Address to Meat & Fibre Council

February 14, 2017
Rick Powdrell

Everybody in this room today would agree that meat and fibre farmers are facing some major challenges at this point in time, many would say for some time.

As individual farmers the perceived level of this challenge will vary depending on farm type, location, climate history, stock mix, stock policies, debt levels, age demographics and other factors.

With all those factors in mind, the multitude of disruptive factors being experienced at present will affect as all in different ways and to different levels. For example, a farmer with a 100% beef operation will be viewing the present farming climate very differently to someone with a 100% sheep operation.

I would not describe this as a cyclical low return phase; in my view it is highlighted by a number of disruptive influences, influences that are creating much uncertainty and will take a period of time to run their courses and reach a stable position.

For many of us our resilience will be tested and our ability to support each other and communicate with the wider industry will be paramount.

I always highlight the fact that farmers have two buckets of influencing factors they are dealing with.

In the left hand, a bucket of issues and actions they have 100% control over: breed type, grazing management, sales dates etc., with the message being to maximise your ability to carry out those actions as best you can.

In the right hand, a bucket of issues that are out of your control: weather, adverse events, regulations, currency, market access, etc. You can have little or no influence over them, so don’t waste time and emotion worrying about them. Leave them to those who do.

The issue I see today is that the balance of these two buckets has got tipped significantly sideways because of additional factors in the right hand bucket - those we can’t control.

Once again, how this imbalance affects individual farmers depends on those previously mentioned farm variables.

According to Meat Industry Association data, red meat and wool was worth $8.2 billion to this country last season and, as much as many would like to think, we are not the poor cousin of dairy.

We must not fall in to the trap of thinking like that of ourselves. We need to remind ourselves periodically of the wonderful progress our industry has made.

In 1961 86% of sheepmeat went to the UK and 74% of beef went to the US.

In 2016 17% of sheepmeat went to the UK, 13% to the EU and 37% to China. Likewise beef to the US in 2016 was 48% and to a rising China market 18%.

In total we now export products to 120 countries.

In the mid 1980s 75% was in carcass form, today 95%-plus is chilled or frozen cuts with an ever increasing emphasis on meal-sized, ready-to-cook portions.

When we look on farm at the controllable bucket the gains have been immense.  From 2005 to 2015 lambing percentage rose from 119% to 127%, average carcass weight from 17.5 to 18.1 and kilograms of lamb per ewe from 16.4 to 19.5.
These are not small gains and we should be proud of these facts.

The question many are starting to ask is ‘at what rate we can keep raising on farm performance? Do we get to a point where rate of gain starts to slow significantly as we maximise what we can draw from the available resources?’.

Technology improvements and new science will certainly provide more gains in the future but will the physical land resource eventually be the limiter for us all?

Once again it will depend where individual farmers lie within my earlier variables.

Resources: I don’t need to remind anyone of some of the pressures being placed on farmers in that space, particularly how we will be able to use our land resource in the future.

As one Canterbury farmer said to me recently, “I own my farm but it has got to the point where I am losing all say in what I do on it.”

How we are going to be able to use our land and what we can do on it in the future appears to now be up for any person or body to have their say, whether they have knowledge of the land, its history or what practices are occurring on it.

No person in this room will deny we have a responsibility for our environment and must play our part in protecting it for the future, and in most cases on farm mitigation is part of farm plans today.
The problem is that of so much money is being used for the processes of remedying the problem rather than being used on the ground for future mitigation measures.

I accept it is complex but many of the processes and plans produced to date will be tied up in lengthy legal challenges that only erode the pool of funds to do the actual work.

My hope, and we all need to stress this to our councils, is that we are all learning from each other’s mistakes and successes and that this will formulate better process for better outcomes going forward.

One thing we all know is that every farm environment is different, so large multi-catchment plans will never produce the fairest outcomes for all parties. A smaller individual catchment approach has benefits in that it involves local communities, communities that know each other, communities that interact in other spheres of life, hence will readily work together to achieve best outcomes for them all and their environment.

Most importantly for this industry group we need to ensure farmers engage in the process from the outset. 3000 farmers in the Waikato are now learning the challenges of working to achieve a good outcome from the back end of a process rather than the front just as Hurunui did a few years ago.

Farming practices are constantly being portrayed in a negative manner, so often by totally uninformed people. The frustrating thing is when invited to view the realities of the practice they are passing judgement on, most decline. But we mustn’t let this deter us. We must continue to engage with them, share our experiences with them and invite them on farm.

We can’t take the denial position as we are not all perfect, there will unfortunately always be a minority that could do better. This is a fact of life.  Most of us don’t burgle houses, but unfortunately some do and that’s where the focus goes.
Encouraging, promoting, highlighting and educating best practice is a very positive means of improving on farm uptake, and carried out well, can have the spinoff of enlightening the wider public audience.

