Dairy

The price of milk

By Professor J.S. Rowarth, Institute of Natural Resources, Massey University

Supermarket prices are causing shock and indignation. In the last quarter of 2007 the price of milk rose almost five per cent, the price of cheese 17 per cent and the price of butter a massive 41 per cent. Milk prices rose again at the beginning of the year – another four per cent. Cheap dairy products, something New Zealanders have come to regard as a birthright, are cheap no longer.

The consolation: if we are paying more, so is the rest of the world. As the economists point out, New Zealand’s saving grace is its agricultural industries. Without them – and particularly without the current high dairy payouts – our economy would be in severe trouble.

So what will happen when the price of dairy products sinks to more accustomed levels? It may not. This time the prices we are seeing may not be an expression of market cycles but of something more sustained, a phenomenon the Economist magazine has headlined as “the end of cheap food”.

The reasons for the global price rises? One is the substantial use of maize as a feedstock for ethanol, with knock-on effects throughout the market; the other, the increasing affluence of emerging economies such as China and India. When people earn more, their diet changes. They move away from food grains and towards products such as meat and dairy.

In 1985 the Chinese consumer ate 20kg of meat per year (FAO statistics); by 2000 consumption per capita was 50kg per year. By 2050 it is projected the world will have to produce twice as much meat as it does today to meet demand.

One estimate has it that by 2020, developed countries will be consuming 32 million tonnes more milk products than they did in the ‘90s and developing countries will be consuming 177 million tonnes more.

All of this should bode well for the New Zealand farming industry, which, since the ‘90s, has become a poster child for efficient subsidy-free farming.

In fact, I and many others believe the opportunity is at hand for New Zealand to achieve a sustainable competitive advantage over its competitors, an advantage that lies in ever more efficient production, in the uncompromising pursuit of quality, and in environmentally sensitive, low-carbon footprint production and export. But before this can happen, certain conditions must be met: we must produce more science and agriculture graduates and we must do more to support agricultural research.

What should New Zealand be trying to produce? We do need to do more than just rely on price rises occurring in all agricultural commodities. Professor David Hughes, of London’s Imperial College, told a conference in Napier last year that New Zealand should be producing the kinds of food for which consumers are prepared to pay a premium.

Which consumers are these? The supermarket giant Tesco segments its shoppers into a number of categories: the price sensitive shopper, the traditional shopper, the convenience shopper, the healthy shopper and the finer food shopper. Of these, two should be of particular interest to us – the ‘healthy’ shopper, willing to pay for organic and sustainably-grown attributes, and the ‘finer foods’ shopper, who wants well-packaged foods of uniform colour and shape as well as exclusive access to premium gene-stock associated with taste. Taken together they make up 26 per cent of Tesco’s shoppers.

But there is a complication. As Claude Lévi Strauss put it, “food has to be good to think as well as to eat”. The discerning consumer is buying not only the product, but also the story attached to it. The shopper who purchases New Zealand lamb has, in the past, bought the story of an animal raised in the open air, in a near-pristine environment, in a far distant country – with spring as winter sets in for the northern hemisphere increasing the allure.

Sadly for New Zealand, that narrative is changing. Just look at the food shows starring Jamie Oliver, Gordon Ramsay or Hugh Fearnley Wittingstall. These are chefs who exercise so much influence on the British consumer that supermarkets now do their utmost to stock up on particular products featured on these programmes before they go to air.

The celebrity chefs are encouraging consumers to eat locally and seasonally and it is a message that has found increasing political support. The encouragement is not confined to Britain. Read the writings of Michael Pollan (e.g., The Omnivore’s Dilemma) for the American equivalent.

If we do nothing to counter these arguments – and an AgResearch study has shown that in many instances the imported New Zealand dairy product has a smaller carbon footprint than its British equivalent despite the travel costs (because New Zealand cows are not housed for several months a year) – the only answer will be to wait until the considerations of cost or supply are overwhelmingly persuasive and trump environmental concern and patriotic conscience.

We need to put the New Zealand case – and we need to establish our credentials as an agricultural and sustainable producer.

