Programme: Kellogg

Disruption has become a constant condition of doing business. The businesses that are more likely to thrive are those that can not only respond by adapting to continuous change but also become the drivers of that change.

The landscape of farming in New Zealand is evolving. Previously it has relied on low-cost competitive advantage. This has been achieved by either increasing productivity or reducing costs, but it is now becoming more difficult to maintain this. Adding value to the lamb that we produce is seen as a way to adapt to this change and is seen as a pathway forward for lamb producers.

This report seeks to understand some of the existing lamb-selling strategies and the mindset of lamb producers. It then examines how to change from a supply chain strategy to a value chain strategy and what that means for the farmer.

A literature review was undertaken to further understand the research topic. Nineteen semi-structured interviews were undertaken with participants either connected to the Lumina Lamb programme or with a deep understanding of value chains.

Some lamb producers have the same selling strategy that they have always employed whilst others are naturally curious and seeking opportunities, to increase returns and build resilience which leads them to be attracted to a customer-led value chain. This relates fundamentally to a farmer’s mindset and the reason ‘why’. Which was driven by an understanding of the customer, the chef.

Lumina Farmers valued their connection with the chefs. The key to Lumina’s success today is based on communication and transparency of the whole value chain and the ability for farmers to be part of a producer group with similar values.

Farmers valued the connection with other like-minded farmers, the collaboration and opportunity to learn from each other, were powerful, motivating and encouraged farmers to join the Lumina programme. To enable this change, the use of incentives in areas that need behavioural change that benefit the whole value chain would be the biggest challenge for growth.

Recommendations

This report outlines recommendations for companies trying to transition from producing a commodity product to a premium product. Some of these findings will be directed at the Lumina programme, but the concept will have relevance to other sectors and programmes.
To achieve the organisation’s goals Lumina leaders, need to:

1. Actively seek to understand the farmer’s current selling strategy and their mindset.

When looking to bring new farmers into the Lumina programme, the initial focus of the discussion should be to get an understanding of the farmer’s existing selling policies and why their motivations for choosing that strategy. The transition to supplying a premium product could require a change in values and mindset by the farmer.

2. Connect the farmer to the Customer.

Build an attractive connection between Lumina farmers and their customer.

3. Utilise the power of the champions in the Lumina community.

Encourage interaction amongst the farmers of the group, express the benefits of collaboration, to build on the strength that the Programme already has.

Champion farmers as Lumina ambassadors, which will create an environment of excellence.

4. Develop a Road Map for farmers to understand the pathway into the Lumina programme.

Outline the different pathways on how to join the Lumina programme with clear systems in place that outline the requirements and identify the risks and opportunities. And expectations?

Why should sheep and beef farmers decrease their on-farm greenhouse emissions and what is the cost in doing so?

Climate change is directly linked to greenhouse gas emissions and is something that cannot be ignored. Major weather events, affecting the primary sector have highlighted the need for change. 50% of NZ emissions come from the agriculture sector, but at what cost will emissions reduction have on the farmer? Will the potential economic benefits outweigh the costs of current mitigation methods?

This report seeks to inform sheep and beef farmers, which of the current mitigation methods have the least effect on profitability and what economic benefits they may gain in doing so. The focus is on the cost and benefits of on-farm profitability, so concentrates on costs, income streams and potential premiums linked to the reduction of on-farm emissions.

Scenario analysis has been used to model greenhouse gas reduction methods that are currently available on sheep and beef properties, other literature was reviewed to compare methodology and results. A literature review was also used to assess benefits of reducing emissions.

While planting forestry offsets and reducing stocking rates are the mostly available methods, the scenario analysis also explored a combination of both, combined with increases in reproductive rates of the remaining stock units on hand.

Plantation forestry is an opportunity for sheep and beef farmers to use lesser productive areas of their property and along with reducing emissions, provides another revenue stream.

Reducing stocking rates is a solution which requires little initial investment but unless production per head is increased, has a large impact on profitability. A combination of forestry and reduced stocking rates, has the largest emissions reduction but the potential earnings from forestry will not be realised unless production has been increased. This may be unachievable depending on the underlying features of the property.

The demand for reduced emissions is mainly from leadership in organisations such as governments, processors and banks. This is driven by obligations to provide feedback to stakeholders on environmental objectives and align with targets of the Paris Agreement. There is no huge demand for low-emissions meat from consumers as they place greater importance on other factors such as the quality of meat.

An introduction of an on-farm emissions levy or introduction of Agriculture in the emissions trading scheme, in order for NZ to achieve their Paris Agreement obligations would be the greatest incentive to currently reduce emissions.
Based on the analysis, it is recommended that the following is taken into consideration when adopting a method to reduce on-farm emissions:

• the saving of an emissions levy that the method would provide;
• if the cost of the mitigation method is more than the expected emissions levy price;
• reviewing the cost of mitigation on the basis of kilogram of meat produced on farm to determine what premium would be required;
• if planting forestry, assessment of the expected return on investment and minimum return per hectare required to achieve this;
• if reducing stocking rates, the ability and extra costs of increasing production per head;
• demand for reduced emissions from organisations that directly affect the farm business, and
• consumer demand for low emissions products and their willingness to pay a premium.

