Food an 'investor sector' but NZ needs to lift game
The global focus on food supply and the protein needs of Asia's burgeoning middle classes are making agriculture a compelling sector for investors, says KPMG's global head of agribusiness.
Addressing a KPMG and BNZ rural update seminar in Hamilton yesterday, Ian Proudfoot said returns from the sector looked very good to investors compared with many other investment areas, and the sector was very much now an "investor sector".
There was much more private equity coming into agriculture, with investors prepared to look beyond market volatility to the long term.
With 3.8 billion people in the Asia-Pacific region considered middle class, and just over 50 per cent of the global population now city residents, the focus was turning to the type of food people needed, Proudfoot said.
"When people move to the cities, they eat different foods and generally they get richer ... they want more complex foods and different products and food that conveys a lifestyle message."
Food markets were also highly distorted by governments, he said.
Providing enough food was the No 1 priority for governments because they were unlikely to survive if they did not.
Another driver of global agricultural markets was the natural environment, which includes productive land supply, and that was likely to go down, Proudfoot said.
In New Zealand, Pukekohe and Lincoln were examples of traditional food-growing land being subdivided for housing.
Water availability also came under natural environment, and Proudfoot questioned whether New Zealand agriculture wanted a long-term export model which involved taking water out of products and sending them overseas to countries with water issues.
He said New Zealand also had to invest more in long-term, inter-generational research and development, and to ensure rural areas had schools and hospitals to attract people to work in agriculture.
In the area of production systems developments, New Zealand was "half pregnant" in the genetics field, Proudfoot said.
At the same time as the country was exploring options for genetics development, it was "desperately" telling the world it was GE-free.
It should be creating a premium market around being GE-free and charging a premium for GE-free product.
Sitting in the middle earned no yield and no premium, he said.
New Zealand currently claimed to be able to feed 40 million people.
What it should be aiming to do was feed 500 million people with 5 per cent of their diet, Proudfoot said.
There was potential to tap into consumers' need these days to know where their food came from, as evidenced by the growing number of shoppers at farmers' markets.
In a "perfect New Zealand primary sector", the focus would be on the attributes of the product, understanding those attributes, and working out through research and development how the product delivered the attributes, he said.
A requirement of today's markets was having representatives there on the ground, "living and breathing" the market and understanding it.
Above all, New Zealand agribusiness had to preserve consumer trust, Proudfoot said.
When there was an issue with infant-formula quality, for example, thoughts must turn immediately to the mother of that infant.
And the story behind a product had to be unique to New Zealand, he said.
The marketing had to be about more than beautiful scenery - Ireland and Scotland could also use landscape to tell the same story.
"It has to bring a lifestyle value for the consumer."