19 Apr 2010

Farmers use KPMG report to urge dropping of scheme

6:46 pm on 19 April 2010

A report by accountancy firm KPMG that says New Zealand agriculture has five years before it loses its competitive advantage, shows the Government must scrap the emissions trading scheme, says Federated Farmers.

KPMG's Agribusiness Agenda study suggests large-scale farms in South America, China and central Asia benefit from cheaper land and less complex regulations.

The report calls for an overhaul of industry practices and products and investment in science and technology.

Federated Farmers dairy chairman Lachlan McKenzie says rising costs are squeezing farm profits and the Government has many urgent problems to tackle. Getting rid of the emissions scheme would be a start on making New Zealand agriculture more competitive, he says.

Mr Proudfoot says New Zealand is a long way from from key markets, and the environmental impact of shipping goods is making it more challenging for companies to compete.

He says more investment in science, technology and infrastructure is needed so competitive advantages can be created in premium markets. Further investment is needed in water and in rural broadband in New Zealand, he says.

Mr Proudfoot says success will also depend on exporters working hard to understand new customers and building personal relationships with them.

New Zealand companies such as Fonterra and New Zealand Farming Systems Uruguay have already begun investing in underdeveloped agricultural regions themselves.

Meat and Wool Economic Service executive director Rob Davison says the sector already feels the pressure on its competitive advantage by developing nations.

Mr Davison says Meat and Wool is investing heavily in science and technology to ensure the industry continues to be a market leader.

Meanwhile the ACT party has embarked on a public campaign to raise awareness about how much the scheme will cost taxpayers.

On 1 July, as part of the scheme's implementation, the price of petrol will rise 4c a litre, and energy bills will rise by 5%.

One of the party's MPs, John Boscawen, says the impact on the public will be much greater as manufacturers recover their costs by passing them on to the consumer.

Mr Boscawen says the Reserve Bank has estimated that implementing the scheme will add about 0.4% to the cost of living.

KPMG lead agribusiness partner Ian Proudfoot says New Zealand's agricultural sector is no longer competitive as a low-cost producer.

He says the sheer scale and volume of the operations being set up in areas such as western China and Eastern Europe mean they have lower-cost labour, lower-cost land and the ability to supply markets far more cheaply.