Professor Caroline Saunders
The persistence of the international food miles debate highlights a much broader set of issues around New Zealand’s primary production industries.
For many years there has been agreement that New Zealand must add value to its primary production. Exports from these industries have continued to increase, and are now around 50 per cent of our total, but many of the products are still largely the same.
The food miles debate has captured international attention at Government and consumer, but a thorough analysis has shown the concept to be deeply flawed. This is because international shipping is only a fraction of total energy required for production and delivery to international markets. If we look at total energy for four New Zealand food exports - dairy products, lamb, onions and apples – we find that New Zealand is more energy efficient overall than producers in the United Kingdom.
In the case of lamb New Zealand is four times more energy efficient – because of the type of production system it uses.
In a follow up study we have learned that even when greenhouse gas emissions are taken into account, New Zealand dairy products produce less carbon dioxide equivalents than British dairy production.
There is now no doubt whatsoever that “food miles” should not be used as the basis for restrictive trade and marketing policies.
Nevertheless, the debate tells us that New Zealand must pay more attention to the requirements and attitudes within our main markets or risk falling behind.
Energy intensity is just one of the environmental and social externalities which have to be addressed. Premium markets and customers on the other side of the world are far more concerned with the attributes of the product than the price. New Zealand must either run with this game or find another one. We will either become more clever at developing and exporting high value products to the premium end of the market.
Back to top
The kiwifruit industry stands out as a model of how this is done. Ten years ago there was skepticism when the industry created the Zespri brand for what appeared to be a standard piece of fruit. But the strategy turned out to be absolutely correct. The New Zealand kiwifruit industry created enormous additional value by creating a strong brand image and targeting the premium end of the market. In addition, the kiwifruit industry embraced and even influenced the development of a market access scheme.
The sheep meat industry has had some success too, with the development of premium cuts such as the French rack. If the sheep industry can further anticipate and keep up with trends in market demands, including higher expectations on animal welfare issues, then there is potential for significant increases in export returns. We need to be aware that the Europeans are already moving in this direction, with subsides in place to encourage the change, so the target is a moving one.
Trade negotiations and policy changes in the EU will help to sort out some of the imbalances in our trading arrangements with Europe, but it is up to New Zealand’s primary industries to take the long view and address the environmental and social issues which are top-of-mind for these markets.
New Zealand has had preferential access to Europe for its sheep meat exports, but as barriers to other exporters are removed there will be new opportunities. It is a contest that can be approached several ways. New Zealand’s historical response has been to focus on production efficiency. In the current climate it might be better to differentiate from other country products and farming practices.
One area of real potential is the dairy industry. Dairy has historically suffered from restricted market access into the premium markets and from subsidised competition in other markets. This has led to the development of new markets in emerging economies and success in milk powder exports. However, to increase returns to this sector more value-added exports would make a significant difference. There have been some success stories, such as casein into the United States, but the potential is huge.
The important factor in developing premium products is sending the right signal down to the farmers. Zespri is good at doing this. Without such a signal, industries tend to remain focused on trying to increase production.
New Zealand is currently enjoying an unprecedented surge in international prices for milk powder, but our future depends on our success in markets that have become highly sophisticated and socially aware. We need to start thinking is this space now. It’s not enough to shoot a few magpies and trim the hedges once a year when European farmers are implementing biodiversity plans and new systems for environmental management.
Adding value is the fastest way for New Zealand to get into the top half of the OECD rankings. By addressing market attitudes in Europe we can protect our long term economic interests, while reducing pressure on environmental resources at home. Marketing assurance schemes, including labeling and verification of production methods, will be a key to developing a win-win for New Zealand.
Professor Caroline Saunders is the head of the Agricultural Economics Research Unit at Lincoln University and lead author of the 2006 Food Miles Report commissioned by the Ministry of Foreign Affairs and Trade.