Arable
Overview of sector structure, size and dynamics
The arable sector focuses on breeding, growing, processing and marketing grain for the New Zealand food, beverage and animal industries. It also produces seed and stock food and grows maize and other crops for silage. Arable farming is generally undertaken as part of a mixed production regime involving pastoral farming, fodder and vegetable production. While the industry is centred in Canterbury, there are also dedicated arable farmers and industry in Manawatu, Hawke’s 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 largely concentrated in the Waikato and Bay of Plenty.
During the year ended June 2002 the arable sector grew 220,000 hectaresof grain, silage and seed crops worth $379 million at farm gate and exported seeds and grains worth $78 million. There are about 2,000 growers, of which about 600-800 produce the majority of the crops. The industry consists of large multinationals through to small private firms of various sizes. There are no formal collective marketing institutions.
New Zealand has a high-quality reputation in the domestic and world market for grass, clover and speciality seeds. A considerable proportion of the productivity gains in New Zealand’s pastoral industries have been generated from improved pasture grasses and clovers. Most of these have been developed and produced by the New Zealand arable industry. Specialist seeds (e.g. chinese brassicas, hybrid vegetable seeds) are returning up to $20,000 per hectare to growers but require very exact management and are inherently sensitive to climatic variations around pollination and harvest times in particular.
The New Zealand arable industry produces about 900,000 tonnes of grain, and a further 319,000 tonnes of wheat was imported in the year ended June 2002. New Zealand is likely to continue to be a net importer of commodity cereal grains. However, the industry has been innovative in development of new varieties and markets such as for specialist pasta and bread wheats, flour mixes and bakery products, malt for brewing and feed and feed mixes for the pig and poultry industries. Together, exports of cereal-based prepared foods, such as pastry, flours, breakfast foods, malt and beer totalled $130 million in 2001/02.
New Zealand wheat production
Years ended June
Source: Statistics New Zealand
New Zealand barley production
Years ended June
Source: Statistics New Zealand
The arable industry has achieved substantial productivity gains in the last decade. Advances in input efficiencies, and in capital use, resource (water) use and labour productivity are very apparent in the industry. Productivity gains have reduced production costs and improved the quality of traditional cereal crops and of seed crops. National average wheat yields have risen from 5.1 tonnes per hectare in 1992 to 5.5 tonnes in 1996 and 7.0 tonnes estimated in 2003 (37% rise in 11 years). Top yields have increased from around 9 tonnes per hectare in 1991 to 15 tonnes in 2003. This is due mainly to a combination of better varieties for the feed The arable industry has achieved substantial productivity gains in the last decade. Advances in input efficiencies, and in capital use, resource (water) use and labour productivity are very apparent in the industry. Productivity gains have reduced production costs and improved the quality of traditional cereal crops and of seed crops. National average wheat yields have risen from 5.1 tonnes per hectare in 1992 to 5.5 tonnes in 1996 and 7.0 tonnes estimated in 2003 (37% rise in 11 years). Top yields have increased from around 9 tonnes per hectare in 1991 to 15 tonnes in 2003. This is due mainly to a combination of better varieties for the feed market particularly, and improved management. New management tools are also used by growers to better target water and fertiliser to optimise yields with reduced impacts on water quality.
Other main cereal yields have improved to a lesser degree. Barley yields have risen from 4.7 tonnes per hectare in 1990 to 5.7 tonnes (21%) in 2003, and maize grain production has improved from 9.1 tonnes per hectare to 10.5 tonnes (15%) in the same period.
Future growth potential
New Zealand is internationally competitive in some niche areas such as seeds, although is unlikely to ever have a competitive advantage in high volume arable crops such as commodity grain. However, there is considerable potential to generate higher returns from these traditional crops. These may be either from developing new uses for them, or from being involved, as many New Zealand firms are, in the development and multiplication of these crops in conjunction with overseas plant breeders. Examples include barley juice extraction for American and Japanese customers, multiplying seed from very small lines of seed as part of Northern Hemisphere plant breeding programmes, and the breeding of cereals with particular health-promoting benefits, pharmaceutical applications or polymer production for plastics. These are incremental improvements, and don’t require huge shifts in capital, production technology and skills.
