Bill Kaye-Blake, principal economist with NZIER, reflects on 20 years of research into creating greater value in New Zealand's primary sector.
I’ve been doing research on agri-food systems for 20 years in New Zealand and in California before that. The same messages keep coming up: Feed the world! Protect the environment! Value not volume! Premium products!
An economics joke always comes to mind. An economics professor and her student are walking along the footpath. The student says, ‘Hey, there’s a $20 bill on the ground.’ The professor replies, ‘No, there isn’t. If there were, someone would have picked it up!’
The meaning is clear: easy money isn’t just lying around waiting to be picked up – nothing happens without someone making the effort. The invisible hand is in fact many actual hands doing actual work.
What is often missing from reports telling farmers to ‘move up the value chain’ is the practical plan. Many farmers and growers know why this should happen. And sometimes there are exemplary role models to show us what they do. But that's not always helpful. We can all see that Coca-Cola makes more money selling branded sugar-water and other products than all of New Zealand food and fibre exports combined. But ‘be more like Coca-Cola’ isn’t an action plan.
Our Land and Water Toitū te Whenua Toiora te Wai is a Challenge about the ‘how'. How can we do better? How can we protect the environment and still produce enough and make enough money? It is taking those slogans and turning them into practical advice.
“Be more like Coca-Cola” isn’t an action plan.
Other parts of the Challenge have focused on the environmental aspects and land-use practices. They have looked at which management tools improve water quality outcomes, and who has used them, and how impacts can be measured and modelled.
The work led by the AERU has focused on the economic aspects. How can farmers continue to be financially viable while doing things that are good for the environment? They have assembled several of the pieces that are needed to figure that out.
For example, the work found that consumers are willing to pay for things New Zealand farmers are already doing. If only those consumers knew – if only someone told them – we could get more value for our existing volume.
Show us how, not just why
The work showcased by The Value Project goes a step further. It shows how to tell overseas consumers. It also worked with individual companies to figure out how to do it better. The AERU has turned that work into advice for other companies so that they can be more successful.
The lessons are a bit funny for economists. We study money and markets. One of the great things about them is that they are anonymous. I can go into a shop and buy whatever is there. I don’t have to know the people, I don’t have to talk with anyone, and I don’t have to get involved in people’s personal lives. I just go buy a jug of milk and I’m done.
That’s great because it provides a lot of flexibility. Money is always money – I can use it here or there, and I can save it or spend it or share it.
The lessons from the research, though, showed the value of having relationships in addition to transactions. If the company distributing your product knows you, they try a bit harder to make the sales and get you a good price. If the retailer or restauranteur has been to your farm, factory or marae, they can make their customers feel connected and willing to pay a premium price.
Also, if there’s a problem, you have someone you can contact. It’s the difference between using the Call Centre versus calling your cousin’s friend in Accounting. These connections were important during the COVID-19 pandemic and wil help when the next disruption occurs. Resilience is built through relationships not just contracts.
If the company distributing your product knows you, they try a bit harder to make the sales and get you a good price. If the retailer or restauranteur has been to your farm, factory or marae, they can make their customers feel connected and willing to pay a premium price.
It turns out that ‘moving up the value chain’ is in part about connecting with the people in the value chain. We can tell them about the great things our farmers are doing and really engage them in our success. In turn, they can share what they know about overseas consumers and market trends, as well as regulatory and logistics issues or anything else that could be important.
The Value Project feels to me like it is turning some of those slogans into practical advice. Here are the things that consumers value more than volume of product. These are the ways to protect your premium through the value chain. When you protect the environment, here’s how to let people know so that they can support you.
That feels like advice that can do a lot of good for farmers and food businesses.
Bill is on the Science Leadership Team for Our Land and Water Toitū te Whenua Toiora te Wai