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Perceptions of MAF's regulatory impact on the grain and seed industry

Appendix 2 Grain and seed industry profile

Summary

New Zealand's arable industry grows seeds for export as part of a system that also produces grains, vegetables and livestock. New Zealand has long enjoyed an international reputation as a supplier of high-quality seeds from our "clean"¹⁰ land. Vegetable seed exports have been the growth export category in the arable industry for the past 10 years and are a very high export return crop on a per- hectare basis. This profile looks at the New Zealand's export seed industry in the wider arable industry context, industry organisations and discusses some of the issues facing the seed and thus the whole arable industry.

Note: Figures given are largely based on the Agricultural Production Census 2002. Data from the 2007 Agricultural Production Census will be available mid-May 2008.

Arable industry context

The New Zealand arable industry produces milling, malting and feed grains, including wheat, barley, maize, oats and peas. One part of the arable industry also produces pasture and vegetable seeds for the pastoral industry and for export.

Table A2.1: arable industry

Crop	Area (ha)	Production (tonnes)
Milling wheat	20 830	137 941
Other wheat	21 325	163 557
Barley	78 097	440 883
Oats	7 353	34 987
Other cereals	2 587	13 162
Maize	14 178	148 847
Field peas	10 925	29 457
Other pulses	1 804	3 302
Other crops *	30 729	Not available
Total	157 129	834 924

*Mainly pasture, vegetable and brassica seeds
Source: Agriculture Production Census, 2002, Statistics NZ

While the arable industry is centred in Canterbury, there are also dedicated arable farmers and industry in Manawatu, Hawkes Bay, Otago and Southland. There is a distinct and significant maize grain and silage industry operating throughout the North Island and parts of the South Island, although it is largely concentrated in the Waikato and Bay of Plenty.

The last agricultural production census in 2002 showed that there were 520 grain farms and 250 farms with both grain and livestock in New Zealand. Most arable farms operate a combination of arable crops, seeds and a graze a significant but varying number of livestock.

Arable industry segments

Arable crops are subject to the Commodity Levy Act (Arable Crops) which collects a levy on wheat, barley, oats, maize, pulses, herbage seeds, vegetable seeds, brassicas, borage and other arable crops. This profile focuses on the export seed¹¹ section of the arable industry.

Seeds exported from New Zealand include grasses (mostly ryegrass), clovers, and specialist vegetable and brassica seeds. Seed exports are estimated to be worth around $145 million¹², although they have come under pressure recently due to the higher New Zealand dollar.

New Zealand's seed industry

Like other arable activities, seed growing is generally undertaken as part of a mixed production regime involving pastoral farming, fodder and vegetable production. Although arable crops are grown throughout New Zealand seeds, and especially those for export are mainly grown in the Canterbury region. Of the seed-growing farms, there are very few that solely grow seeds.

Seed industry background

The New Zealand pasture seed industry began with the importation of English ryegrass for improved pasture grasses during the 1800s. Improved pastures soon required seed multiplication, which remains the basis of the New Zealand seed industry. Development of local eco-types followed, laying the foundation of a modern and successful plant breeding sector. Grain production and trade dates back to the late 1880s and early 1900s when large areas of wheat were grown for the fledgling flour milling and baking industry. New Zealand has long enjoyed an international reputation as a supplier of high-quality seeds of grasses and legumes and in the past 20 years vegetable seeds have also become a significant part of the export seed industry.

The seed industry in New Zealand

Although the seed industry is a small part of the wider arable industry, its contribution to New Zealand's economy is substantial. The estimated farm-gate value of the downstream production is $370 million, the compound feed industry value $500 million, poultry and pork products produced from this grain $1200 million and retail value of cereal products $1200 million¹³.

Seed grown in New Zealand is a key input for the primary sector and enables downstream annual production of:

• 950 000 tonnes of barley, wheat, maize and oats; (350,000 tonnes is for human consumption and 600 000 tonnes for animal feed);
• pasture seeds (primarily ryegrass and clovers) support New Zealand's livestock and dairy industry, which make up 60 percent of New Zealand's exports.

The most recent Agricultural Production Census in 2002 showed that the seed industry in New Zealand has an annual production of:

• 40 000 tonnes of seed off 40 000 hectares of land;
• seed with an estimated value of $150-170 million;
• seed exports of $70 million.

Quality systems

The reputation and growth potential of New Zealand's seed industry is built on growers' and seed companies' commitment to high purity and trueness to type of the seed lines via robust traceability and segregation practices. A key part of this success is the voluntary seed certification and isolation distance management systems (SCID) being operated for the industry by AsureQuality. This system operates in a very competitive and generally non-farmer owned environment where many relatively small companies compete with each other vigorously, yet co-operate where there are mutual benefits.