In addition, specialist seed growing has considerable growth potential and very high returns per hectare. Examples are chinese brassica, hybrid vegetable seeds, and potentially hemp seed oil production. These high value crops have shown huge growth in the last 5-10 years, albeit from a low base. Several companies are focusing on this market and report great potential, with at least one intending to double the area for the 2004 harvest. This is the result of considerable investment of time and capital by these firms in establishing relationships with overseas companies.
In the short to medium term, the arable sector is likely to continue to be underpinned by import substitution into the domestic market, by the needs of the pastoral sector for pasture seeds and animal feed such as maize silage, and niche opportunities such as wheat for specialised pasta products. The domestic market will remain an important part of the mix, as it continues to raise the productivity of New Zealand’s pastoral industry and also allows growers and firms to spread the risks inherent in developing the high-value export seed opportunities.
Factors determining growth potential
The area covered in arable crops, the production per hectare and the financial returns fluctuate on a year to year basis due to climatic factors and market signals. The industry is very responsive to changes in market conditions, crop options and new technology.
The New Zealand industry is climatically, geographically and operationally very well placed to take advantage of the high-value seed production opportunities identified above. As noted earlier, New Zealand growers and the industry have a deserved high reputation for consistently providing quality seed lines of high purity and trueness to type. Therefore, continued focus on efficiency, quality assurance systems and high value production in a competitive environment means the medium-term outlook for the sector is positive.
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 being operated for the industry by AgriQuality NZ. 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.
The growth potential of the arable industry will be significantly influenced by factors such as the availability, allocation and use of water, the relative profitability of other landuses, the ability to manage biosecurity risks and the influences of consumer demand, particularly in relation to the acceptance or otherwise of genetically modified organisms. The industry is likely to continue to be innovative, market-focused and to invest in research and the application of technology because it is subject to global prices at the commodity end of the market and relatively high costs of production in New Zealand.
Ongoing innovation and niche product development may allow greater profitability from existing areas of the major arable crops grown. Crop and Food CRI and the Foundation for Arable Research (FAR) are likely to be crucial to performance gains. Crop and Food CRI has a very credible track record in new crop and new product development and has the potential to catalyse new growth opportunities for the sector. Collective research funding by farmers under the Commodity Levies Act levy administered by FAR has very good support from farmers and industry players.
The availability of new plant genetic material is likely to be a key factor driving future growth in the sector.
Constraints on and risks to sector
The constraints on the sector include the limited amount of land in New Zealand suited to arable farming and the availability of water for irrigation.
Growth in high value arable sector farming depends on reliable and certain irrigation. Customers of higher value arable products require consistent quality and predetermined amounts of product, year after year. While irrigation doesn’t remove all climatic variability, it does reduce a major source of yield and quality fluctuation. Arable systems incorporate crop rotations and so have the flexibility to adjust to some water restrictions, but unexpectedly having no irrigation water available will result in losing markets, including high value ones. Having a reliable irrigation infrastructure and a fair and equitable allocation system are therefore critical to the industry’s future.
The maintenance of industry infrastructure remains a concern to the sector. 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. Most recently Goodman Fielder, the largest grain processor in New Zealand, has come under new ownership resulting in some uncertainty around the future of flour milling in New Zealand.
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.
The widespread adoption of genetically modified (GM) crops overseas may create both opportunities and risks for New Zealand arable farmers. The successful implementation of a co-existence regime that can allow GM and conventional agriculture to complement each other rather than be in conflict is important to the industry.
Areas for policy to focus on
An essential mechanism underpinning future growth is the ability to establish
Plant Variety Rights (PVRs) to protect and enhance investment in new products.
The price difference between older “common” varieties of grasses and clovers
and the proprietary varieties (those under PVRs) has fluctuated but is generally
tending to widen. MAF is actively working with MED and other agencies to
modernise plant variety rights legislation.
The sector is likely to be substantially affected by decisions on and market
perceptions relating to GM crops and the extent to which co-existence between GM
and conventional agriculture is possible. MAF is active in addressing this
issue.
MAF is likely to review issues around the availability of overseas plant genetic
material for the arable sector.
Water allocation, enhancement and management policy are critically important to
the sector and are being addressed by MAF together with MfE and other agencies.
Contact for Enquiries
Monitoring and Evaluation
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0623
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