21. New Zealand
Support to agricultural producers in New Zealand consistently ranks among the lowest in the OECD. During 2020-22, the Producer Support Estimate (PSE) averaged 0.7% of gross farm receipts, slightly higher than the 0.5% reported for 2000-02 but far below the OECD average. Almost all prices align with world market prices. Exceptions are fresh poultry and table eggs, and some bee products, which cannot be imported into New Zealand due to the absence of Import Health Standards (IHS) for these products – the standards that imports considered a biosecurity risk must meet. These restrictions result in some market price support (the only form of support to individual commodities in New Zealand), amounting to 12% of gross commodity receipts for poultry meat and 33% for eggs in 2020-22. Additional minor producer support is provided through on-farm services, mainly related to animal health and disaster relief.
Agricultural policies in New Zealand focus on animal disease control, relief payments in response to natural disasters, and investments in the agricultural knowledge and information system. The government also provides support to community-scale off-farm investments in irrigation systems. Over the past decades, the share of agricultural land under irrigation expanded significantly.
Thanks to structurally low producer support, more than 70% of all support to the sector was for general services for most of the past two decades. Still, such support for general services (General Service Support Estimate, GSSE) is estimated at just under 2% of the value of agricultural production during 2020-22, well below the OECD average. On average, total support to the sector represented just over 0.2% of Gross Domestic Product (GDP) during 2020-22, less than half the average share across the OECD.
The New Zealand Government provided funding to support recovery after a record number of adverse weather-related events, including flooding, drought, and cyclone damage. By April 2023, the government had paid out NZD 37 million (USD 23 million) to aid rural communities and the agricultural sector with cyclone recovery and clean up, about half of what had been allocated by then. The Ministry for Primary Industries and the National Institute of Water and Atmospheric Research also developed a new drought-forecasting tool, with a first version available for testing since early 2023.
Important reforms related to animal welfare were conducted in 2022. A ban on battery cages for housing layer-hens came into effect on 1 January 2023 after a long phase-in period that started in 2012. In September 2022, new legislation was passed to end the export of livestock by sea, effective from April 2023. The ban follows a transition period to allow impacted businesses to adjust.
Several new land regulations were passed. These include an amendment to the Overseas Investment Act 2005, now requiring certain overseas investors to demonstrate the benefits of their investments to New Zealand; the National Policy Statement for Highly Productive Land, requiring identification and protection of the most productive land; and an update of the Intensive Winter Grazing regulations, with an updated farm-planning module released for the 2023 winter grazing period.
In May 2022, New Zealand published its first Emissions Reduction Plan. Its key actions include the introduction of an agricultural-emissions pricing mechanism by 2025 and the establishment of a Centre for Climate Action on Agricultural Emissions, to accelerate the development and uptake of mitigation technologies, among others. Options for such a pricing mechanism have been proposed by the He Waka Eke Noa Partnership and the Climate Change Commission.
The Organic Products and Production Act in force since April 2023 helps develop standards for organic products and set requirements for businesses in the organic sector, from production through sale.
The New Zealand-United Kingdom Free Trade Agreement (FTA) was signed in February 2022 and negotiations on a New Zealand-European Union FTA were concluded in June 2022. When implemented, both will expand export opportunities for New Zealand’s agricultural and food products.
New Zealand’s move towards pricing agricultural emissions is remarkable on the international stage as a first-of-its-kind trying to reduce the climate footprint of the agricultural sector. While of significant economic importance, the sector also represents a large share of New Zealand’s total emissions due largely to ruminant livestock production. Parallel investments in climate-related research at national and international levels rightly focus on the mitigation of methane emissions. Strengthening research and development (R&D) efforts in collaboration with other countries will also help limit potential competitiveness losses and carbon leakages.
At the same time, New Zealand’s farmers must adapt to a changing climate and growing frequency and intensity of weather-related adverse events. In addition to the government’s engagement in climate-change-related research and adaptation planning, New Zealand could consider enhancing measurement of adaptation outcomes, possibly complemented by resilience-oriented measures. Short-term responses to adverse weather-related events should be complemented by longer-term measures to help the sector transition to more climate-resilient production structures and methods. For example, given expected increases in drought frequencies, climate-change-related challenges need to be fully reflected in New Zealand’s water-management policies.
New Zealand’s agricultural sector focuses on foreign markets and trade. Its export-orientation (underlined by the country’s low level of producer support and laudable absence of formal trade barriers) is buoyed by New Zealand’s engagement in many FTAs, which cover two-thirds of its agricultural exports. The recently signed FTA with the United Kingdom and the one concluded with the European Union are important additions to this set of trade agreements.
New Zealand’s IHS are key to the country’s biosecurity vis-à-vis imported products. However, some livestock products (including eggs, fresh chicken meat, and honey) cannot be imported because they do not have IHS. While representing a small share of New Zealand’s agricultural output and consumption, the development of relevant IHS would provide consumers lower prices and larger choice (not least in times of short domestic supply) without compromising biosecurity.
Kiwifruit exports to markets other than Australia by entities besides Zespri (the main company) continue to be subject to regulatory authorisation by Kiwifruit New Zealand. New Zealand should aim to ease these restrictions, as they burden participation in kiwifruit exports by other firms wishing to do so, reducing competition and efficiency in the kiwifruit trade.
