Welcome again to the Far North and Waitangi.
Firstly I want to talk about Beef + Lamb New Zealand at an organisational level and then I’d like to move to some topics that are more around the broader sector.
I guess if I describe Beef + Lamb New Zealand as an organisation we often think in 6-yearly cycles, given we are funded under the Commodity Levies Act and the referendums that occur every 6 years. And we’re quite pleased to see the progress as an organisation that we’ve made from 6 years ago. If you recall back to 2009, I was the only director on the board that’s still there today. We just sneaked through with 51.5% support by farmers to continue as an organisation and many of you will recall that the wool levy was defeated at the time.
Pleased to say, in 2015’s referendum we received 85% support by farmers on both beef and sheep meat. To get that level of support we were very humbled but at the same time it was very satisfying with all the work that went in over the preceding six years. I think there have been a bunch of factors that have really contributed to that. The farmer council structure that we’ve developed – and we’ve got a lot of the farmer council members here in the room, particularly within the northern farmer council – has been absolutely crucial to help drive a lot of that greater engagement with farmers.
Our management team have developed a culture under the leadership of Scott Champion where we’ve become much more responsive – we’ve engaged with farmers in a much more genuine way. We shook off some of that old ‘producer board’ culture that we’d inherited from the Meat Board and the Wool Board when we’d merged into Meat and Wool New Zealand and we’ve become a much fitter and more responsive team.
One of our taglines is ‘By farmers, for farmers’ and we fundamentally believe that – it’s absolutely in our DNA. Often organisations will have a tagline but this is something that we absolutely live and breathe. When we were leading into our referendum in 2015, Kirsten Bryant – one of our directors – said: “You know what we do? We’ve got farmers backs.” And I think that really sums it up – we do have farmers’ backs on the big issues. At the end of the day, Beef + Lamb New Zealand was created by farmers to do the things that farmers didn’t want to have to go and do themselves – but by banding together collectively, they had an organisation that could knock on the doors of Parliament, could invest collectively in research, extension activities, market access, market development type work, and provide leadership for the sector. Those are things that farmers knew that they had to have done but it was very hard for them to do individually. So they created Beef + Lamb New Zealand to do those things. Now I’m not suggesting for a second that we’re perfect – we’ve actually got a lot of room for improvement – to be honest, that’s what excites us as an organisation – we know we’ve come a long way but we know we’ve got so much more potential to deliver greater value for farmers.
Just a couple of things to note, to that end – around research and development: we invest about $5 million in research and development, that’s Beef + Lamb’s contribution. We then leverage a significant amount through other parties and government to invest in research and development that really fits the needs of sheep and beef farmers.
We’re always looking at how we can do things better, so we commissioned a review of our research and development programme last year. So that’s thrown up some interesting insights around how we can improve the pipeline around research coming through, right through to the uptake and how we get better alignment there. (Time doesn’t allow for me to go into the detail on that.)
The Constitutional review is another thing that we committed to do last year in the referendum process. The Beef + Lamb New Zealand Constitution was developed back in 2003 and voted in by farmers at the time we moved away from the old Meat Board and the Wool Board structures. When we look at the Constitution today it’s in need of an overhaul, from a governance structure right through to a bunch of technical amendments, to ensure that we’re fit for purpose and relevant for today’s farmers and environment.
The other area I’d like to note is Market Development. We invest $5.5million in promotional activities on behalf of the sector and on behalf of farmers. More importantly, to ensure that demand is maintained and also increased for our products. We’ve commissioned a review on that and we’ve got some findings back which we’re now testing with focus groups and also meat companies, around how we can do promotion better.
This hasn’t been an easy road – we’ve had a few harsh starts around how we can really shake up the whole promotional area and get better bang for farmers’ dollars in that area. We feel we’re in a pretty good space and we’re just about ready to come out and start talking to farmers as we go through our annual meeting through this winter where directors get out on the road and start talking to farmers. So I really invite you to get along to those meetings as we do that – participate and feed your thoughts into that process.
If I move over to the sector now, in terms of some of the highlights but also some of the things that haven’t been going so well. We often get judged – when the sector isn’t doing so well, often there’s a perception that Beef + Lamb New Zealand as an organisation is failing. I’d like to think that our organisation, while it has a lot of room for improvement, has been doing a good job and the sector would be a lot worse off if we didn’t have a functional Beef + Lamb New Zealand. What we do is we attempt to exert influence over the sector but we are only one player in the sector team.
So if I can just talk about a few of the highlights – and I won’t be listing all of them but here are just a few. What’s been pleasing is that we’ve seen our sector move to over $9 billion of total revenue now, which is a new record for the sector. It was only several years ago we were just over $6 billion. So it’s very pleasing to see that increase over time.
After years of decline of undergraduate students studying agriculture at tertiary institutes, we’re actually seeing a big upswing. So it’s great to see some new talent getting attracted to our sector and coming through the pipeline. It’s important that we keep that going and we harness it and get them into good jobs in our sector.
We’ve seen more trade liberalisation. The Korean Free Trade Agreement has been one that’s been great to get across the line – we were slowly getting squeezed out of that market with a 40% tariff on beef in particular. We now have that free trade deal signed. It’s something that Beef + Lamb New Zealand worked very closely with government on.
Trans Pacific Partnership is the other one. Obviously it needs to be ratified by the various member countries, but that’s a significant deal for us.
