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Avoiding complacency in kiwifruit biosecurity.

Executive Summary

Psa has increased biosecurity awareness in the kiwifruit industry, and is reinforced by recent fruit fly incursions and biosecurity communications by industry bodies. Kiwifruit growers believe that a future biosecurity incursion is a significant risk to their investment in kiwifruit, if not the greatest risk. Yet on most orchards, biosecurity practices have slipped from where they were several years ago.
The aim of this study is to determine if growers are becoming complacent in biosecurity practice over time. If so, how do we overcome this to ensure that the kiwifruit industry is prepared for a future biosecurity incursion?
Interviews were held with kiwifruit growers, post-harvest grower services representatives and biosecurity subject experts to understand grower attitudes to biosecurity practices and why certain practices were no longer being implemented, especially in “Recovery Regions” where Psa had been present the longest. A subject expert from Civil Defence was also interviewed to learn how they overcome complacency when preparing the public for emergencies.
The results of the study indicate that growers in Recovery Regions are retaining those practices seen to make a difference in mitigating the impacts of Psa. Some growers believe the initial protocols implemented for Psa are excessive for the current environment and the decline in practice is not a result of “complacency” but rather a “new norm” appropriate for the current level of risk.
However, this reflects the Psa-centric paradigm of the industry. For most growers thinking about “risk” does not extend beyond Psa at least not in terms of their own on-orchard practices. The role growers can play in mitigating the impact of future biosecurity incursions does not seem to be well understood and is considered the responsibility of organisations such as KVH and MPI.
Most growers believe they are doing what is necessary to manage “risk” (of Psa). However, this falls below what most subject experts would recommend as a minimum standard to reduce the impacts of a future biosecurity incursion. If every grower maintained a baseline of minimum on-orchard practice even in the absence of an imminent threat, the industry would be more likely to limit the spread of a pest or pathogen before it is detected, and for many organisms that could determine whether eradication is a possibility or not. For growers the financial implications of this can be extremely significant. A biosecurity threat that is not eradicated, creates a challenge that needs to be managed year after year. Impacts to the grower may include loss of orchard productivity and land value, increase in operating costs, market access implications and in some cases, all of the above. Biosecurity practices provide the industry with a form of insurance against a significant business risk.
Numerous barriers to implementing best practice are identified in the study including information overload, the cost of implementing practices and commercial disincentives associated with some practices. However, subject experts, from biosecurity or Civil Defence, were unanimous in stating that the single greatest barrier to uptake of recommended practice is a lack of understanding of risk, and how specific measures mitigate this risk. Creating this understanding is a fundamental step in the implementation process, but it is only the first step. Different segments of the industry respond to different cues and require different support through the implementation process which may include; guidance on how to implement the practice, testimony from trusted sources such as their peers or opinion leaders, observation that the practices are effective and feedback to reinforce their decision to implement once they have done so.
Literature and subject experts suggest that to facilitate the necessary behavioural change, the industry should establish a working group of biosecurity champions and opinion leaders. Involvement of this group in the development of biosecurity guidelines will ensure they are practical, fit for purpose and have the support and ownership of the industry from an early stage. Industry champions also provide a respected resource to communicate key messages and provide on-going support to growers. When programme champions play an active role in the development of an innovation, spread and implementation is likely to be more effective.
The study makes the following recommendations for the kiwifruit industry:

  1. Biosecurity awareness material needs to be made “real” for growers, in terms they relate to such as potential impact to orchard productivity, trade, and orchard value.
  2. Industry biosecurity guidelines are required, to indicate the level of practice required for business-as-usual operation in absence of an imminent biosecurity threat or response. These guidelines would provide consistency across the industry, remove commercial disincentives that currently exist, and thereby improve the industry’s ability to withstand a future biosecurity incursion.
  3. Guidelines should clearly explain the purpose of a recommended practice and how this mitigates risk.
  4. Recommended practices should be practical and easy to implement. Industry bodies should facilitate this process.
  5. A network of industry champions and opinion leaders should be created to assist in the development, communication, implementation and on-going support of the biosecurity practices.
  6. Care must be taken when selecting industry champions and opinion leaders to ensure selection of individuals with appropriate influence into a diverse range of industry networks.
  7. There is value in a coordinated approach with other industries and they should be involved in the development of biosecurity guidelines to provide consistent messages across the horticultural sector.

