopolitical position and economic profile, makes it attractive in a resource hungry world.

There is major scope to develop highly profitable companion industries off our primary base.

To ensure our research efforts make a difference we need to have an appropriate research spend and an effective science system with the right incentives.

New Zealand’s science ecosystem
New Zealand, as we know, has one of the lowest investments in science, research and development at around 1.2 percent of GDP; about half the OECD average of 2.3 percent.

Federated Farmers believes we need to aim for three percent of GDP and fast.

Funding of this magnitude enables more expansive research, not just retaining our top scientists, but attracting the world’s best here. This creates a research cluster that attracts not just start ups, but established companies being where the innovation and resources are. But just spending more on R&D would be wasted if we don’t get the implementation right.

The Federation welcomes the recent change in direction towards a more collaborative approach to science.

The merging of MoRST and FoRST into the Ministry of Science and Innovation, the Centres of Research Excellence, Research Platforms, the Crown Research Institute reforms and the Primary Growth Partnership are all positive moves to create a science and innovation ecosystem. This enables more strategic deployment and coordination of our scant research resources.

However there is still a space for competitive science funding to stimulate new ideas. The Science and Innovation Boards, on which I sit, provide that role in the research facing and business facing spaces. I am pleased to say that business is at least beginning to embrace the concept of R&D with bids becoming more competitive.

For agriculture, the PGP is helping to engage business and science with a focus on commercial outcomes.

Creating the right science ecosystem is not about lurching from one extreme to another, as Sir Paul rightly points out.

It is about balancing the science portfolio. Balance between discovery and applied science, balance between industry sectors and balance between economic, social, cultural and environmental outcomes.

It is also about creating an ecosystem where excellence is rewarded. Finally, it is about deciding priorities which provide the strategic direction.

Priorities which inform us of the areas we should ensure are strong and which areas we should not focus on. I think that weapons research and nuclear power generation are not considered areas of strategic opportunity for New Zealand for obvious reasons.

Cleantech is also an area in which we would find it hard to compete, considering the cleantech budgets of industrial powers like China. But that doesn’t mean that when excellence and opportunity present themselves we should ignore it. Take Lanzatech for example; a New Zealand grown company using biotechnology to process waste from steel plants to create fuel.

Our primary industries earn about $31 billion out of the $43 billion in physical exports we know about, roughly about 71 percent. Our number one priority is to protect and increase those earnings and we need science to do both.

If we are to take advantage of our opportunities, while mitigating our threats, then as farmers we would see like to see three areas of focus for research spending They are:

Increasing our productivity;
Increasing the value of our products; and
Reducing our environmental footprint.

I have been asked to present to you farmer’s priorities for research spending.

A twenty minute speech would not provide the detail and direction I think you seek but there are a number of sources of good information. In particular the Red Meat Strategy, the Dairy Industry Strategy, the Aquaculture Strategy and the Horticulture Industry Strategy. Both AgResearch and Plant and Food have consulted with primary producers and their statements of corporate intent provide useful high level detail on research areas of priority.

When we as farmers stand inside the farm gate we have two main concerns; can we run a profitable business and do we have the freedom to operate?

Farmers are essentially price takers so costs anywhere in the value chain tend to be reflected in farm profitability. Productivity inside and beyond the farm gate is critical.

A recently released NZIER study shows that our agricultural labour productivity is 61 percent higher than that in Australia. Yet the gap, the NZIER notes, is closing.

Farming is a complex and at times, unforgiving business and one of the many ‘arts’ of being a top farmer is to manage multiple farm inputs and livestock. We must also take account of the unpredictability of weather and commodity markets.

The role of science is to convert farming’s art into rational decisions, allowing us to intelligently use resources. We are only scratching the surface on-farm when it comes to the adoption and use of technology to aid decision making.

Increasing our productivity
Agriculture's year-on-year multi-factor productivity has increased by 1.8 percent over the past two decades.

Since 1990, we have managed to produce seven percent more lamb but from 55 percent fewer sheep. With beef, our meat volumes are up 23 percent but from 11 percent fewer cattle. Meanwhile dairy production growth per cow has averaged 26 percent since 1990.

We’ve also managed to reduce carbon per unit of product by about 1.3 percent a year. All without need for an ETS but instead driven by efficiency and productivity.

For all farm businesses though, there comes a point in the business model when the law of diminishing returns is invoked. In farming, this is the point on the production curve where increasing investment to increase production becomes uneconomic.

