SPEECH NOTES:
HON JOHN LUXTON
Opening of the Pipfruit Growers Of New Zealand Conference
Hastings Racecourse,
Hastings
9 September 1999
(check against delivery)
Chairman, Richard Easton, ladies and gentlemen, I am delighted to once again address your Annual Conference of Pipfruit
Growers after another interesting but difficult year for your industry. Since I last spoke to many of you in May, a
great deal has happened.
But firstly I want to acknowledge the pressure that has come on the industry from the international marketplace where
apple production continues to surge, particularly in China and also from traditional producers, together with the
increasing impact of other fruit in the retail of your product.
The current season has been described as the most difficult of the past 10 seasons, so I commend the work of your
industry and its recognition internationally as a producer of the highest quality pipfruit in the export market.
Over the last 18 months there has been much debate on the issue of producer board reform. The Government has been very
focussed on ways to increase industry returns overall.
There is also debate within your industry as to whether single selling or multiple selling is the best way to continue
maximising returns for the New Zealand pipfruit industry.
That is an ongoing debate that is healthy and should continue. The last 12 months have been a rocky road but I believe
we have made significant progress over that time.
Even in May when I addressed some of you at the Airport Hotel in Wellington, there was still a high level of uncertainty
and finding a way forward was proving difficult. Now the Government and industry have agreed to a package which I
believe puts the industry in a good position to face future challenges.
I am pleased with the level of consensus we have achieved among growers and I would like to thank John McCliskie and
other industry leaders for their role in reaching it.
Just last weekend Parliament endorsed the Apple and Pear Industry Restructuring Bill with 117 votes to 1 and I believe
the high consensus is a consequence of the rigorous debate that growers and politicians have had over that time.
Apple and Pear Industry Restructuring Bill
The Apple and Pear Industry Restructuring Act enables growers to determine the ownership of ENZA. It also separates the
commercial activities of ENZA from the regulatory roles of the Board. For too long there has been a mix of regulatory
and commercial functions within the one organisation which has made it difficult to get a very clear focus on one or the
other.
I believe the majority of growers are supportive of the concept of having real ownership of the very large assets
accumulated within the current Apple and Pear Board structure. With a corporate structure, every incentive will be on
you as owners and growers to ensure your organisation maximises its returns.
Point of Acquisition
Another very significant change brought about by the legislation is that from 1 February 2000 ENZA will acquire fruit
from Free Along Side Ship. This very significant change took place in the kiwifruit industry two years ago and resulted
in quite significant reductions in onshore costs to producers.
We would like to see this move to Free On Board Ship within 2 years, especially if competing on-shore operators can
arrange more competitive stevedoring.
New Export Permits Committee
Whilst the single buyer issue is still being debated within the industry, the new Act brings some changes. A separate,
independent stand-alone Export Permits Committee is to be established. Its members will be appointed by the new
regulatory Board. It is my view that this Committee should exercise its judgement and its discretion in the export
consent area in a way that recognises the diversity of growers in the industry and encourages innovation and
benchmarking.
An increasing number of growers I might add, are disappointed the Bill did not go further on this issue, and remove the
export controls like the new dairy industry legislation potentially does. Certainly that was a lively piece I saw on the
Holmes show a couple of weeks ago.
Although there has certainly been some heated debate over the single seller issue, I believe the structural changes we
have made are very significant in moving your organisation forward.
The package is very different from changes made to the dairy industry legislation, which includes the removal of the
single buyer, because of the distinct nature of each industry as well as the different stages of their evolution.
The dairy industry already has clearly defined ownership while the Apple and Pear Marketing Board does not. Perhaps
growers will see fit to eventually take the next step and move to multi-exporting, a move, which I believe, will
increase returns to growers.
Declining commodity prices
The apple industry is caught, as are most other parts of the agricultural sector, in the downward spiral of falling
commodity prices which sees apple prices that were more than $1.50 a kilo in 1950 in today's money, now selling for
around 35 cents per kilo. And commodity prices are still trending down. Increased orchard efficiencies have not been
sufficient to offset the fall in prices.
