kellogg

Internationally increasing soil carbon in agricultural soils has the potential to offset greenhouse gas emissions. This project evaluates the role of soil carbon in relation to farm greenhouse gas emissions in New Zealand. Agricultural soils in NZ have naturally higher levels of carbon than those overseas because they are typically younger and our practices include more restorative pasture and animal phases. Therefore we may not be able to increase soil carbon in the same way as international studies suggest.

The aim of this project was to examine the role of soil carbon in NZ and in relation to farm greenhouse gas emissions and policy. Key groups industry stakeholders were identified and interviewed. From the results themes were identified and analysed to answer the study questions.

The key learnings of this project were:

• It is unlikely that soil carbon will play a role in the offsetting of greenhouse gas emissions in New Zealand agriculture because levels on farms are already high.
• The complexity of including soil carbon in an emission scheme could be inaccurate and lead to unwarranted costs for farmers.
• It is more important that farmers focus on retaining and avoiding losses of soil carbon.
• Soil carbon contributes to soil health by improving soil physical properties such as water and nutrient holding capacities.
• More research is needed on soil carbon in NZ, where it is practical to increase it and how.
• Farms are businesses and need emissions reduction solutions that are going to be both practical and ensure that their businesses remain financially viable.

The recommendations from this project are that:

• More research be done on management practices that could increase soil carbon.
• Information be presented to farmers on the benefits of soil carbon.
• Tools be made available so that farmers can compare the effect of different practices on soil carbon.
• Farmers need help to better understand their greenhouse gas emissions and a range of solutions on how to reduce them.
• The industry and the broader society need to support farmers as they adapt their businesses to account for and reduce emissions.

Agriculture is a turbulent industry with many variables and challenges affecting different businesses throughout New Zealand. This is not new but more pressure is building to challenge one’s social license to farm, being added compliance through environmental management and climate change policies. A resilient business will overcome these challenges and be well positioned to drive direction and the strategy going forward. With current high commodity prices and low interest rates, many farmers will still struggle to be profitable, limiting their ability to access capital and restricting any opportunities for growth and the next generation. Financial literacy has a significant impact on one’s business and its profitability.

The purpose of this report is to understand the current level of financial literacy within farming agricultural sector, be it, horticulture, arable, dairy, sheep and beef sectors. It is important to measure the current level of financial acumen to understand what the barriers are impacting one’s ability to upskill, and what the implications are to farmers and their wider support networks. From understanding the barriers and implications we can then conclude with recommendations to where and how farmers, rural professionals, industry-good organisations, software providers and government bodies can help improve and upskill one’s financial literacy to create resilient businesses and a stronger economy.

In order to measure the current level of financial literacy there were two elements to the research, a survey questionnaire was undertaken interviewing farmers within four agricultural sectors along with rural professionals over similar industries. A review of historical research included industry reports and articles of relevance. The findings were compared and contrasted against the surveyed findings. Once the surveyed data was collected, a thematic analysis method was used to analyse the qualitative data. Themes that emerged became the barriers and implications within this report.

Financial literacy has shown to have only improved by 15% over the past 12 years in the sheep and beef sector. This against all measured sectors demonstrates that sheep and beef farmers continue to have the weakest financial acumen. Over all sectors, 40% of businesses are what I would call “flying blind”, with no insights regarding their current financial state or year-end 2021 performance. A further half of all businesses have no formal plan or strategy in place to direct/govern their business appropriately.

It was obvious very early within the survey that a lack of financial planning and forecasting was prevalent, the larger the variables, the weaker one’s financial literacy. For example, only 50% of sheep and beef farmers complete planning and forecasting, with many variables impacting their production and performance.

Discussion groups were however considered to add significant value to the business. Five barriers were identified to be restricting an improvement in financial literacy, these are: time, technology, education, training and rural professional support. Education is deemed the only uncontrollable factor and this has been identified by some survey respondents as being their “biggest concern”. Part of their concern is having no compulsory personal and financial management courses in the school curriculum, and their staff having weak financial acumen, such as “spending their pay cheque before they have earn ’t it’. A further concern identified is weak rural professional support with lack of honest feedback, a rural professional quoted “you can kill people with kindness”.

