NZ agricultural exports to reach $100 bln in 20 years, KPMG expert says

Tuesday 10th November 2015

New Zealand’s agricultural exports are predicted to grow to $100 billion a year in the next 20 years and will be much more diversified than the current mix, which relies on dairy and forestry, says Ian Proudfoot, KPMG’s global leader for agribusiness and food.

Speaking at an Auckland conference on farming and the future of food today, Proudfoot said that would mean increasing the compound annual growth rate for agricultural exports from 4.5 percent to 5.4 percent, but that will only happen with a cultural shift towards more value-add products.

“That has to be driven by organisations aligning their cultures to one of value growth, focusing on intelligence in-market and building better relationships with customers, employing the right people, and offering branded experiences like Apple does with the iPhone,” he said.

New Zealand companies are good at building things like a new powder drier where they know the cost and outcome and need instead to take more risks and move into the unknown, he said.

“The biggest constraint is most organisations are geared to accept a lower risk activity. The right leadership is critical to taking on these opportunities because if we keep doing what we’re doing now, we’re not going to be as successful.”

The Ministry for Primary Industries projects exports from agriculture and horticulture, fisheries and forestry to grow to $40.7 billion by 2018 and the government’s target is to lift them to $64 billion by 2025.

More than half of New Zealand’s agricultural exports are dairy and forestry-related, Proudfoot said. Future growth will come from new products that can attract a premium from the growing middle class consumer.

He’s predicting strong growth in the beef sector which will become New Zealand’s single biggest agricultural export within 20 years, with middle class demand for products such as hormone free and grassfed steak.

Proudfoot also predicts a move to dairy liquids rather than the dried powder products prevalent in New Zealand’s dairy industry due to a lack of water in developing markets and despite declining fluid milk sales in recent years. “I disagree with Fonterra on this issue,” he said.

He pointed to Coca-Cola’s long-term investment in the dairy industry with the launch of a premium milk beverage, Fairlife, which contains 50 percent less sugar and has 50 percent more protein. It was a “gamechanger for the dairy industry” with Coca-Cola executives predicting the long-life shelf product will “rain money” for the firm, he said.

While he sees exports of skim milk and whole milk powder drying up, Proudfoot thinks high-end nutritional ingredients from milk will be in demand along with sheep milk.

Kiwifruit, apples, and pears will continue to grow and Proudfoot is forecasting the boutique craft cider market will grow from a small base to $1 billion and “is one where New Zealand has a real chance to create an export opportunity”, along with new products from the forestry sector that are being developed by the likes of crown research institute Scion rather than just exporting unprocessed logs.

Another area he sees with potential for export is medicinal plants, including potentially controversial cannabis. Proudfoot points to new Canadian Prime Minister Justin Trudeau promising to legalise marijuana for recreational and medicinal use. Medical marijuana has been projected to become a US$1 billion business in Canada by 2020 but legalising the drug for recreational use could push the industry to the US$7 billion mark by some estimates.

Climate change also offers opportunities to grow new crops such as tropical fruits, particularly on under-used land in areas like Northland, he said.

Two population niches likely to be most important to New Zealand are over 65 year olds who will number 1.1 billion by 2030 and are looking to improve their wellness, and urban consumers who will expand at an extra 1.3 million a week until 2050 which will drive demand for convenience food that is safe and nutritious.

BusinessDesk.co.nz

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