Farmers must seize opportunities

By LIAM DANN primary industries editor

Down on the farm there is growing awareness that agriculture will lead the charge as New Zealand's trade with China booms.

But Federated Farmers chief executive Tony St Clair said our primary sector has historically been very Euro-centric and there were still some adjustments in mindset that would need to be made.

The time had come for it to broaden its horizon, he said.

He sees huge opportunities for New Zealand to sell its agricultural expertise in China.

"We can help them improve their agriculture but they are still always going to be massive net importers of primary produce."

Live cattle sales to China - which have soared in the past 12 months - provide an excellent example of the type of opportunities New Zealand has to sell its intellectual property to China.

In this case it is the high standard of our cattle genetics, developed over many decades, that appeals to Chinese buyers.

The Chinese are expected to buy more than 20,000 dairy cows this year and the Ministry of Agriculture and Forestry predicts demand could eventually reach 60,000 a year.

Remarkably, there is no fear in the agriculture sector that bolstering the Chinese dairy industry with our genetic stock might undermine future exports.

Despite its rapid growth there is no chance that China will be able to supply domestic demand for primary produce.

Agricultural officials there conceded that maintaining agricultural surpluses would no longer be possible as the country opened itself up in line with World Trade Organisation rules.

Although China's primary produce exports for the first half of this year jumped 11 per cent from the same period last year, imports were up by 62.5 per cent.

Ian MacDonald, the managing director of Xcell Cattle Exporters, has been exporting to China for eight years.

He said trading with China took patience and perseverance. The cultural barriers had dwindled over the years as both sides became used to doing business, but there was still room for improvement.

St Clair said despite several failed ventures into China in the past - particularly by wool and meat companies - there was a renewed level of maturity and commercial experience coming out of the huge country.

There was a feeling that China has become a more open and easier place to do business.

But the old bogeymen were still there, he said.

Issues such as ability to pay, lack of facilities and a complex regulatory environment were issues on the Chinese side. On the New Zealand side there were still problems such as a general lack of understanding of the Chinese language, culture and geography.

"If you are going to have successful trade there needs to be greater commitment - more from our end than theirs - to understand the language and culture, rather than having them come down here and expecting them to speak fluent English to us."

We may also have to look at our presentation and how we package our products, he said. What was liked by the EU market might not be popular in China.

"We have to show our adaptability. But that's something Kiwi farmers have a great record of being able to do," he said.

New Zealand Wool Services is a scoured wool exporter that has been dealing with China for 13 years.

The company lifted its profile by listing on the New Zealand stock exchange's alternative board in May.

Despite selling a relatively raw product the company had successfully created a strong, sought-after brand for its wool, said general manager John Dawson.

Its success had been based on regular communication and travel to China, Dawson said. "It is just absolutely critical. Like any business it comes back to getting to know the client."

For wool exporters, China had already taken big steps towards free trade. Quotas had been abandoned and official tariffs were just 1 per cent.

There was a value added tax (similar to GST) charge of about 17 per cent for scoured wool.

Wool Services was fighting to get the scoured-wool VAT lowered to the same level as for raw greasy wool, Dawson said, but the company did not expect a free trade agreement could do much to help that.

Overall, he said, a free trade agreement probably would not make big changes to his business. Much of the hard work had been done already.

The meat trade to China was less well established but the prospects were exciting, said Meat and Wool New Zealand trade policy manager Scott Gallacher.

China was already big market for meat byproducts - offal, fats and raw skins. There would be an increasing opportunity to sell high-value products like top-grade lamb cuts.

The idea that Chinese did not eat sheep meat was something of a myth, Gallacher said. China's national flock was the largest in the world at more than 130 million.

But because they are farmed primarily for their wool, mutton seen as a cheaper, less desirable meat than beef or pork.

The trick for New Zealand exporters would be to shift the Chinese mindset to see that when bred primarily for its meat, lamb could be a delicacy.

New Zealand exporters had worked hard in the United States to overcome a prejudice against sheep meat.

Already there was increasing demand for lamb as as western tastes become more popular in the urbanised southeast, Gallacher said.

A free trade agreement offered many benefits and opportunities and no obvious downside, Gallacher said. "We're looking for an agreement that can reduce or eliminate the tariffs we are paying now and then hopefully address some of the non-tariff barriers - such as overly prescriptive testing and certification requirements."

Wool that had NZ Wool testing certificates often had to be re-tested, which was costly and time-consuming. The re-testing seemed unfair given that New Zealand testing met all international requirements, he said.

Fruit Growers Federation president Martin Clements said China had, until now, hardly featured in the plans of the nation's horticultural exporters and growers. That was about to change.

In contrast to other areas of production, China had the ability to become a strong international competitor in horticulture.

It represented both a threat and an opportunity, said Clements.

He and VegeFed president Brian Gargiulo visited China in April and were impressed by what they saw.

"The growth and development in apple production will almost inevitably ensure that China becomes an issue for us to deal with," Clements said. "They will be an exporter - the only question is when."

In terms of an upside, it was all about the development of that strong middle class.

Traditionally, as these economies had grown, tastes became more westernised, Clements said.

"We are a high-cost producer of high-quality fruit," he said.

"We need to go into markets that can afford to pay top-quality prices. That market segment will emerge in China as the market grows.

"There are also opportunities in terms of selling intellectual property and expertise."

As for a free trade agreement, the situation for growers was the same as it was for all of the primary sector, Clements said. "We have no subsidies so there is nothing to lose."

China bound


Milk powder $267m

Animal byproducts *$190m

Wool $150m

Wood products** $206m


*Offal, fats and skins. **Logs, timber and pulp


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