While these barriers restrict financial literacy and awareness, they not only impact the farmers but their supporting networks as well. Many implications were identified with profitability being the biggest impact to farmers, rural professionals, rural communities and New Zealand’s economy. Further implications include financial wellbeing; impacting health and the number of young farmers coming through into the industry. Constant rural professional changes and lack of capacity, impacts on the level of trust within the rural professional network and an organisation.

The key to creating high levels of financial literacy within a person and business is having trust; trust in themselves and trust in their network team. To gain trust people must be willing to learn and play the infinite game. “The infinite game, a game where players come and they go, there are no winners or losers, only being ahead and behind with no defined endpoint” (Simon Sinek 2019).

New Zealand farmers are known by their “do it yourself” mentality but now more than ever, farmers need to utilise or build their trusted team to create resilient businesses in times of increasing regulations and compliance. To enable this farmers must be willing to move out of their comfort zone and value their time using the $25-$100-$1,000 concept. This concept helps identify that being on farm completing day to day jobs is replaceable by staff at $25/hr. Management decisions are valued at $100/hr, whereas being prepared to strategize and plan the business direction is worth $1,000/hr. At $1,000/hr, million dollar decisions can and will be made.

Working on their business rather than in it, and seeking a second opinion will result in further insights, which ultimately impact decisions and outcomes. Farmers must also look after themselves and their financial wellbeing along with supporting the next generation with their financial skills and involve them in strategic decisions. “Empowering individuals with the knowledge of financial literacy will have a dramatic impact on societies and entire nations.

The impact of financial literacy can no longer be ignored. It is up to policy makers, educators and people with sufficient private equity, to make financial literacy a priority in our society. As awareness spreads and people make their voices heard, the impact of this skill set will no longer be overlooked. Education in financial literacy will become ubiquitous and these critical life skills will become the norm. The positive impact of financial literacy is undeniable and the sooner this movement spreads, the better off everyone will be” (financial educators council).

The New Zealand arable farming industry faces a number of issues as it attempts to remain profitable in a world of increasing public scrutiny and environmental regulation.

This report investigates whether the integration of a hazelnut orchard into an existing Canterbury arable farm could provide:

• A profitable alternative to other common arable crops;
• A lower nitrate-N leaching profile than other common arable crops thereby bringing down the overall
  leaching profile of a farm; and,
• An opportunity to sequester carbon on-farm in order to offset the charges associated with agricultural
  greenhouse gas emissions that will be in place from 2025 onward.

The New Zealand hazelnut industry is small but has an enthusiastic grower base. Approximately 400ha of hazelnuts are planted across New Zealand. Production and profitability from these orchards has been low when compared to international production and when compared to New Zealand trial data. Low production and profitability are likely due to the choice of the high quality but low yielding cultivar ‘Whiteheart’ in the majority of New Zealand hazelnut orchards.

Internationally, gross margin returns from well-managed hazelnut orchards can be in excess of $5,000/ha.

New cultivars that have been bred internationally such as ‘Jefferson’ show significant promise in terms of high yield and nut quality. If international production can be replicated in New Zealand then hazelnuts offer a significantly higher gross margin than most common arable crops. Modelling has shown that income from a hazelnut orchard is highly sensitive to both price and yields, however a gross margin of $4,375/ha can be achieved after 12 years. The NPV and IRR of a hazelnut orchard are calculated to be $10,987/ha and 10% respectively.

There is a widely held view by the public and Central Government that excessive nitrate-N leaching and the subsequent pollution of freshwater are no longer acceptable. Hazelnuts use low quantities of nitrogen fertiliser when compared to most common arable crops. The average Canterbury arable farm leaches approximately 50kgN/ha/yr.

Modelling in Overseer shows a hazelnut orchard may leach approximately 7kgN/ha/yr. This makes hazelnuts an appealing option especially in catchments where nitrate-N leaching is capped or where reductions have been mandated by regional councils.

The He Waka Eke Noa climate agreement which was established in 2019 will introduce a pricing mechanism for agricultural greenhouse gas emissions by 2025. This mechanism will likely allow for emissions to be offset by on-farm carbon sequestration and planting of orchards may be an allowable component of this agreement.

