Doubling Kiwi exports requires focus and a strategic plan: Jacqueline Rowarth

Trade Minister Todd McClay says “focus is key” if the Government is to deliver on its goal to double exports by value in 10 years.

THREE KEY FACTS

• The Government’s goal is to double the value of exports within 10 years.
• The cost of living for the average household increased by 5.4% in the 12 months to the June 2024 quarter.
• Food and fibre products already provide 82% of the export economy.

Dr Jacqueline Rowarth is an adjunct professor at Lincoln University, a director on the board of governance of DairyNZ, Ravensdown and Deer Industry New Zealand, and a member of the Scientific Council of the World Farmers’ Organisation.

OPINION

Doubling the value of exports within 10 years will take more than restating the goal.

Success will depend on identifying what people value and then creating the business environment to allow competitive companies to meet the demand.

Minister for Agriculture and Trade Todd McClay says “focus is key”.

But, more than focus, achievement requires the development of a credible strategic plan to get to the goal.

In turn, this means identifying roadblocks and difficulties and then working out how to allow businesses to overcome the barriers to progress.

In May, Phil O’Reilly — Iron Duke managing director, chairman of the board of business at the Organisation for Economic Co-operation and Development, and past chief executive of BusinessNZ — explained that exporting happens when a business takes the risk to invest in something new, such as a market, product or service.

In order to assist, the Government can create “an enabling and supportive business environment to encourage appropriate risk-taking and innovation”.

He also commented that trade missions were great, “but what we need is focus”.

That message appears to have gained traction with Minister McClay.

The focus for New Zealand can be identified with the assistance of Professor Michael Porter, a business strategy guru at Harvard Business School.

New Zealand’s competitive advantage is driven by demand conditions, firm strategy and structure, supporting industries and factor conditions.

These include labour costs, interest rates, exchange rates and economies of scale.

Food and fibre products fit the bill.

And, logically, given they already provide 82% of the export economy, it would be difficult to double its value without them.

Providing a focus for the next steps is a matter of identifying what consumers value.

There are many sources of information, and all rely on what consumers say they value — at least at the time of the survey.

Jacqueline Rowarth says success will depend on identifying what people value and then creating the business environment to allow competitive companies to meet the demand.

Because preferences change, we need to keep core competencies to the fore, maintaining agility on the strong base of pasture-based protein production, and sustainably produced fruit, vegetables and grain for the balance of vitamins and carbohydrates.

A report by Innova Market Insights, a global company based in the Netherlands, on trends for 2024 suggests a focus on protein and nurturing nature.

Third on the list is prioritising prevention (let food be thy medicine), and fourth is plant based.

The tenth is “minimising the noise”, which harks to clean labels and shortlists of ingredients.

Milk and meat would seem to fit the bill for the first three priorities, and with large processing companies and farmer support through co-operatives and levy bodies, we have economies of scale.

(Fourth fails on the list of ingredients, hence the debate on ultra-processed food.)

Despite this fit, the primary sector is not ebullient.

Porter’s factor conditions give a clue as to why — interest rates have skyrocketed.

Federated Farmers of New Zealand has called for a review of banks, and while terms of reference are being debated, StatsNZ’s data released last week shows it’s not only farmers suffering.

The cost of living for the average household increased 5.4% in the 12 months to the June 2024 quarter.

Listen to Jamie Mackay interview Dr Jacqueline Rowarth on The Country below:

Interest payments increased 26.7% and insurance costs increased 18%.

A cynic might ask how much individuals pay in interest or simply “extra” for products to support Olympic and other sporting aspirations. Would we do that voluntarily for the entertainment value?

In comparison, food prices decreased in the 12 months to June 2024. Fruit and vegetables fell 16.1% and meat, poultry and fish fell 1.4%.

Restaurant meals and ready-to-eat food increased by 4%, reflecting wages and overheads such as compliance costs.

Farmers also face these increases.

They are not able to put up their prices — except in direct sales to consumers such as through farmers’ markets — and the prices they are being paid do not cover the costs of production.

The latest AgFirst survey on costs of production for milk solids in the Waikato and Bay of Plenty area shows the model average farm (based on data from over 4000 farms) broke even last year only when dividends from Fonterra were included in the budget (noting that not all farmers supply Fonterra).

The same is forecast for this year, but only by deferring repairs and maintenance.

The biggest worry for farmers, on top of trying to stay in business, was environment and compliance.

The Government can help, and steps have been taken in a positive direction. Now focus should come into play.

When dollars are limited, where is the best return on investment likely to be achieved, and what risk needs to be mitigated to achieve that return on investment?

Porter would suggest reducing interest rates and the costs of production and increasing research to identify productivity gains.

Phil O’Reilly would suggest keeping with the trade missions to reduce tariffs, as well as non-tariff barriers to trade.

Minister McClay is right about focus and the primary sector is keen to assist — so a re-examination of Porter’s list is warranted.

Top of the list — sort out interest rates.

All New Zealanders will benefit.