Avoiding Complacency in Kiwifruit Biosecurity – Matt Dyck

How technology is disrupting New Zealand agriculture’s value chain.

Executive Summary

It makes sense to look at disruptive technology within agriculture when so many other industries have been disrupted. Music (iTunes, Spotify, Pandora), books (Amazon, Book Depository), travel agents (TripAdvisor), transportation (Uber, Tesla), accommodation (AirBnB), entertainment (Netflix), insurance (Trov), recruitment (LinkedIn) or energy (Flick) have all been affected.What all have in common is a lack of physical infrastructure. None of them own stores, factories, hotels, generation sites or shopping outlets. Instead their infrastructure is digital and their domain ends in .com.

This project’s literature review, case studies and industry interviews suggest disruption is already alive and well within Agriculture’s value chain.My prediction is that such disruption will only accelerate as new technologies become more open and affordable making it the norm rather than the exception. New Zealand agriculture is not immune, and the message is clear: disrupt your own model before someone else does.

his project’s specific focus is on where I believe the greatest value is being lost between farmer and consumer: the retail space. The space that is closest to the consumer and the one facing the most disruption from new players often founded or funded by Silicon Valley who know plenty about disrupting industries. When you have the CEOs of Salesforce, Twitter or Disney investing in artisan food brands you know your sector is ripe for disruption.

This project’s findings conclude the term “value chain” is an oxymoron. Something is wrong when return on assets for producer or processor is so low compared to the same returns a manufacturer or retailer enjoys. Unless our value chain changes, the fear is more family farms will decline in profitability as input costs rise with an inability to pass those costs on to consumers. Worse is the potential scenario where more New Zealand family farms fall to corporate or overseas capital. New Zealand has a long and rich history of farming and forms part of our national identity. Agriculture underpins our global exports and our rural communities are responsible for producing two thirds of our export receipt dollars.

This project concludes that we will come full circle seeing farmers re-gain marketing control from their large co-operatives by clustering into smaller, micro farmer producer group brands that come in “underneath” (Christensen 2013) in the same way craft beer brands such as Tuatara, Panhead, Emmersons and Garage Project have disrupted and stolen share and margin from large brewery beer brands (who have had no choice but to buy them knowing they can’t beat them).
Every farm will have their own marketing plan realising they can no longer abdicate their marketing responsibility to their processors who will continue to struggle and fragment due to a decline in stock units coupled with overcapacity. Some will adapt by becoming more flexible through accepting smaller, more individualised toll processing contracts to defend throughput and maintain infrastructure.

These smaller, local artisan farmer producer groups, along with existing iwi or corporate farming groups, will collectively pull resources together to promote their unique brand story fuelled by their distinct Terroir whilst enjoying a direct and unimpeded line of sight to a targeted niche of end consumers who are willing to pay a premium for their produce. Consumers will pay more because they value a deep connection to the food they buy and the people and story behind it such as Kaitiakitanga. As Simon Sinek suggests with his Golden Circle Model, these customers are buying the why rather than the what or how. Identifying their big why, or noble purpose, will be vital for these farming groups to tell compelling and differentiated brand stories to justify higher prices.

This more direct model will create additional value through capturing efficiencies that come from shorter and more disintermediated value chains. These farmer groups will use established technology and social media platforms to regularly communicate and connect with their customers in a way they never could before creating raving fans of their produce. These brand ambassadors will share their experiences online amplifying product visibility – good and bad.

Despite the common notion that smaller family-owned farms are a declining species, this report challenges that theory and predicts small will be cool in the face of an increasing distrust of big, industrialised food companies by a new generation of more discerning caring consumers who have a healthy preference for quality over quantity.

On the basis of the findings in this report, small and local craft farming brands focussed on their distinct terroir and artisan produce will become the new norm and those farming groups that move first will enjoy the spoils most.

How technology is disrupting New Zealand agriculture’s value chain – St John Craner

Search for the sweet spot in the New Zealand dairy industry.