New Zealand’s policy mix rightly focusses on key general services. In addition to pest- and disease-control, significant investments target the agricultural knowledge and innovation system. In the long term, this should improve agricultural productivity growth, which has been low in recent years. Mandatory funding by private investors often complements public expenditures for general services. This can help ensure that investments are allocated efficiently and that the beneficiaries of these services contribute to their funding. However, public investments in general services relative to the sector’s size remain below the OECD average, suggesting that additional funding could be considered, notably towards sustainable productivity growth. New Zealand’s engagement in international co-operation is key for accelerating progress in this area.
Data suggests that New Zealand’s agricultural sector continues to face large (and increasing in the case of nitrogen) nutrient surpluses due to its large livestock sector and fertiliser use. This puts soil, water, and air quality at risk. The 2020 Resource Management Regulations limiting chemical nitrogen fertiliser application on pastureland should help limit agricultural pollution of freshwater ecosystems and reduce such pressures. The extent to which additional efforts could be required should be carefully monitored. Such efforts might include revisiting the production mix or changes in production practices – even though this transition could be supported by the planned pricing of agricultural emissions.
Overview of policy trends
Prior to the 1970s, New Zealand exported more than half its agricultural production to the United Kingdom and support for agricultural producers was largely non-existent except for some import-competing sectors such as eggs and poultry. At the same time, New Zealand’s Statutory Marketing Boards, operating since the end of World War I, enjoyed significant rights to regulate supply and trade of several key export products. Overall, relative to the more protected manufacturing sectors, agriculture was implicitly taxed (Anderson et al., 2008[1]).
The accession of the United Kingdom to the European Economic Community in 1973 weakened New Zealand’s access to its most important market, and the oil shock of the mid-1970s generated significant foreign exchange shortfalls given the country’s dependence on oil imports. In response, the government introduced policy measures to support agricultural production (MPI, 2017[2]). These included input subsidies, minimum prices supported by import barriers and export incentives, tax concessions, low-interest loans and development grants (MPI, 2017[2]; Harris and Rae, 2004[3]).
In response to macroeconomic problems, including the substantial fiscal burden of these support measures, a new government implemented significant economic reforms during the second half of the 1980s. By the end of that decade, production and trade distorting policies supporting the farm sector practically disappeared (Table 21.2). In the context of these reforms, New Zealand’s Statutory Marketing Boards lost most of their authority or were dissolved (Nayga and Rae, 1993[4]).
Since the policy reforms in the late 1980s, New Zealand’s level of support to agricultural producers has been the lowest among OECD countries (Figure 21.4). Consequently, for the last three decades, total support to the sector was driven mainly by policies related to general services to agriculture, such as agricultural research and biosecurity controls for pests and diseases. For the last almost 20 years, PSE has been consistently below 1% of gross farm receipts, and while this low support has been dominated by SPS-related market price support, most of the budgetary producer support has consistently been provided for livestock disease control. Most of the support for the sector, however, has consistently been in the form of provision of general services to the sector, notably through the agricultural knowledge and information system and related to the country’s pest and disease control.
Main policy instruments
Agricultural support in New Zealand is limited largely to expenditures on general services, primarily agricultural research and biosecurity controls for pests and diseases. A significant share of the costs of regulatory and operational functions, including for border control, is charged to beneficiaries (e.g. farmers) or those who create risks (e.g. importers).
Market and trade regulations
Practically all of New Zealand’s agricultural production and trade is free from economic regulation. Since the phasing out by the end of 2010 of restrictions on dairy exports directed to specific markets protected by TRQs, export rights have been allocated to dairy companies based on the proportion of milk-solids collected. Export regulations continue to exist for kiwifruit: the New Zealand company Zespri has the default right, although not an exclusive right, to export kiwifruit to all markets other than Australia. Other traders can export kiwifruit to non-Australian markets in collaboration with Zespri, subject to approval by the relevant regulatory body, Kiwifruit New Zealand. Kiwifruit exporters to Australia are required to hold an export licence under the New Zealand Horticulture Export Authority Act 1987, which provides for multiple exporters to that market.
As a trade-dependent economy geographically distant from export markets, New Zealand currently has ten Free Trade Agreements (FTAs) in force, which cover approximately two-thirds both of the value of New Zealand’s total exports and of its agro-food exports. Four additional agreements are concluded but not yet in force: the New Zealand-European Union FTA; the New Zealand-United Kingdom FTA (see section on trade policy developments on these two agreements); the Regional Comprehensive Economic Partnership (RCEP);1 and the Anti-Counterfeiting Trade Agreement (ACTA).2 Negotiations are ongoing between New Zealand and the countries of the Pacific Alliance.3
Biosecurity and food safety
Import Health Standards (IHS) issued under the Biosecurity Act 1993 state the requirements for importing risk goods4 into New Zealand. Risk goods can be imported only with an IHS in place for the product, and with the product meeting all relevant IHS measures. For some products (table eggs, uncooked chicken meat, honey), no IHS is in place. These products therefore cannot be imported, leading to some market price support as their domestic prices are above the world market level.
