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Operating mechanics of New Zealand’s four main rural retail businesses.

Executive Summary

New Zealand has four prominent rural retailers, Ashburton Trading Society (ATS), Farmlands, RD1 and PGG Wrightson (PGW). Each of these businesses core, is providing farmers with goods and services. Over recent years we have seen numerous mergers and amalgamations, leading to the marketplace we have today.

Each business is having success in different areas, contributing to their ability to provide goods and services on farm at a sharp price. There seems to be little attraction for each business to compete head to head with each other, instead providing a healthy market place of “Low margins, low overhead costs, and input costs.” (Jason Minkhorst RD1)

The future looks bright for each of these businesses, with numerous opportunities and growth strategies available to them all. Of course, this does not come without threats and game changing market place revolutions. The will see constant battling and drive a to see who can claim that number one spot.

Operating Mechanics of New Zealand’s Four Main Rural Retail Businesses – Wayne Langford

Pipfruit sector: mechanisms for waste minimisation.

Executive Summary

Each of these areas, discussed either individually or collectively, has the potential to increase marketable yield and minimise waste through the supply chain directly or indirectly. The solution to reducing fruit waste and gaining efficiencies “lies in a combination of planning, investing, controlling, and partnering across the supply chain.” (Harz-Pitre 2013) The pipfruit industry needs to collaborate, create better transparency and technology transfer if it is to be successful in further minimising waste.

Growing pipfruit is complex; it is a dynamic biological system with many layers. Waste occurs throughout the growing cycle and the supply chain from the paddock to market. Waste fruit (apples) can account for 15 – 30% of the harvestable export crop and can be as high as 35%. The key stages of waste are: in the field, grading, and packing, storage and at retail and beyond. It is important to understand that gaining efficiencies is necessary to minimise waste. There are many mechanisms for waste minimisation and all have varying degrees of complexity. Waste is a component of all practices, processes, and procedures. One of the key drivers to reducing waste in the orchard system is the development and adoption of simple architecture. Simple architecture allows better crop load management, which is critical in reducing waste downstream in the production cycle. The impact of achieving the correct crop load can be as much as $15,000 to $29,000 per hectare. “There are 3 management practices that have a large effect on crop load: 1) pruning, 2) chemical thinning and 3) hand thinning” ( Robinson et al., 2013). Using quantitative rather than qualitative pruning strategies can reduce the inputs required for the remaining two  management practices.

Chemical thinning, which relies on timing, rates and weather windows, is often variable and unpredictable. However, precision thinning which bundles new emerging technologies, such as carbohydrate modelling and new chemistries, is providing greater control. A good chemical thinning strategy can significantly reduce hand thinning to $1000 – $2000 per hectare, which could otherwise cost as much as $8,000/ha. The ability to optimise crop load is a critical component to minimising waste because significant amounts of waste are generated by getting it wrong. Crop load has a direct influence on yield recovery, and more specifically on marketable yield.

A key mechanism for increasing recoverable yield and reducing waste is good tree architecture, which allows for simpler management, and a reduction of inputs. Traditional systems or larger, denser canopies do not lend themselves to high yield recovery and high quality fruit, due to their complexity. The shift from more traditional canopies will be the catalyst for the move to greater mechanisation, because tree architecture that is Simple, Narrow, Accessible, and Productive, (SNAP) is more fruitful, less demanding, and allows for more mechanised forms of pruning, thinning and harvesting. Through their simplicity, they are creating synergies that will help speed the adoption of mechanised technology and precision farming. Growers that are on the path to full emergence in SNAP canopies currently are benefiting from the options of being able to implement partial mechanisation through harvest-assist machinery and platforms which increase productivity, are less physically demanding, attract staff, and broaden the labour pool. They require less supervision and can help increase yield recovery. Using platforms, compared to ladders, can reduce pruning and fruit thinning costs by $1,400 per hectare. SNAP canopies allow for greater light interception and increase fruit quality, spray deposition, and colour. As mechanisation advances and the technology for harvesting systems advances, a greater proportion of grading will occur in the field. Thus, reducing transport, grading, cold storage costs, and the resources required to carry out these procedures. The ability to send higher quality fruit through the orchard gate will significantly reduce waste along the supply chain.

