Potential for
Diversification of Rural
Production in Canterbury
Prepared for: Canterbury Development Corporation
Prepared by: The AgriBusiness Group
January 2015
Contents
Potential for Diversification of Rural Production in Canterbury
1
EXECUTIVE SUMMARY
2
2
BACKGROUND
6
2.1 METHODOLOGY
2.2 LITERATURE REVIEW
6
7
3
FIRST STAGE ASSESSMENT.
12
3.1 IDENTIFICATION OF PRODUCTS TO BE INCLUDED
3.2 PRELIMINARY SCREENING
13
15
4
25
SECOND STAGE RESULTS
4.1
4.2
4.3
4.4
4.5
4.6
4.7
PHARMACEUTICAL PLANTS
MILKING SHEEP
MANUKA HONEY
WALNUTS
BLACKCURRANTS
PEA ISOLATE
COMPARISON WITH ALTERNATIVES
25
28
32
36
39
43
45
APPENDIX 1: ORGANISATIONS CONTACTED FOR FIRST STAGE ASSESSMENT
47
APPENDIX 2: LIST OF CROPS INVESTIGATED BY CROP AND FOOD.
48
Please Read
The information in this report is accurate to the best of the knowledge and belief of the
consultants acting on behalf of the Canterbury Development Corporation. While the consultant
has exercised all reasonable skill and care in the preparation of information in this report
neither the consultant nor the Canterbury Development Corporation accept any liability in
contract, tort or otherwise for any loss, damage, injury or expense, whether direct, indirect or
consequential, arising out of the provision of information in this report.
Potential for Diversification of Rural Production in Canterbury
1
1 Executive Summary
The Canterbury Development Corporation (CDC) has engaged The AgriBusiness Group to
provide professional services to undertake a research project investigating the feasibility of
options for diversification of rural land use in the Canterbury region.
The overarching questions that this study was aiming to answer were:
 Is it likely that there is a compelling business case for the alternative
products?
 Is there a high likelihood of providing a commercial return on
investment (particularly for products requiring irrigation)?
The methodology was staged with two points at which the research team reported to CDC.
The first point was to ensure that the work was comprehensive in its scope of products
selected and the second point was to select the products which the team believe are worth
further analysis.
For the first stage screening the products were assessed against the following criteria.
 Analysis of the production trends.
 Analysis of the market and market trends for the product.
 Analysis of the feasibility of production and its potential impacts.
 Identification of any natural competitive advantages or barriers associated with
production in Canterbury.
 Identification of any capabilities and support required for the successful establishment
and growth of the industry.
 Analysis of the strategic potential and viability
Some key findings that came out of the first level assessment were:
 We have one of the most technologically advanced agricultural sectors in the world.
 With our soils and irrigation we are capable of very high yields of high quality pasture
and crops on a reliable basis.
 Traditionally we have been very efficient ($ cost) at commodity production (very little
value added).
 The production sector is quite advanced in New Zealand in terms of seeking out and
finding new opportunities to grow things.
 The processed food sector is identified as the next area to grow but one of the barriers
to growth is the scale of processing.
 There is a need to concentrate on value chain development.
The second stage analysis took a more in depth analysis of the top six products identified in
the assessment exercise. This analysis included:
 Detail of the investment required for the development of the product concept
enterprise level as well as at a regional level.
 An analysis of the potential returns from the investment.
 A strategic analysis of the investment opportunity.
Potential for Diversification of Rural Production in Canterbury
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Details of the first level screening and selection of the six to go through more detailed analysis
are included in this report. The addition of further added value either in the on farm or further
processing sectors was seen as an important element in selection.
The six chosen for the second round analysis are:
Pharmaceutical Plants were chosen as an example of a completely new arable crop
which has high added value potential.
Milking Sheep were chosen as a completely new pastoral crop that has the potential to be
relatively low in the amount of Nutrients that it leaches to water.
Manuka Honey was chosen to represent the expansion of an existing activity into a higher
return operation.
Walnuts were chosen as an example of an existing industry which has grown comparatively
rapidly from a small base.
Blackcurrants were chosen as an example of an existing horticultural industry which has
the opportunity to expand into further added value activities.