The New Zealand Government engages with industry and stakeholders to build biosecurity readiness and response capability. The Government Industry Agreement for Biosecurity Readiness and Response (GIA) established an integrated approach to preparing for and responding to biosecurity risks through voluntary partnerships between the government and primary industry sector groups. Signatories share decision-making, costs and responsibility in preparing for and responding to biosecurity incursions. In total, the number of industry groups having joined with the Ministry for Primary Industries under GIA now stands at 22.5
The Food Act 2014 came into force on 1 March 2016. Since March 2019, all agro-food business operates under this new law. The Food Act 2014 applies a risk-based approach focused on safe and suitable food, rather than using prescriptive regulation. It aligns the domestic food system with the risk-based approach of other New Zealand food statutes that have more of an export focus and with international trends in food regulation.
Farm assistance services
Under the Commodity Levies Act 1990, “Industry good” activities (such as research and development, forming and developing marketing strategies, and providing technical advice) previously undertaken by statutory marketing boards are now managed through industry organisations funded by producer levies.6 Under this legislation, levies can only be imposed when approved by producers, and producers themselves decide how to spend the levies. With a limited number of exceptions, levy funds may not be spent on commercial or trading activities. To provide accountability to levy payers, the Act requires that levying organisations seek a new mandate to collect levies every six years through a referendum of levy payers held prior to the expiry of their levy orders.
Sustainable Food and Fibre Futures (SFF Futures) is a public co-investment programme that finances projects that create value and improve sustainability in the food and fibre industries. SFF Futures has a budget of NZD 40 million (USD 25 million) per year and provides a single gateway for farmers, growers, harvesters, and industry to apply for investment in a range of projects that deliver economic, environmental and social benefits. Projects range from small, one-off initiatives to long-running multi-million dollar partnerships. Community projects require co-investment from the partner organisation of at least 20% of costs. Commercially-driven projects require a co-investment of at least 60% of costs. SFF Futures supports projects that contribute to:
Sustainability and sustainable productivity growth
The Ministry for Primary Industries’ Productive and Sustainable Land Use package promotes farmland use practices aimed to improve value creation and environmental outcomes. One part of the programme, Extension Services, supports and enables producers to improve environmental, social and wellbeing outcomes in their communities by helping them design their own solutions. Extension Services emphasises partnering with farmers through catchment groups, regional stakeholders and agricultural professionals to ensure services are relevant to the needs and priorities of local communities. The programme’s NZD 35 million (USD 22 million) budget over four years from July 2019 supports up to 2 200 producers across targeted catchments and regions.
The Māori Agribusiness: Pathway to Increased Productivity (MAPIP) framework supports Māori primary sector asset owners who seek to sustainably increase the productivity of their primary sector assets, including land, agriculture, horticulture, forestry, and seafood. Introduced in 2015, the MAPIP programme offers a one-on-one approach to achieving primary sector aspirations. The Māori Agribusiness Extension Programme (MABx) additionally enables the Government to partner with Māori (in a one-to-many approach) to achieve economic, environmental, social and cultural aspirations through sustainable development of primary sector assets. The government committed NZD 12 million (USD 7.6 million) to facilitate MAPIP and MABx projects. Such projects may also be eligible for funding under the SFF futures fund and the Maori Agribusiness workforce skills and training programme (see above).
The Essential Freshwater package, introduced in 2020, contains national policies and regulations to stop further degradation of New Zealand’s freshwater resources, improve water quality within five years, and restore freshwater ecosystems to a healthy state within a generation. The Resource Management (National Environmental Standards for Freshwater) Regulations 2020 implement part of the package and set requirements for activities posing risks to freshwater and freshwater ecosystems. The standards set minimum requirements for feedlots and other stockholding areas; define requirements for managing intensive winter grazing of forage crops; restrict further agricultural intensification until the end of 2024; and set a cap on the application of synthetic nitrogen fertiliser for pastoral farming at 190 kilogrammes per hectare per year.
As part of the Essential Freshwater package, the Government introduced The National Policy Statement for Freshwater Management 2020 (Freshwater NPS), which requires regional councils to work collaboratively with Māori and the community to develop a plan for maintaining or improving the state of freshwater in the region, in line with national freshwater health indicators. Other Freshwater NPS requirements include avoiding further loss or degradation of wetlands and rivers, and protecting the habitats of indigenous freshwater species.
The Sustainable Land Management Hill Country Erosion Programme (HCEP) aims to protect New Zealand’s estimated 1.4 million hectares of pastoral hill country classified as erosion prone. It funds councils to develop four-year erosion control projects. The government approved a total of NZD 35.3 million (USD 22.4 million) for the period 2019-23. Selected projects include: the development of whole-farm plans to manage erosion on farms with highly erodible land; the development of agroforestry plans; wide-spaced planting of poplars and willows; land retirement from production to revert to native vegetation; and soil conservation and sustainable land management programmes. Although the main purpose of the HCEP is to reduce erosion, it also aims to reduce sediment loss to waterways, increase on-farm biodiversity, and contribute to the sequestration of carbon in small-scale forests and through planting of poplars and willows.