Colouration is also linked to tree architecture, crop load, and climatic conditions, which all affect colour development. Fruit foreground colour is becoming more important as New Zealand growers focus on Asian markets where high-grade coloured fruit receives premiums. The ability to manipulate colour has significant economic benefits and increases recovery of marketable yield. The use of reflective cloth can increase the amount of fruit harvested by as much as 25%. However, the capital investment can cost up to $16,000 per hectare. The plant growth regulator, Ethephon, could be a more cost-effective alternative to help improve fruit colouration. Research has that use of Ethephon resulted in a greater volume of fruit, harvested earlier and overall, with less fruit left on trees post-harvest. The use of Ethephon, it is estimated, could increase a gross margin by $10,000 per hectare. The use of Ethephon in combination with SNAP canopies has the potential to significantly reduce waste by increasing marketable yield.

Dry matter concentration (DMC), a new quality metric for apples, has greatly increased the ability to measure quantitatively a fruit’s quality attributes. Since the introduction of DMC, “many producers have seen a marked reduction in product rejection from overseas super markets related to quality” (Plant and Food, 2011) DMC is also showing promise as a predictor of internal disorders such as browning. The cost of internal browning to the supply chain is $200 per bin before it enters the market! The ability to determine lines of fruit that have greater risk of internal disorders will greatly reduce waste and reduce economic loss of stored fruit. Perhaps the most significant tool in the post-harvest sector that has reduced waste is 1 – methylcyclopropene ( SmartFresh™), a compound that inhibits ethylene allowing better control of fruit maturation. This technology has allowed fruit to maintain better flesh firmness (crunch), a key retailer and consumer specification, reducing the amount of fruit that is rejected in market. Smart Fresh™ has enabled fruit to be stored for longer while maintaining good condition, significantly reducing waste. New markets in less developed countries are also benefiting as SmartFresh™ technology is bridging the gap where cool chain is not developed or consistent.

Perhaps the largest area of waste yet to be fully realised, is the retailer and consumer. Waste in this area is less controlled by the actions of growers and more by the perceptions of the market place. The demand of consumers has placed high product specifications on growers, ultimately causing large amounts of waste. British “supermarkets reject between 20 and 40% of farmers’ produce, often on purely aesthetic grounds.” ( EuroMonitor , 2012) “Tesco has also revealed that 40% of apples were wasted and a quarter of this is in the home”. (Smithers 2013)

The question remains : how we can influence consumers to minimise waste?

Pipfruit Sector: Mechanisms for Waste Minimisation – Grant Mckay

Which perennial ryegrass to sow.

Executive Summary

  • This study stems from the common farmer complaint, that there are too many perennial ryegrass options on the market, this number conservatively estimated at over 50, with a few and limited tools available to farmers to aid them with variety choice for their pasture renewal programme.
  • A survey is conducted of 16 Dairy Women’s Network Regional Group Convenors in semi-structured, conversational format and previous industry surveys were reviewed to provide insight into how decisions are made based on the limited resources.
  • Predictions that farmers largely rely on ‘people’ sources to assist their decision making processes were confirmed. While not hypothesized, the information shared at farmer discussion groups and ‘over -the-fence’ style conversations ranked highly as a valued information source.
  • Information gathered and the ‘Diffusion of Innovations’ model of Rogers (5th Edition, 2003) was used to create a matrix of predicted response to methods of transferring information about perennial ryegrass variety by farmer segment to provide useful paths for a Seed Company to target the specific groups.

Which perennial ryegrass to sow? – Michaela Soper

Farming mums NZ: The next step.

Executive Summary

Two years ago, I had an idea of adding a ‘one-stop-shop’ website into the brand that is, Farming Mums NZ.

The aim of this study is to determine whether further, specific support and resources are wanted or needed by the Farming Mums NZ community and to initiate a game plan on how to get it started. After Kellogg, I will look at the implementation of my concept and I will surround myself with professionals and advisors who can help me make this happen.

To avoid replication among other organisations, my aim is to create an online platform where each aspect of our industry can be brought together in one place and utilise each of our strengths to create a comprehensive and personalised website with member requested additional content and information not found elsewhere.

To determine whether this would be well received, I formed a 10 part, Survey Monkey questionnaire (Appendix 2). I attached the link into a post in the Farming Mums NZ Facebook Group to get a more accurate view on whether I was looking at the issue from the right angle.

Farming Mums NZ has the social aspect, the forum and the largest numbers giving it a community- feel, meaning great exposure, a dedicated following and a large amount of the ‘Next Generation’ of farmers, farming mums and rural women.

Other organisations I will be looking to collaborate with include Rural Women NZ, Agri-Womans Development Trust, Young Farmers, Dairy Woman’s Network, Rural Health Alliance Aotearoa, Young Rural Ladies, Primary ITO, Regional Community Connectors, AuPair Link, Newcomers Networks, Maori Woman’s League, Farmstrong, Fit4Farming, As well as the wider agricultural industry organisations. I.e. Beef + Lamb, Dairy NZ, FAR.

