AgITO - Futures Research

FUTURESRESEARCHANNUAL REPORT 2010

AgITO FuTures reseArch ANNUAL REPORT 2010

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Simon Lovatt AgResearch

Scott Champion Beef + Lamb NZ

Mark Paine DairyNZ

Haylon Smith NZ Trade & Enterprise

Paul Vaughan NZ Trade & Enterprise

Paul Goldstone Ministry of Agriculture & Forestry

Kevin Steel Ministry of Agriculture & Forestry

Karlheinz Knickel Ministry for the Environment

Ken Eastwood Tertiary Education Commission

Murray Gibb Water NZ

Steve McCrone Cornwall Strategic

David Powell Lost Ark Consulting

Fred Hardy AgITO

Kevin Bryant AgITO

Tracey Shepherd AgITO

Ruth McLennan AgITO

Fiona Beardslee AgITO

Paul Cording AgITO

Carrie Graham AgITO

Charlotte Steel AgITO

Justin Blakie AgITO

Michelle Hansen AgITO

Graeme Couper AgITO

Jane Mitchell Agriculture Services Ltd

Jeremy Neild Agriculture Services Ltd

AcknowledgementsThe following people and their agencies were represented in the discussions that have led to the production of this report throughout 2010. We gratefully acknowledge their assistance.


InTRodUcTIonWelcome to our second Futures Research Annual Report. This report represents the analysis that we have put into our futures research process throughout 2010, and summarises the key trends that are emerging for our industries.

This is the second year that AgITO has produced an Annual Report for Futures Research. The key themes that we have identified in 2010 are:

• Water,orlackthereof• Thehumancapitalmismatch• Transformingresearchcreativityintorealproductivity• Makingchoices,takingchances:NewZealand’sfutureinthe

global market.

Of note is the underpinning theme of needing to invest in the development of human capital across the primary sector. Education and training will move the above key themes from points of debate and discussion into the productivity and success factors of the future for our primary industries and assets. This is timely, with the partnerships that are forming across our industries alongside the tertiary sector and research institutions. Capability development starts with literacy, numeracy and communication. With these base skills we can spark the development of high level agribusiness and technical skills, and therefore drive productivity increase. Education and industry based partnerships cannot but benefit the primary sector, and enhance the productivity of our land managers.

Thisforward-thinkingapproachiswhat‘futuresresearch’isallabout,andAgITO will continue to promote the strategic analysis of our social, economic, and political environment. It is essential to have a wide grasp of the issues of the day; but is also essential that these issues are considered in light of their implications and that action is taken as a result. These actions must add value to our industries, the numeracy and literacy project is an example of this.Ifyou’dliketolearnmoreabouttheAgITOfuturesresearchprogramme,please get in touch. The more people involved in this programme, the widerandrichertheinformationbecomes.Ifyou’dliketochallengeourassumptions, please get in touch also – we welcome the debate!

KevIn BryAnT, chIeF execuTIve, AgITO

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Water, along with land, is the most critical supply side constraint for agriculture and therefore food production. All indications from our global scanning show that water as both an input and an output in agriculture, will dominate the future of the food industry and water usage will not only determine primary industry export volumes but increasingly, the way that the international markets perceive these exports. Water and how we manage it will be the most significant factor in the future success of our primary sector. It is only one component of our production system, but it is vital. We will need to understand the role of water as a component of a system that includes pasture, crops, soil, agritechnology, skills, knowledge and management expertise. Furthermore we need to understand that water is important to agriculture from both input and output viewpoints. The issues that are relevant to the input side (such as allocation, irrigation, etc.) are sometimes similar to those on the output side (effluent, eutrophication, discharge consents, etc.) but they are also sometimes different.

NewZealandmustlookatwaterinanewway.Water is a resource that we have taken for granted, but its strategic importance in a world that needs more food means we have to change the way it is valued and managed.

