Productivity growth must be “unlocked” to drive profitability and competitiveness in New Zealand agriculture – Rabobank
Declining growth in public R&D spending, an ‘enabling’ policy environment and access to technology are three of the critical factors which must be addressed in order to ‘unlock’ future productivity growth in the New Zealand food and agribusiness sector, according to a newly-released report.
In its flagship 2015 research report Unlocking productivity growth in the Australian and New Zealand food & agribusiness sector, agri banking specialist Rabobank says it is crucial that productivity growth be reignited to both drive farmer profitability and ensure New Zealand agriculture remains globally competitive over the coming decades.
The report says the rising cost of production over recent years has pressured the competitive position of New Zealand agriculture in the world market and turned a spotlight on the slowing productivity growth in the New Zealand ag sector.
And reviving this growth is a “particularly pressing issue”, the report warns, given the challenges faced to reduce New Zealand agriculture’s environmental footprint while maintaining international competitiveness.
At an individual enterprise level, productivity gains will also be critical to drive future profitability and sustainability for farmers and other businesses throughout the food and agriculture supply chain, it says.
New Zealand’s challenge
A particular challenge for New Zealand, says report co-author Rabobank analyst Georgia Twomey, will be in reigniting sustainable productivity growth in agriculture against the backdrop of strengthening environmental regulation.
“The open market economic reforms undertaken in the mid-1980s forced global competiveness to the forefront across the New Zealand agricultural sector, driving efficiency gains across all parts of the value chain,” she said.
“Additional productivity growth has been derived from changing land use, particularly the switch from extensive sheep and beef farming into dairy production. And the significant expansion of irrigated land area – which has doubled every 12 years since 1970 – has also contributed to land use change and increased productivity.
“Driving further productivity growth will need to accommodate increased regulation governing the use of natural resources and the impact agricultural production has on land and water assets – making the challenges even greater.”
June 30, 2015
The report says, similar to many other high-income nations, New Zealand has seen a slow-down in agricultural productivity growth in recent years.
“While New Zealand agricultural productivity growth is still ahead of the world average of 1.7 per cent per annum1, it has demonstrably slowed in recent years going from an average per annum growth of 3.2 per cent in 1991-2000 to 2.3 per cent in the decade 2002-11,” she says
“This trend has typified productivity growth in many other high-income nations, while low to middle-income nations have seen an acceleration in productivity growth.”
One exception, says Ms Twomey, has been the Netherlands – a high-income nation which had managed to sustain and indeed improve agricultural productivity growth levels, despite having significant resource restraints.
“The Netherlands has been able to achieve this by adopting a sharp focus on innovation and value-adding in order to improve productivity,” she said. “The Netherlands is now, despite its resource challenges, the second largest exporter of agricultural products in the world.”
The Rabobank report – which looks at the challenge of agricultural productivity growth at a global, national and individual farm level – spotlights a number of real-life business case studies of agricultural productivity growth.
It is at this individual farm and business enterprise level, it says, where the “rubber hits the road” in terms of innovation.
“It is essential that governments and industry bodies create an enabling policy environment that encourages innovation to harness productivity-enhancing opportunities from the adoption of new technologies, management practices and business models,” the report says.