nuffield 2021

A fracturing social licence to farm.
Recruitment.
An authentic provenance story.

These are our sector’s most entrenched challenges.

At their roots, they are about culture, values and perception.

They are homegrown, non-market problems confronting a sector that has optimised to win in the global marketplace. We can’t rely on our traditional strengths to produce, R&D or market our way out of them.

There is a tacit acceptance that the way forward is to shift from designing for volume and market value, to systems that also include social and environmental values.

To support that transition, this report imagines what a values-led food & farming system in Aotearoa New Zealand might look like. It’s built around an analogy, what if food & farming was more like healthcare and education – a public good. The analogy helps us to compare systems designed to sell to consumers, with those designed to more fully meet the needs of people. It helps us to see the challenges in values-led systems (like complexity, stakeholder collaboration and empathetic design) and their benefits (like trust, engagement and local prosperity).

In addition to the public good analogy, this report looks to examples in Kaupapa Māori, proposes a ‘cheat sheet’ for values-led innovation and explores five forms of values-led food & farming operating at the
edges of the sector.

It concludes with something concrete. A strategy for values-led redesign of the domestic market focussed on scaling local food & farming economies.
It’s a strategy to realise the untapped value in our domestic food system – our home paddock. It calls for enabling some farmers to look inwards and participate directly in their town’s local food economy.

It’s about designing around our values and practices that Kiwis increasingly want to engage with – like connecting to nature, learning & healing on farms or farming-based sustainability solutions. It proposes a
framework for action on food insecurity and health, two fundamental barriers to developing the ‘food & farming culture’ we need to rebuild social licence, recruit Kiwis and tell a provenance story to the world.
At its core, this is a strategy for building meaningful, everyday touchpoints with urban New Zealanders.

Because values matter across every kitchen table, community hall and boardroom – this report concludes by covering the potential roles of each sector player in a values-led domestic system.

We’re a trading nation, and we’re good at it. But we need to front-up to the fact that under the current export-dominated model, Kiwis feel increasingly disconnected from food & farming.

To meet these entrenched social challenges, we need to have the courage to do things differently – to lean into our values and redesign our home paddock, for local food & farming economies to thrive.

Here’s how.

This paper initially set out to determine whether it was possible to better monetise sustainability with the New Zealand Deer Industry. In addition to this, I wanted to understand why NZ deer farmers seemed to achieve such poor returns in comparison to both the end value of their products, and the level of risk they accepted in producing them. And lastly, I wanted to know whether our conventional industry supply chains were going to be fit for purpose in a rapidly changing world.

To achieve this, I undertook a review of existing literature, spoke to industry leaders, academics, public servants, and business owners. Most of these were connected to the primary sector, however perspectives and experience from outside the sector were also sought for insight and comparative purposes.

In doing so I found the following:

• NZ deer farmers, similar to the wider drystock sector, are not profitable in the context of other industries and what are considered average Returns on Capital Employed (ROCE) within NZ. On average, NZ deer farmers achieve approximately 3.4% return on their capital. In comparison, the NZ share market has achieved an average return of 6.5% since 1900. Additionally, our true capital gains are virtually zero once inflation is considered.
  
  
• There are a number of macro level risks and trends in existence that are affecting the NZ deer industry now or will do so in the future. It is also likely that we are underestimating them. The risks posed by factors such a climate change, environmental degradation, geopolitical risk, and the rapid emergence of alternative proteins are significant. Each of these has the ability to significantly disrupt our industry, one that is plagued by poor returns and an increasingly unsympathetic public. Our current approach to these trends is largely one of defense and maintaining the course. This must be replaced by a strategy of active risk management and opportunity realisation.
  
  
• Our current industry supply chains do indeed place the majority of the risk onto the farmer, noting our conventional position as sellers of raw undifferentiated commodity products into global markets. This ongoing situation forces the industry to accept all production risks and the prevailing market price, while allowing multiple other members of the supply chain to add their margin. This results in farmers receiving as little as 3% of the end value of their velvet. As the range and severity of the risk’s deer farmers face increase, it is clear that we can no longer afford the status quo.
  
  
• Environmental outcomes and profit are not mutually exclusive. There are currently working examples within NZ of primary sector organisations and businesses that are achieving above average returns and positive environmental outcomes. An example of this is Lake Hawea Station that is achieving a 40% premium over the current industry average for its fine wool on the basis of its carbon zero certification.  
  
  
• Whilst environmental attributes can be successfully monetized, it is unlikely to be done successfully through our conventional supply value chains. These systems are set up to supply undifferentiated commodities onto the open market and are therefore unlikely to achieve and/or maintain a premium for those attributes, particularly when other agriculture countries are doing the same. Additionally, not all of our end customers place the same value on environmental attributes. To fully leverage positive environmental attributes, it is necessary to fundamentally change the way we take our products to market. It is also recognised that developing new business models can carry a significant degree of risk and requires a range of competencies outside of those required to run a traditional farming business.

To achieve this, it is recommended that the NZ Deer Farmers Association (DFA) establish a programme of work in coordination with Deer Industry NZ (DINZ) and Central Government, with the purpose of transitioning the industry away from the sale of its products as raw/undifferentiated commodities via conventional supply chains, and towards the establishment of short value chains that are effective in matching value creation with economic return. It is proposed that the programme contain the following key objectives:

(a) Identify and support the establishment of business models and/or industry structures that have the potential to achieve the intent of the project. This work would be initially informed by those models utilised by Spring Sheep, NZ Merino and Zespri.

(b) Identify and promote the utilization of technology and web-based platforms that allow for the identification of consumers and the sale of finished products directly to them.

(c) Identify what environmental attributes can be leveraged by these business models for commercial advantage, noting that the delivery and communication of on-farm environmental outcomes will also be beneficial to the deer industries social licence.  The key focus of this objective is turning environmental compliance into economic opportunity.

It is further proposed that financial support for this project by sought from Government, based on its alignment with current political priorities, including addressing climate change through the reduction of on-farm emissions.

It is well understood by the author that many of findings contained within this report are not new, and that attempting to both capture and create more value from NZ’s agriculture products has long been an area of focus. However, our environment today is different from yesterday. We now have the knowledge, the examples, and the tools necessary to take our products to market more profitably and achieve better environmental outcomes. We as farmers, should no longer let existing structures, interests and thinking continue to dictate what we are paid and how much risk we accept in turn.