NZ and its rural productive model. NZ and its rural productive model. Learning from a global agricultural Learning from a global agricultural

leader. leader.

JULIAN RAMIREZ – LUNABUSINESS DEVELOPMENT MANAGER

DEREK FAIWEATHER CHIEF EXECUTIVE OFFICER

DAIRY SOLUTIONZ - WAIKATO INNOVATION PARK HAMILTON, NEW ZEALAND

Points to be shared

1. What´s happening around the world – dairy sector.

2. What Can be learnt from the New Zealand and its International Experience ?

3. Two situations related to the NZ rural development that could useful for Colombian current situation

1. GLOBAL SITUATION: CURRENT STATE

The supply of food to meet human nutritional needs over next 40 years is quantitatively equal to the amount of food previously produced in the history of human kind. D.E. Bauman – US News & World Report

NZ =Free range, lowest cost of production, high quality, safe protein, 2% of world formal productionGlobal leading Agtech Cluster for ongoing productivity improvement tech & systems

Unsubsidized Wealth

Others =Corn based, corn price linked to oil price, high capital, high cost, est 90% of worlds formal production

Marginal Business seeking subsidy /protection to sustain high local prices

Concentrate feed Prices

0

5

10

15

20

25

30

35

1996

1998

2000

2002

2004

Jan-06

Mar-0

6

May-0

6

Jul-0

6

Sep-06

Nov-0

6

Jan-07

Mar-0

7

May-0

7

Jul-0

7

Sep-07

Nov-0

7

Jan-08

Mar-0

8

May-0

8

Jul-0

8

Sep-08

Nov-0

8

Jan-09

Mar-0

9

May-0

9

Jul-0

9

Sep-09

Nov-0

9

Jan-10

Mar-1

0

May-1

0

Jul-1

0

Sep-10

Nov-1

0

Jan-11

Mar-1

1

May-1

1

Jul-1

1

Sep-11

US-

$ / 1

00 k

g feed

IFCN feed price indicator

Calculation based on feed concentrate with 70% corn and 30% soybean meal

annually monthly

Food Prices and Oil prices

NEW ZELAND

NEW ZELAND• Population: 4.4 million• Area: 270.000 square km

• Dairy production: for 100 million of people• 11 million head of cattle

Profitable NZ Grassland Farmingwhat is it all about?

• Effective farm surplus per hectare, farming for profits not liters per cow • Lowest cost industrial production and highest quality

• US 22 to 23 cent per liter • Payment based on International prices

• US 42 cents per liter, • No subsidies: impossible for a small country to subsidize its No1 export industry

at over NZ$15billion per year• 95% export• 40% global trade • 2-3% global production• Our forecast indicates that annual demand increase for dairy is greater than

5 times the total annual production of Colombia.

• Best NZ farmers are achieving NZ$4,000 EFS / hectare

2. LESSONS FROM THE EVOLUTION OF THE NZ DAIRY INDUSTRY

1980´S ECONOMIC CRISIS IN NZ

Scale over time; more cows, fewer herds 1980 - 2010

Productivity growth per cow and per ha

Evolution in farming & processing

100 years

Key Learning / Universal Truths

• Individual farmers have no commercial power

• Milk Production gravitates to where the factors of production are the cheapest

• Value gets created and captured at both ends of the value chain, either/both the farm level or in consumer Brands

• Political solutions to commercial problems do not last

Key Learning / Universal Truths.. Cont.

• New Zealand is low cost because it has to be. Farmers respond to price signals. They must be clear, accurate, transparent

• Farmers deal best with production issues. Processors / marketers deal best with the customers / consumers

• World Price and Domestic price will inevitably converge

3. OTHER KIND OF LEARNINGS OF THE RURAL DEVELOPMENT OF NZ

TWO EXPERIENCES TO TAKE INTO ACCOUNT: 1. MAORI EXPERIENCE2. WW2 – AFTER WAR SITUATION

MAORI EXPERIENCE• The Treaty of Waitangi (Māori: Tiriti o Waitangi) is a treaty first signed on 6

February 1840 by representatives of the British Crown and various Māori chiefs from the North Island of New Zealand.

• The Treaty established a British Governor of New Zealand, recognised Māori ownership of their lands and other properties, and gave the Māori the rights of British subjects.

WW2 –AFTER WAR SITUATION

Components of a Dairy Farm

Milk Parlour

Land

Fences

Milk Parlour

Sheds, accommodation

Irrigation / Effluent

Races

Cows

Tractors, bikes & equipment

Shedsaccommodation

The Landowner – NZ Gov

Milk Parlour

Land

Fences

Milk Parlour

Sheds, accommodation

Irrigation / Effluent

Races

Shedsaccommodation

The Sharemilker (Small rural family)

Cows

Tractors, bikes & equipment

+ Employs and pays for farm workers

Revenuemanages the farm… milks the cows and sells

the milk to…

Landcorp

a milk processor who pays …

50% percent of milk revenue to both the Sharemilker and the Landowner

Sharemilker

Practical explanation

Then.. A good lesson for Colombia

Highlights

•The NZ Government established Landcorp with NZ$167 million most of which was land

•The NZ Government has never been asked for more capital

•The NZ Government has been paid over NZ$400 million in dividends

•Landcorp has grown its assets from NZ$167 million to NZ$1.7 billion in the last 25 years

• Farmers, Processors, Government agencies all pulling in the same direction will be a powerful force.

Your Future is in Your hands