Pea Isolate was chosen because it was seen to offer the potential to the arable industry of
further value added processing of the crop.
Analysis of each alternative is based on the industry growing to 5,000 ha in size. The following
results are variable in the accuracy as a result of the difficulty or ease of gaining information
on them. It is fair to say that the on farm results are very accurate because of the ease of
access to information on them. The processing results are less accurate as a result of the
dearth of publically accessible results. In some instances the calculations on the processing
industry are based on standard relationships in the processing sector therefore we are less
sure of their accuracy.
Potential for Diversification of Rural Production in Canterbury
3
Table 1: Summary Results of Financial Analysis
NPV
IRR Return on Invested
Capital
Pharmaceutical Plants
On Farm
Processing
$118.5m
$160.2m
32%
32%
$107m
$134m
24%
34%
25%
34%
$0.56m
15%
16%
$85m
17%
38%
$156m
$235
16%
39%
25%
39%
$1.75m
$137m
25%
25%
Milking Sheep
On Farm
Processing
Manuka Honey
Beekeeping
Walnuts
On Farm
Processing
Blackcurrants
On Farm
Processing
Pea Isolate
On Farm
Processing
Pharmaceutical Plants
Pharmaceutical plants are a very promising crop which would provide excellent returns for
both the farmers and the processor. The ability to grow pharmaceutical plants could be
dependent on gaining a licence to grow them from the Government. We recommend that:
 Pharmaceutical plants should be considered as excellent new arable crops for
Canterbury.
 If required approval to grow pharmaceutical plants is gained and the regulatory regime
is designed to meet the requirements of the crops.
 Support should be offered to potential growers to locate either a joint partner investor
in processing facilities or support in sourcing the required funds.
Milking Sheep
Milking sheep is potentially an excellent product for farming in Canterbury because of the
returns it offers and the fact that the nutrient leaching is lower than traditional dairy farming.
The success of establishing an industry will rely on their being enough interest and the
willingness of a processor to start up an operation in the province. We recommend that:
 Further investigation into sheep milking as a new land use in Canterbury should be
carried out with a more detailed analysis of the potential market, the optimal on farm
production system, the economics of farming and the potential for nutrient discharges.
 The organisation carrying out this further investigation should engage with Blue River
Dairy to ascertain if they would be keen to process the production in Canterbury.
 The concept of sheep milking in Canterbury should be promoted initially with
Environment Canterbury and the major irrigation companies.
Manuka Honey
The establishment of a Manuka honey industry in Canterbury as a result of planting land in
Manuka with the UMF factor suffers as a financial consideration because of the long wait
Potential for Diversification of Rural Production in Canterbury
4
between planting and the first harvest and the potential for yields to be variable dependant on
the weather conditions at flowering. We recommend that:
 The industry should keep a watching brief on the results of the current trial work into
establishing a Manuka honey plantation.
 The local beekeeping industry should investigate the possibility of extending the
current trial work into Canterbury on suitable sites.
Walnuts
Walnuts suffer as a result of the long period between planting and first harvest as well as the
highly variable productivity of the orchards, which is weather dependant. There is very little
apparent value added in the processing industry. We recommend that:
 A watching brief on developments in the walnut industry should be maintained over
the next 10 years.
Blackcurrants
Blackcurrants offer excellent returns for both the grower and the processor if demand can be
created for their products from the health and wellbeing market through proving of the health
benefits of products through human clinical trials. The cost of doing this is beyond the present
limited number of growers and processors. We recommend that:
 Assistance should be given to the blackcurrant grower group to help in raising funds
to finance the required clinical human trials.
 Assistance should be given to the blackcurrant grower group in developing a New
Zealand brand around the product.
Pea Isolate
The development of a Pea isolate business in Canterbury would not offer much additional
financial advantage to farmers but would offer considerable advantages to a processor of the
product. The level of returns from processing requires a lot of further work. We recommend
that:
 More detailed analysis of the opportunity to ascertain the true capital cost, processing
cost and detail of the processes should be carried out.
 The organisation carrying out this additional work should also engage with existing
processors to ascertain under what circumstances they would be willing to enter the
industry.
