One in a series of policy notes on coutries of interest to Canada.
This Policy Review focuses on agricultural policy today and how New Zealand is supporting the agricultural sector now without resorting to subsidies. It describes the policy New Zealand uses to support farmers dealing with adverse events such as climatic disasters. It also describes New Zealand's strategy for promoting competiveness in world markets.
New Zealand Agriculture Policy Review
One in a series of policy notes on countries of interest to Canada.
This note draws on analysis from several sources, listed on page 4.
climatic disasters. It also describes New
Context for Policy Reform
Zealand's strategy for promoting
competiveness in world markets.
In 1984, New Zealand introduced important
policy reforms in order to address major
Figure 1: Support to producers and general services in
macroeconomiic and fiscal imbalances. New
agriculture, average of 2004-06
Zealand?s support to agricultural producers
rapidly decreased from 30 percent of the
value of production to about 2 percent, and
has remained the lowest among OECD
economies since that time.
Ge ne ral
Ne w Ze aland OECD
Managing Adverse Events
The New Zealand government's current
policy for responding to adverse events is
detailed in the ?Readiness & Recovery Plan
for Natural & Climatic Disasters in Rural
Areas? but this will soon be replaced by the
?On-farm Adverse Events Recovery
Framework?. The aim of these programs is
to promote a shared understanding of the
roles of central and local governments and
Source: NZMAF (2006)
the primary sector in preparing for, and
recovering from, adverse events. Adverse
After a difficult transition, the removal of
events can include floods, storms, droughts,
subsidies resulted in a more diversified and
volcanoes and earthquakes. On-farm
competitive rural economy in New Zealand;
means commercial agriculture, horticulture,
total factor productivity growth has been
viticulture and forestry properties.
roughly 2.5 percent annually since 1984,
compared to roughly 1.5 percent in the pre-
Currently there are four criteria that must be
met before the Government provides on-
farm recovery assistance. These are that the
This Policy Review focuses on agricultural
policy today and how New Zealand is
supporting the agricultural sector now
1) is rare and extreme;
without resorting to subsidies. It describes
2) is economically significant regionally;
the policy New Zealand uses to support
3) is beyond the community?s coping
farmers dealing with adverse events such as
PPeerrcceenntt ooff aaddjjuusstteedd
vvaalluuee ooff pprroodduuccttiioonn
Agriculture Policy Review 2
4) requires government assistance for
recovery. 1) A framework which allows for an overall
assessment of the adverse event. This
Adverse events are categorized into three involves assessing the event in 3 areas,
levels, depending on their severity: minor using 5 criteria. These criteria would
(localized) events; regionally significant grade the adverse event on a 3 point
events; nationally significant events: scale. This scale would help provide an
Minor, Localized Events: Rural citizens are assessment of whether the event was
encouraged to consider risks they face from small-scale, medium-scale or large-
extreme, localized climatic and natural scale.
events. They are to develop strategies to
protect their families, businesses and 2) An approach that allows the government
communities from those risks. Authorities to respond in accordance with the
suggest setting aside reserves of money, magnitude of the event. It is proposed
food and livestock feed, keeping insurance that in a small-scale event, the
up to date, locating buildings away from high Government would provide no additional
risk areas, and keeping stock in good health. on-farm assistance (other than general
recovery measures currently available).
Individuals can also get taxation relief if the
farm business is forced to sell livestock. The In a medium-scale event, the Government
Adverse Event Income Equalization Scheme would draw from the ?emergency recovery
is a voluntary scheme which enables measures? as deemed appropriate for the
farmers to reduce their current tax burden by event (i.e. one measure or a combination of
carrying forward income. measures might be appropriate). The
general recovery measures would continue
Regionally Significant Events: Occasionally to be available.
there are natural disasters which impact on
rural communities (region-wide basis). In large-scale events, the Government
Communities and regional organizations are would draw from both the ?emergency
expected to organize a response. The recovery measures? and, after review, one
central government may provide limited of the ?special recovery measures?. The
assistance including labour assistance, general recovery measures would continue
living expenses for families and financial to be available.
support to regional organization efforts.
3) A means to balance the role of
Nationally Significant Events: When natural government and the primary producer.
disasters occur on a scale that will seriously The criteria should reflect the
impact the national economy, the central importance of risk mitigation prior to an
government may support local community event. This is important in order to
and regional organization efforts. This maintain the balance of responsibilities
support may be provided during and after between the government and
the emergency. communities. Although the criteria would
be a guide for the Government in
Communities are encouraged to establish intervention, it would be equally
links with key agencies, identify leaders to important that they reflected the role of
represent their interests in an emergency, primary producers in managing adverse
and be prepared to manage events before, events.
during and following an emergency. This
involves: having local response plans; 4) Flexibility with respect to the nature of
training people who can put the plan into government intervention. The criteria
action; knowing how to apply for government should continue to act as a guide in
support; and being aware of the conditions decision-making because the
that have to be satisfied to qualify for Government?s decision to intervene
support. depends on a complex range of
New Zealand is currently considering new
criteria for government intervention. The
new approach has 4 components:
Agriculture Policy Review 3
fastest growing markets ? from both a
New Zealand?s Forward Agenda
geographic and a product oriented basis.
