Nathan Guy

28 JULY, 2014

Speech to Red Meat Sector conference

Good evening and thank you for the opportunity to address you all tonight.

Following some challenging years, there are strong indications of improved results for many companies in the sector this year.

This resilience is a reflection of the hard work of people throughout the red meat sector.

The meat and wool sectors make up 21 percent of total primary sector export revenue at an estimated export value of $8 billion for the year ending 30 June 2014, which is a record.

The recovery of dry stock numbers after last year’s drought and the productivity improvements need to be acknowledged.

In the face of forecast decreases in stock numbers these capabilities will be important assets for the future.

Export revenue from the meat and wool sectors is estimated to increase by about 22 percent over five years to $9.4 billion by 2018.

However, sheep numbers and beef cattle numbers fell 47% and 19% respectively from 1990 to 2013.

While productivity gains and an increase in dairy beef have helped offset these declines, the forecast is for stable beef production and slight increases in lamb production.

The good news is overseas prices for New Zealand manufacturing beef are currently 28 percent higher than 12 months ago and farm gate prices for lamb are currently 13 percent higher than a year ago.

Export growth is expected to mainly stem from higher prices for product rather than increased production.

While higher prices from a globally constrained supply of beef and lamb and steadily growing demand in Asia are forecast to keep prices strong over the next few years, the sector must continue to look to increase the value of its product.

The OECD has forecast that demand for sheepmeat will be driven by the growth of the middle class in China and the Middle East in particular.

The Government is committed to supporting the sector make the most of these export opportunities.

Trade with China

Our Free Trade Agreement with China and our current trade agenda puts New Zealand’s red meat sector in a strong position to take advantage of these opportunities.

The recent progress in getting 13 meat premises added to the list of premises approved for export to China is worth millions of dollars to the industry.

New Zealand is extremely well placed compared to the rest of the world when it comes to access for our primary products into China.

The trade issues that arose last year highlighted that MPI’s existing overseas capability needed to increase.

We are now taking a whole of Government approach to achieve an increased presence there.

MPI in particular have increased their representation by three from mid-2013, and there are another three planned from this year.

I want to take this opportunity to acknowledge the hard work of our team in Beijing and Shanghai - who I know work tirelessly on your behalf.

The New Zealand presence in China will be bolstered by the new NZ Embassy in Beijing. This is a $40 million project, being built on the site of the existing Embassy.

Although we are taking an all of Government approach to China, we can’t do it alone. It is essential that NZ businesses with a strong interest in the China market think carefully and strategically about their own business plans in this important market.

The recent Meat Industry Association-led delegation to China highlighted the determination of processors in the sector to work together, and strengthen overall relationships here and overseas.

MPI is prioritising the further work required with their counter-parts in China to review the meat access protocols to provide for access of New Zealand chilled meat, unprocessed casings (‘green runners’), and further processed meat products.

I understand the authorities in China have indicated a willingness to engage in these discussions, and that MPI, MFAT and MIA recently met to discuss the approach to be taken to progressing them.

We are currently negotiating on the Trans Pacific Partnership – this includes 11 countries that make up over 40 percent of our trade.

Labour refuses to express their support for the TPP which is terrible news for exporters.

Trade agenda

New Zealand’s current trade agenda is particularly busy, with progress being made across a number of negotiations. Negotiations with Korea have been very intensive in 2014.

Currently our beef exports to Korea face tariffs of up to 40% and our sheepmeat is subject to tariffs of 22.5%.

Although some market access discussions remain challenging, good progress has been made in many areas of the talks. Efforts are now focused on concluding the negotiations.

I am aware that Indonesian import regulations are hampering your access to that important market.

The New Zealand Government is continuing to focus efforts on seeking a positive resolution to this issue and is currently engaging with Indonesia via the World Trade Organisation dispute process.

Red meat structure

While discussion appears to have decreased in the face of forecasted increased returns for processors and farmers, there remains a determination to ensure the sector is operating to its full potential.

The continued sharing of ideas among sector participants, including through the election of Meat Industry Excellence representatives to the Boards of the major cooperatives, can only enhance understanding of the sector’s complexity.

I encourage you to continue to engage and discuss any improvements of how the sector operates.

As I have said previously, if a plan for change with broad and strong industry buy-in is developed, I will do whatever I can to ensure the Government supports the industry.

I notice that Labour has come out with a policy for the meat sector which says that a Labour Government will dictate the direction of meat reforms, and that they will review PGP meat programmes.

The last thing the meat sector needs is a plan dictated by a Labour-Greens-Mana Dotcom Cabinet, with no grassroots support.

Biosecurity

Throughout my time as Minister for Primary Industries biosecurity has been, and will remain, my number one priority.
More than any other developed country, New Zealand depends on the success of its primary industries and the biological system that underpins them.

Retaining a world-class biosecurity system is critical to our economy, environment and way of life.

New Zealand will always face threats from unwanted pests and diseases.

We need to manage risks pragmatically, and this requires targeted investment, working together, and new scientific knowledge to drive innovation and improvement throughout the biosecurity system.

This year’s Budget outlined more funding for MPI with a real focus of strengthening core systems like biosecurity and food safety.

Significant new investment and improvements have been made at the border, including upgrading our x-ray detection technology, and recruiting 125 new Quarantine Inspectors in last 18 months.

We now 40 dog handler across the country, up from 25 in the last two years.

I recently just announced a new $65m high-security biocontainment laboratory in Wallaceville.

The new facility will replace the existing lab and continue more than 100 years of animal disease diagnostics at the site.

This is a new lab supported by skilled personnel that have an essential role in responding to disease outbreaks, protecting public health and providing international trade assurances about New Zealand’s animal disease status.

Many of our trade relationships are dependent on ongoing surveillance and investigation work, such as that currently undertaken at the site on a day-to-day basis.