Climate change mitigation
Primary agriculture is responsible for about half of New Zealand’s gross GHG emissions. This share is large relative to other OECD countries, due to the prevalence of livestock-based agriculture and the large share of renewable sources in the electricity mix. Most agricultural emissions are methane emissions from dairy, sheep, and beef cattle.
In its 2021 Nationally Determined Contribution (NDC) to the Paris Agreement, New Zealand committed to reducing national net GHG emissions by 50% below gross 2005 levels by 2030, an economy-wide target covering, among others, agriculture and other land use sectors. This corresponds to a 41% reduction on a multi-year emissions budget for the 2021-30 period.
The Zero Carbon Amendment Act 2019 (Zero Carbon Act) sets separate long-term emission reduction targets for long-lived and short-lived GHG emissions, including a target for biogenic methane. In particular, the emissions reduction targets set out in the Zero Carbon Act aim to reduce all GHG emissions, except biogenic methane, to net zero by 2050; and reduce gross biogenic methane emissions to 10% below 2017 levels by 2030 and 24-47% by 2050.
An independent Climate Change Commission advises on setting carbon budgets and policies to meet them. On 31 May 2021, the Climate Change Commission provided the government with its final advice on the first three emissions budgets (2022-2025, 2026-2030, 2031-2035) and on the proposed policy direction for New Zealand’s first Emissions Reduction Plan (ERP) which was published in May 2022. Key actions include introducing an agricultural emissions pricing mechanism by 2025, establishing a new Centre for Climate Action on Agricultural Emissions to drive a step change in mitigation technology innovation and uptake on farms, and supporting producers to make changes through programmes to support needs and aspirations of Māori and climate-focused extension and advisory services.
The New Zealand Emissions Trading Scheme (NZ ETS) is the main policy tool to reduce GHG emissions. It requires companies in the agricultural supply chain (e.g. meat processors, dairy processors, nitrogen fertiliser manufacturers and importers) to report their agricultural emissions. However, these companies are not required to pay for their emissions. The NZ ETS also imposes a cost on emissions from transport fuels, electricity production, synthetic GHGs, waste and industrial processes, including in primary sectors.
One of New Zealand’s major projects tackling climate change is He Waka Eke Noa - the Primary Sector Climate Action Partnership. This brings together resources, expertise and knowledge from industry, Māori and the government. The partnership aims to implement a framework by 2025 to reduce agricultural greenhouse gas emissions specifically and build the sector’s resilience to climate change. This is to be achieved through: 1) measuring, managing and reducing on-farm emissions; 2) recognising, maintaining or increasing integrated carbon sequestration on farms; and 3) adapting to a changing climate. The framework will include incentivising farmers and growers to take action through an appropriate pricing mechanism by 2025, in line with legislation.
In mid-2022, the He Waka Eke Noa Partnership provided the government with its recommendations for a farm-level emissions pricing system. In this system a levy is raised from the sector, with discounts given for on-farm sequestration and the uptake of mitigation technologies. The Climate Change Commission contributed its own advice on agricultural emissions. Officials across government departments worked with He Waka Eke Noa partners to develop advice for ministers on the pricing mechanism for greenhouse gas emissions from agriculture. The government intends to introduce legislation in 2024. If an alternative pricing system is not implemented by 1 January 2025, the Climate Change Response Act 2002 states that agricultural emissions will be priced under the NZ ETS.
Recognising the need to drive increased afforestation, the government introduced a package of changes to the NZ ETS in 2020, designed to stimulate afforestation and ease forestry owners’ compliance burden. In 2023 these changes came into force, including a shift in forestry accounting to a simpler averaging system, and also a category for permanent forestry.
The One Billion Trees programme aims to double the previous planting rate (including re-planting following harvest and new planting) to plant one billion trees over the decade from 2018-28. The programme is supported both by direct government investment (such as the One Billion Trees Fund and joint ventures between Crown Forestry and private landowners), and adjustments to regulatory settings (such as the Emissions Trading Scheme) to encourage and support tree planting.
The One Billion Trees Fund was launched in November 2018 as part of the One Billion Trees programme. The fund has provided NZD 77.8 million (USD 49 million) for tree planting grants to landowners including farmers, in order to generate environmental, landscape and productivity benefits. It has also provided NZD 98.8 million (USD 63 million) for partnership initiatives to help in overcoming the barriers to tree planting. The fund closed to new applications in June 2021 but the programme is continuing until 2028 for grants that have already been approved.
Within the SFF Futures programme, a total of 40 projects were completed between July 2022 and April 2023. The Ministry for Primary Industries has committed up to NZD 258 million (USD 164 million) since the inception of the SFF Futures Fund in 2018. The total ministry and industry investment in SFF Futures programmes as of 30 April 2023 was approximately NZD 555 million (USD 352 million).
The New Zealand Government researches and develops mitigation technologies to reduce agricultural GHG emissions. It does so primarily through the Centre for Climate Action on Agricultural Emissions (CCAAE), comprised of the New Zealand Agricultural Greenhouse Gas Research Centre (NZAGRC), and a joint venture between government and industry leaders, as well as in co-ordination with the member countries of the Global Research Alliance on Agricultural Greenhouse Gases (GRA).