This also represents one of the greatest opportunities for science; shifting an individual farm’s point on the production curve or, better still, changing the shape of that curve. Quite literally, more from the same or more from fewer inputs.

The economic damage brought by the 2007/08 drought for instance has been costed by MAF at $2.8 billion. Developing crops and pastures requiring less water and fewer nutrients would revolutionise the economics of farming.

Similar traits bred into horticultural varieties would allow expansion of production land for niche, high value crops. This reduces market risk through diversification and provides greater security in the face of climate variation.

The bonus is that we reduce nutrient loss and get to keep more water in our rivers. Like so much that science has to offer; an economic win and a win for the environment.

Farming productivity also comes from better utilising what’s under our feet.

A dairy farm’s effluent system may cost $100-$300,000, but, according to DairyNZ research, it can save the average dairy farm $10-$20,000 in synthetic fertiliser costs each year.

Adding biogas production to this system could further reduce the carbon footprint of a farm by reducing both fossil fuel use and biological emissions at the same time. Currently biogas production is too expensive to be deployed on-farm but I note that the New Zealand Energy Strategy includes biogas as a research priority. Bearing in mind my previous comments, we must develop these technologies where we find a niche or have excellence and world leadership. Otherwise, we should adapt technology from abroad

Productivity gains also lie in the nutritive value of feeds as this materially influences the quality of stock and the stocking rate. With it comes the ability to influence effluent and emissions too.

In other words, we need science to help us to do a whole lot more from a whole lot less. All the while, ensuring that the minerals, insects, bacteria and nutrients in soil are kept in optimal balance. We may have something to learn from organic agriculture here but we must be sure that the ideas we deploy have a scientific basis while satisfying our productivity and environmental outcomes.

Science, not dogma, lies at the heart of turning our challenges into opportunities.

In that respect, water represents an opportunity and in the minds of some, our Achilles heel.

Despite being our most precious asset, water is only now being realised for the potential it offers. We have increased the scale and efficiency of water use through central pivot irrigation.

But to put irrigation in perspective, the combined water take from rivers of all irrigation in New Zealand is only marginally more than the out of river take of one hydro scheme; the Manapouri power scheme which diverts water destined for the Maroroa River.

While farmers see water storage and irrigation as an enabler, the environmental lobby often views it as a means to just ‘intensify’ yet further. It doesn’t help that centre pivot irrigators are more visible than the flood irrigation it replaced.

We need science to deliver the commercial means to optimise the efficient use of this precious resource while helping us to deal positively with the outcome of its use. For example, we need a better understanding of water and nutrient flows in specific catchments to inform decision-making by farmer and regulator alike.

Increasing the value of our products
To optimise our returns and to give farmers confidence about their future, we need to develop new products tailored to specific market preferences and needs. The Japanese grain fed beef market specifies black cattle only and that is but one example of market preference.

Let us remember that commercialising a new apple variety can take up to 30 years from selecting the initial cultivar to market launch. It involves something we are only just beginning to value and that is intellectual property.

It is here where we need a close collaboration between farmers, scientists, processors and marketers to communicate market requirements into the science pipeline. This is of course can be done by reading through the various industry strategies, but as a pipeline it is clear the valuable proposition begins on farm.

As a farmer, we can sometimes feel disconnected from the end market yet it is the end market we need to understand because that determines not just how we farm, but how we stock our farms and orchards.

One example from aquaculture is a seven-year PGP programme with Sanford, Sealord Group and Wakatu Incorporation to domesticate and selectively breed green shell mussels of high value to the market.

Aquaculture, we must remember, is around 10,000 years behind terrestrial farming in terms of domestication and the genetic improvement of livestock. We have the knowledge and tools to make rapid gains here.

Improving the value of our products can come in two ways We can improve the current products and create new products to stimulate demand and maximise returns. Farmers need to be open minded here.

The bagging of Kerotec was in my mind short sighted. Here was a product, which while small in its demand for wool, had the potential to create a significant lift in the value of the wool which went into it.

Velvet Antler Research New Zealand, which I chair, has a product from deer velvet which is ready for human trials. If these trials are successful, it could demand half of the country’s velvet. What’s more, accredited farmer suppliers, those capable of putting in place the demanding supply systems, will see a significant jump in their revenue and profitability with no increase in environmental impact.

It’s positive too because New Zealand doesn’t have Chronic Wasting Disease for Deer. That means it would be hard to move production offshore. Compare that to our software friends

So we need scientists to be thinking outside the square as well. Research can take some direction from its users and that is important but as Henry Ford famously said, “If I listened to my customers I would have built a faster horse.”

