OVERVIEW OF PRODUCER BOARD ISSUES
Summary
A vibrant, entrepreneurial and internationally competitive agribusiness sector is vital to New Zealand’s economic success.
New Zealand’s main agricultural and horticultural sectors, however, are generally in a depressed state. While some farmers and growers are doing well, overall the agribusiness sector is characterised by weak profits and continued dependence on unbranded commodity products with declining prices. In the current climate, and with current structures, many parts of New Zealand’s agribusiness sector are unlikely to be attractive to those with ability or capital.
The Government has an important role to play in influencing the future prosperity of the agricultural and horticultural sectors. The Government cannot guarantee the prosperity of these sectors but it can, by its legislation and regulations, create a framework that encourages productivity, innovation and wealth creation.
In recent years there have been important changes in the regulatory regime for the agricultural and horticultural sectors, including some to the regimes applying to Producer Boards. However, the current regimes for the Boards still impose too many unnecessary costs on farmers and provide incentives for farmers and other agribusinesses to engage in activity that is not wealth enhancing.
Further, ongoing change in the policy environment is necessary if the Boards are to remain relevant to the future competitive environment. In tomorrow’s global environment, the strength and prosperity of New Zealand’s agribusinesses is likely to depend not so much on their reliance on statutory structures as on their flexibility, creativity and ability to meet customers’ changing needs.
Introduction
This paper provides an overview of public policy issues relating to the agricultural and horticultural Producer Boards.
The paper first provides summary background information on the Boards. The paper then outlines recent developments in the markets the Producer Boards operate in and in the regulatory regimes governing the Boards. Finally, the paper highlights the policy issues likely to face Ministers in relation to the Producer Boards over the coming months.
Background
There are currently eight statutory Producer Boards. Table 1 (attached as an appendix) provides summary statistics for each Board.
Each Board is different in terms of its historical development, current functions and legislative regime.
The main Boards are the three big trading Boards - Dairy, Apple and Pear and Kiwifruit. These Boards had revenues of $7.7 billion, $784 million and $550 million respectively in 1998. Together they account for around 23 percent of New Zealand’s export revenues. These Boards currently have a statutory near-sole right to purchase for export New Zealand-produced dairy products, apples and pears or kiwifruit.
Four of the other Boards (Meat, Wool, Game and Pork) are “non-trading” Boards, meaning they do not acquire or on-sell the basic product. Rather, these Boards provide to farmers, under statute, certain services – e.g. promotion and research and development services.
The final Board is the Hop Marketing Board, which has a statutory sole right to market hops, both domestically and offshore.
In the 1998 Budget the Government asked each Board to prepare a plan outlining how it would adjust and operate without special statutory backing.
In October 1998, the Producer Board Project Team (PBPT) was established by the Government. The PBPT is an interdepartmental unit tasked with working with the Boards and industries and advising Ministers on the public policy issues relating to the Producer Boards.
While the Government’s reform direction was initially received by the Boards and many industry players with considerable disquiet, packages for legislative change were negotiated and legislation was passed for the dairy, apple and pear and kiwifruit industries in September 1999. These legislative changes and the challenges the industries continue to face are described below.
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