Bad attitude hold ag sector back

RICHARD MEADOWS
Last updated 05:00 19/10/2012

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New Zealanders' hostility to foreign investment could damage the agricultural sector's chances of becoming a trillion-dollar "food bowl" to Asia.

A Greener Pastures report released by ANZ Bank today details the enormous potential for New Zealand food producers exporting to growing economies.

The country stands to earn an extra $300 billion to $1.3 trillion between now and 2050 by doubling the real value of agricultural exports.

The report said Australia and New Zealand were well placed in terms of proximity, resources, and skills to take advantage of new-found wealth in the developing world.

The burgeoning middle class in China and other developing Asian countries is hungry for higher-calorie diets rich in protein, which is our biggest export.

Population growth combined with increasing affluence in developing countries will see the world demand at least 60 per cent more agricultural output by 2050, compared with 2005-2007.

But the report warned that "seizing the prize" would not be possible without overcoming some hurdles, including a huge shortfall in capital.

The nation's farmers will need up to an additional $210b between now and 2050, and a further $130b to support older farmers exiting the sector.

Traditional sources of funding- debt and retained earnings- would not be enough to bridge the gap.

"Inevitably, foreign investment will be an important part of the answer, but the pace of investment cannot get too far ahead of public opinion without undermining its sustainability," the report said.

One survey quoted found 82 per cent of Kiwis believed foreign ownership of farms and agricultural land was bad.

ANZ commercial and agri managing director Graham Turley said the sector could work harder at educating urban New Zealand.

"We've built New Zealand off foreign capital, and we've done that reasonably wisely," he said.

"They just need to increase their awareness of foreign investment being a good thing, that it creates access to market, it brings in technology and allows us to expand the productive base of our economy."

The ANZ report noted that the Overseas Investment Office's test for the sale of agricultural assets lacked clarity and transparency, and that the regime was seen as too restrictive by some.

Turley said the Crafar farms OIO saga was a "fringe" distraction from the real debate, which should be about how to attract and deploy foreign capital to the country's advantage.

Another concern was the lack of talent, with the average age of farmers approaching the mid-50s and a shortage of agriculture university graduates.

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"On the supply side, domestically, we've actually got a bit of a crisis," said Federated Farmers chief executive Conor English.

"Farms are actually high risk, complex businesses, and it takes plenty of brain power to run them."

He also said more action was needed to best monetise the opportunities in China and India, which would include switching to higher-value products and "weightless" exporting of the country's world-class skills, expertise and intellectual property.

Other challenges the report identified were intense competition with other producers, effective land and water use, improving supply chains and focusing R&D.

The best-case scenario presented in the report, which it said was aggressive but not inconceivable, estimated an average 1.8 per cent annual growth to 2050.

That was dependent on a shift to higher value products, faster growth in global food demand, and increased interest in biofuels.

It also assumed that developed countries would eventually bring their daily calorie intake to 3,550 calories, or the equivalent of seven Big Mac burgers.

The most conservative "low case" scenario would lead to a cumulative $300b increase in export revenue by 2050.

- BusinessDay.co.nz

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