The only way to increase profit is to increase revenue or lower costs or to do both. In essence in most ventures today
the focus has to be on both.
To increase revenue we can improve the marketing and I'm quite sure that the changes brought about with the
Restructuring Act will assist that.
You can diversify product and it's interesting to see different product lines coming through particularly with new
varieties and the growing demand for organic produce. And we can innovate. There are a variety of ways in which
innovation is, and will occur in the industry.
Innovation
We see the potential of biotechnology allowing longer storage life of fruit. New products we've spoken about. New
systems of handling and lowering costs. New marketing ideas and new processing technology. New varieties will also
continue to be very significant in the apple industry.
The other focus has to be on reducing costs. On-farm, differing spray programmes, differing pruning programmes and the
like. A focus on off-farm costs; Free Along Side Ship I'm quite sure is going to markedly reduce the costs that growers
pay in New Zealand. Even more so with a subsequent move to FOBS.
What Government has done for Growers
Obviously New Zealand's economic changes and the Government's policies over the last 15 years have focussed very much on
lowering the costs to growers and exporters so that you can remain internationally competitive.
I have to say it is with some surprise that I listen to people criticising Government reforms as not being of benefit to
our agricultural sector. I find it very hard to think of a significant reform in this country that hasn't been aimed at
lowering the cost structure of our agricultural sector and improving our international competitiveness.
Reducing taxes, opening up the fuel industry to competition, the Employment Contracts Act, now under threat from the
Labour/Alliance bloc, the elimination of stamp duty, shipping deregulation which has lowered the costs of a container
travelling across the Tasman or across Cook Strait. Tariff reductions and the list goes on.
For those who argue that we should retain tariffs in New Zealand, I ask why would anyone want to pay 20% more for their
farm ute or farm tractor or for their gumboots or spray gear? That simply doesn't make sense. Eliminating tariffs is
vital for the agricultural sector. I know of no New Zealand tariffs that actually help our agricultural sector.
Economic stability, low inflation, a stable exchange rate and low interest rates have also greatly assisted grower
profits. Just this decade we've seen a halving of interest rates and it's one of the reasons why farming remains viable
in this country - despite declining international commodity prices.
Parallel importing and of course producer board reform. You can also look at other significant Government reforms which
have all been aimed at lowering costs by improving efficiency and prioritising spending in those important sectors.
Some in our society believe that increasing taxes and increasing Government spending in these areas instead of
restructuring them and improving their efficiency might provide a solution.
But to those people I say that if the spending on a Government service increases then taxes will increase, farmers will
have less money to spend on their farms and families and, basically, farming will become unviable. Many say it is at
present but I have to say these difficulties are worldwide. And there are also many examples of innovation and success
throughout New Zealand agriculture.
The future challenge
What the Government has to do is provide an economic environment that continues to lower costs.
The choices coming up to the election are stark. I noted comment from your organisation earlier this year that you were
comfortable with Labour policies, well I hope you read carefully their Industrial Relations policy released yesterday
and the promise to return to compulsory unionism.
Either we turn the clock back and run our country into the ground with costs increasing off-farm, to the extent that
farms become completely unviable. Or we continue reform and restructuring in our society and open it up to allow new
investment, new opportunities, new products and new jobs.
I am leaving this Conference now to go straight up to the APEC Conference in Auckland. This is one of the most
significant conferences that this country has ever hosted. It is all about what we can do for this sector, the export
sector, about lowering the hurdles into other countries.
It follows with the WTO Seattle Round at the end of this year, which will put agriculture on to the agenda for the World
Trade Organisation. I have to say the Government is very busy in trying to ensure that the environment for the continued
prosperity of New Zealand agriculture, horticulture and the apple industry is a positive one. Something that other
parties don't seem to have focussed on.
With apple exports of $384 million in 1999, your industry is very important to the whole New Zealand economy - not just
the apple growing regions. I'm confident that with the sound policies that my Government can provide, it's contribution
can grow.
Thank you very much.