Locally we have a super abundance of water. It is expected to be always available at a reasonable cost and at a “clean and green” level of quality. Water quality has become a key concern which has often set urban interests against rural such as thecaseoftheManawatuRiver,“Publicconcernabouttheriver’swaterqualitycametoaheadagain... when national media applied the “worst in the Western world” tag to the river, based on a set of modelled results that pertained to one data set, affecting only one small section of the river.”2

Ross Woods, a principal scientist from NIWA, saysthat:“We’restilloneofthemostwater-rich countries in the world... The key thing now is to make good decisions about what we do with that abundant resource so we stay in that position.”3Makingtherightdecisionsinvolves valuing water as a society, investing in appropriate infrastructure and educating users

ThEmE onEWater or lack thereof...

“Water is critical [and] its ownership, allocation, management, quality and storage are in play right now... The decisions that are made in the next one or two years will be felt for the next 50 years.”conoR EnglISh, FEdERATEd FARmERS chIEF ExEcUTIvE 1

1 Quoted in “Liquid Assets” Nick Smith, New Zealand Herald, 29 November, 2010, Database Record 1200

2 “A river view based on good balance, not punitive bite,” Lee Matthews, Manawatu Standard, 3 November 2010, Database Record 1108

3 “Choose wisely to save water,” Sudesh Kissun, Rural News, 18 October, 2010, Database Record 1095

4 “Liquid Assets” Nick Smith, New Zealand Herald, 29 November, 2010, Database Record 1200

5 “The Lords of Water,” From the book Troubled Water, Maude Barlow and Tony Clarke, 2003 Database Record 132

and stakeholders. Water has often been a divisive issue in recent times with farmer pitched against urban environmentalist, farmer against electricity generators, and horticulture users against recreational users.4

Water: Conflicting Forces, Pressing Questions HowdoesNewZealandbuildaunifiedapproachto the care, management and conservation of water?

HowdoesNewZealandmovepastconflictingviews about water and build a future that enables our primary sector and national economy to build on our water resource?

HowdoesNewZealandeducatestakeholdersinthe ideas of water ownership and governance?

What is the international context around water thatNewZealandwillhavetoworkunder?Dowe understand the changing consumer demands around water with the rise of concepts such as virtual water (the amount of water required to produce a product) and water footprinting (the total volume of water used to produce the goods and services consumed)? Will New Zealand’swaterpolicybedecidedbyahandfulofsupermarket buyers?

Who will dictate the international water agenda in the future? Will it be set here or overseas? Currentlylessthan10%oftheworld’swatersystems are under private control but at the rate they are expanding, the top 3 alone will control more than 70% of the water systems in Europe and North America in a decade.5

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The concept of ownership of water is at odds withNewZealand’senvironmentallegislativeframework and the Treaty of Waitangi. However water infrastructure may be privately owned. The right to harvest and use a set volume of water in a defined period of time has spawned the concept of sale or transfer of water rights. Thedifferencebetweenthisand‘ownership’isoften misunderstood and therefore can result in some inappropriate claims being made on water as a resource.

Two Future Trajectories for New Zealand1. Water as an opportunity“Our cousins across the Tasman have minerals. We’ve got water. Their minerals will run out one day. Our water won’t. We’re slowly waking up to the fact that it is a strategic resource that increasingly provides us with competitive advantage internationally.” mURRAy gIbb, WATER nEW ZEAlAnd6

• Weareabletotellourglobalmarketsa NewZealandwater“story”withwater as a renewable, carefully managed, high quality input to intensified high quality food production.

• EveryNewZealandervalueswaterandmanages it carefully.

• Wehaveanirrigationinfrastructure network that efficiently captures, stores, and enlarges our supply of water to key economic uses (inefficient use of water, such as border dykes, has disappeared).

• Innovativewaterusagedrivesproductivity,growthandjobsinNewZealand.

• Waterisallocatedsustainablyacrossa variety of sectors.

• Useofinternationalbestpracticeandtechnologies in water management and allocation.

• Recreationandproductionusersofwatercoexist peacefully.

6 “Water – New Zealand’s Strategic Resource”, Murray Gibb, Water NZ Newsletter 3, 28 Feb 2010, Database Record 971

7 “For want of a drink”, John Grimond, The Economist, 20 May, 2010, Database Record 943

2. Water as a problem“When the word water appears in print these days, crisis is rarely far behind. Water, it is said, is the new oil: a resource long squandered; now growing expensive and soon to be overwhelmed by insatiable demand.” John gRImond, ThE EconomIST, 20107

• “Scarcitythinking”dominatesNewZealandpolicy and governance around water.