Executive Summary

The dairy industry is in a difficult period and faced with volatile global milk price, increased farm debt and an increasing level of compliance and regulatory costs. The industry is entering its second consecutive year of negative cash flows. The industry’s biggest processor, Fonterra’s current farm gate milk price of $3.90/kgMS, which is well below the break-even $5.25/kgMS needed according to researchers from DairyNZ. We are starting to see the combined impact of all of these factors reflected in a decline in farm sales and a fall in land values in parts of the country. The pressure has added urgency to the need for realignment in some farming systems and operating cost structures.

The qualitative study reported here explores the idea of a sweet spot in the dairy industry. This is the point where the operational cost of production (in this case farm working expenses per kilogram of milk solid produced) has the flexibility to mitigate downside risk and capture upside risk in a sustainable farming system. The study examines whether in fact the sweet spot exists, if so where is it and how can it be found? The sweet spot has a direct relationship with the concept of buffer capacity. This term, used to describe resilience in an ecological sense, is applied in a surrogate form to the New Zealand dairy as financial efficiency (Shadbolt, 2013).

Through interviewing Taranaki farmers, rural bankers, farm consultants and farm accountants, I was able to compare and contrast the different views surrounding the sweet spot in the region. I reviewed current literature on the industry’s competitive advantage strategies, analysis of resilient farming systems and an analysis of the five dairy production systems. The data sets were then analyzed and results are discussed in this report.

Search for the Sweet Spot in the New Zealand Dairy Industry – Dale Cook

Thinking small: what are the opportunities & challenges for a small farming business by adopting a niche marketing approach.

Executive Summary

Many agribusiness leaders see New Zealand as going through a transformational phase in agriculture. There is a lot of rhetoric about how best to solve the commodity cycle conundrum we find ourselves in. This ‘cycle conundrum’ is not new to New Zealand as we have been commodity price takers for decades and there are plenty of businesses that have done well out of this. What has changed over the past 5 years is simply the volatility in those markets which has meant less certainty for all who sit along the value chain, from marketer to farmer. There are plenty of industry leaders who talk about the need to add value, to tell our story better, to push the provenance of our products, think about our brands and to understand our customers better.

This research sought to find out what opportunities and challenges there were to small farming businesses if they were to adopt a niche marketing approach. When I looked at the world from a farmer’s perspective I asked myself ‘what can an individual farmer do to add value to their products when they sell them along a value chain and essentially have to take the price they are offered by their stock agent/wool buyer/account manager?’ I wondered how the ‘little guy’ in this world of selling commodities could really make some cold hard cash and add value to their business. By digging a bit deeper it became apparent that there is a range of farmers in New Zealand who have also potentially posed that same question to themselves and their businesses and have ended up doing something about it.

A review of the literature helped guide my thinking around niche marketing in general and then how agriculture fitted into this. I then interviewed six farming businesses, five of which were small family owned and operated. Out of this research a number of themes emerged namely that there were three key factors that were a catalyst in small farming businesses choosing to adopt a niche marketing approach (financial, environmental and emotional). Other themes were based around the lack of resourcing and support available, the financial considerations in creating a differentiated product and that all businesses (with the exception of one) had at least one extravert (sometimes two) helping drive the business.

With some experts from around New Zealand offering their advice about niche/diversified markets, the discussion centred on the opportunities for farmers to really start thinking about what customers need and want before launching into adopting a niche approach. Some of the key requirements were discussed including relationship building, understanding the marketing mix, utilising regulation as an advantage and design thinking. There are challenges in going down a niche marketing route and these were discussed with respect to resources and investment requirements. All of the farming businesses interviewed showed courage and leadership in developing their niche businesses which I believe is a vital component to success.

The recommendation for farmers who want to explore whether a niche marketing approach is the right thing for their business is to first consider some key challenges that they may face. Some of these challenges include what investment is required (both time and financial), whether the people who are going to help drive the business forward have the ability to handle risk and where they are going to look in order to find sound advice and support.

Upon completion of this report, I came up with more questions than answers! This area is not well researched and I believe there is huge opportunity for more in-depth analysis of small farming businesses that have adopted a niche marketing approach.