Using ETS pricing as a proxy tool, this report calculated the approximate income (in the form of a cost offset) that a hazelnut orchard could provide to an arable farmer. The result being that the carbon income from a hazelnut orchard would be negligible ($5-$50/ha/yr) and therefore the offsetting of greenhouse gas emissions would not be a reason for planting a hazelnut orchard.

Planting an orchard is a significant commitment, particularly in terms of opportunity cost, as the success of the orchard will not be able to be determined until at least 10 years after establishment. For this reason, farmers need robust data to ensure they are making a well-informed decision.

Therefore, it is recommended that further research is conducted in the following areas:

• Optimum fertiliser quantities and timings;
• Actual yields that are currently being achieved in New Zealand; and,
• How higher yielding international varieties perform at scale in New Zealand soils and in the New
  Zealand climate.

New Zealand’s current protein production is dominated by meat and dairy. There are ongoing and increasingly growing challenges for sustainability, environmental limits, and pressure for greater efficiencies. Emergent and developing trends in plant-based proteins are creating movements and shifts in consumer demand and food production. Health and nutrition are influencing consumer demand more than ever, therefore the value proprositions in the food market have to meet this demand. The current alternative protein industry is still in its infancy in New Zealand with some sectors such as Hemp and Quinoa rapidly growing. However, in general, New Zealand is behind the main growth countries producing plant based protein like Canada and the Netherlands. This presents an opportunity to take learnings and develop potential collaborations, to advance New Zealand’s progression.

Throughout this study, a greater understanding was sought in the global positioning of alternative proteins and within the New Zealand context. This was then used to identify the considerations required to evaluate the importance of alternative proteins to the Agri-industry in New Zealand.
Key findings and discussion points raised are:

• Food production needs to increase by 70% to feed the world population of 9.7 billion in 2050.
• New Zealand has a natural bioeconomy as there is low fossil fuel use and more energy produced by renewable sources (80%) such as wind, geothermal, hydroand biomass, but New Zealand needs to move into a new bioeconomy charactarised by biotechnology and greater cross -sector thinking and actions.
• The Fourth revolution is here and characterised by building on the Third, the digital revolution, that has been occurring since the middle of the last century. The fourth is combining human and machine where technology is embedded in our societies enabling artificial intelligence, renewable energy, 3D printing and autonomous vehicles.
• Sustainability is key in all aspects of food production. Using the fourth revolution and utilising plant-based opportunities to create products that fill market gaps or outperforms the rest of the world will enable New Zealand to be a global leader in food production.
• The steps that enable New Zelaand to be a global leader should concide with achieving goals in climate change (the Paris Agreement) and mitigating the affects of green house gases and the other pollution occurring like high nutrient loading in water bodies.
• “Farmers are motivated by a diverse range of drivers  and constrained (and enabled) by a range of social, cultural, economic, and physical factors. Farmers will therefore react in different ways to external drivers of change and will respond differently to encouragement, incentives, and legislation aimed at influencing their farming practice.”

From the above findings and conclusions , the following recommendations have been suggested:

• Keep monitoring consumer trends & food markets to increase awareness of markets and consumer change
• Maintain and grow our reputation/ story of being food producers of high value and highly nutritious ingredients or wholefoods.
• Leverage our competencies of current successful sectors especially as meat and dairy innovators
• Seek expertise where knowledge or skills are low and empower people to become experts in new alternative proteins.
• Encourage and develop coalitions with the government departments such as Ministry for Primary Industries, the Ministry for the Environment and farmers to provide incentives and/or support in areas where New Zealand can deliver the world’s best produce.
• Reward and support leaders paving the way for the nation and their peers in agricultural and especially in new products or production that adds value to the New Zealand Agricultural Industry.
• Develop a New Zealand plant-based food strategy for New Zealand agriculture
• Create and develop a greater understanding and technical expertise in plant-based opportunities to enable greater diffusion of adoption to farmers.