• Waterpolicyisboundupinregulationandpunitive actions.

• Competinginterestsandinfightingdiscourage new infrastructure investment.

• GlobalmarketsimposereportingandmeasurementregimesonNewZealandexports.

• WaterwaysinNewZealandcannotsatisfyboth recreation and production requirements.

choosing our future: What will we need to address?WhatdoesthismeanforNewZealand?Ifweareto choose a positive future trajectory, what must be addressed with regards to water use and management?

• “NewZealandInc”mustdeterminetheagenda for water; what is important to New Zealandandhowthiscanbearticulatedandworked towards.

• Arobustandtransparentconsentsprocessmust be established and maintained, to solve conflicting water usage demands.

• Waterperceptionsmustbeaddressedtoshiftboth rural and urban mindsets and behaviours (public education is key).

• Aconcertedeffortmustbemadetouniformlyapply current technology.

• Investmentinnewtechnologyeithermustbemade, whether it is imported or developed in NewZealand.

• Wemustclarifyownershipofbothwateritself and water infrastructure.

• Investmentintrainingforwaterusersin: —Specialistskills —Systemsthinking,problemsolvingand

management skills — Crop and soil knowledge.

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ThEmE TWoThe human capital Mismatch

He aha te mea nui? He tangata, he tangata, he tangata!

What is the most important thing? It is people, people, people! 8

Any enterprise depends on the expertise, experience and effectiveness of its human capital.TheNewZealandprimarysectorisanenterprise, albeit comprised of many multiples of individual small, medium and large enterprises. Human capital is a major reason why our farming industries have done so well over many generations, and it is a possible constraint as we focus on the future of the primary sectors. There have been endless debates and much has been written over a long period of time about the rural workforce and how it (and productivity) can be improved. Everyone is in agreement that the future will depend on the people involved. How then can the sector work to ensure that there is no mismatch in requirements and human capital supply?

Primary Sector Human Capital is Changing• Weareunderconstantpressurefor

productivity improvement: in an increasingly demanding international market, how can NewZealandensurethatinnovationuptakeand on farm performance can continue to rise?

• MultipleoptionsareavailabletotalentedpeopleinNewZealand,sohowdoestheprimary sector compete for talent? How does the new talent view opportunities in agriculture?ArecentMAFsurvey9 showed 64 percent of the urban public said they considered the rural sector to be important, yet the number of agricultural graduates remainslow.RecentstudiesbyMasseyshow that the industry lacks glamour for many young people. This raises questions aroundhowNewZealandcanensurethereis an adequate supply of human capital coming into the primary sectors. Jobs in agriculture provide attractions such as working outdoors and with animals; creativity, variety, challenges, an attractive lifestyle, and opportunities for good pay (or as in the past, an opportunity to build longer term wealth), but still have few takers as other paths are more heavily promoted.10

• Jobmobilityor“churn”ismuchmoreprevalentinmodernlabourmarkets.Goneare the days when people could enter the industry and remain in the same place for a lifetime. Entrepreneurship, investment and seizing global opportunities are increasingly relevant skills.

• Ageingworkforce:agenerationofskilledfarmers is nearing retirement and the average age of current farmers is rising; how is a new generation of farmers being prepared for the future?Dowehavetoimportfuturelabourorcan we develop it here?

• Differentskillsneeded:asfarming changes, farms grow and technology evolves, the rural workplace needs an increased focus on “soft” skills such as management and leadership, as well as technically specific skills.

• Technologyischangingthenatureofworkonfarm. A sudden rise in the implementation of robotic or automated technology could solve the problem of labour shortage but what else would change? Computers are being programmed as virtual doctors and virtual lawyers so why not a virtual farmer?

• Isthecurrenteducationsystem(vocationaland academic) meeting the needs of the NewZealandprimarysector?Willitbeableto evolve at the same rate as the industry?