Thinking Small: What are the Opportunities & Challenges for a Small Farming Business by Adopting a Niche Marketing Approach? – Natalie Bowie

Effective family succession planning and governance.

Executive Summary

The underlying motivation behind undertaking this research is to identify some of the key processes and initiatives that successful New Zealand family businesses implement to ensure their successes and human capital are passed down through the generations effectively. Conversely, I was also interested in clearly identifying some of the common issues which arise in family succession plans and ways in which these issues may be avoided.

This topic is important to me having lost my father in 2012, and being the oldest child, I feel a certain level of responsibility to provide leadership within our family in the hope that our family business continues to prosper in a sustainable and risk averse manner. My long-term vision is an ‘intergenerational family business’ which creates employment and investment opportunities within our family and the next generation to come.

Initially, the context in which I planned to undertake my research was more in a broad sense focusing on family owned businesses across the primary sector. As my research progressed, I decided to narrow my focus and apply my topic to family businesses involved within the kiwifruit industry.

My hope for this research, is that it will provide some benefit to other industry families and encourage them to ‘think bigger’ and openly communicate around succession planning. I hope that this research will also provide some framework around how to govern a family business effectively and that it will benefit family businesses for the better.

We live amongst an increasingly busy world, and I am therefore mindful that people, including myself are becoming increasingly time constrained. For this reason, I have chosen to prepare my report more concisely than recommended in the project guidelines focusing on the salient points of my research. By taking this approach, I hope that it will encourage more people read this report.

The thing I enjoyed most about compiling this research paper was the opportunity to sit down one on one, face to face with some highly successful key industry participants who openly spoke about their family owned businesses. They each willingly shared with me the challenges they had faced along the way, mistakes they had made and what they had learnt from them. These are people who have walked the walk, and their knowledge and shared experiences in my opinion, is significantly more valuable than any other information source available. I found this part of my research to be highly inspiring, and reiterated to me how great the kiwifruit industry is and what a privilege it is to be a part of it. Effective leadership highly revolves around people, and it became obvious to me that the success of the kiwifruit industry is a result of great leadership from key industry personnel, some of which I have been fortunate enough to engage with.

The issue of succession planning for family businesses can potentially be an emotional one, or not depending on a number of factors which I have attempted to identify throughout this report. ‘A change of ownership and/or management is inevitable for every business – everyone exits eventually. But moving out of a business is often harder than moving in.’ (McLeod M. , Farm Ownership & Transition Workshop Resource Book., 2014). Every family business is unique and faces its own challenges around different personalities within the family and different needs, wants, ideas, opinions and aspirations of each family member. There is no one size fits all, and I believe it comes down to leadership within the family to co-ordinate and govern a family business successfully. Succession planning within families is about open communication from the beginning, including the ability to sit down and listen to each family member’s goals and aspirations. From a governance perspective, I also believe having strong discipline around separating family time and business is paramount in governing a family business whilst still maintaining strong family relationships.

One of my survey participants believed a family culture and identity was one of the most important factors in a successful family business, as well as installing the right values into children from a young age. For family succession to be successful, he believed it was highly important to include children in the business from a young age and for it to always be referred to as ‘our business’ rather than ‘Dad’s business’. Another survey participant emphasised the importance of having clearly defined roles within a family business, reflective of each individuals strengths and capabilities rather than ‘as of right’. For a family business to be successful, he also strongly believed in ‘grass roots’ training to ensure a thorough understanding of the business from the ground up. Michael Hill expresses a similar opinion in his books ‘Toughen Up’ and ‘Think Bigger’ where he emphasises the requirement for children to prove themselves within the business without receiving special treatment because they are a family member.

As kiwifruit orchard prices continue to rise underpinned by strong industry confidence, it becomes increasingly difficult for the younger generation to acquire orchard ownership and become involved within the industry as a grower. For those families well entrenched in the kiwifruit industry, I believe succession planning is now more important than ever if those families wish to continue into the future and achieve longevity and future prosperity for their existing businesses.

Effective family succession planning and governance – Dylan Barrett

Implementation of the fonterra palm kernel guideline.