Much attention was paid to markets with the
In August 2006, a Government-Industry
biggest potential for growth and profitability
Task Force recommended an agenda
(in both the product and geographic sense)
designed to mitigate pressures on the
as the primary focus for efforts. This allowed
environment and natural resources, while
markets on the demand side to be
developing new products and processes and
prioritized. With this foundation, more
expanding into new markets. Three priorities
targeted SWOT-type assessments were
were established to achieve economic
made, focusing on benchmark firms for each
growth: economic transformation and
target market. In this way, leading
improved productivity, new high margin
prospective clients, areas of demand, and
products, and new markets. Based on past
leading competitors were identified.
experience and a survey of future prospects,
defensive ?business as usual? approaches
On the supply-side, analysis was also done
were considered high risk, as they amount
based on the world?s leading enterprises in
to supporting under-performers and
different markets. This allowed attention to
be focused on turnkey activities that might
help position New Zealand?s agri-food
A number of world class enterprises have
industries and firms for the future.
already emerged under New Zealand?s
Government?s role is seen primarily as an
sustained reforms over the past two
enabler, with little attention paid to financial
decades. There are success stories such as
transfers. Short shrift was given to small
Fonterra, Zespri, the wine industry,
farms, lifestyle farms and commuter farms
Greenshell Mussels and Whitestone
as underlying analysis suggested that they
Cheese. However, farm leaders continue to
contribute little to rural employment, rural
focus on developing new world class
communities or the economy.
enterprises and ask themselves what the
key ingredients are for another global leader
The focus was on how to allow winners to
to emerge from within the sector and how to
emerge and flourish rather than supporting
put in place the conditions necessary for
sectors and firms that had difficulties
such an event.
competing and coping. In New Zealand?s
SWOT-type analysis, leading firms were
used as benchmarks rather than countries.
? Natural environment conducive to ? Distance from markets
pastoral and marine production ? Poor in-market presence
Those involved in the analysis recognized
? Disease free status ? Limited understanding of
? Effective bio-security systems consumer preferences and trading
that it is at the firm level where the health of
? Potential for year round conditions in emerging markets
production ? Low levels of private sector R&D
an industry is determined.
? Positive reputation internationally ? Low levels of capital intensity
(but awareness limited) ? Few NZ owned m id-sized firms
? Well-developed science capability hungry for export led growth
? Innovative culture and tradition ? Skills supply gaps Responding to Challenges
? Small scale conducive to close ? Poor application of intellectual
networking and information property protections
sharing ? Tendency for ?soft-selling? and
For each market, difficult choices must be
? Sustainable management of undercutting in new markets.
made as to whether to pursue a ?low cost?
producer approach or a ?branding?
? Continued income growth in Asia ? Declining availability of land, water
approach, with associated value-added and
? Ongoing global growth in food and wild fish stocks
service ? Consolidation of global retail
support services. The challenges are to
? Potential to link gourmet cuisine to chains leading to uneven
growing NZ tourism industry to bargaining and lower margins in
expand into the emerging markets, to
extend global awareness export markets
? Income rich health conscious baby ? Consolidation of global food
capture a larger share of the growing
boomers producing companies making NZ a
? Closer economic integration with branch office
functional food market, and to align
Australia ? Increasing production and rising
resources with emerging market
? Growing Asian population in New quality from China and South
opportunities and the needs of food and
? Ongoing trade liberalization ? Increased flow of goods and
? Science based solutions creating people raises risk of pest and
beverage firms. Integrated efforts among
?superior? foods disease incursion
? Capacity to lift productivity by ? Rising standards on residues and
government and all levels in the value chain
improved uptake of available demands for traceability raise costs
knowledge and technique of supply
? Changing global weather patterns
Source: New Zealand Food and Beverage Taskforce (2006).
A ?NZ Inc: Smart Food, Cool Beverage?
approach has been embraced as the best
The groundwork for developing the new hope for a resilient and profitable sector.
agenda provided an overview of the world?s Sector leaders recognize that there is no
Agriculture Policy Review 4
single model for success ? those that have
done well have used a variety of approaches
and adopted different strategic pathways.
Lattimore, R. 2006. Farm subsidy reform
Work is ongoing in developing the tools,
dividends, paper presented at the North
marketing strategies, technologies and
American Agri-Food Market Integration
management structures that will position
Consortium, Calgary, Alberta, June.
New Zealand?s agri-food sector to tackle
challenges, and to share costs and risks.
New Zealand Food and Beverage Taskforce
(2006) Smart Food, Cool Beverage: New
New Zealand?s Experience ? The Zealand?s Future in the Food and Beverage
Sector, Wellington, August.
New Zealand Ministry of Agriculture and
New Zealand?s agri-food sector is thriving
Forestry (NZMAF) (2006) Agriculture in New
with levels that are the lowest in the OECD.
Zealand: Past, Present, Future, ABARE
There is no desire to return to the days of
extensive government support.
_(2006) MAF Statement of Intent 2006/09,
New Zealand does provide support to help
the agricultural sector cope with adverse
events beyond the ability of the individual
_(2006) Situation and Outlook for New
producer. But the New Zealand approach to
Zealand Agriculture and Forestry,
such events is closely circumscribed
according to the scale of the event.
_(2005) Contribution of the Land-based
When evaluating competitors, New Zealand
Primary Industries to New Zealand?s
found it more useful to benchmark with
leading firms rather than countries; it is at
the firm level where competition actually
_(2005) Briefing for Incoming Ministers,
takes place. The sector examines
successful firms with a view to establishing
best practices and performance
OECD (2007) Agricultural Policies in OECD
benchmarks, and views them as potential
Countries, Paris, June.
competitors, clients, investors and partners
when planning for the future.
New Zealand farming and the rural economy
are now more diversified, responsive and
better positioned to deal with changing
consumer and societal demands both at
home and abroad.
For further information regarding this paper, contact:
Brad Gilmour (email@example.com, 613-759-7404)
Rajendra Gurung (firstname.lastname@example.org, 613-694-2451)
For further information regarding this series, contact:
Cameron Short, Director, Policy Analysis Division (email@example.com, 613-759-7426)
Project No. 07-050-b