Skills

A big challenge and priority for all of us is selling our success story and attracting people into the industry.

The primary industries currently employ 350,000 people and account for one in six jobs. In some regions the figure is as high as one in three.

We know that by 2025 we’ll need another 50,000 new jobs. Over half of these workers will need a Tertiary or Level 4 Qualification.

Businesses are likely to be larger, more complex, use more technology and require more professional support. This means a greater need for more degree qualified people in a range of areas.

The challenge for all of us now is to promote the diversity and breadth of careers in the primary industries.

Last month I launched the Enterprising Primary Industries Career Challenge (EPIC).

This is for Year 10 students to raise awareness amongst their peers about the many and varied careers that can be found in the primary industries.

We also need to ensure that those who advise and support people making career decisions - teachers, parents, career advisors - have access to the best and most relevant information.

Primary Growth Partnership (PGP)

Innovation has long been, and will continue to be, a driver of productivity in New Zealand’s red meat sector. The Primary Growth Partnership is about growing New Zealand’s future by investing in innovation programmes.

This is a $700 Government/Industry total committed investment in Research and Development in 18 cutting edge projects.

A recent report by NZIER shows the potential prize is around $6.4 billion by 2025 – with the possibility of up to $11.1b if the aspirational stretch of some of the programmes is realised.

Broken down to the farm gate, this report estimates returns of extra income per year of $270 per hectare for hill country farming, $600 per cow for dairy, $370 per tonne of exported seafood, and $190 per hectare for forestry.

In the red meat sector, the Government and industry are investing some $326 million through Primary Growth Partnership programmes to support innovation.

The range of PGP investment in the red meat sector includes work across the value chain. This includes programmes which focus on value-add products, supporting on-farm practice, and integrating the value chain.

Examples include:

The Integrated Value Chain for Red Meat programme - led by FarmIQ – which aims to create a demand-driven, integrated value chain for New Zealand red meat.

FarmIQ has set out to ensure there is a better understanding of the factors that make a difference in the value chain in order to more consistently deliver great eating experiences and lift returns for all in the value chain.

The Red Meat Profit Partnership which involves participants across the sector, including meat processors, Beef + Lamb NZ and banks.

The programme aims to transform the transfer and adoption of farm business best-practice, providing better information and tools to support farm business decision-making.

Under the New Zealand Sheep Industry Transformation PGP Programme, the Alpine Origin Merino joint venture with New Zealand Merion has formed. This is opening up new markets for differentiating Merino meat, under the 'SILERE alpine origin merino' brand.

Through the Marbled Grass-fed Beef programme, Firstlight Foods Ltd is establishing direct sales of Wagyu beef to consumers in domestic and international markets.

Based on experience from domestic sales, and building on the success entering the South Californian market prior to the start of the PGP programme, they have entered the London market and are establishing entry into Dubai with the assistance of local partners.

The FoodPlus PGP programme is identifying opportunities to create new higher value products with a focus on new food, ingredients and healthcare products.

Investment in science and research

Earlier this year, Steven Joyce announced the Government is investing $15 million over five years into advances in genetics research that will improve the profitability of New Zealand’s sheep and beef sector.

A new partnership, Beef + Lamb New Zealand Genetics, will also bring together New Zealand’s existing sheep and beef genetics research by consolidating different entities.

Total funding for the new project from government and industry sources will be up to $8.8 million per year.

In just 10 years Beef + Lamb New Zealand Genetics expect that farmers will receive around $6 extra profit per lamb sold at that time.

In an interesting example of the New Zealand brand at play, the Herald recently ran an article on Hollywood actresses who use sheep placenta extract in a cream to keep maintain their youthful looks.

One Hawkes Bay company who supplies some of the placenta says that demand is growing steadily all the time.

I note that the celebrity doctor who advocates the placenta pays special acknowledgement to sourcing his placenta from New Zealand as "[we] have no impurities in their system whatsoever.”

Election

Of course, September 20 is just around the corner.

This year’s KPMG Agribusiness Agenda said that this year’s election is the most significant in decades for the primary sector.

While the latest polls may be favourable for the National Government, the risk of getting complacent - when the alternative threatens so much of the primary sector’s livelihood - is a risk we can’t afford to take.

Labour’s primary industries includes a capital gains tax on every farm, higher income taxes, and bringing agriculture into the ETS which would hammer these industries that are the backbone of New Zealand’s economy.

Labour’s withdrawal of support for irrigation is a slap in the face for regional development, especially given we suffered through the worst drought in 70 years last year. The Crown’s role as a kick-start investor has great potential, with NZIER estimating that exports could be boosted by around $4 billion a year by 2026.

Labour and Greens have consistently opposed creating new jobs in the regions, given they are anti-mining, anti-oil and gas, anti-roads, anti-West Coast logging and now anti-irrigation.

Conclusion

Before I leave, I’d like to leave you with a quote adapted from Dwight Eisenhower, which I think aptly summarises the context for this year’s election.

“Farming looks bloody easy when your plough is a pencil, and you live a thousand kilometres from the paddock.”

And so I’d like to thank you for all you do – because I don’t believe that you don’t get thanked enough. Through hard toil and passion, you craft product that is exported to the finest restaurants and dinner tables around the world.

As September 20 draws nearer, and the dog-whistling heightens from some of the pencil-pushing parties of this country who all believe they can farm better than you, it’s worth remembering that this has been a Government that has backed the primary sector.

As a Government and as Minister for Primary Industries, we realise that the primary sector has helped float our economy through stormy times when others economies have sunk.

The primary sector has helped us pay for new schools, hospitals, and road. If we are fortunate enough to be re-elected, it won’t be something that we forget.

Thanks once again for the invitation to be here tonight.

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