While participation in the New Zealand seed certification scheme is voluntary, the pasture seeds industry participates to a very high level and this plays an important role in protecting the integrity of the seed industry by optimising standards and ensuring conformity with procedures.

In New Zealand the regulatory environment for seed is unique in that it has no laws specifically governing the domestic production, certification or marketing of seed. However, general laws relating to fair trading apply.

Protection for new cultivars is afforded by registration under the Plant Variety Rights Act and the New Zealand seed certification system, which has been operating for almost 80 years and is modelled very closely on the OECD seed certification scheme.

Seed market trends

Many New Zealand-bred cultivars, especially ryegrass, tall fescue and clover species, are commercially adopted in other countries. Pasture seed has traditionally been the mainstay of New Zealand seed exports, but there is a rapidly increasing trend towards vegetable seed production aimed particularly at the populous countries of Asia. In recent years substantial new business has also been developed in contract seed production for other countries.

A key driver of growth in vegetable seed exports is the inability of traditional vegetable seed-producing countries in Europe to maintain "clean" land. Clean land does not have isolation issues from previous crops or weeds that cross pollinate. New Zealand has a world leading isolation and certification system that give our high value arable farmers a distinct comparable advantage.

Opposite production seasons in the northern and southern hemispheres enables New Zealand plant breeders to accelerate seed production, and commercial companies to make up seasonal shortfalls from their own production.

Pasture seed and vegetable seed are currently the main export items of the New Zealand seed industry. Approximately 25,000 tonnes of seed are exported annually and the major markets are the United States, Australia, Europe, Japan, China and South America.

The International Seed Federation estimates that New Zealand's domestic market for seeds is the 36th largest in the world. In comparison we are the 23rd largest seed exporter and 16th largest horticultural seed exporter. The table below shows that the value of New Zealand's vegetable export seed industry is on the increase.

Industry organisations

Arable Food Industry Council (AFIC)

The Arable Food Industry Council (AFIC) is an umbrella organisation to act as the public face of the arable food industry; the first port of call for government or outside bodies; a roundtable for discussion on current industry issues; a "drafting gate" for issues requiring specific action and a body with critical mass capable of collective industry action where necessary and appropriate. It has representation from the following parties:

• AgResearch;
• NZ Institute for Crop and Food Research;
• Federated Farmers - Grains Section;
• Foundation for Arable Research;
• New Zealand Feed Manufacturers Association;
• New Zealand Flour Millers Association;
• New Zealand Grain and Seed Trade Association;
• New Zealand Plant Breeders Research Association;
• United Wheat Growers Association.

New Zealand Grain and Seed Trade Association (NZGSTA)

NZGSTA exists to foster the business environment for its members. It comprises 80 companies who breed seed, and research, produce, process and market, import and export New Zealand's grain and seed outputs.

Foundation for Arable Research (FAR)

FAR is an applied research organisation responsible to New Zealand arable growers and is involved in funding arable research and technology transfer. It was formed in 1995 and operates under the Commodity Levy Act. In a 2005 referendum FAR received over 80 percent support from arable growers who voted, and 60 percent support from maize growers who voted.

FAR collects levies from wheat, barley, oats, maize, pulses, herbage seeds, vegetable seeds, brassicas, borage and other arable crops. The levy is collected at the first point sale (or used on the farm, for example, to feed stock) for all grain and seed, with the exception of maize which is collected on the seed purchased. FAR also receives funds from research grants, cooperative research and information sales.

Plants Market Access Council (PMAC)

The Plants Market Access Council Inc (PMAC) is a peak industry body, which focuses on promoting effective, affordable and reliable export market access for New Zealand plants and plant products. PMACs Executive Council is made up of co-opted and elected representatives from the horticultural and arable sectors, a representative from NZFSA and MAF, and the Executive Secretary. It provides a forum for NZFSA, MAF, industry and other relevant government agencies (for example, MFAT and NZ Customs Service), to work together

Seed Quality Management Authority (SQMA)

The Seed Quality Management Authority is an incorporated society, and consists of representatives appointed from seed growers, seed industry, and researchers. MAF and AsureQuality are ex officio members. It effectively employs AsureQuality on behalf of the seed industry to manage the seed certification scheme, and is concerned with service, price and delivery of the Independent Verification Agency. SQMA manages the Seed Crop Isolation Distance scheme, vital to maintain the purity of New Zealand's export seed crops.