• Workersarebeingdisplacedfromotherindustries due to global economic challenges. This provides opportunity for new blood into theprimarysector.InAustralia,Ingham’sChickens in Adelaide recently took on 70 peoplemaderedundantfromMitsubishi.In Ireland the economy is reeling, jobs are scarce in financial services, and one of the few sectors that shows any promise is agriculture.“There’sresurgenceinproducingfood... It will become something people not only want to do but may have to do.”11

8 Maori proverb, unknown attribution

9 UMR Research for MAF: ‘Beliefs and Values Research: Urban and Rural Perspectives of the Primary Sector’, August 2008, p35

10 Comments by Jacqueline Rowarth quoted in “New Zealand’s Future is Farming”, Gisborne Herald, 9 October 2010, Database Record 1059

11 “Ireland’s unemployed head back to the farm”, Louisa Flahey and Finbarr Flynn, Businessweek, 14 October, 2010, Database Record 1070

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• Tokeepanindustrymovingforwardthereneeds to be research and development. Lack of profiling in schools around the value of the industry is resulting in fewer numbers entering agricultural science and further diminishing the “intellectual grunt” needed in this area.”12

The future of Human Capital: future divergent trajectories?Trajectory one: neglecting to sow• Lackofinvestmentinalleducationresulting

in low literacy and numeracy.• Agriculturedoesnotvalueformallearning

and relies on ad hoc information gathering which may or may not be reflective of good practice

• Asaresultrealfarmproductivitygainsarerestricted to top quartile farmers. Corporate farming is able to buy and lease large amounts of land because they are able to operate on lower margin spread over a larger base.

• NewZealandstrugglestosupplynichemarkets which require high quality products that are free of defect and of proven provenance

• Agriculturehasbeenforcedbackintocommodity trading rather than quality food and fibre production.

Trajectory Two: Reaping the harvest• Lifelongeducationfrompreschoolto

retirement, and beyond, is culturally embeddedintoNewZealand.

• Agriculturehasaneducatedandskilledworkforce that is adaptable, professional and understands both production needs and customer needs.

• Wedemandqualityandinnovationin training (e.g. use of new technology, learning methodologies).

• NewZealandisthepreferredsupplierofniche and luxury food and fibre. Innovation andqualityarehallmarksofNewZealand’sprimary sectors.

• Allthoseworkinginagricultureknowthatthey are in the food production sector and are skilled to deliver the needs of the food sector and our industries value human capital development.

• Educatedandskilledpeopleareabletomoveto jobs across the entire food production supplychain.NewZealandisamanagementincubator, and an international leader and hub in enterprise development and management.

• Theworkforcecomesfrommultipleethnicbackgrounds and is a mix of imported and home grown talent.

12 “Education in Agriculture” Select Committee Presentation, Jacqueline Rowarth, 21 April, 2010 Database Record 863

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• “Agricultureissexy”–ourprimarysectorsarepromoted well and are desirable career paths for the most talented products of our schools and universities.

• Increasingskilllevelsleadtowiderinvestment in technology and productivity gains on farms.

making it happen: navigating to the future• Seedsneedtobesownatschool.The

primary sectors must become part of urban and rural consciousness from a much earlier age to ensure that the resources of urban human capital are tapped to their potential.

• Governmentandindustrymustcreateahuman capital strategy for our sectors. Our aspirations of economic growth from the industry will be attainable when we have built the right people and skills.

• Wemustembracenewwaysoflearningincluding using best practices in technology as enablers.

• Careerpathsandbusinessopportunitiesintothe primary sectors must be planned and encouraged.

• Literacyandnumeracyissuesmustbeaddressed fundamentally throughout New Zealand.

• Ensurethatprimarysectorworkplacesare‘greatplacestowork’;theyattractandretainstaff through good management culture and practice.


ThEmE ThREETransforming our research creativity into real productivity

“Our farmers have shown that they’re leaders in improving productivity and production, generating the export dollars that pay the country’s bills.”hon bIll EnglISh, mInISTER oF FInAncE13

TheNewZealandprimarysectorhasbeenbuiltoninnovativeresearchanddevelopment(R&D)and the subsequent successful transition of new technologies onto the paddocks and sheds. This lifeblood has been oxygenated by research investment. For our industries to continue to grow in productivity and value, the future depends on ensuring this continues. We add to this the need for global food volumes to increase. This necessitates “pushing the agricultural technology frontier outwards” on a number of fronts, according to the United Nations Food and Agriculture Organisation.14Macroandmicro pressures are on the primary sectors to continually do more with less, and the key questionisifNewZealandhasthehumancapital,investment, innovation and technology transfer system to do what is being demanded.

