Archive for June, 2014

Supermarkets, Growers & Food Prices.

munichmerch1One of the more intelligent articles I have come across in recent years on the topic of supplier relationships in the perishable food area can be found in the Guardian.  Here is a poignant part of  the article’s last paragraph which should have some resonance in our part of the world too.

“…farmers need to be paid enough to invest in our agricultural base. We actually need to pay a little more for our food now to avoid paying much more later. A price war might be good for consumers in the short term. It might offer some sort of relief. In the long term, however, we would all be much the poorer.”

I wholeheartedly agree with this sentiment but would even be more specific. Growers and farmers need to receive sufficient enough a price for the food they produce to provide them with a reasonable income as well as a return on their investment.

The background to the article is the market share loss being experienced by the UK’s main stream supermarkets at present, with the writer analysing the predictable price cutting strategies being implemented from the perspective of their potential impact on Britain’s self-sufficiency in food production.   A very worthwhile read.

I Had A Farm In Africa

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A few years ago, I came across a stand at the US Produce Marketing Association  (PMA) Convention which had me intrigued. “Land for Sale”, it said. “In Africa”, it said. I stopped and started to ask questions. The upshot of the conversation was that I was hearing for the first time about the Chinese ambitions relating to food security.

This week I came across two articles from different parts of the world which were touching upon the very topic. The first one, from the Bloomberg scribes, specifically discussed the Chinese strategy of acquiring land all over the globe and shipping the harvest or yield back to China. The most poignant statement in the article, “China has 21% of the world’s population, but just 9% of the arable land.” Clearly a call for action.

The second article, written by Professor Richard Archer from Massey University here in New Zealand is entitled ‘Predicting the food of the future’. It identifies population growth as the “biggest single driver” which will force humanity to change its attitude and processes related to food production – and not just in China. Archer’s focus is clearly on the opportunities this situation will create for the New Zealand food export industry, predicting that more food will be sold processed in future, albeit that “processing will be gentler with fewer ingredients” and that “more plant protein will be used to stimulate the meats we love but with meat used to round out nutrition and provide flavour.”

And last week, the New Zealand Parliament finally passed the proposed Food Bill, which aims to provide a regulatory Food Safety related framework for the wider industry.

Should we have food on our minds then? Sure should.

For me, the issue is greater than food though. Economics come into it big way. I have the Fresh Facts brochure for 2013 on my desk, where the New Zealand horticultural industry annually publishes its vital statistics. In his introduction, Plant & Food Research CEO Peter Landon-Lane writes, “The horticulture industry continues to play a vital role in New Zealand’s economic growth. Total horticultural produce value is now appr. $6.7 billion and horticultural exports account now for 8% of total merchandise exports.”

Landon-Lane goes on to say, “Asia is a key player in this growing market, taking 32% of exports…”

I paused to think about what I had read at this stage. And as is so often the case with me, I then came up with some questions rather than answers. Questions like:

  1. If China, or India for that matter,  go around buying agricultural production capacity all over the world to feed their people, who will feed the people in the countries whose land those two nations  are growing their food in?
  2. Whose economic growth is it if China buys dairy farms here, uses Chinese owned dairy factories to turn the milk into milk powder and ships the finished product to Chinese retailers?
  3. Can we actually believe GDP data and the like produced by the Reserve Bank and others because ‘our’ economic output is no longer purely ‘ours’?
  4. What is the future meaning of ‘our’?

Please do not get me wrong. This is not about China. New Zealand is a nation dependent upon migration of both people and investment.  I am an immigrant myself  and Chinese people and Chinese money are, from my perspective, very welcome here.

But if the ‘new normal’ is that people rich, land poor and liquid countries wander off and buy production in other sovereign nations at the rate China currently does, we will surely have to revisit how we measure our economic performance as a country. The sales dollars generated through the product being ‘pulled’ from our lands by specific markets through a wholly owned supply chain that operates parallel to our national and natural efforts to export similar products can no longer be considered to be the ‘fruits of our labour’.  Rather, they are the fruits of someone else’s labour, using New Zealand land as a platform for success.

And no – I do not want to get involved in land ownership rights or disputes either. It seems to me though that in our age of globalisation, digitalisation and sustainability, where just about everything and everyone is open to challenge, we may need to consider how we measure economic success, progress and prosperity in future, as the days when there was a simple solution for every issue seem to be long gone.

A whole new challenge for supply and value chain management and comprehension  as we know it. Time to re-jig how we measure things and one more reason not to believe every data set produced by Treasury me thinks.