As part of the Climate Emergency Response Fund, New Zealand has allocated nearly NZD 339 million (USD 215 million) to accelerate the development of high-impact technologies and practices to reduce agricultural greenhouse gas emissions. To achieve these objectives, the new Centre for Climate Action on Agricultural Emissions has been established. The centre has two key components – a new public–private joint venture with some of New Zealand’s top companies and an enhanced NZAGRC. These play complementary roles in driving research and development for reducing biological emissions. The new centre will compliment work done by He Waka Eke Noa, and will also include knowledge-based approaches to support Māori land owners with climate change mitigation.
The NZAGRC, funded by the Ministry for Primary Industries and the Ministry of Business, Innovation and Employment, brings together nine organisations that conduct research to reduce agricultural GHG emissions. The research focuses on practical ways to reduce on-farm methane and nitrous oxide emissions while improving productivity and sequestering soil carbon, as well as Māori-focused research and future farm systems’ research. Industry partners co-invest in some of the research led by NZAGRC. The Pastoral Greenhouse Gas Research Consortium (PGgRc) holds the intellectual property (IP) generated by the research and develops commercialisation pathways for greenhouse gas mitigation solutions to reach livestock farmers.
The GRA, a network of 67 member countries and 29 partner organisations, was established in 2009. New Zealand hosts the Secretariat and GRA Special Representative, and co-chairs its Livestock Research Group. The GRA facilitates collaborative and evidence-based dialogue and knowledge sharing. New Zealand collaborates with other GRA members on research, development and extension of technologies and practices to deliver more climate-resilient food systems without growing GHG emissions. New Zealand builds future capability and capacity through running training programmes and supporting GRA scholarship programmes in developing countries, including in South-East Asia and southern and eastern Africa. New Zealand funds international collaborative efforts to accelerate global research in mitigating GHG emissions from agriculture, especially for pastoral livestock farming, and co-funds and participates in several international research calls designed to decrease agricultural emissions.7
Land rights policies
The Overseas Investment Act 2005 makes acquisitions of “sensitive land” involving “overseas persons”, as defined under the Act, subject to consent of the Toitū te Whenua Land Information New Zealand. Most New Zealand land is considered as “sensitive” under the Act. The criteria that apply depend on the land being acquired and the pathway under which the application is made. For applications under the benefit to New Zealand pathway, there are additional criteria that apply where the land includes farm land. The amended act also places conditions on overseas investors – they must demonstrate how their investment will benefit the country.
Climate change adaptation policies in agriculture
The New Zealand Government published its first National Climate Change Risk Assessment in 2020. It sets out the priority and significant risks New Zealand faces from the impacts of climate change. The government published its first National Adaptation Plan in August 2022, which sets out actions to address these risks. Unlike the ERP, the National Adaptation Plan does not have a chapter dedicated to either the agriculture or forestry sector. Rather, agricultural and forestry adaptation measures, policies, and strategies are subsumed within the Natural Environment and the Economy domains of the Plan. Agricultural actions in the Plan include: strengthening border and on-farm biosecurity, water availability and security, plant health and capability, animal health, research, indigenous landowners, and the aquaculture industry; and reducing hill country erosion.
In addition, the government provides funding to Rural Trust Funds (RSTs) after climatic and other adverse events to help affected primary producers, and their families and employees. Rural Assistance Payments can be provided to cover essential living costs for farmers in hardship.
Domestic policy developments in 2022-23
Responses to biosecurity threats and adverse events
New Zealand is currently five years into a 10-year programme to eradicate Mycoplasma bovis, a bacterial disease that affects cattle and can generate significant animal welfare issues, resulting in production losses for farmers. Farmers impacted by the eradication programme are eligible for compensation, and in the fiscal year ending June 2022, the government paid out NZD 14.3 million (USD 9.1 million). The current phase of the M. bovis response aims to control the last known pockets of the disease.
New Zealand endured a record six climatic events between mid-2021 and early 2023 that required a response under the Primary Sector Recovery Policy. Government funding allocated by the Ministry for Primary Industries enabled rural support trusts (RSTs) to increase psychosocial support, run information sessions and coordinate local recovery efforts. In total, in the fiscal year ending June 2022, the government provided the RSTs with NZD 1.5 million (USD 0.95 million) in funding. Some of the most significant adverse events were floods followed by droughts which affected the South Island.
In July 2021, flooding was experienced across the West Coast and the top of the South Island. The Ministry for Primary Industries supported the work of two local RSTs, provided animal welfare services and worked with local civil defence and industry partners to assess property damage and wellbeing needs.
In early 2022, drought conditions were affecting Southland, Clutha and the Queenstown Lakes districts. The Ministry for Primary Industries worked with all 14 RSTs, industry groups and the Caring for Communities network to provide a range of recovery activities. This included arranging social events, motivational speakers and access to technical advice.