In general, global investment in agricultural research and development has been dropping asapercentageofGDP.Theexceptiontothishas been the agbiotech companies that service theprimarysectorssuchasMonsanto,DuPontorHeximainAustralia.InNewZealandthegovernment has been the main investor in primarysectorR&Dandprivatesectorspendhasbeen limited. Our primary sector is predominantly an industry of many smaller players which can cause innovation to be hampered. Our notions of return on investment may need to be modified from a short term to a long term measurement.

A key challenge is helping the primary industries tounderstandandvalueR&Dsothattheymaintain and develop their mechanisms for collective support and purchase of innovation. While some industries have perceived their levies to be worthwhile, others have not and much needed innovation is lost. On the flip side, how can the research industry be more compelling with its offerings to industry, so that payments forR&Darenotseenasinvestmentsinfuturelivelihoods?

Biological enterprises such as agriculture and food are facing numerous challenges, including the productivity challenge mentioned above.Solvingthesechallengesoftenleadstofurther challenges such as the role of genetic modification or genetic engineering. When

scientists are seeking to embark on major research programmes (up to 20 years) how can they factor in consumer and industry policy and demands around these issues?

Perhaps more critical is how our primary sectors pick up and “normalise” new innovation and technology. In the past we have made assumptions that there is a linear process where excellent science becomes an opportunity that is then picked up commercially. In reality it is not this straightforward. Farmers are often seen as not being receptive to innovation and new concepts, but often researchers are guilty of failing to demonstrate the commercial benefits of their innovation. How can we build better mechanismstointroducethefruitofR&Dtothe people that need to use it? How also can we continue to build lucrative new international productopportunities?RecentlyPGGWrightsonhas identified its new agritech arm as its primary source of new revenue and growth. They saw greater potential for top-line growth from the agritech businesses in a world that would turn to science to feed a booming population.15

Trajectory one: building our Primary Sector: commitment to an Innovation cultureWhatcouldthefuturelooklikeforNewZealandif it embraces innovation and better integrates it into primary sector production, processing and marketing?

• NewZealandisspendingatleast3%ofGDPonR&D,withamuchgreatersharecomingfrom onshore and offshore private enterprise.

13 Quoted in “Fast broadband becoming essential for farmers” New Zealand Herald, 18 March, 2010 Database Record 875

14 The FAO’s latest projections indicate that global agricultural production must grow by 70 percent by 2050 in order to feed an additional 2.3 billion people “Increased investment in agricultural research essential” UN Food and Agriculture Organisation Media Centre, 29 September, 2009 Database Record 609

15 PGGW Looks to Agritech, Agbrief, Inventas Media, 7 July 2010, Database Record 936

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• Scienceisadesirablecareeroptionfor national talent, its role in economic development is understood and there is a passionate focus on the creation, development and adoption of new science, technologies and methodologies.

• NewZealandhasaneffectivetechnologytransfer system that has been benchmarked internationallye.g.Israel,USAetc.

• NewZealandembracesoffshoreinvestorsinR&D,butintellectualpropertyandfacilitiesare retained in this country, providing a springboard for new innovation.

• Weunderstandthemechanismtonormalisetechnology – education and tailored commercial services delivering product specific training to farmers. Researchers and commercialisers are better at telling their story to stakeholders.

• Marketmechanismsaredevelopedtofundresearch:

— A longer term view is taken by public and private investors

— Incentives from government are offered — Technology and market foresight is

prioritised, using global scanning systems to identify opportunities.

• Moreeffectivepartnershipsaredevelopedbetween science and users. Primary industriesrecognisethevalueofR&Dandtechnology transfer:

— Value is realised — Rapid prototyping, fast feedback loops and

continuous improvement in technologies and methodologies is standard.

• Intermediaries(e.g.consultants,technologyagents) are effective instruments of technology transfer policy.

“The lifeblood of our business is that R&D spend... We have to continuously create new innovation that lets people do something they didn’t think they could do the day before.”STEvE bAllmER, cEo, mIcRoSoFT16

Trajectory Two: maintaining status quoWhat would an alternate future look like for New Zealandifitwastoignoretheopportunitiesof Trajectory One and continue traditional approaches?