New Zealand companies that export goods face the challenges of seeking cost effective ways to overcome the disadvantages of a small domestic market, the high cost of domestic production, stringent regulations and compliance, and the geographical distance to major markets. One approach to respond to this challenging environment is business collaboration, using strategic alliances. Strategic alliances need to comply with the commerce act however and avoid anticompetitive behaviour. The purpose of this report is to investigate three key areas regarding strategic alliances:

1. Explore the benefits and risks associated with alliance relationships
2. Understand how to implement and maintain a strategic alliance
3. Investigate the current use of strategic alliances in the agriculture industry and the appetite for more collaboration

The methodology used for this report includes a literature review and a qualitative approach was conducted using interviews with industry leaders. The responses from the interviews were categorised and key trends identified. This allowed me to draw recommendations and identify key actions.

International research has shown the use of strategic alliances are increasing rapidly. The intention of a strategic alliance has typically centred around growth, sharing resources, extending reach, access to information / knowledge, and to enhance a product. However, strategic alliances need to be approached with caution as numerous studies indicate that 50% of all strategic alliances will underperform, and 30% will fail outright. Poor execution is responsible for 86% of all failed alliances.

The findings in this report indicate there are enormous opportunities for improving outcomes. This report identifies the crucial steps and actions required during the implementation and on-going management of a strategic alliance. Recognising and adapting to the unique characteristics of each alliance can dramatically increase the likelihood of success for everyone involved.

It is my recommendation that a strategic alliance should be considered within any company growth strategy. I recommend having a check list and work through a process, with three key focus areas being:

1. Have a sound business plan
2. Have real clarity on the purpose
3. Getting the right partner

Supporting my view, 90% of industry leaders interviewed are considering a new alliance going forward. Furthermore 100% of industry leaders believe there is an opportunity for more collaboration in the industry, and agree strategic alliances are a good tool to achieve this.

New Zealand’s current protein production is dominated by meat and dairy. There are ongoing and increasingly growing challenges for sustainability, environmental limits, and pressure for greater efficiencies. Emergent and developing trends in plant-based proteins are creating movements and shifts in consumer demand and food production. Health and nutrition are influencing consumer demand more than ever, therefore the value proprositions in the food market have to meet this demand. The current alternative protein industry is still in its infancy in New Zealand with some sectors such as Hemp and Quinoa rapidly growing. However, in general, New Zealand is behind the main growth countries producing plant based protein like Canada and the Netherlands. This presents an opportunity to take learnings and develop potential collaborations, to advance New Zealand’s progression.

Throughout this study, a greater understanding was sought in the global positioning of alternative proteins and within the New Zealand context. This was then used to identify the considerations required to evaluate the importance of alternative proteins to the Agri-industry in New Zealand.
Key findings and discussion points raised are:

• Food production needs to increase by 70% to feed the world population of 9.7 billion in 2050.
• New Zealand has a natural bioeconomy as there is low fossil fuel use and more energy produced by renewable sources (80%) such as wind, geothermal, hydroand biomass, but New Zealand needs to move into a new bioeconomy charactarised by biotechnology and greater cross -sector thinking and actions.
• The Fourth revolution is here and characterised by building on the Third, the digital revolution, that has been occurring since the middle of the last century. The fourth is combining human and machine where technology is embedded in our societies enabling artificial intelligence, renewable energy, 3D printing and autonomous vehicles.
• Sustainability is key in all aspects of food production. Using the fourth revolution and utilising plant-based opportunities to create products that fill market gaps or outperforms the rest of the world will enable New Zealand to be a global leader in food production.
• The steps that enable New Zelaand to be a global leader should concide with achieving goals in climate change (the Paris Agreement) and mitigating the affects of green house gases and the other pollution occurring like high nutrient loading in water bodies.
• “Farmers are motivated by a diverse range of drivers  and constrained (and enabled) by a range of social, cultural, economic, and physical factors. Farmers will therefore react in different ways to external drivers of change and will respond differently to encouragement, incentives, and legislation aimed at influencing their farming practice.”