Just to give you some top-line numbers – with all the trade deals we’ve had over the last few years, we now have saved $161 million in terms of total tariffs. To put some context on a per kg of carcase weight, as farmers we pay 38 cents per kilo of beef in tariffs. Now we don’t pay that directly but indirectly that comes off what we receive. On sheep meat, it’s 12 cents per kilo of carcase weight. So these are actually real costs. Our aim at Beef + Lamb New Zealand is to help facilitate and encourage government to continue around the trade liberalisation so that we get those tariff savings from $161 million to $186 million next year. Now that might be stretchy, but that’s what we’re pushing for on behalf of farmers.
One of the things that has been quite frustrating is volatility, for us as farmers. If we look at the global context and the way change is happening – probably at an exponential rate – we are seeing volatility become more and more significant – the ups and the downs are higher and lower than we’ve experienced in years gone by. If we look at wool, it’s great to see wool on a rebound – albeit we’d like to see it higher. Beef has also been hitting new territory, particularly if you’re a beef breeder enjoying some of these record weaner beef prices. We’ve seen beef at new levels where a 5 in front of the schedule is now accepted as the norm, as opposed to a 4.
Obviously sheep meat has been an area where we’ve been disappointed – the volatility has been working against us and when you couple that with climatic impacts such as drought, it’s been a very disappointing year for lamb and also mutton.
What’s interesting is we are also seeing over the fence our dairy colleagues who are having an absolutely terrible year and the light at the end of the tunnel just seems to keep drifting off into the distance, so that has been disappointing for our dairy colleagues. I guess how that impacts our sector, in terms of the sheep and beef sector, is the disruption that starts causing in the supply chain as we get activities occurring or suddenly dairy grazers out there looking for beef animals, calf rearers that are used to a certain volume that’s required – the disruption that occurs when you suddenly get a lot of dairy farmers rearing calves – all that disruption creates further volatility.
My view on this is that volatility is something we need to learn to manage – it’s not something we can ever minimise. It’s about having resilient businesses, it’s about having more reserves in our business in terms of what we do. And it’s something we’re deeply committed at Beef + Lamb New Zealand – is to help farmers manage through these things. I often say that, farming in New Zealand with our price volatility, we probably need to start taking the approach that a lot of Australian dryland farmers do – where they will farm for one good year in 10, a few average years and a few absolute shockers. Maybe in New Zealand as sheep and beef farmers we need to start building more resilience into our business – more reserves, where we can actually ride through these troughs but make sure we capitalise on those good years.
An important principle that I want to share today is that whatever we focus on, enlarges. I think we’ve had quite a lot of debate and frustration over the last few years around the industry structure, around lack of returns that we deem as acceptable as farmers. However, the division and the infighting is something that has become characteristic of our sector. And it’s important that while we need to acknowledge the problems – problem definition is absolutely vital – we also need to focus on the things that we agree on. Whatever we focus on enlarges, and if we continue to focus on the negatives in our sector, that will become the thing that consumes us. It’s important that we acknowledge the things that aren’t going right but we also need to focus on the things that are going well. Let’s build a pocket of excellence around those things and let them start growing and expanding.
Culture is a very important thing – and the culture of our sector needs to be a culture of innovation, a culture of go-forward, a culture of a can-do attitude where we get out there and we take on the world in a positive way in terms of what we do. To share a slice of New Zealand in terms of the culture and the values that we instil and the products that we produce as farmers and go and share that with consumers all over the globe. It’s important that we start speaking to the solution, not the problem. If we speak to the problem, what we’re doing is we’re focusing on the problem. If we speak to the solution, we actually focus on the solution.
Just to give some examples, health and safety is one where we have been working very hard for farmers to make sure we get good outcomes for farmers. There’s no doubting the fact that we do have a high accident rate in the agricultural sector – it’s something we need to address. However, I think a lot of farmers have felt very judged and beaten up by the health and safety initiatives and WorkSafe. We’re engaged very closely with WorkSafe, also at a political level, to ensure we get some good outcomes. And we’ve done that in conjunction with Federated Farmers and Dairy New Zealand.
Now we haven’t been making big headlines on this – that’s been quite deliberate. Our way of engaging is to get in there and try to influence the decision makers rather than leading protests around the Beehive. Having said that, at times I’ve had a lot of calls from angry farmers, ready to go down the protest track. And it is useful having in your hip pocket when you’re talking to the decision makers to say that we’ve got farmers that are seriously angry about this stuff.
We haven’t quite got the quad bike passenger thing across the line yet but we feel that we’re very close in terms of coming to a good resolution with WorkSafe on that. So watch this space.
I guess coming back to speaking to the solution not the problem, the problem we could focus on here is regulation, it’s deaths, it’s injuries. The solution is having a culture of safety, it’s about understanding what the risk factors are and using a risk-based assessment to start minimising those injuries.
Lamb pricing is another problem. We’re not getting enough for our lambs. There are quite a few solutions – one we’re focusing on is how do we create more demand – both in new and existing markets.
I just want to finish with a farewell to Scott Champion, our chief executive. Scott has done a fantastic job leading the organisation for 7 ½ years as chief executive and with the organisation for 10. I just want to acknowledge you Scott for your time with the organisation and the legacy that you’ve left for farmers of New Zealand, for the team that you’ve been leading and for the organisation of Beef + Lamb New Zealand.
So thank you very much.