New Zealand farming is synonymous with sheep. Their naturally grown fleece has many unique attributes that make it a “super-fibre”, but competition from synthetic fibres has seen a decline in the popularity of wool over the last fifty years, as synthetics are cheaper to produce and consistently perform well in manufacturing.

Wool used to be the main income stream for sheep and beef farmers and strong wool now is currently a net loss for growers. Sheep still need to be shorn for the health of the animal but considering all the additional costs of doing business these days, removing wool from their business is a choice many are considering.

For generations, New Zealand growers have developed sheep genetics that yield a high quality and quantity of wool and this report highlights the opportunities and markets that still exist and are developing that need their wool clip.

Purpose of report.

The purpose of this report is to understand the structure of the New Zealand strong wool industry. To understand how the market price is determined for strong wool, an industry analysis is conducted, the driving forces influencing the wool market pricing are identified and the opportunities and challenges facing the industry are discussed with a focus on the grower.

This report is aimed at the next generation of decision-makers on sheep and beef farms to inform them of the market opportunities that exist for strong wool and recommend how might the market price improve for strong wool.

Methodology.

A mixed qualitative research approach is used including Content analysis, through a literature review, Semi-structured interviews with fifteen industry stakeholders, and Thematic analysis used to evaluate insights from the interviews. Discussion of the profitability and competitiveness of the New Zealand strong wool industry is completed using Porter’s Five Forces and PESTEL model.

Analysis and Discussion.

Analysis of the themes from interviews and literature found prioritizing quality, collaboration, promotion, environmental sustainability, and global market engagement will pave the way for improved market prices.

• There is a consumer trend towards natural fibre solutions over plastics and synthetics.
• There is a demand for quality New Zealand strong wool, and it is well-suited for carpet manufacturing.
• Competitive rivalry is high within the strong wool industry and profitability is low.
• There are many other uses for strong wool, and these are increasing as growers and businesses innovate by solving problems with natural fibres, none of which are currently consuming a significant volume to influence the market demand.
• Quality strong wool will sell well, but to what degree? that is influenced by the additional value created through collaboration with businesses well connected to the consumer.

Recommendations.

1. Growers to ensure a quality clip is produced and well prepared for sale.
2. Growers to collaborate with other wool suppliers and supply chain partners. This is key to creating additional value and a unique value proposition with their strong wool clip.
3. All stakeholders are responsible for promoting wool and its advantages to consumers.

The kiwifruit industry is New Zealand’s largest horticultural exporter, responsible for 40% of all horticultural revenue (Aitken & Warrington, 2021) and in 2021, celebrated a record-breaking harvest exceeding $4 billion of global revenue (Burke, 2023). The impacts of climate change are being felt in the industry and will continue to have an impact on kiwifruit growing seasons into the future.

The purpose of this report is to collate scientific climate change data, analyse the likely impact this will have on key kiwifruit growing regions and summarise strategies to help kiwifruit growers build climate change resilience.

The aims of this report are to:

• Outline the likely impacts of climate change for New Zealand.
• Understand the current impacts of climate change on kiwifruit growers and where the greatest risks are for the future.
• Provide recommendations that will help build resilience and give growers confidence going forward.

The methodology for this report was based on the three-legged stool model. This included conducting a literature review, semi-structured interviews, and a thematic analysis to discover new knowledge to help build climate change resilience amongst kiwifruit growers.
The four main areas of climate change impact are:

1. Average temperatures are set to increase.
2. Minimum temperatures are set to increase.
3. Average rainfall (precipitation) will be varied across the regions. The upper North Island is likely to become dryer.
4. Hot days (>25 oC) are likely to become more frequent with impacts posing a moderate risk.

These climate change impacts will have two major impacts on the kiwifruit industry. Firstly, there will be a decrease in winter chill hours, directly affecting the number of flower buds produced. Secondly, there may be a shift in suitable kiwifruit growing regions due to increasing temperatures. Regions that were formerly too cold and presented frost risk, may become more suitable than current regions.

The findings from semi-structured interviews and thematic analysis identified the following recommendations to help growers build climate change resilience:

1. Growers should work to become financially resilient by building reserves for responding to future climate change events.
2. Prior to purchasing a new orchard, due diligence should include climate change impacts.
3. Climate change is not a static problem. Adaptability is an essential attribute for growers to maintain their climate change resilience.
4. Collaboration will be key in responding to climate change. Growers, postharvest and Zespri all have their part to play.

Transparency of data from postharvest and Zespri is needed to give growers confidence in the longevity of the kiwifruit industry.