The OECD has determined a set of certification guidelines for the international trade of small seeds. A similar set of standards required for some markets has been developed by the Association of Official Seed Certifying Agencies (AOSCA). MAF Biosecurity New Zealand is the designated authority for the OECD scheme. The Seed Quality Management Authority sits on AOSCA. MAF Biosecurity New Zealand sets the standards required to achieve OECD certification and also audits the Independent Verification Authority that is employed to implement the standards set by MAF on behalf of the seed industry to ensure that government-to-government assurance of seed purity is maintained. There are two Independent Verification Authorities in New Zealand SGS Ltd (an international certifying company) and AsureQuality. All data from within the scheme belongs to MAF and the Seed Quality Management Authority.

Federated Farmers Grains Council of New Zealand

This is one of seven industry groups that are part of Federated Farmers. Federated Farmers is New Zealand's leading rural sector organisation and seeks to provide farmers a collective voice nationally and within each province.

Issues facing the industry

New Zealand enjoys an international comparative advantage in the pasture and vegetable seed industries. In both cases, this advantage is consistency, reliability, and quality and any threats to any of those three assets will erode New Zealand's competitiveness.

Growing specialist seeds (e.g. Chinese brassicas, hybrid vegetable seeds) can return up to $20 000 per hectare to growers, however it is a high risk industry that requires very exact management and is inherently sensitive to climatic variations around pollination and harvest times in particular. An example of the associated risk is shown in the table below where seed production suffered in 2002 due to adverse climatic conditions with cloudy, wet weather and poor pollination.

The constraints on the arable and export seed sector include the limited amount of land in New Zealand suited to arable farming¹⁴ and the availability of water for irrigation.

Growth in high value arable sector farming depends on reliable irrigation. Customers of higher value arable products require consistent quality and predetermined amounts of arable product, year after year. While irrigation doesn't mitigate all climatic variability, it does alleviate a major source of yield and quality fluctuation. Arable systems incorporate crop rotations and so can adjust to some water restrictions. However, a reliable irrigation infrastructure and a fair and equitable allocation system are, therefore, critical to the industry's future.

The number of growers has declined in recent years, although those remaining are getting larger and more secure. There are concerns about the availability of people skilled in arable farming techniques and the implications for the next generation of arable farmers. A number of young arable farmers and machinery operators are choosing to work overseas where continued long term work can be achieved in comparison to New Zealand's strongly seasonal pattern of employment. Strong competition for labour between the agricultural sectors in Canterbury is also developing. Related concerns are that the arable industry is not "glamorous" enough, and there is no obvious career path such as there is in the dairy industry via sharemilking.

The major risks to the sector are biosecurity breaches, impediments to exports in the form of non-tariff barriers, and restricted access to new genetic material due to the HSNO Act. The high and changeable exchange rate is also squeezing profit margins in the export seed industry.

The widespread adoption of genetically modified (GM) crops overseas has created both opportunities and risks for New Zealand arable farmers. A successful co-existence regime that can allow GM and conventional agriculture to complement each other rather than be in conflict could add value to the industry. While the current ban on GM crops in New Zealand means the arable industry is unable to exploit the potential market opportunities, it also means that New Zealand's marketing advantage in being GM free remains intact. Presently, the GM crops that are available globally do not offer significant advantages to the New Zealand industry.

Arable farmers' outlook is positive for the medium term due to global biofuel demand competing for land and therefore raising the values of all crops, and also the optimism in the dairy industry. Arable farmers supply dairy farms with pasture and cereal silage and winter feeds. Oilseed rape grown for biodiesel is of concern to growers of specialist arable crops because unharvested seed can lie dormant in soil for many years. It readily germinates with any later crop, causing major contamination issues. AsureQuality administers the Seed Crop Isolation Distance (SCID) programme which goes some way to mitigate this risk.

High dairy prices are also leading arable farmers consider converting their farms to dairy, although it is also providing earning potential for the future.

Figure A2.1 Tonnes of herbage and amenity seed produced in New Zealand by calendar year

Source: Foundation for Arable Research

¹⁰ "Clean" in this context means relatively free of other plants that produce seeds that would reduce the purity of the seed line.

¹¹ Difficult to define specifically as can include some seeds from all these crops. Mostly made up of pasture, vegetable and forage seeds, but also includes some peas and cereals.

¹² 12 Year ended March 2007, made up of vegetable seeds $41M, ryegrass $31M, clovers $22M and peas $24M, other minor crops about $7M.

¹³ 13 Source: New Zealand Grain and Seed Trade Association http://www.nzgsta.co.nz/?q=node/63

¹⁴ In this case, suited means in terms of the climate, the soils (not too stony) and the competition from other land uses, particularly dairy farming, vegetable production and lifestyle blocks.

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PO Box 2526
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