• Fiscalpressuresandalackofrecognitionof the value of innovation and research has meantthatR&DexpenditurehasbeenparedtotheboneandNewZealandnolongerholdsan edge over our competitors

• The“BrainDrain”isexacerbated,withvaluable researchers, entrepreneurs and innovators, and other talented individuals leavingNewZealand.

• Theperformanceofourprimarysectorsisadversely affected, bringing further economic challenges to the nation.

• Technologicalinnovationthatdoeshappenfinds no adequate channel to market, new technologies and opportunities languish and the lack of perceived results causes further cutstoR&Dspend.

• Ourprimaryindustrieslosetheircomparativeadvantages in production and a consequence is an excessive environmental footprint and disqualification from lucrative markets.

16 Greatquotes

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ThEmE FoURMaking choices, taking chances: new Zealand’s future in the global market

“South Africa has diamonds, Australia has minerals, Saudi Arabia has oil – and in New Zealand we have farming based on pasture. We have an unusual profile for a developed country in that our economy is largely dependent on primary production.”17

hon dAvId cARTER, mInISTER oF AgRIcUlTURE

NewZealand’scurrentandfutureeconomicprospects are inextricably linked to the market success of the primary sectors. Being underpinned by agriculture rather than minerals, manufacturingorfinancialservices,NewZealandhas been subject to an economic decline against faster growing nations, and is exposed to competition and protectionism for a significant proportion of its economic output.

While good trading prices and commodity booms often mask less than stellar economic growth, thetruthisthatinmanyareasNewZealandisunderperforming when it comes to high-value processed food exports. According to a recent report, such products made up only around 14 percentofthiscountry’stotalfoodandbeverageexport value, per capita, in 2009.18 By comparison, processed edibles made up about 30 per cent ofDenmark’stotalfoodandbeverageexportvalue during the same year and almost 40 per centofIreland’s.BothofthesecountrieshavelessproductioncapabilitythanNewZealand,buthave further processed to add value. The research shows that milk powder undergoes a 10-fold increase in value when turned into baby formula, andsignalsthisasadirectionforNewZealand.ItisquiteclearthatNewZealandcouldmovefarhigher in international value chains rather than accepting traditional “trading” positions.

Who do we really think we are?SometimesNewZealandasaneconomicactorsuffers from double mindedness, not really certain over what its economic or export strategic positionreallyis.OnonehandNewZealandsees itself as a global food supplier, dominating commodity trade in some sectors and being a significant player in others. On the other hand, NewZealand’soverallproductioniscomparativelysmall and we can only feed a small proportion oftheworld’spopulation,sowetryandposition ourselves as high value niche suppliers, underpinned with a clean, green, natural story. The truth is that in many of our industries the double mindedness shows through. In one segment we might be the premium brand,

backed with a compelling story and high margins, yet in another segment we find our products in a price sensitive commodity trap. Until we are able to really understand this muddled position how can we really seek to steer out of it?

There has been much discussion about some obviousfuturesforNewZealand:

1. NewZealandseekstodriveproductivity(either through onshore gains, or utilising overseas land resources) to become more dominant e.g. Fonterra as “the FedEx of milk”.

2. NewZealandbuildsaconsistenthighvalueniche for wealthy markets, based on brand, value added processing or other features (suchasGE-FreeorOrganic).

Each of these possible trajectories has unique requirements but they also have some common features. Is it possible to have a future where both trajectories can co-exist or will future pressuresbesogreatthat“NewZealandInc”will need to make a strategic choice between these or other options? Is there enough foresight, leadership and enough “will” in our primary sectors to want to make choices like these?

Prerequisites for Growth: Factors in our International Market Future• “NewZealandisCleanandGreen”.New

Zealandtradesonitscleangreenimage.This is vital to our tourism and export industries. Overseas reports are questioning our environmental credentials. One badly performing sector can rub off on other sectors.19 Over time we must seek to make our industries actually clean and green relative to today. Technological and human capital innovations will aid this.