Executive Summary

The use of Palm Kernel (PK) as a supplementary feed for NZ dairy cows has seen unprecedented growth over the past decade, despite volatile milk prices. Demand has been driven by system intensification, a production focus and climatic challenge. The availability, flexibility and cost- competitiveness of PK make it a popular choice with dairy farmers.
New Zealand imports around a third of total palm kernel produced and is the largest sole importer. Palm kernel is a by-product of the palm oil industry, which is considered to have an adverse global environmental footprint associated with deforestation, biodiversity loss and greenhouse gas emissions, particularly in Indonesia and Malaysia.
In response to an increasing amount of PK fed to dairy cows by its suppliers, Fonterra Co-operative Group (Fonterra) announced the introduction of a PK guideline in September 2015, recommending a maximum feeding level of 3 kg/cow/day to future-proof the co-operative as a supplier of pasture- based milk. Further communication indicated a milk test was being developed to assess PK feeding levels. There was a likelihood that high PK feeding levels were causing milk composition changes that could cause issues with manufacturing and/or customer specification requirements.
The aim of this project was to understand individual farmer use of PK, their understanding of the Fonterra PK Guideline, the changes and time-frame required for implementation and the perceived impact. Their views on the likelihood of a future nil PK directive and an associated transition time were also explored.
Ten Fonterra farmers were interviewed who were feeding above the PK guideline level for all, or a part of, the season. In addition, industry professionals (industry body and farm consultants) were also interviewed to give a broader perspective to how implementation could be achieved and what the impact would be.
All farmers rated PK as important or very important to their farming business, despite using it in different ways and for different reasons. Findings indicate farmers use PK as a base feed to underpin stocking rate or predictable climatic challenge, a buffer for vagaries of pasture growth or as an emergency response to an adverse climatic event, or a combination of these uses.
Interviews found implementation of the guideline is achievable. For most farmers it is anticipated change will be incremental rather than transformational. Options to reduce the level of PK fed to guideline levels included:

  • Reducing feed demand through stocking rate, culling and drying off decisions,
  • Reducing feed supply by non-replacement of PK above guideline levels
  • Increasing feed supply from home-grown feeds or alternative imported feedsThe impact of the guideline on farmers will depend on the degree of change required to adhere to the guideline and the climatic challenges they face. The impact could be minimal or even negated if other aspects of the farm feed system are optimised.There is a need for farming systems to increase their resilience to climatic challenge and adverse events. Although System 4 & 5 farmers (high input) would be most immediately affected by the guideline, it was anticipated System 1 to 4 farmers (nil, low and medium input) would be made most

vulnerable, particularly in challenging or adverse climatic events. It is recommended Fonterra communicate a PK policy for adverse climatic events as this was considered to be the most likely challenge to compliant feeding thresholds.
Farmers indicated a twelve month period would be required for transition. It is recommended Fonterra adopt this time-frame for compliance and provide milk test results during this period. It is anticipated there will be variation in feeding levels for compliance both between farms and within individual farms, due to seasonality and management differences. Farmers should be encouraged to challenge the milk test during transition to find their individual farm feeding thresholds.
A consistent message from interviews was the need for Fonterra to provide more clarity and proof around what they were asking farmers to do. Farmers were unclear whether the motivation for the guideline was milk composition creating processing issues or customer expectations around sustainability or product specification, or a combination of both. It is recommended that Fonterra provides relevant research around the key drivers of the guideline and clarity around factors that will influence farmer management.
Seven out of ten farmers and four out of six industry professionals felt Fonterra was unlikely or highly unlikely to introduce a nil PK directive in future. Reasons given were that adherence to the guideline would overcome milk processing issues, a perceived lack of consumer willingness or ability to pay a premium for a PK-free product and the risk of supply loss to competitors for Fonterra. Those that believed a future nil PK directive was likely, thought so because of issues with customer perception and sustainability. Farmers felt that if a nil PK directive was made, they would require 2-3 seasons to transition.
Although beyond the scope of this project, interview findings have also led to broader recommendations for Fonterra to develop a “Know Your Customer” programme, develop a NZ grass- fed certification standard and investigate a ‘grass-only, home-grown’ specialty milk pool.

Implementation of the Fonterra Palm Kernel Guideline – Rachel Baker

Supporting our rural women.

