From the Farm: Encouraging innovation

Oct. 10 (BusinessDesk) - When it comes to annoying buzzwords, ‘innovation’ lags behind ‘solution’ on Google, returning 261 million results to solution’s 838 million.

But doing things better, smarter and more efficiently is going to be the key to growth for New Zealand’s primary sector. Natural resources are finite. They’re not making any more land to add to New Zealand’s 26.8 million hectares.

Answers have to come from programmes like the Primary Growth Partnership, which held an expo in Wellington at the start of the month and is aiming to achieve a 10-fold return on investment for the New Zealand economy by 2025. That means turning the $684 million co-investment from government and industry in 16 projects into a $7 billion-a-year benefit in the next 12 years.

The biggest payback is to come from dairy. Transforming the Dairy Value Chain started in 2011 and the programme will get $171 million of funding over its seven years. Potential economic benefits are estimated at $2.7 billion a year by 2025.

The DairyNZ and Fonterra-led programme is made up of two parts – on-farm and beyond the farm gate. Farm-based projects include improving the genetics of the dairy herd, lifting the quality and variety of forage plant, improving effluent and nutrient management, more effective animal welfare and increased training.

Beyond the farm gate are more than 30 projects ranging across three broad themes of helping the food industry develop and manufacture increasingly complex foods and ingredients, using “transformational science” to deliver cost and efficiency gains across the supply chain and producing the science that underlines the nutritional and health benefits of dairy products.

If the language is at times jargony –‘transforming’ is another frequently used buzzword – what was on show at the expo was eye-opening, even among the niche projects.

For example, I wasn’t aware that all the spat used in the greenshell mussel farming industry is caught wild, much of it from Ninety Mile Beach, where its genetics are a lottery with vast variations in terms of size, colour and growth.

SPATnz’s Selectively bred high value shellfish programme has $26 million of funding for seven years to selectively breed mussels in a hatchery and produce improved spat. The Sanford-owned business expects to deliver its first improved spat in 2015.

Precision Seafood Harvesting has already made the TV news with its prototype harvesting system that can target specific species and fish size, as well as enabling fish to be landed in much better condition than traditional trawls. It is getting $52 million over six years.

Another of the jumbo return farm based projects is FarmIQ’s Demand-driven value chain for red meat, which aims to have farm management driven by the demands of the end consumer. Some 700 farms are involved in the seven year, $150 million project between Silver Fern Farms and Landcorp that has been running since 2010 and is targeting annual economic benefits of $1.1 billion by 2025.

Stump to Pump - forest waste to liquid biofuels is a programme between Norske Skog and Z Energy looking at converting forestry waste into liquid biofuels. The 14-month, $13.5 million project is looking into the feasibility of a test plant costing $80 million to $100 million that could process 50,000 tonnes of forest waste into biofuel.

Net benefits are estimated at $1 billion a year by 2033 if the technology is commercialised.

Perhaps the most ambitious programme from an investment returns viewpoint is High-performance Manuka Plantations, led by Manuka Research Partnership and listed honey products maker Comvita.

It aims to achieve a 16-fold increase in market returns by doubling hives per hectare, Manuka honey yield per hive, the proportion of medical grade honey, and the land available for beekeepers.

The six-year, $1.7 million project started in 2011 and has three large scale Manuka plantations with a fourth planned. Research is underway to identify cultivars whose nectar provides the highest anti-bacterial qualities. Estimated annual benefit to the economy by 2025: $925 million.

The remaining programmes are equally as exciting – how to produce grass-fed marbled beef through breeding calves produced by the dairy industry with Wagyu sires to produce a premium table product. How to extract more value from a beef carcase; reducing methyl bromide use in timber exports; more efficient logging of steep hillsides; moving more sheep growers to fine wool; better targeting of fertiliser.

The Primary Growth Partnership could be about to double in size. The ninth round closed on Sept. 19, with 14 proposals requesting more than $110 million of government funds and the same amount to come from industry. Decisions on the applications will be made by next month.

It’s not a lolly scramble. The companies have their own funds on the line and they’re taking risks, but on carefully scrutinised projects that seem worthy of taxpayer support to encourage long-term economic growth.

(BusinessDesk)

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