17 David Carter, Address To Dairy Farming Conference, 9 November, 2010 Database Record 1158

18 “New Zealand ‘missing out’ on added value bonanza” Christopher Adams, New Zealand Herald, 1 November 2010, Database Record 1100

19 “100% Pure Hype” Geoff Cumming, New Zealand Herald, 2 January 2010, Database Record 717

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• Wemustinvestinexcellentmarketresearchto best quantify and qualify our opportunities and feed into national strategy and business model development. This intelligence is the framework for more effective integration ofNewZealandofferingsintochoseninternational value chains:

— Enhanced understanding of the international consumer (in selected markets) and international customers (e.g. supermarket chains).

—MappingNewZealand’svaluechains by sector.

• Wemusttargethighvaluemarketpositions.Even our “commodity” business needs to aim high, given competitive pressures and our distance to market.

• NewZealandmustbeattheforefrontoftransnational farming initiatives (global agriculture developments or offshore ventures).NewZealandorganisationsandcompanies must be the “go to” contacts for global land transformation expertise and technology, particularly for dairying and other pastoral systems.

• CollaboratewithNewZealandcompaniesalready seeking to undertake transnational farming. Fonterra has just signed a deal to develop a second 3000-cow, $43 million dairy farm in Hebei province, two hours drive from Beijing. There are plans to build at least two more in the area. Andrew Ferrier (Fonterra CEO) says the cost of setting up new farms ties up an enormous amount of capital and the company is looking at ways of reducing its investment.20 What are the opportunities forNewZealandInchere?

• WemustrecogniseandprotectourNewZealandIncintellectualproperty.

• WemustensuredebateisrightlyframedonissuessuchasGEandorganics,usingsustainability, economic growth and opportunity identification as appropriate “frames”.

• OurR&Dengineroommustdeliversmartsystems, delivering high growth specialist products.

• ValuemustbecreatedandretainedinNZ–retaining ownership by producers.

Making choices: Getting there from hereOur strategic choices will determine our future trajectory.WhatchoicesdoesNewZealandIncneed to make to better integrate into international value chains?

Choices to:

• Controlvalue/supplychainsfromNewZealandandbuildstrategicrelationshipswithsupermarket chains.

• Buildanationalstrategyinplacetogrowprimaryandfoodindustryreturns(buildanNZInc collaboration), considering:

— What is our optimum position (commodity or niche, volume or luxury).

— Invest in branding stories.• Investineducatingourpoliticians,business

leaders and future employees, so that they understandhowNewZealandgottowherewe are now.

• Investindevelopingmanagementunderstanding, business and entrepreneurshipskills.Givepeopletheability to look globally.

• Investinunderstandinginternationaltradebarriers and trade negotiations.

• Investinbuildingscale(throughoffshoreventures, transnational farming, alliances) to operate globally and dominate our chosen markets(e.g.NewZealanddominatestheAsianmarketforMcDonaldsfrench-fries).

• Courtstrategicrelationshipswithlargecompanies (seek percentage investment in our best companies to access capital and offshore markets).

Are these choices valid or achievable for New ZealandInc?Whatisholdingusbackfrommaking them and changing our future in global markets?

20 “Plans for ‘rapid’ China growth” Peter Burke, New Zealand Herald, 3 November, 2010, Database Record 1105

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TheAgITOFuturesResearchapproachwasdevelopedbyKateDelaney,ofDelaneyandAssociates.TheprojectscopeistoidentifytrendsanddevelopmentsthatwillalterthecurrentstateofNewZealandAgricultureand Water industries and the impact of these trends on the development of Human Capability.

For further information on this project and process, please contact [email protected].

FoR moRE InFoRmATIon

ThEmES IdEnTIFIEd In 2010 QUARTERly REPoRTSThe themes in this Annual Report were informed by our quarterly reports from 2010, along with an annual report discussion meeting. Further information, along with strategic discussion points, are found in these quarterly reports. All themes are listed below.

NewZealand’sbiologicalbasethekeyenabler of economic growth

Perfect positioning Engaging with changing markets, shifting

societies A human capital revolution Resource stewardship Innovation! The changing face of farming Transformingtheworld’sfoodproduction

“landscape” The “I” Revolution, information and learning “Fast Punches” – more than just survival

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