Executive Summary

Rural women are moving their social space and networks online and increasingly seeking to work longer hours off farm, while the communities they live in continue to operate in the historical colonial space of a ‘man’s world’.

Survey results for this report portray farming Mums in particular, as largely feeling lonely and isolated and without support.

Social media has become their crutch – their shoulder to cry on and for some, their exclusive social forum with the outside world.

With 88 percent of the rural mothers in this report’s survey working 21 hours or more and 26 percent working for over 40 hours a week, their usual social space within the rural community and, in particular, the school community had been vacated.

Traditional volunteering roles of these women within communities that are heavily reliant on the exploitation of that time, were not able to be met, leading to exclusion from important social peer groups.

Coupled with that was the immense exhaustion, stress, anxiety and pressure these women reported as suffering due to hectic timetables and pressure to take children to a large number of extracurricular activities.

The rural school’s role in escalating that pressure was evident, with many demanding volunteering from parents as Government funding has tightened. However, if that role was not fulfilled by a rural mother, she was in danger of being completely isolated from the community.

The majority of rural schools offer little to nothing in the way of after-school childcare despite evidence that many rural women were now earning off farm with many working Mums reporting feeling ‘excluded’ and ‘ostracised’ because many school events were held during working hours which they could not attend.

Many rural women have come from urban environments and may not have any experience of agricultural life. It is clear that educated career women outside of agriculture have limited options in using their skills in a farming context and risk limiting their personal growth.

Women spoken to for this report that categorized themselves as being ‘happy’ were utilising skills they had in a former career and were being paid for them. General farm manager from OB Group, Stu Taylor deliberately looks to use male employee’s partner’s skills in a way that benefits both parties. Recently this saw a female partner of a member of staff create a health and safety app for his farm that is now about to be rolled out nation-wide.

From this it is clear that farm owners and managers have a role to play in supporting rural women whether they be employees, partners of employees or partners and wives.

With the Government wanting to double primary industry export targets and wanting to encourage educated students into agriculture it is clear that the current ‘wasteland’ of knowledge among rural women who have had to stop their careers to live on farm has not been tapped into or acknowledged.

Finally, there has been very little research undertaken of today’s rural women or the wider social environment she endeavours to live within. Without urgent research, and targeted initiatives rural women and their families are at risk of severe harm that could be felt for generations to come with a vast cost to society.

To that end the following recommendations are made:

  1. Urgent in-depth research of rural women in New Zealand is needed.
  2. Current rural women’s groups need to engage empathetically across social media and educate themselves on the modern social space of rural women if they are to survive. To do that there needs to be better internet access across rural New Zealand as this is also the main way in which the modern rural woman socially engages with her peers. Without that connectivity she is at risk of further isolating and excluding herself from the wider rural community and that in turn could lead to deteriorating mental health.
  3. While the social space of rural women has changed, the environmental space has not. Rural schools are at the forefront of communities and should reflect that modern social space, and seek to support it. Board of Trustees within these schools need to consider if they are currently supporting the changing environment of today’s rural families or if they are condemning them.
  4. Working women need more support in after school childcare. Until that is enacted it will be hard for rural women to continue careers and personal growth. It’s a practical way of enabling social change, particularly as this report’s survey shows many women are working substantial hours often to the point of exclusion in their community.
  5. Transformative learning across rural New Zealand, for all rural women, not just those who have been marked out as leaders or professionals, would benefit the community and rural women’s health. While there are many professional courses available to rural women in agri-careers there is no support available to the rural woman who does not have an agri-career and is not interested in attending agri-professional women’s groups such as Dairy Women’s Network, Women in Arable or Rural Women NZ.
  6. Farm employers need to embrace the skillsets offered by females who may live on the farm because of their partner’s career. They should seek to find ways to incorporate those skill-sets in a way that showcases the female’s worth and remunerate financially.
  7. Volunteer work is often considered mandatory in rural communities where volunteer workloads are high. However, it should not be considered a viable alternative to a women’s previous career as that can prove exploitative and ultimately unfulfilling.
  8. There is no data available to analyse mental health in our rural women. There needs to be an annual survey similar to ‘rural business confidence’ conducted by one over-arching organisation so that when a crisis like the dairy downturn occurs, there is data available to lobby groups to ensure Government does not leave our rural women behind. We have no gauge as to how our rural women are coping in the current downturn and no knowledge of the crutches some of them may be turning too to cope i.e. alcohol and/or drugs.
  9. 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.

