Once in a generation level of change divides primary sector

Bank of New Zealand’s (BNZ) Shift Happens – Future of agribusiness report today reveals a divided primary sector, adapting to the challenges of climate change and regulation, demanding more from rural connectivity, and grappling with COVID-induced supply chain pain and labour constraints.

When considering the future, the Shift Happens survey found New Zealand’s agribusinesses evenly split. 53% expressed optimism for the future (down from 58% in 2020) while an increasing number of farmers were feeling threatened by change and its impact on the long-term success of their agribusiness (42% to 47%). Those who were more optimistic about the future, were also more likely to embrace the myriad solutions available to overcome the current challenges impacting the sector.

The survey also found:

  • Rural connectivity as the most influential megaforce on the future of agribusinesses (54%) with 70% of farmers seeing it as essential to the increasing use of technology and data collection.
  • Supply chain risks and labour shortages are weighing heavily on farmers and growers, with 45% saying the closed border was presenting immediate risks to production.
  • Nearly three quarters of respondents (73%) said the pace and scale of regulatory change was too much and too fast with 56% suggest the pace and scale of change driven by the Market was ‘about right’.
  • 42% will consider adjusting their land use in response to consumer demand.
  • 96% of farmers have noticed an increase in the costs of managing environmental impacts over the last five years
  • 44% had already or were planning to reduce farm inputs such as chemicals and fertilisers, especially dairy farmers.
  • More than 50% use sustainability strategies that incorporate compliance obligations, while 59% are already using some form of farm environment plan.

BNZ Head of Natural Capital, Dana Muir, says, “Farmers and growers are investing in their operations and reducing impacts, but it’s clear the pace and scale of change is daunting.

“Increasing environmental regulation, the rise of the conscious consumer and covid disruptions are hitting all at once. But with strong commodity prices and strong demand for New Zealand food and fibre, many farmers now have the flexibility to invest in meeting the challenges head on.

“New Zealand’s agribusinesses understand the importance of the health of climate, land, and water to the future performance of their businesses and products. But it’s the ability and support to adopt solutions which needs to be the focus,” she says.

Rural connectivity key to sustainable future

Paul Conway, BNZ Chief Economist, notes the criticality of rural connectivity, with 70% of farmers and growers saying it is a key influence within their Agribusiness.

“Digital tools and data collection is increasingly at the heart of sustainable agriculture. It is driving the ability for farmers to make accurate decisions on how to measure and manage critical future considerations like on-farm emissions. But without strong rural connectivity, farmers are effectively shut out of being able to take advantage of new technologies.

“Compared to other OECD countries, the coverage of New Zealand’s broadband network is good and new technologies are creating new ways for remote farms to get online. One way or another, we need to get more farms online to help improve sustainability and productivity in New Zealand’s primary sector,” he says.

The case for change

Dana Muir says farmers and growers are increasingly attuned to what the market wants and are answering the questions posed by conscious consumers about where products are made, how they are grown, and their carbon footprint.

“It’s great to see work to increase sustainability and efficiency already underway across most New Zealand farms because consumers, the market and governments have spoken and there is no going back.

“The half of the sector that see threats from the level of change in their agribusiness need to be supported to embrace solutions and systems which will position them to be the farms of the future,” she says.

Dana Muir says while R&D can’t afford to slow down, the primary sector is well supported with tools, information and services to help farmers and growers meet changing consumer preferences and compliance obligations. The financial sector is incentivising change too.

“BNZ is supporting our agribusiness customers to invest in sustainability. Earlier this year we developed the first on farm sustainability linked loan that will see our customer Southern Pastures receive financial incentives for meeting ambitious emissions, biodiversity and waterway targets.

“Running a successful agribusiness takes stamina, skill, and courage – qualities, time and again, New Zealand primary producers have demonstrated as they adapted to satisfy market forces and meet the ever-evolving obligations of their social licence to operate,” she says.