Agriculture, like any other human activity, has environmental impacts. The UN’s Food and Agriculture Organisation estimates that livestock production directly and indirectly uses 30 per cent of the earth’s ice-free land and generates nearly one fifth of the world’s greenhouse gases. Closer to home, the recently released OECD Environmental Performance Review of New Zealand, while noting the progress that had been made in integrating environmental concerns into the daily management of agriculture and forestry operations over the past decade, also implicated livestock production in deteriorating soil and water conditions.

So here are some challenges for New Zealand agriculture. We must promote the fact that we have high quality products and sustainable production systems. We must continue to improve our production efficiency to maintain cost competitiveness. And we should think about how best to take our ‘story’ into our key markets.

But to do any of these things well we must produce more science and agriculture graduates and we must do more to support agricultural research.

There are now more than 2000 students a year graduating in the ‘creative and performing arts’, while in ‘agriculture, environment and related studies’ there are just 355. That might not be such a concern if those graduates stayed in New Zealand, but many will not.

Twenty six per cent of New Zealand’s tertiary graduates are now overseas (in comparison with a mere three per cent of Australia’s), and 28,000 New Zealanders emigrated to Australia last year, a significant number identifying themselves as being aligned with agriculture.

Australia is going to continue to be a potent lure for agriculture graduates. Professor Les Copeland of The University of Sydney has calculated that Australian agriculture will have 123,000 new jobs in the next five years. Who will fill them? Julian Cripps of Sydney’s University of Technology has written about Australia’s shortsighted slashing of agriculture research, the many agricultural scientists now entering retirement age, and the collapse of university agricultural science enrolments. While Australia has been preoccupied with its drought and the forecast consequences of ongoing climate change, he writes, a second drought is nearing: “An agricultural knowledge drought”. This is a mirror image of what has happened in New Zealand.

Professor Cripps also points out that in the past 15 years most conflicts and many refugee movements have had, at their core, a scarcity of food, land or water. “Australia has not yet understood that agriculture policy is defence policy. It is refugee policy, immigration policy, as well as health, food and economic policy. We persist in seeing it as an issue all on its own.”

It is not surprising that students are choosing to take degrees other than agricultural science. They want to be associated with industries which they perceive to be growing, exciting, and offering challenges, opportunities and material reward. That has not been the image associated with agriculture. During the turmoil that surrounded the withdrawal of subsidies, agriculture was deemed a sunset industry. Instead, information technology, biotechnology and the creative and performing arts were regarded as the great hopes for the economy. Agriculture lacked the silver screen factor.

In fact the agricultural sector has a lot to offer. Although choosing to study agriculture, agricultural science, agribusiness or food technology at university is not the easy option, the primary sector offers careers with responsibility, challenge, variety, money, work-life balance, caring for the environment, and doing social good, for instance, as well as the excitement of working for a dynamic and expanding sector. These are all the things that members of the younger generation say that they want in work.

Massey Agriculture is doing what it can to spread the word on the importance of agriculture. We are constantly keeping our subjects and degrees up to date in consultation with industry. We have appointed four new professors in soil, pasture and animal science (as well my own professorship in pastoral agriculture). We do our best to make sure the University promotes agriculture and the opportunities it offers, particularly among the 85 per cent of the New Zealand population who live in towns and cities.

However, this isn’t enough. If wider society fails to recognise how important our agricultural expertise is in managing the complexities of land use or does not properly acknowledge the overwhelming importance of agriculture to our economy, students will continue to make other choices.

Fast Forward, the Government’s new endowment fund for science-food-farms, currently standing at $700 million and building, is a statement about value. The Government has shown that it recognises the importance of the primary sector for the future development of New Zealand. Industry is investing in the fund and the aim is to achieve a $2 billion pool.

The Fast Forward initiative sends the very clear message to society that New Zealand’s future is about innovation in food and farms – and that very good, well-funded science is needed to achieve a truly sustainable productive competitive advantage.

With this endorsement, people deciding on where to put their working lives can again choose the primary sector, and all it embraces, with confidence.

The primary sector, from paddock to plate, farm to fork, laboratory to lips, studio to stomach … offers all that people need want and desire from work – and Fast Forward makes it clear that the Government regards the sector as a vital part of New Zealand’s future If we value the research system and environment managers (farmers) as we should, I foresee a bright future.

New Zealand can and will lead the world as an innovative, environmentally aware, cost-competitive agricultural producer.

This article was first published in Issue 24 of the Massey University Alumni & Friends magazine, April 2008 and is reprinted here with kind permission.

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