Supporting Our Rural Women – Nadine Porter

Opportunities for private equity investment within the sheep/beef and deer industries.

Executive Summary

Use of private equity is well established in the agriculture sector. The dairy industry, in particular, has used private equity partners to fund purchases and conversions, successfully driving growth of businesses across different stages.

This report identifies the limitations and opportunities of private equity for the sheep and beef industry, where capital constraints and cash-flow issues are an inherent hurdle to growth.

Modern farming systems, technology, and sciences are evolving along with the way businesses are being financed and governed.

This evolution is influenced by such factors as investment costs, social and environmental pressures, availability of skill sets and price volatility – factors that shape how we farm today and into the future.

The backbone of New Zealand agriculture is family- farmed businesses. The industry has been further shaped over the last two centuries by strong trading cycles influenced by political and environmental dynamics ranging from economic recessions, global conflicts and subsidies, to technological and land use advances and high interest rates.

While the traditional family-owned farm remains a strong part of the agriculture industry now and into the future, structures are evolving with the rapid growth of corporates, foreign investors, multi shareholder businesses, leases and their relative hybrid models.

My views and interest in private equity are based on my personal background of growing up on a family farm, my education, work, business experience and the family succession process.

Capital – or lack of it – is probably the largest factor influencing the sustainability and growth of my farming businesses.

The focus on both cost of capital investment in the farming business and on ownership structures has elevated rapidly, driven by high levels of capital appreciation in the last two decades.

Perhaps the issue is best demonstrated by a discussion I had with a former employer about the cost of buying a farm, this was about the in the year 2000. He reflected on how tough farmers thought things were in the 1980’s when the capital cost was about three times the gross turnover of a stock unit. He noted that this was nothing compared to where it sat in 2000 – nearly eight times the gross turnover.

So, 16 years after that discussion, the cost is over 10-12 times the gross turnover, and there are now far greater compliance costs and social and environmental concerns increase the cost of doing business.

While high capital gains have created wealth, this has created its own challenges around succession and entry into the industry. Issues over land availability, land use change and investors paying aesthetics values for marginal producing land have all impacted on the environment we farm in today.

I hope this report will stimulate debate and highlight opportunities with the use of private equity for the benefit of industry businesses.

Opportunities for private equity investment within the sheep/beef and deer industries – Edward Pinckney

How can we create value from compliance in the dairy industry.

Executive Summary

Investment in time and capital to satisfy compliance requirements in the dairy industry is increasing year by year. While this is a necessary requirement to operate a business in our modern environment there is potential to create value out of this at the same time. Often when we look at disruptions we look for solutions as to how to get around them or avoid them rather than embracing the change and making the most of the opportunity.

The aim of this project was to investigate an opportunity to develop an audited farm assurance scheme in New Zealand. The process included looking at the existing programmes which have recently come to the market as well comparing the opportunity in New Zealand with what is in place in Ireland with Origin Green Ireland. DairyNZ’s Sustainable Milk Plans which have been used in different catchments across the country could also offer a template to be built on to develop an assurance programme.

While Synlait and Miraka have recently launched their assurance programmes in anticipation of demand from consumers as well as showcasing an opportunity to create extra value. This could be expanded and rolled out across all primary industries and also the tourism sector. There is a large amount of commonality in what the primary industries and tourism are focussed on and that is selling New Zealand products and experiences.

Based on findings from this study and looking at similar assurance schemes, the following recommendations could take the opportunity to the next level and should be investigated further.

