KEY POINTS:
Meat Industry Association of New Zealand chairman Bill Falconer has been named chairman of New Zealand Fast Forward - the Crown company set up to invest $1 billion of Government cash to boost innovation in the pastoral and food industries.
The fund was set up in March with $700 million of Government money, which is expected to grow to about $1 billion after interest during the fund's 10- to 15-year lifespan. The total investment could add up to $2 billion when matched by the private sector.
Falconer - who is also chairman of Hellaby Holdings and Oyster Bay Marlborough Vineyards - is upbeat about a role he says is "up with the best" of his career.
"If you take the view that the primary sector's always going to be at the core of what New Zealand does, there's a lot of work to be done to upgrade our capabilities and it requires some pretty dedicated and serious research and development, and Fast Forward will do that," Falconer says.
A chief executive is yet to be named but Falconer expects the company to be up and running this year.
"I think what the partnering [of Government and private industry] does is create an opportunity for all of us in the primary sector to start thinking about bigger initiatives, more profound initiatives about lifting New Zealand's game in the primary sector," he says.
"We're now able to talk about doing this on a material scale and I think that the outcome will be significant advancements for New Zealand."
Spread across 15 years the investment could be worth $133.3 million a year which may sound less impressive. But $2 billion in total is not small change by anyone's standard.
Falconer and his colleagues will have to find a balance between widespread funding which could help build a cluster and culture of innovation, with giving enough individual support to ensure the success of economy-transforming breakthroughs.
Private investors will have to pitch ideas plus stump up funds themselves - not necessarily on a dollar-for-dollar basis, although that is the aim in total.
A sort of $2 billion agri Dragon's Den - sounds like fun.
Hello sunshine
Not so long ago agriculture picked up the unwelcome tag of a sunset industry.
Hard to comprehend today considering the booming dairy sector and that Fonterra pumped about $9 billion into the economy during the last season - a welcome fillip for New Zealand amid a global slide towards recession.
The world needs to eat and New Zealand is blessed with fertile land and sea for growing and harvesting food.
Economists say the next year or so is looking tough for the economy but point to a brighter future based on earnings and exports rather than spending - making stuff, selling it and pulling money into the country.
Agriculture is the key to the future and a resource we need to mine carefully and sustainably.
The Ministry of Agriculture and Forestry's Situation and Outlook for New Zealand Agriculture and Forestry 2008 report last week painted a picture of solid growth.
Agricultural gross revenue was forecast to rise 26.5 per cent from $18.9 billion in 2008 to $23.9 billion in 2012.
Dairy exports would grow from $10.5 billion in 2008 to $11.9 billion by 2012 - a 90 per cent increase on 2005.
Sheep and beef exports were forecast to grow from $2.1 billion and $1.6 billion in 2008 to $2.6 billion and $2.3 billion respectively by 2012, while kiwifruit and wine would both top the billion dollar annual export barrier.
Quite a sunrise for a sunset industry.
MAF director-general Murray Sherwin said international commodity prices looked like they were holding up at levels significantly above two or three years ago.
The ANZ Commodity Price Index for dairy products rose for 15 consecutive months, from 127.6 in August 2006 to hit 291.9 in November, before falling back to 257.9 in July.
MAF's outlook was also more positive for sheep-meat and wool which have struggled in recent years.
Lamb export volumes are forecast to fall in 2008 and 2009 because of the drought and smaller flock but the outlook for prices is good as all major producing countries make less during the next few years.
The assumed drop in value for the New Zealand dollar means lamb schedule prices are expected to rise significantly during the next four years - welcome news to those farmers struggling to make a living from sheep.
There is a future in sheep meat simply because some land by its nature cannot be converted to dairy, he says.
"I think it's in all of our interests that we have a recovering sheep meat industry and wool industry for that matter, if for nothing else than to distribute some of our national risks a little more widely."
Forestry may not have hit the headlines like the dairy sector but exports are still expected to rise from $3.4 billion in 2008 to $4.6 billion by 2012, although strong growth in 2010 and 2011 will be mostly because of depreciation of the dollar.
The falling value of the dollar is a recurring theme in many sectors and the Treasury's forecasts assume the exchange rate will drop by about 20 per cent during the next four years.
Music to the ears of exporters who have watched international price rises and hard work on trimming costs gobbled up by a rising dollar.
Sherwin says MAF is as confident in its forecasts as it can be.
Logic may say a significant drop in the dollar will happen but few businesses will bank on it - safer to take it as a bonus.
"The standard assumption that the Treasury and the Reserve Bank use is simply that the exchange rate will, over time tend back towards its long term average," Sherwin says.
"One can't have a huge amount of confidence in that at all, none of us are any good at forecasting exchange rates."
But the general proposition about pressure on commodity prices holds true, he says.
"Just about all of the analysis that we're seeing from all sorts of different places is pointing in the same direction - weak stocks, continuing population pressure, continuing growth out of Asia, high energy costs, which is a part of the equation as well, and that all tends to point towards support for food prices."
The theme of a consumer-led approach was common to all sectors.
"I think we're just going to have to get a lot smarter ... on the sustainability front around things like greenhouse gas footprints and how we're going to deal with them," Sherwin says.
The air-miles issue was more of a London and UK story, he says.
"I don't think anyone would yet say that it's biting, although there are industries and companies that have got on the front end of it in terms of the way they present themselves."
New Zealand is a green, fertile land with enormous agricultural potential but it is a long way from its markets.
The food mile debate may not yet be a deciding factor for most of our customers who have trolleys to fill and household budgets to meet.
But these changes start on the periphery and though our produce may well be "greener" than more local options, despite the shipping, the facts can lose out to the image.
Farming is key to the future of the economy so food miles is an issue we must own and if there is going to be a standard we need to set it.
Sheep dip
Sheep numbers dropped 11 per cent in the year ended June 30 to 34.2 million animals after the impact of drought and the expansion of dairying, says Meat & Wool New Zealand.
Economic service executive director Rob Davison says the drought forced the slaughter of extra capital stock and accounted for 60 per cent of the drop in numbers, while conversion to dairying made up the rest.
"Recovery from the drought is expected to be slow as the sheep and beef sector adjusts to there being less finishing land due to dairy conversion," Davison says. "There is also the challenge presented by significantly higher global fertiliser prices."
The drop was bigger than expected.
The South and North Island were down 3 million and 1.3 million sheep respectively.
More than 300 new dairy farms had started during the spring, helping boost the total number of dairy cattle by 6.1 per cent to 5.6 million animals.
"As the dairy farms expand all their young replacement stock are reared on sheep and beef farms which displace sheep and beef cattle."
Beef cattle numbers were down 3.2 per cent to 4.25 million animals.
The export lamb slaughter was expected to be down 23 per cent to 20.3 million animals next season.
However, lambing percentages will be better in 2009 as the sector recovers from the drought and there would be a 10 per cent lift in export production to 22.3 million lambs in 2009-2010.