In early 2023, New Zealand was once again hit by three adverse weather events, first by a cyclone in the upper and east coast of the North Island, then by widespread flooding in Northland, Auckland, Waikato and Bay of Plenty, followed by a cyclone only a few weeks later resulting in further significant flooding and storm damage in these areas. Some areas recorded record rainfall which flooded farmland, damaged infrastructure, and washed away crops. Funding of about NZD 1.2 billion (USD 770 000) was allocated to RSTs to implement support following these events. The government then approved funds to aid rural communities and the agricultural sector with cyclone recovery and clean up. By April 2023, the total funding allocation reached NZD 78 million (USD 49 million), of which NZD 37 million (USD 23 million) had been paid out.
In response to these kinds of adverse weather events, in October 2021 the Ministry for Primary Industries and the National Institute of Water and Atmospheric Research began developing a new drought-forecasting tool that uses climate modelling to provide 35-day soil moisture forecasts. Soil moisture observations can warn of drought or flood conditions before other, more traditional weather indicators are triggered. Testing of the first version of the tool by user groups began in late 2022.
In April 2022, New Zealand reactivated the national Feed Coordination Service, initially established to help farmers find grazing and connect with surplus feed following nationwide shortages due to the COVID-19 pandemic and earlier droughts. A monthly survey on regional feed supply, to support feed budgeting and planning, was also reinstated in February 2023.
Farm services and workforce initiatives
The Ministry for Primary Industries is establishing an on-farm support service to deliver assistance to farmers and growers. The service aims at connecting farmers and growers to resources, advice, funding opportunities and extension services. These are provided by the public sector, organisations. As of March 2023, the Ministry had 41 staff in the regions and expects this to grow to 90 across all regions over time. The service has been allocated NZD 55 million (USD 35 million) over four years.
The Opportunity Grows Here workforce attraction campaign launched in June 2020 as part of a wider programme to get more New Zealanders employed in the primary sector workforce and to address longer term workforce issues. This programme was launched to employ 10 000 more New Zealanders in the food and fibre sector over four years. As of February 2023, the Ministry for Primary Industries and its sector partners have helped over 14 000 people to enter the food and fibre sector through the programme.
Animal welfare
On 7 December 2012, the Minister for Primary Industries issued an amended code of welfare for layer hens that created a phased transition away from housing layer hens in battery cages by 1 January 2023. The Animal Welfare (Care and Procedure) Regulations 2018 outlined the transition deadlines in regulation, making them directly enforceable. The phase-out was to ensure that industry had sufficient time to adjust and to lessen a short-term increase in the price of eggs. However, in December 2022, 10% of the industry was still using battery cages for layer hens. This contributed to a temporary shortage of eggs, as well as an increase in wholesale egg prices, once the ban came into effect. This was compounded by a recent decision by two major supermarkets to also phase out the sale of colony cage eggs by 2025 and 2027.8 This was further impacted by ongoing impacts of COVID-19, and a global rise in the cost of grains.
A review of the livestock export trade was undertaken in 2019 in response to concerns that the welfare of livestock during long-distance sea transport could be a risk to New Zealand’s reputation, and was an opportunity to examine the welfare of livestock being exported. New Zealand’s remoteness means animals are at sea for extended periods of time, posing a risk to their welfare. New legislation ending the export of livestock by sea was passed in September 2022 and came into effect in April 2023. The ban follows a transition period which has allowed impacted businesses, including in importing countries, to adjust. The impact on New Zealand’s total primary sector exports is low, as livestock exports by sea represent 0.6% of total primary sector exports.
Natural resource policies and organic farming
In the fiscal year ending June 2022, more than NZD 1.3 million (USD 0.82 million) was committed through the Sustainable Land Management and Climate Change Freshwater Mitigation fund (SLMACC FM) to a four-year project aimed at quantifying the effectiveness of mixed species and soil cover-based management approaches that avoid or reduce the transfer of contaminants from soil to water. In partnership with industry, over NZD 600 000 (USD 380 000) has also been committed to a Sustainable Food and Fibre Futures project (SFF Futures) to quantify nutrient, sediment and faecal losses from sheep winter crop grazing.
New Zealand has benefited from overseas investment in developing the forestry sector and in bringing to it new skills and thinking. The August 2022 amendment to the Overseas Investment Act 2005 was introduced to ensure that new investments involving conversion of farm land into production forestry benefit New Zealand – including by bringing tangible community, economic and environmental benefits. Prior to the amendment, overseas investors wishing to convert land, such as farmland, into production forestry (i.e. for the intention of harvesting, replanting and long-term management) could apply under a streamlined “Special Forestry Test” which was designed to encourage investment in production forestry. With the passage of the Overseas Investment (Forestry) Amendment Act 2022, new proposals by overseas investors to convert land into production forestry will need to clearly explain how the proposed investment will contribute to New Zealand, as assessed against factors set out in the “benefit to New Zealand test”.9 The new rules give decision makers additional discretion to determine the appropriateness of investment in a forestry conversion and whether it benefits New Zealand, as well as discretion to impose consent conditions to ensure delivery of benefits. The law change applies only to land conversions and does not affect overseas investments in existing forestry land, which will continue to be assessed under the Special Forestry Test.