I mentioned that people demand safer food for their children and life-prolonging products for themselves. New Zealand has a reputation for safe food and good science and there is an opportunity to exploit consumer desires with robust science and regulation which develops an industry supplying functional foods to the world. But we need to be creative and bold.

Finally, we need to have a better understanding of the real value drivers in our customers’ minds. I have been disappointed at the poor quality of information which poses as science when it comes to consumer choices and what drives their purchasing decisions.

Reducing our environmental footprint
It may be a perverse argument but it is my view that the current climate of conflict between farmers and environmentalists risks having the reverse outcomes than what is desired.

If farmers feel under threat and consider that their freedom to operate is being unreasonably curtailed, confidence for their future will be eroded. The result will be short term exploitation of the here and now.

Last century, the New Zealand Government created leases in perpetuity to change the short term exploitation of some high country properties. The result was better management by leaseholders who now had an intergenerational view of farming.

We ask that farmers and scientists work together to understand one another’s point of view and each other’s situation. It is in the environmental space that our greatest challenge lies.

So, in that spirit, let me express our concern about the recent report of the Office of the Auditor General The response to the Auditor-General’s report lacked one vital thing, a scientific response. Scientists are collectively working in this space and in terms of phosphorus and faecal bacteria, the trend is very much an improving one, especially in Southland.

While the OAG seemed happy to point the finger at famers for water quality in the Manawatu, it failed to notice the discharge consent violations of Palmerston North City Council and the major effect that discharge is having on the river.

Is this really the Auditor Generals business? Yet there’s been silence from those ‘in the know’.

The key challenge for us here again comes from the words of Sir Paul Callaghan; a perception that we are at our limits and only harm comes from intensification. This is a recipe for economic and technical stagnation.

Having said that, we need a better understanding over how to trap and utilise nutrients such as phosphorus and nitrogen within our farming systems. Of the two, nitrogen needs greater focus as there’s a growing policy sense phosphorus is coming under control.

The policy response to nitrogen is akin to blunt force; nutrient caps or farming by consent as councils invoke caution in the face of insufficient knowledge on management options.

Helping farmers develop better nutrient cycling will satisfy the public and policymakers that we have the environmental means to grow as an industry. The Ballance-led PGP on improving fertiliser utilisation and reducing nitrate loss is a start.

Retaining these nutrients on-farm is vital for us to farm to our potential. The world needs its most efficient producers farming to potential while using resources optimally.

While some New Zealander’s believe we are shirking our climate change responsibility, we should be more concerned about not pulling our farming weight.

Not farming to our potential will more likely bring international condemnation. It will be seen as being selfish in a world facing food scarcity.

We need the science and our agricultural and horticultural scientists supporting the farm system with solutions to meet our current challenges. Meeting these real environmental challenges demands that the whole agricultural sector be united to address pasture, crops, soils, farming systems, feed and genetics.

Our new president, Bruce Wills, has talked about a collaborative approach Collaboration needs engagement from both sides; we need to understand one another’s points of view.

So, if there is a plea to the scientific community it is for more and better communication But remember, collaboration does not mean complicity. Where is our ‘Dr Mike Joy’ I need to ask? People who passionately believe there are real improvements in farming because we aren’t looking for sycophancy, only balance to what is a one-sided debate. This needs your engagement.

In conclusion
I wish to wrap up with the word “genetics”. It will excite the green movement who overlook the fact we’ve been breeding beneficial traits in and less beneficial ones out, for thousands of years.

There comes a point in time where we need to use all of the tools at our disposal and that demands you, as scientists, to stand up to a luddism that relishes a climate of fear.

The words ‘Genetic Modification’ seem to be the science that dare not speak its name.

We need to wake up to the reality of those 3,600 people who have joined the human race while I have been speaking. They need food, shelter and economic development. The last aspect if we want the world population to stabilise.

Perhaps next September’s Agricultural Biotechnology International Conference in Rotorua is a means for us to showcase what we do to the rest of the world. It is the Rugby World Cup of biotechnology and a means for us to show that we are world leaders and not followers.

That conference has potential to lead to direct investment into the research we do because we are good at biology. There is no reason why we ought not to be the epicentre of global agricultural research and I know, Massey’s Vice-Chancellor believes in that.

Maybe, just maybe, I’ll even spring Sir Paul a registration to show him that we can embrace physics, biotechnology and agriculture equally.

Thank you.

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