The support and collaboration between these organisations would be the best use of the website and I believe would add value to each of them. Each organisation could give a valuable contribution of resources and information from a different area of the industry and expertise, creating a whole and well-rounded knowledge base. In saying that, having full support industry wide won’t determine whether the concept goes ahead.

Nadine Porters Kellogg report from earlier in the year highlighted the need for us to all work together. I agree completely with this point and believe it is the best way forward to form a well- rounded support system for our wider industry rather than each organisation offering separate ideas, overlooking key points or risking replication.

”Who is the voice for rural women? There seems to be confusion among women as to who is representing them. Rural women groups urgently need to co-ordinate and develop a collective strategy in today’s environment.” Nadine Porter, 2016

The results from the survey were positive and with 660 participants it helped to build confidence around the idea and what was most important to those who will be most likely to benefit. 96% of respondents were on board with the idea.

Having the brand “Farming Mums NZ” or similarly named, along with the large page support and reputation bringing this initiative together, is going to be the best way to engage the largest number of technologically savvy women. I also see FMNZ as an independent in the middle of these other mentioned groups with no particular industry bias or current monetary influence.

Farming Mums NZ: The next step – Chanelle O’Sullivan

Improving communication of primary industries research, science, technology and innovation

Executive Summary

By the year 2020, over $1.6 billion of New Zealand taxpayer money will be invested in science and innovation per annum. What share will Primary Industries have of this investment?
“With the coming of the fourth industrial revolution – fundamental change to our daily personal and professional lives from the combination of physical, digital and biological technologies – the primary sector will find itself at the centre of change.”
Ian Proudfoot, Global Head of Agribusiness, KPMG 2016
The aim of this project was to understand what the benefits might be of improving communication of government-funded Research, Science, Technology and Innovation related to the New Zealand Primary Industries and how this could be achieved. Ten stakeholders from a wide range of areas in the science and innovation ecosystem were interviewed and findings were related to literature and initiatives already underway in New Zealand. Benefits of improving communication include:

  • Attracting science and innovation talent to the primary industries and building future capability
  • Positive engagement with the public ensuring social licence to operate
  • Building New Zealand’s international reputation as an innovative country – to attract skilled migrants, build partnerships with global experts, and be seen as a trusted producer of safe, premium food and fibre products
  • Improved cross-sector collaboration and learning
  • Faster and more advanced innovation in industry from research, science and technology uptake

To achieve sustainable growth in New Zealand Primary Industries, attracting and retaining a diversity of talented people is critical. Recommendations from this report for key stakeholder groups include: Government:

  • Improve the New Zealand Story Business Toolkit information on science and innovation
  • Government funding agencies could publicise their science and innovation investments more
  • Include a section on the quality of the communication plan in assessment criteria for government science funding

Research Organisations:

  • National Science Challenges could increase their focus on engaging school children in science and innovation (and the government could incentivise or reward them for doing this)
  • Universities and Crown Research Institutes could include positive public engagement in their promotion criteria for staff (likely if the government funding criteria changes)

Primary Industries:

  • Industry associations or businesses could develop more graduate programmes with a science and innovation focus to create career pathways for attracting talented young people
  • Businesses could sponsor employees and their research providers to visit schools to talk about science and innovation being invested in and the future career opportunities in their sector
  • Industry could investigate how to collaborate on opportunities of the fourth industrial revolution

Improving communication of primary industries research, science, technology and innovation – Kylie Phillips

The 50/50 Sharemilking: Where are we in 2013.

Executive Summary

The purpose of this report is to have a better understanding of the 50/50 sharemilking industry in 2013.

The perception within the dairy industry is that the 50/50 sharemilking business structure is on the decline and not enabling sharemilkers to progress to purchasing their own properties or enter other business investments.

Having been a 50/50 sharemilker for seven years, from the late 1980’s to mid 1990’s and having gained significant benefit from the system, I identified the need to ensure this unique pathway endures. Due to this interest in the succession of our industry, I investigated where the 50/50 sharemilking system stands today and provided some solutions for how it may develop in the future.

The body of the report looks at the actual numbers today and the trends over the last decade. I also decided very early on in my research that there appeared to be, as I have termed it, a “natural progression bottleneck”. This in itself was having a significant effect on how the 50/50 sharemilking system was functioning. To illustrate this more clearly; I chose to survey 10 long term 50/50 sharemilkers from around the country.

My findings were conclusive in that the industry needs to look seriously at its 50/50 sharemilking contract to more closely align itself with the current economic landscape, market changes and farm demographics.

