News this week that the Fonterra estimated milk solids payout to farmers is looking to go stratospheric and pump billions of dollars into our economy.
There has been plenty of discussion about the downstream effects of this. Farmers are, as expected, downplaying the windfall and just talking about debt reduction, while others are talking of huge multiplier effects on our regional, and hence national, economy.
All this has got me thinking….. I’m one of the myriad of commentators who for years now has been pushing the necessity of building knowledge based businesses, adding value to raw products and joining the knowledge economy. The $8bill dairy windfall is all on the back of a pretty much non-value added commodity (OK I realise that Fonterra have done some good things in terms of diversification, global production expansion et al – but at essence it is still an unimproved product). Maybe our focus on the sexy industries missed the core issue.
Just perhaps the primary producers understood things that we hadn’t quite grasped;
- NZ is seen as clean and green, so,
- Our food products have an extra selling edge
- We produce milk and meat pretty efficiently
- While we have significant down steam risks in terms of water resource threats, our water situation is better than the majority of our dairying competitors
- These are all significant differentiators
On the other hand lets look at other industries, design, IT, apparel etc etc
- What unique selling proposition do we have that isn’t available in India, Turkey, China or the former Easter European countries?
- What can we design or manufacture that cannot be done so elsewhere and closer to market?
- How do we overcome the dichotomy of high labour rates, a regulated economy and increasing competition from low cost manufacturing and design locales?
None of this is meant to discount what our new-economy businesses are doing, but it does just go to show that those in Ivory boardrooms in Auckland and Wellington might just need to revisit their attitudes towards primary production.