As an industry we need to use any opportunity available to showcase the positive actions the greater majority of the sector display as they go about their daily activities.

The annual Bay of Plenty Federated Farmers Farm Day reminds me every year how far removed many children and some adults have got from practices on the land.

Likewise, the lack of rural content in the school curriculum today is not helping spread the positive stories of life on the land. In recent times the Red Meat Profit Partnership and NZ Young Farmers have picked up the baton in this area and are working with schools to further the agricultural content in the curriculum.

Once we have visitors on farm, and can gain their confidence, the absorption of knowledge is immense. You can often witness the excitement and transformation from a position of little knowledge, often fear, to wanting to know more and understand.

We need our students to be gaining a greater knowledge of primary industries, as looking out to the future and the demand for skilled labour we need, some of the grounding needs to begin during schooling years.

The focus of agricultural training is being refined to assist schools to offer agricultural options and create the links to post school tertiary study and practical training. These linkages will mean trainees possessing better practical skills and being a more productive labour unit on arrival at first employment.
At the same time, we as farmers need to clearly understand our role as a good employer, an efficient trainer and a provider of good pastoral care.

One area of focus on the training front being considered is interaction between industry training arms within a wider industry so the labour force has a better understanding of value chains and how an individual’s actions relate to the quality of product or efficiency of the value chain.

This leads me back to my lopsided right hand bucket and the changing geopolitical environment. Presently in the right hand bucket are two major factors influencing trade, Brexit and the Donald Trump administration.

Dealing with Trump, the common sentiment is that of the unknown. It would appear he will have a crack at doing the things he campaigned on but just how they pan out and what that may mean is yet to be seen. Two things we do know are that the judiciary have overturned his executive order travel ban and that he won’t entertain the TPP agreement.

The US pulling out of TPP is a significant loss to NZ. It would have reduced our tariffs on beef into the US to zero after five years. But even more significantly it would have got us back on a level playing field with Australia into the lucrative Japanese market where we are currently losing market share. While we face 38.5% tariffs the Australians are down to 28.5% and will eventually be down to 9% courtesy of their bilateral FTA.

It would appear the new US administration is willing to discuss bilateral arrangements but to what level their self-protectionist beliefs influence that process and what benefit NZ may be able to gain is an unknown.
It is heartening to see discussion from the remaining countries around the possible continuation of TPP minus the US.

For farmers I see the Trump effect manifesting itself in two ways: disruption to trade and geopolitical stability and increasing currency volatility.

Firstly, if we can maintain our existing US trade arrangements that will be a good starting point for a bilateral agreement. Another unknown is whether the US will end up in trade wars with other nations, notably China, which would disrupt world trade flows and potentially put NZ in a precarious position between two of our major trading partners. Anything that upsets the economies of our markets creates significant risks for our industries as is highlighted by the common saying ‘when China sneezes, NZ catches a cold’.

These are all ifs and maybes.

Brexit, in my view, will be extremely challenging for us in the meat and fibre industry and an outcome with as little disruption to the markets is essential.

When we look at the MIA data, 30% of sheepmeat goes to the UK and EU market; lamb is higher again at 41%.

In these two markets we are presently seeing pressure from static to falling consumption, price level challenges versus other proteins, and in the UK a drive for more consumption of local product.

Over and above the geopolitical issues we have challenges around consumption, local product, synthetic alternative proteins, how we use our NZ Story, ever-increasing compliance, the anti-farming brigade, how we grow the market, new markets etc., etc.  
Beef + Lamb NZ are working on these issues, likewise processing companies and the MIA, as well as other agencies and farmers will have ideas also.

Are we co-ordinating our efforts to get best bang for our buck through all these organisations, avoiding duplication and having a common strategy of where we are heading and how we approach these challenges? We all know that every dollar is having to be stretched further and the margins continue to get tighter.

Over the next day and a half you will get the opportunity to hear and question many of the key players within our industry. We need to be able to reassure our fellow farmers that this lack of confidence they feel at present will be short-lived because those who can influence my right hand bucket are doing so in a united manner.

I must finish by commenting on the resilience of the many farmers who have experienced the outcome of mother nature flexing her muscles. Whether it be earthquake, prolonged drought or storm events, some farmers have had to endure more than their share.
I make special mention of North Canterbury / Marlborough who just when it looked like the dry might be abating, the earth transformed itself around them.

These farmers continue to need a great deal of assistance and the ongoing co-ordination of help at all levels will be vital.

So to finish up, the words I intend hammering in 2017 are “engage, communicate, unite and support”.

We need a movement led by rural people built of hope instead of fear; science instead of emotion; education instead of litigation; resolution instead of conflict; employing rather than destroying human resources.

Thank you.