The 50/50 Sharemilking: Where are we in 2013. – Phil Butler

Defining the cost of within orchard production variability on the overall profitability of a NZ apple orchard.

Executive Summary

Growing conditions in New Zealand have historically been recognised as being some of the best in the world for producing exceptional volumes of excellent quality apples. To remain financially sustainable New Zealand apple growers need to specifically focus on their natural strengths, ensuring that the production they achieve maximises the advantage of their location.

NZ apple growers have spent significant time and focus on cost reduction in orchards this may have been detrimental to overall profitability. The NZ apple industry does not have the same access to cheap finance as many of its international competitors such as the USA. New production techniques generally come with significant costs, areas of new production have a relatively long lag time from initial investment to final repayment. New growing systems also have financial risk, with the potential cost of mistakes made during the learning and development process.

Increases in the overall production of market acceptable apples can be achieved by ensuring all trees are working individually at an optimum level with minimal variation between them. This has potential for gains in cost reduction, resource use efficiency, minimisation of fruit quality variability and improvement in overall profitability.

To ensure tree to tree variability is minimised systems need to be created to efficiently measure key differences between trees. Similar populations of trees are grouped and then analysed to quantify each groups impact on overall block performance, in an easily understood format.

Beyond the scope of this project, tree to tree variability information can be used to assist with investigations into potential solutions and financially justifying the cost of variation mitigation.

This study was undertaken in a commercial Royal Gala apple or chard with 6159 – 10 year old trees planted on M9 rootstock. The assessment focuses on 1887 trees within this block. The use of trunk diameter measuring was decided as the basis for ranking variability. Fruit size and total fruit number per tree was assessed in a small trial. 5 different trunk size groups were eventually formed and the profitability of these assessed using a computer based profitability benchmarking model.

  • The missing new trees returned a negative profit of – $19,755 per ha.
  • Weak/small trees returned a profit of $ 8,516 per ha.
  • The average size trees returned a profit of $14,435 per ha (approximately the same as the overall block profitability).
  • The largest of the average trees returned a profit of $21,344 per ha.
  • The excessively large / scion rooted trees returned a profit of $5,435 per ha.

Defining the cost of within orchard production variability on the overall profitability of a NZ apple orchard – Jonathan Brookes

Connecting with the Conscientious Consumers.

Executive Summary

The following report has been completed as part of my participation in the 2013 Kellogg Rural Leaders Programme. The scope of this individual research project was to select a topic of interest to the participant and spend ‘Phase Two’ of the Kellogg Rural Leaders Programme completing the individual research project. Findings are then presented on return to Lincoln University during November 2013.

After a great deal of deliberation, the topic of research I developed was to investigate the different ways that producers were connecting with consumers, and vice versa. Of particular interest to me was the concept that producers were taking control of the messages that were being portrayed with regard to production. Thus I came up with the title “Connecting with the conscientious consumer.”

Those involved in the food production industry are keenly aware that consumers are becoming increasingly discerning about the origins of their food. Of particular concern to consumers is the way ‘meat is made’. This concept is reflected in a number of different signals and includes the consumers desire to understand the way their product was raised, what chemical and additives were used during the production process and the animal handling techniques employed during the lifespan. The purpose of my report was to investigate some of the different techniques being employed to connect our increasingly metropolitan and city-­‐based population with the origins of their food. I was able to segregate the different themes of these techniques into three categories: education, food service and practical. As such this report is split into these three themes.

The major finding of this research and exploration is was that there are a huge number of innovative and energetic producers who are going above and beyond to connect with their consumers. These concepts will be explored through the report. Another major finding was that those buying from these producers are content with buying in this manner. The shoppers appreciate the integrity that can be attributed to this kind of purchase, particularly with regard to those producers who engage in direct marketing. Due to the immense scale of people engaging in ‘connecting with the conscientious consumer’ this report is not all conclusive. Instead of simply listing all of those producers who are connecting with their consumers I decided to complete an investigative case study into some of the unique elements of their businesses. However, I can come to the conclusion that Australian consumers are becoming more discerning and cautious to know about the origins of their food. I see there is a great opportunity for people, particularly those from smaller, family based businesses, to employ tactics of direct marketing, selling the story of their exemplary land management and animal welfare techniques, along with the traditional protein (or fibre) product.

With this in mind, my main recommendations are that there is a great deal of appetite in the marketplace for a product that has both a story and integrity. There are great opportunities for producers to engage in employing techniques, as detailed in the following discussion, to enhance their business model.

Connecting with the Conscientious Consumers – Mary Johnson

Farming under nitrate leaching limits.