  • An assurance scheme committee should be started with representatives from supply companies, DairyNZ, Beef and Lamb, MPI, and other interested parties
  • It will be wise to canvas farmers early and ensure that a majority of suppliers are in support of such a scheme to give it the required critical mass to get moving
  • Marketers within supply companies should investigate the value of this increased brand value to determine a return for the scheme
  • Logistical aspects of an assurance scheme would need to be sorted at the start of the project to ensure that the workload requirements are able to be met (data collection and auditing)
  • It is important that the industry support (rural professionals) have the capability and capacity to handle the likely increased demand from farmers also

The next steps following this report in my view are –

  • A meeting of interested parties should be gathered to further work through details of how such a farm assurance scheme could be implemented and funded (look to the case studies as examples of a template)
  • There may be an opportunity to incorporate the Synlait and Miraka programmes under a New Zealand umbrella programme that satisfies the other requirements of a cross sector assurance scheme
  • Once a clear and defined strategy has been established it will be important to get a group of influential and innovative farmers on board to ensure that a critical mass of product supply backs the initial proposal to ensure that a large majority (ideally all) of farmers are on board before any programme is launched
  • Marketing will be important so any initial committee should consider getting suitably qualified marketing personnel on board to establish an easily recognisable brand to go along with the launch

While there would undoubtedly be some resistance to this opportunity by farmers seeing more compliance as a hassle, the reality is that most of what is being reported and audited is legally required to operate a business in New Zealand anyway. We need to stand back, have a critical look and identify the opportunity from challenges which are placed in front of us. All New Zealanders should strive to improve our environment and be excited about an opportunity to increase the value of our products by meeting an auditable standard.

How can we create value from compliance in the dairy industry? – Sam Williams

Exploring stock access: Perspectives on framing the problem and solutions.

Executive Summary

New Zealand’s pastoral industry was founded on the breaking in of the land, and the romanticised image of cattlemen droving stock across rugged countryside remains a powerful image, even today. In abrupt contrast, however, is the more recent focus on stock access to waterways and its power as a catalyst for intense debate about water quality.
The aim of this report is to better understand the manner in which the problem of stock access and proposed solutions have been constructed. The approach used involves a case study of the Marlborough region. Ten individuals from a cross section of the community were interviewed in depth to gain insight into the values, experiences and understandings they had of the issues in question. Essentially a piece of qualitative research, the interview data was extended through an analysis of both the published and grey literature, including policy documents, discussion papers and media reports. Participant observation, was an additional component.
Participants framed the water quality problem in different ways. There was no consensus either on the scope or nature of the problem. There was some general acceptance that stock access as a component in hill and country farming was different from stock access in the lowlands, due to relative density of stock numbers in both areas. Almost all interviewees believed there was little difference between dairy and beef cattle in terms of their impact on water quality.
What were presented as issues of stock access on further examination were viewed as symptomatic of broader environmental concerns, including the intensification of agriculture over the past two decades, habitat destruction, and lack of pest management.
Perception was identified by interviewees as shaping the views of of the general public. The “community” was referred to as demanding of change, yet it was difficult to get an understanding of who makes-up that community. Most interviewees had some connection to farming in their background and their childhood experiences of local rivers became important to their narrative.
Council representatives saw stock access problems as easily address through better communication between their staff and farmers to encourage riparian planting and fencing. Farmers with experience of fencing and riparian planting identified numerous barriers to resolving the issues.
The report makes a number of recommendations.

  1. We need to develop good frameworks to ensure that environmental problems are well defined. We cannot underestimate the importance of the problem definition at the outset.
  2. Members of local communities need to be empowered, and given the agency, to determine their desired water quality and environmental outcomes, as part of a regular and iterative process. Fundamentally, this is about values.
  3. It is important to recognise that science has a critical role in informing the development of people’s opinions, informing options for possible solutions, and in comparing relative degree or extent of an issue. But science alone will not provide us with the answers; they exist within the community.
  4. We need to think carefully about our discourse, how we communicate our intentions, our experiences, and our beliefs. Language is more powerful than we might first realise.

The stock access debate is as much about how environmental and social problems in New Zealand, in regions, in local communities are constructed and pieced together as it is whether stock should be allowed access to waterways.
In the midst of much debate, discussion and heightened interest, and on the cusp of recommendations from Central Government that will determine the pathway forward for stock access, I consider that we need to crystalise our thinking on the problem definition. It is time to return to the problem definition, and acknowledge and debate the preconceptions and assumptions that are contained within that definition. Put simply, I believe the problem needs reframing.

Exploring Stock Access: Perspectives on Framing the Problem and Solutions – Kristy McGregor