The much-used analogy of No 8 fencing wire fixits to characterise New Zealand’s can-do approach does some disservice to the sector that spawned it. Rural businesses have always been good at adopting – and milking profits from – new technology.
Examples of how the industry ploughs its energy into new fields of endeavour aren’t hard to find. Moving right along from straight milk, companies like Waikato-based Tatua Dairy have long pursued an added value strategy in specialty food ingredients – spray-dried milk proteins and freeze-dried biologically active proteins such as lactoferrin, an iron-binding protein for which it has cornered sizeable chunk of the global market.
Bioactives, nutraceuticals, functional health foods – all are growing part of the production repertoire for New Zealand’s biggest dairy cooperative, Fonterra, which has its own research centre devoted to exploring new product potential in milk constituents.
Meanwhile Hamilton-based Dairy Goat Cooperative, which developed the first goats-milk based infant formula back in the late 1980s, has become leading world manufacturer of goat milk nutritional powder products. lot of emphasis is put on the health benefits of the milk’s natural ingredients and there’s plenty of science to support that.
And when it comes to living off the sheep’s back, you can no longer just think wool. Try touch-sensitive fabrics (think heated clothing or vests wired for sound), or intelligent textile-based systems for managing patient health and safety (monitoring vital signs, collecting patient data etc). Then there’s the high-value protein, polymer-based products used in personal care and health products.
These are among the business interests of Canterbury-based Canesis Network (itself product of New Zealand’s Wool Research Organisation) that helped the science and technology company grow its annual export earnings to $12 million in the past year.
And none of that is touching on local strengths in cloning, transgenics, reproductive technologies, animal genomics, plant-based biotechnologies or the burgeoning use of IT to improve farm systems and data collection.
The pastoral sector is scientifically based industry, notes AgResearch CEO Andrew West – and it has to be innovative if it’s to keep growing its markets and increasing the returns from them.
“It’s an export industry and has to compete on global markets – it’s very exposed to competition from anyone else, anywhere in the world, so it has to stay out in front.”
Adding value through applied science is an approach the industry has long pursued – from its first successful transportation of frozen meat, through improvements in farm management brought about by such devices as the electric fence or the Hansen pipe fitting (a boon for easy irrigation), to its current exploration of raw material properties.
“There are lot of special ingredients or components you can be looking for in milk, meat or wool which hopefully will be able to capture bigger return in the marketplace. And that has been the strategy of companies like Tatua or Greenlea Premier Meats in Hamilton,” says West.
“It’s not easy to create product that would appear to have high value in the marketplace, then capture that value. To do it we are going to have to move down that path of speciality ingredients, branded products, human health nutraceuticals, as well as potentially moving into other animals or out of livestock into things like biofuels. But all this is science-based – whether you want to cut costs or move into high value, more diversified products, you’re gonna need more science.”
The sector has deservedly earned its reputation for innovation, says Livestock Improvement Corporation’s (LIC) acting CEO Graeme Milne. And just as well.
“After all, in New Zealand we only have agriculture and few things tacked on – so we’ve got to be very good at it.”
And the sector does have to deal with certain disadvantages – distance from markets, restrictions on trade access and vagaries of the weather to name just few, says Milne.
“The industry doesn’t get any protection, commodity swings are big in agriculture plus agricultural products can be bit restricted in terms of market access, so the sector has to be tough to survive. Because of its competitive disadvantages you really have to maximise your competitive advantages – exploit them as much as possible to compensate.”
It’s something farmers tend to be very aware of. While they can’t control what’s happening out in the markets, they can keep lid on costs and tend to take pretty pragmatic approach to new technology.
As Information Technology Minister David Cunliffe noted at last year’s Digital Cities and Regional Networks Conference: “Farmers have always been early users of advancements in technology when they contribute directly to productivity improvements.”
They know that if they want to be sure of making profit, they have to be cost conscious and they’re well aware that technology reduces costs, says West.
“They’ve got into the mentality that they have to continue adopting new technology in order to continue reducing costs – and that’s been the case over generations.”
It’s largely necessity that’s forced farmers to collectively identify that if they don’t solve certain issues, they’re not going to be in business, says Milne.
“They also realised that they couldn’t individually do some things – but collectively they could.”
Look at the history of the dairy industry where the demise – or greed – of privately owned dairy companies prompted farmers to take control of their own destiny by working cooperatively, he suggests.
“Cooperatives are pretty vital [in dairy] because the individual producers don’t have market power – you can’t sit on the produce and wait for prices to improve. Even if the price is half of yesterday’s price, you still have to sell. You need someone on your side setting the price.”
Collective clout
The rural sector not only leverages collective clout in the market but in how it builds its competitive advantages in those markets.
There is, says Andrew West, whole bunch of reasons why farmers tend to operate as co-ops.
“They have common problems to overcome if they’re going to control costs and can’t marshall their own resources to do that. Secondly they don’t actually compete with each other – you might get lamb farmers competing with chicken or dairy competing with soy but it’s not rivalrous industry. So from that regard, the best and only way to deal with complex science-based problems is to get together.”
A number of research initiatives and bodies are funded by farmer levy. Dexcel – established five years ago as commercial trust and incorporating the former Dairying Research Corporation and Consulting Officer service of LIC – is good example. Wholly owned by New Zealand dairy farmers, it functions as both generator and conduit for developments or information that benefit the whole sector.
It’s all about increasing farm profitability and productivity – largely by disseminating what’s described as “industry-good” innovation, explains Dexcel CEO Tim Mackle.
“A lot of technologies and research findings are not really commercial in the sense that they don’t lend themselves to proprietary development. In other words they’re to do with things that can’t be legally protected. The enforceability aspect of on-farm productive technologies is quite difficult – you can’t stop them migrating from farm to farm or from one country to another.
“The classic definition of industry good we’ve had is where there is market failure of an innovation or technology often because there’s not clear market in terms of value proposition – but it does need to be picked up by someone. I’m not talking about particular type of drench because those are things you can patent, but when it comes to good pasture management or managing the condition of your cows for optimum fertility – these are things you can’t ringfence or protect.”