Executive Summary

This report investigates the impact that altering the farm system of Singletree Dairies in mid Canterbury to achieve a predicted nitrogen leaching loss in Overseer of 24kgN/ha/year will have on both the operation management of the farm and the financial effects of this.

Singletree Dairies currently has a predicted leaching loss of 32kgN/ha/year and through the implementation of more pivot irrigation, increasing the area that effluent is applied along with altering nitrogen fertiliser management in April and May the level of leaching loss can be reduced to 24kgN/ha/year. The management and financial implications of these alterations are minor and are viewed as quite achievable.

When modelled on a ‘light’ soil with and available water holding capacity of 60mm, the leaching estimate for Singletree Dairies increased to 62kgN/ha/year. Significant management alterations are required to reduce leaching to the desired 24kgN/ha/year – notably a decrease in stocking rate from 3.76cows/ha to 2.90 cows/ ha. The financial implications at a farm level of these alterations were not as great as initially thought with a reduction in return on asset from 6.91% to 6.75%.

Singletree Dairies is able to continue to operate profitably under the level of nitrogen leaching suggested in this document, however there is likely to be a decrease in production levels in dairy farming areas of light soils which may affect the local communities the greatest.

Farming Under Nitrate Leaching Limits – William Grayling

Farming families and succession.

Executive Summary

Global food systems are experiencing unprecedented changes in the way food is produced, distributed and consumed. Food systems are highly dependent on fossil fuels, emit large quantities of greenhouse gases (GHGs) and significantly contribute to environmental problems (FAO, 2006).  Agricultural farming systems particularly in New Zealand are under increasing pressure given the growing awareness of agriculture’s contribution to GHGs and deteriorating water quality.

New Zealand’s social, environmental and economic wellbeing is linked with our ability to supply the rest of the world with protein. Animal-based protein production alone accounted for over 60% of our total 2016/17 primary export revenue (Sutton et al. 2018). A temperate climate combined with advanced production systems make the NZ dairy, sheep and beef industries among the most competitive in the world. Consequently, increasing world demand for food will be a significant factor in New Zealand’s economic growth and prosperity over the next half century (Hilborn and Tellier, 2012).

Consumer concerns around the impacts of agriculture on the climate, animal welfare and water quality are increasingly influencing their purchasing decisions as they look to reduce their environmental impact including their contribution to climate change (Goldberg, 2008). This demand has led scientists to develop alternatives to animal protein from farmed animals.  These alternatives have been coined “Alternative Proteins”.

This report outlines two types of alternative proteins, these being plant based proteins and cultured meat. Plant based proteins are currently in market, whilst cultured meat is still under development.  Cultured meat has the greatest potential to displace traditional farming as if successful it could address the environmental issues created from large scale intensive farming, by growing meat in a laboratory setting.  However to be viable and to successfully compete against real meat, cultured meat needs to overcome a number of challenges. These include issues around public perception, cost, the ability to scale and the ability to deliver on environmental benefits.

Significant financial investment is being made into the research and development of alternative proteins and current estimates predict cultured meat will be in market within the next 5 to 10 years.

A Life Cycle Assessment (LCA) was carried out as part of this report comparing the environmental impacts of cultured meat in comparison to NZ Beef. The results showed that production of 100g of cultured meat requires 0.021m3 water, 0.022m2 land and emits 0.207 kg CO2-eq Greenhouse Gas (GHG) emissions. In comparison to New Zealand Beef, Cultured Meat involves approximately 91% lower GHG emissions, 99% lower land use and 99% lower water use. Despite high uncertainty, it is concluded that the overall environmental impacts of cultured meat production are substantially lower than those of conventionally produced NZ beef.

Cultured meat is still in the development phase, so it is too soon to know whether cultured meat will be a marketable product, or whether the estimated environmental impacts presented here will be able to be achieved.

In order to remain profitable and sustainable in to the future, NZ agriculture needs to work on being the best that we can be in terms of our systems and practices. We need to work collaboratively both as a country and as an industry to market our products with a strong natural, grass-fed message. We need to target our products to the markets willing to pay the highest prices for these and continually look for opportunities to add further value to these products.  Furthermore we should look for opportunities to diversify our farming and meat processing operations.  Lastly we need to continually invest in NZ agriculture, market research and our communities in order to future proof our industry.

Given the shortfall in the current food supply predictions to feed the worlds growing population by 2050, it is anticipated that there will be room in the market for both alternative proteins and traditionally farmed meat.  Nevertheless there is an increasing awareness of the impact of agriculture on the environment, on animals and on human health, which NZ Agriculture needs to stay abreast of.

Farming Families and Succession – Mark Stevenson