From the above findings and conclusions , the following recommendations have been suggested:

• Keep monitoring consumer trends & food markets to increase awareness of markets and consumer change
• Maintain and grow our reputation/ story of being food producers of high value and highly nutritious ingredients or wholefoods.
• Leverage our competencies of current successful sectors especially as meat and dairy innovators
• Seek expertise where knowledge or skills are low and empower people to become experts in new alternative proteins.
• Encourage and develop coalitions with the government departments such as Ministry for Primary Industries, the Ministry for the Environment and farmers to provide incentives and/or support in areas where New Zealand can deliver the world’s best produce.
• Reward and support leaders paving the way for the nation and their peers in agricultural and especially in new products or production that adds value to the New Zealand Agricultural Industry.
• Develop a New Zealand plant-based food strategy for New Zealand agriculture
• Create and develop a greater understanding and technical expertise in plant-based opportunities to enable greater diffusion of adoption to farmers.

“The nation must grow its people who are working across the food and fibre value chain.” (Grimmond et al., 2014).  The human capability required to meet the primary industry’s strategy for 2025 is a forecasted 4,700 increase in jobs associated with the arable industry (2012 to 2025).  It is therefore critical that as an arable industry we are prepared to grow, and our people are trained and skilled to meet our primary industry strategy.

The aim of this report is to research the development of a grain trading course for field reps, specifically targeting field reps in their first two years out on the road with the objective that it is used by agribusiness organisations.   Industry could use this research document to inspire further discussion and development on upskilling our people in arable.

The methodology included an exploratory literature review which concluded that there is a gap in arable training and development in New Zealand. I looked at overseas grain trading courses: two that stood out were the Grain Trade Australia (GTA) courses and the Kansas State University – International Grains Programme (IGP).  These courses are based in Australia and the midwestern State of Kansas in the USA where grain production is key to their economies.

I created a semi-structured questionnaire, and targeted grain traders from the arable industry with field rep staff and arable growers from the various cropping areas throughout the country.

As a result of the information gathered from the literature review and the grower and industry surveys, it is my recommendation that a grain trading course should be developed in New Zealand, with the following guidelines.

• A course template is created that is operated from the industry body, NZGSTA, with the intention of the course operating biennially or as required. I would recommend NZGSTA act as the facilitator alongside an education provider such as Lincoln University, to run the course. 
• The suggested course outline is for a 3-day grain trading course for field reps. Day 1, a full day, Day 2, a ½ day.  Both days are done consecutively.  Day 3, a ½ day, six months later.  Speakers with relevant experience would be brought in to present on each of the topics.
• An elected member of the NZGSTA executive committee is appointed to oversee training and development. Personnel training and development needs to be at the forefront of our industry and any course offered, should continue to evolve and remain relevant. 
• A customised in-house training option should be available, as we have seen with Ravensdown and their cropping course. This would potentially suit some of the larger companies with rep teams, as businesses can take on the base course content and adapt it to suit their individual company culture.  As with the above course template a service provider such as Lincoln University could run the course. 
• From the feedback from the grower survey, “that the link the field rep holds between the firm and the farmer is most important,” my recommendation would be that the course provider identifies good growers, that are willing to be mentors, to new field reps. One farmer assigned to one rep.  The course provider communicates with the growers before Day 3, to provide constructive feedback, that can help assist individual field reps.  This is a similar concept that Primary ITO adopts, where it gets the employer to verify on-farm training. 
• Further work needs to be done on the funding for the course. Perhaps, opportunities for industry sponsorship.  The intention is however, that the course is funded by the attendees or their employers.

The Primary Industry has long been stated as being the backbone to New Zealand’s successful economy. A reputation worldwide for a high quality of food and fibre, and good agriculture practices on luscious clean and green land. The Primary industry employs over 14% of the total population of New Zealand and has been through a rollercoaster in employment since 2002.

In 2011 the recognised seasonal employment scheme came into effect and it has allowed the food and fibre industry to grow since. Although continued growth requires a capable workforce to do the work. This was identified in 2019 by the Primary Industry Council and the Food and Fibre Working Group which has led to each establishing a vision and strategic 3 – year plan to grow the Knowledge, Employment, Education and attraction of New Zealanders into the primary Industries.

However, the impact of a global pandemic crisis has highlighted that the development of strategic labour force plans like the food and fibre skills action plan and the primary three year plan was all too late to assist with the biggest challenge the industry would face in over 20 years. COVID19 forced the New Zealand border into lockdown and restricted travel into New Zealand. With upcoming seasonal work starting, how was the primary industry get its capable workforce to achieve the level of productivity it was used to.

