New Zealand's leading position in agriculture faces challenge
New Zealand's agriculture sector will soon feel the squeeze from lower-cost foreign competition, according to a report by accounting and advisory firm KPMG.
The KPMG Agribusiness Agenda said it could be only five years before underdeveloped agricultural regions including South America, Western China and Central Asia's large-scale intensive methods eroded New Zealand's advantage in making bulk commodities.
This country has historically claimed its competitive advantage was to produce exports at a lower cost than other nations, the report said.
"However, the expectations that a global food shortage is looming as the world's population continues to expand is opening up historically marginal agricultural regions such as South America, areas within the former Soviet Union, Mongolia and Western China, and large tracks of Africa to large-scale intensive farming," it said.
KPMG agribusiness chairman Ross Buckley said such regions benefited from lower-cost land and labour, often with a less complex regulatory regime.
"In addition, they are traditionally closer to key markets, enabling them to deliver food to the customer at a significantly lower cost than a competing farmer or grower in New Zealand could achieve," Buckley said.
"This gives New Zealand companies a short buffer, maybe as little as five years, before low-cost regions are producing bulk commodity products in significant volumes and undercutting New Zealand's pricing in our traditional commodity markets," he said.
New Zealand's exports of agricultural and forestry products were worth NZD26.5 billion (US$19 billion) last year, Ministry of Agriculture and Forestry figures show.
KPMG met chief executives and chairmen from organisations across the sector and found that views on New Zealand's agriculture future were reasonably consistent, Buckley said. It was important to maintain the green, clean national image, which would allow New Zealand to continue to differentiate on the global market, he said.