In October 2022, New Zealand launched the National Policy Statement for Highly Productive Land. About 15% of New Zealand (3 830 000 hectares) is estimated to be highly productive. In the last 20 years, over 35 000 hectares of highly productive land has been lost to urban or rural residential development while lifestyle blocks10 under 8 hectares occupy more than 170 000 hectares of highly productive land. This National Policy Statement requires the country’s most productive land to be identified and managed to prevent inappropriate subdivision, use and development.
The Intensive Winter Grazing (IWG) regulations were updated in November 2022. To help farmers manage their winter grazing, a farm planning module, co-developed by government and industry stakeholders, has been updated and released for the 2023 winter grazing period. The Freshwater Farm Plan system, to be introduced in mid-2023, will provide a risk-based, tailored approach to managing fresh water, including intensive winter grazing. The low-slope map used in the stock exclusion regulations has been updated to improve its accuracy.
In April 2023, the Organic Products and Production Act became law. This Act aims to help with developing new standards for organic products, and to set requirements for businesses in the organic sector from production through to sale.
Dairy Industry Restructuring (Fonterra Capital Restructuring) Amendment Act
In November 2022, New Zealand passed the Dairy Industry Restructuring (Fonterra Capital Restructuring) Amendment Bill to support Fonterra’s move to a new capital structure. The act also included measures to:
Increase the number of ministerial nominees to Fonterra’s Milk Price Panel from one to two to improve the transparency and robustness of Fonterra’s base milk price-setting arrangements.
Clarify the requirement that the Chair of Fonterra’s Milk Price Panel be fully independent of Fonterra.
Require that Fonterra only appoint a Chair of the Milk Price Panel who has been approved by the minister.
Give the Commerce Commission the power to issue binding directions to Fonterra on matters arising from its reviews of Fonterra’s Milk Price Manual and base milk price calculation.
Support liquidity and transparency in the trade of Fonterra shares in its restricted farmer-only market by, for example, requiring Fonterra to engage one or several designated market makers and to make independent financial markets analysis of its performance accessible to farmers and unit holders.
Require Fonterra to maintain and publish a dividend and retentions policy, to support Fonterra’s ability to access internal capital for investment in innovation.
Domestic policy responses to Russia’s war of aggression in Ukraine
Throughout 2021 and 2022, the government communicated with industry leaders through the Supply Chain Forum. The forum had representation from across the food and fibre sector and met fortnightly. By of the end of June 2022, the forum had provided up-to-date information to the food and fibre sector and enabled a range of experts to discuss the implications of world events. It helped ensure communication channels worked effectively and intervened successfully to resolve logistical challenges. It also ensured the sector was well represented at cross-governmental workshops that led to the development of the New Zealand Freight and Supply Chain Strategy.
New Zealand’s distance from Russia and Ukraine combined with limited bilateral trading relationships has helped insulate New Zealand from the direct economic effects of the invasion. The most significant impacts on New Zealand have been through higher fuel and commodity prices, financial market volatility, and the drag on global economic activity. Exports historically going to Russia were able to be largely diverted to other markets.
Domestic policy responses to the COVID-19 pandemic
New Zealand lifted the annual cap on Recognised Seasonal Employee Scheme (RSE) workers by 3 000 places to allow access to 19 000 workers. This is in response to ongoing sector growth and subsequent increased demand for seasonal workers with a corresponding regional supply shortage, reduced working holiday makers in New Zealand as a result of COVID-19 and global workforce shortages.11 Employers, unions, and the government were all involved in the decision for the new cap, with Pacific representatives brought in as the work developed.
Trade policy developments in 2022-23
The New Zealand-United Kingdom Free Trade Agreement was signed on 28 February 2022. In 2022, food trade between the two countries represented 2.4% of New Zealand’s total food exports, and 2% of its food imports. The new free trade agreement, once in force, will remove customs duties for a range of food products, such as wine, honey, onions, kiwifruit, and a range of dairy products. Dairy and horticultural products will be 100% tariff free within 7 years of the agreement’s entry into force. Trade in beef and sheep meat will be liberalised over a longer time frame of 10 years and 15 years, respectively.
Negotiations on a New Zealand-European Union Free Trade Agreement were concluded on 30 June 2022. In 2022, New Zealand’s food trade with the European Union represented 4.5% of New Zealand’s total food exports, and 19.1% of its food imports. The new free trade agreement, once in force, will reduce tariffs on a number of agro-food products. For horticultural products, 99.9% of New Zealand’s current trade with the European Union will enter tariff free at entry into force. Dairy and meat will see a reduction in tariffs, as well as new FTA quota access, some of which will be duty free. Other agricultural products, such as wine, honey, and seeds, will see 97% of tariff lines eliminated as of the FTA’s entry into force, rising to 99.5% on full implementation.
New Zealand has reopened negotiations with the Gulf Co-operation Council on a Free Trade Agreement (involving Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates).
New Zealand is a relatively small and sparsely populated country with a per capita GDP that is slightly above the OECD average, but well above the average of all countries covered by the report. It has a high degree of market openness that is related to its high dependency on international trade. Agriculture has a comparatively high, albeit slowly shrinking, importance to the economy, accounting for around 6% of both GDP and employment. Moreover, agro-food products account for more than two-thirds of New Zealand’s total exports.