Immediate challenges affected the kiwifruit and dairy industry, while no one really understood the impact and implications the crisis would have going forward. Now in October 2020, summer is approaching and so is pruning and harvest season for the horticulture industry, the biggest sector of the industry that relies on seasonal overseas workers. At least 10,000 workers are still needed to harvest the crops, turning 2020 into a year of “how much crop can you harvest rather than how much crop can you grow”.

Slow but steady support from the government has helped overseas workers and immigrants stay longer in New Zealand, however the closure of the boarders is preventing the additional numbers of the workforce coming to New Zealand to help with harvesting. Some New Zealanders will turn to help, but the sector requires a capable workforce to move volumes of fruit and vegetables around the world.

The resilience of the New Zealand workforce has been tested through the duration of the COVID 19 global pandemic crisis but now New Zealand and the primary industry need to plan for the next global pandemic. A contingency plan for the next crisis, greater collaboration with the New Zealand Government and inclusion with the contingency planning and expanding the Recognised Seasonal Employment scheme so New Zealand can have a capable workforce and continue to grow the strengths of the primary industry in New Zealand.

There is something special about owning a piece of land and providing high quality nutritional produce to the world. Farmers are dedicated to their jobs and work every day to put food on people’s plates. This commitment is vital to sustain the growth of the world’s population and address continuous change, be it market, technical, disease or environmentally driven. The challenge is to grow the agricultural industry and keep entry points open, to allow the next generation to attain farm ownership.

The aim of this project is to investigate what options there are for younger farmers to grow their equity within the agricultural industry, rather than investing in external options, and enable them to get a foot in the door to farm ownership.

From my discussions with farmers, rural professionals and business owners outside the agricultural industry, there is a sense that it is harder than it has ever been to buy a farm, but it is still possible. For those people wanting farm ownership, they felt this could still be achieved through hard work, embracing opportunities and a bit of luck. Generation Y and Z have a different view to the traditional mindset about the pathway that may lead them into farm ownership. In the past, this has typically involved hard physical graft, but for Generation Y and Z, they are looking for more than just physical ownership.

Generation Z, who are being raised in a fast-paced continually changing world, want to develop skills that are transferable between industries so they are not confined to the same job for many years. For this generation, while farm ownership may limit their diversity of skills, they also want the security and stability, which can be achieved by owning a farm.

However, there are also some in Generation Z that have full autonomy in their farming role and, because they view themselves as guardians of the land for a limited time, they do not see the need for farm ownership to achieve their goals.

A significant issue that the agricultural industry is facing, is to create a vibrant industry that attracts and retains the next generation in farming. Without a diverse and exciting industry that allows progression within the farm gate, Generation Z will look to other industries that can fulfil their needs. Losing this resource will also have a direct impact on farm profitability.

From the discussions held with farmers and rural professionals, the model that appears to work best for all parties in the long term, and particularly Generation Y and Z, is equity partnerships. For Generation Y and Z it meets their desire for flexibility and provides a variety of structures and options for entry and exit. It enables a holistic approach as both parties are working towards the same goal. The advantages of equity partnerships are that they share the capital gain equitably, enables tax to be offset against capital improvements, and it is easy to change the proportion of shareholders holdings. There was also a view from rural professionals that, operational shareholders need opportunities to grow their equity in the farm. Given the cost of changing management of operational shareholders, this may be cheaper in the long term if existing managers are financially rewarded. Staff stability will enable the business to achieve higher targets because all the shareholders are aligned with common business goals. There are different ways an equity partnership can allow operational shareholders to do this, for instance rearing livestock, diversification of land use or farm profit performance-based shares. This in turn allows the next generation to grow their equity, and provide more opportunities for retiring farmers to sell their land.

New Zealand farmers are well known for their “kiwi ingenuity” and the challenge of getting into farm ownership from scratch is just another hurdle that can be overcome with creative thinking and support. In order for farms to remain in New Zealand ownership, it is important to work with young people, give them a vote of confidence, guidance and financial opportunities to pursue farm ownership in a way that is meaningful for them and allows them to meet their goals.