Listen: the Brexit opportunity for New Zealand

Within a week of the outcome of the Brexit vote last June, the New Zealand government had assembled a taskforce and had jetted to London to offer its services to the UK government.

New Zealand’s minister for primary industries (the equivalent of the Irish Department of Agriculture) Nathan Guy was in Ireland recently and he spoke exclusively to the Irish Farmers Journal about the opportunities it sees as a consequence of Brexit, working closer with Ireland and where now for the country’s dairy industry.

Minister Guy is up front about the opportunities Brexit can deliver for his country.

However, Brexit is not the opening of the trade door New Zealand has been looking for. Conversations between the EU and New Zealand over a free trade agreement (FTA) have been under way for years.

Listen to an interview with Minister Guy in our podcast below:

Listen to "New Zealand's Minister for Agriculture Nathan Guy" on Spreaker.

Guy says he and New Zealand are “excited” about working with the EU and the UK.

“We have been trying to negotiate an FTA with the European Union for many years now.

“There is no way a formal negotiation can begin until Article 50 has concluded and that’s likely to take two years.

“There’s a trade dialogue that has already commenced that’s between officials. That meeting has already taken place”.

Ministers have met

“Minister [Todd] McClay, our trade minister and (the UK’s international trade) minister [Liam] Fox have had a great working relationship. They indicated at their recent meeting a month ago that ... New Zealand and Australia would like to be the first countries to do a deal with the UK after Brexit.

“We think there are further opportunities in the UK market for New Zealand but we need to get to the point where we can actually sit down and have those discussions in a formal negotiation.

Guy confirms that informal discussions have commenced and will continue.

Dairy

A country of the same population as Ireland, New Zealand equally shares the “export or die” mentality that we do. This mentality has been honed and sharpened since the country removed subsidies paid to farmers in the 1980s.

The country can feed 40m people so it must ship produce from the north and south island to many global markets as possible.

Food exports for 2016 hit NZ$36.7bn (€23bn). Dairy is still the giant of New Zealand’s agri food exports but its prominence is waning.

Last year, dairy exports were down 6% from NZ$14bn (€8.7bn) to NZ$13.3bn (€8.3bn). For the first time in its history, a downturn in the dairy markets did not crash the overall New Zealand economy.

It has diversified and grown other primary industries, such as the Kiwi fruit and manuka honey as well as growing its agriculture technology.

“What was really interesting is that we worked our way through the dairy downturn and that was almost three years ago and our overall exports from New Zealand grew quite considerably.

“The New Zealand economy is quite diversified across the primary sector.

“The opportunity for New Zealand is product diversification, to add more value because we have set a target of doubling our agricultural exports but we can’t double the number of dairy cows or catch double the amount of fish in our oceans. We’ve got an opportunity to try and add value.

“The positive of the dairy downturn was that our farmers have had to refocus on costs and look back inside the farm gate.”

Sheepmeat

The UK already represents a sizeable portion of New Zealand’s agri exports. It has 228,000t sheepmeat quota to the EU, with the UK taking half of that. “Where that sizeable tonnage of product goes once the UK exits the EU remains to be seen,” Guy explains.

“New Zealand has a TRQ (tariff-rate quota) of 228,00ot and we’ll have to work that through with the negotiation with the European Union, how that looks in the future and the way it is potentially going to be sliced and diced or amalgamated into a deal with the UK”.

He adds that he would like to see greater collaboration between large scale sheepmeat producers like Ireland and New Zealand to help promote and drive consumption of the product.

Dairy prices

Minister Guy said both he and the New Zealand dairy industry remain positive about milk price in the medium to long term. Prices last season dipped down to lows of NZ$3.90/kg (17.5 c/litre) which was down from NZ$8.75/kg milk solids (39.3 c/l) in 2014.

“It (milk price) is $6/kg (26c/l) at the moment and we are forecasting that it will climb up to $7/kg (31.5c/l ex-VAT), maybe a bit above that, right out to 2020,” Guy said.

“It’s supply and demand, that’s basically what it is. The European Union is producing less milk, Ireland has produced considerably more and will continue to do so. New Zealand has reduced considerably less because of heavier culling of cows, focusing on costs, less P (phosphorous) and K (potassium) in the system,” he said.

Whole Milk Powder (WMP) exports to China remain the most important product and market for New Zealand’s dairy sector. Of New Zealand’s NZ$13.3bn (€8.3bn) dairy exports in 2016, NZ$2.8bn (€1.7bn) went to China. However, Guy said the focus in New Zealand is about diversifying those markets.

“So we see the outlook still as very positive and we are all the time looking at diversifying our economies. We have a very successful FTA with China. It’s a very important market. But we don’t want to have all our eggs in the Chinese basket.

“We look all the time at new and emerging markets and we are trying to land an FTA with the Gulf States, and obviously the European Union. We remain optimistic, albeit less so, that we can salvage something from TPP,” Guy said.

Dealing with the consumer

Part of New Zealand’s export or die mentality is the need to deliver what the consumer wants, rather than produce food for the sake of it. Guy said New Zealand farmers have become savvier and educated on the needs of the consumer.

“Our farmers are a lot more connected to the consumer and to international markets than they have ever been.

“In the 1980s, before subsidies came off, we were focused on volume and we lost sight of the consumer. And now we have had to focus on what the consumer wants.

“They want products that are safe, that are ethically produced just like Origin Green here and we need to take those to market and have the consumer sitting at the forefront of any decision-making that our processors make,” he said.

Brexit or no Brexit, New Zealand has an appetite for selling its food abroad but Brexit may be more than a foot in the door for the Kiwis.