With little arable land, grass-fed livestock products represent the backbone of the agricultural sector, and livestock products account for 80% of its total production value. New Zealand is the world’s largest exporter of sheep meat, and among the largest exporters of dairy products. Beef, fruit and horticultural products also contribute significantly to the country’s agro-food exports.
New Zealand has a stable economy having featured robust growth and a relatively low inflation rate for most of the past decade. However, after rebounding from the COVID-19 related recession to a growth rate close to 5% in 2021, the globally difficult economic situation due to Russia’s war of aggression in Ukraine reduced GDP growth in 2022 to just over 2%, while inflation rose to 7.3%, the highest level in more than three decades.
New Zealand is a consistent and growing net exporter of agro-food products, which after some drops in 2015 and 2016 due to, among others, lower dairy prices, have picked up again since 2017 and reached record levels in 2021. Most of New Zealand’s agro-food trade, particularly its exports, is processed food for final consumption. On the import side, however, intermediary products represent two-fifths of the trade basket.
Notes: Numbers may not add up to 100 due to rounding. New Zealand’s growth in agricultural output over the 2011-20 decade has been below the global average, driven by relatively low productivity growth: at 0.7%, the estimated average growth in total factor productivity (TFP) is well below the global average. It is also well below the TFP growth measured for the 1990s.
Due among others to the large share of renewables in electricity generation and the dominant role of dairy and ruminant meat, agriculture is responsible for half of New Zealand’s GHG emissions. Almost three-quarters of agricultural emissions are in the form of enteric methane from ruminant livestock. Nutrient surpluses are also well above the respective OECD averages, although those of phosphorous have declined somewhat from their levels in the 1990s. The sector is also the country’s prime consumer of freshwater as irrigated land has expanded, partly in response to climate related uncertainties. Nonetheless, its overall level of water stress, while higher than in the 1990s, is relatively low.
References
[1] Anderson, K. et al. (2008), “Distortions to Agricultural Incentives in Australia and New Zealand”, Agricultural Distortions Working Paper, No. 09, World Bank, Washington, DC, https://openknowledge.worldbank.org/handle/10986/28184.
[3] Harris, D. and A. Rae (2004), “Agricultural Policy Reform and Industry Adjustment in Australia and New Zealand”, Conference paper for International Agricultural Trade Research Consortium, Philadelphia, 6-7 June 2004, https://doi.org/10.22004/ag.econ.15762.
[2] MPI (2017), New Zealand Agriculture. A policy perspective, Ministry for Primary Industries, New Zealand, https://www.mpi.govt.nz/dmsdocument/27282/direct.
[4] Nayga, R. and A. Rae (1993), “New Zealand’s statutory marketing boards: Their history and some recent developments”, Journal of Food Distribution Research, Vol. 24, pp. 94-100, https://core.ac.uk/download/pdf/6988122.pdf.
[5] NZIER (2007), Productivity, profitability and industry good activities. Report to Dairy Insight, New Zealand Institute of Economic Research, https://nzier.org.nz/static/media/filer_public/11/cb/11cb415e-a97b-4ac9-b86c-a0b238de9b61/productivity_profitability_and_industry_good_activities_feb_2007.pdf.
Notes
← 1. RCEP comprises the ten countries that make up the Association of South East Asian Nations (ASEAN), Australia, the People’s Republic of China (hereafter “China”), India, Japan, Korea and New Zealand.
← 2. Other ACTA signatories include Australia, Canada, the European Union and 22 of its Member States, Korea, Japan, Mexico, Morocco, Singapore, and the United States.
← 3. Pacific Alliance countries are Chile, Colombia, Mexico, and Peru.
← 4. Risk goods are any items that may constitute, harbour, or contain an organism that may cause unwanted harm to natural or physical resources, or to human health in New Zealand (https://www.mpi.govt.nz/import/importing-into-nz-how-it-works/import-health-standards).
← 5. Three more industry groups, which have not signed the deed, are represented by other signatories.
← 6. Activities “beneficial to the industry, but whose benefits cannot be captured by those who fund or provide the activity”, or “long-term investments in the industry made with the expectation of accelerating delivery of better technology and products for the industry” (NZIER, 2007[5]).
← 7. Other funders of the GRA include the Climate Change, Agriculture and Food Security programme of the Consultative Group on International Agricultural Research (CGIAR-CCAFS) and the government of the Netherlands.
← 8. A colony cage is an inside enclosure that can house up to 60 hens.
← 9. The benefit test is considered to be met where a) the overseas investment will, or is likely to, benefit New Zealand (this benefit being assessed against 7 broad factors outlined in Section 17 of the Overseas Investment Act 2005, including economic benefits, benefits to the rural environment, and others; and b) if the relevant land is, or includes, residential land, the relevant Ministers are satisfied that the conditions imposed on the consent are likely to be, met (https://www.linz.govt.nz/guidance/overseas-investment/overseas-investment-tests/benefit-new-zealand-test).
← 10. Rural land which has been turned into residential housing.
← 11. Working holiday schemes allow young adults from other countries that participate in the programme to work and make holidays in New Zealand for up to 6, 12 or 23 months depending on the nationality.