Potential for Diversification of Rural Production in Canterbury
5
2 Background
The Canterbury Development Corporation (CDC) has engaged The AgriBusiness Group to
provide professional services to undertake a research project investigating the feasibility of
options for diversification of rural land use in the Canterbury region.
The aim of the investigation was to identify categories of primary product that are currently, or
with the right infrastructure could be, commercially viable to a scale that supports an export
(or import substitution) industry in Canterbury. The overarching questions that this study was
aiming to answer were:
 Is it likely that there is a compelling business case for the alternative
products?
 Is there a high likelihood of providing a commercial return on
investment (particularly for products requiring irrigation)?
2.1 Methodology
The methodology used was designed to counter the problem which this research project
presents in that there was a very large potential for products to be analysed and a relatively
small budget to carry out the work. Therefore we proposed that this project was best to be
phased into two stages. The first stage assessment was relatively short in that the products
were assessed against a standard template and that only those which score the best were
then put through a more detailed assessment to test their worth for investment.
The methodology was staged with two points at which the research team reported to CDC.
The first point was to ensure that the work was comprehensive in its scope of products
selected and the second point was to select the products which the team believe are worth
further analysis.
2.1.1 Identification of products to be covered.
This first stage was seen as being very important in being able to comprehensively compile a
list of potential products to examine. This stage entailed a brief literature review to identify any
previous work in this area and the results found from it. Our thinking at this point was that there
was very little opportunity for new products at the farm level. We believed that there was
probably more potential in the added value segment of the market.
We were able to interview a wide range of people in Canterbury to try to come up with a
comprehensive list of potential products. At this point we carried out a check back with the
client to get approval to proceed with our list of potential products.
2.1.2 First stage screening.
The first stage screening was designed to be comprehensive but also to be relatively quick in
its assessment. Each product was assessed against a standard template which included:
 Analysis of the production trends and any significant production issues - in New
Zealand and in other relevant production areas. This included an analysis of
productivity factors and significant contributing management factors.
Potential for Diversification of Rural Production in Canterbury
6
 Analysis of the market and market trends for the product including an analysis of the
product value chain to identify requirements and issues associated with establishing
production and the processing and marketing of any product.
 Analysis of the feasibility of production and its potential impacts – economic, social and
environmental.
 Identification of any natural competitive advantages or barriers associated with
production in Canterbury.
 Identification of any capabilities and support required for the successful establishment
and growth of the industry.
 Analysis of the strategic potential and viability for entering and growing the case study
industry including the economic impacts at an enterprise and at a regional scale.
Once the assessment was carried out the results were discussed with the CDC and the top
six opportunities were chosen to take through to the second stage analysis.
2.1.3 Second stage analysis.
The second stage analysis took a more in depth analysis of the top six products identified in
the assessment exercise. This analysis included:
 Detail of the investment required for the development of the product concept
enterprise level as well as at a regional level.
 An analysis of the potential returns from the investment.
 A strategic analysis of the investment opportunity.
This analysis provides the CDC with a much more detailed understanding of the potential for
each of the products and the scale of investment required to get it off the ground.
2.2 Literature Review
The literature review was able to find three studies which were relevant to the subject area
that were carried out in New Zealand. In addition there were a number of studies that were of
interest from the aspect of them having similar climatic conditions and from a process of
discovery point of view.
2.2.1
Agribusiness and Economics Research Unit (AERU)
In Greer1 they examine the range of land uses that it is possible to grow within the areas of
potential for irrigation development in North Canterbury. They examine the area from a
growing point of view looking at physical conditions like soil type, land use class and climatic
variations. They then go on to evaluate the potential land uses against a range of criteria which
they have developed from previous work looking at the development of new industries.
 Comparative and competitive advantage and innovation.
 Complementarity with other enterprises.
 The policy environment.
 Access to infrastructure.
 Industry structure and leadership.
1
Greer G, Marquet M, Saunders C: Potential Enterprises under Irrigation in North Canterbury.
Potential for Diversification of Rural Production in Canterbury
7
 Market development, promotion and brand promotion.
 Key factors.
 Efficient production system.
 Efficient processing and value adding capacity accessible.
 Product description and quality assurance system.
 Efficient trading and distribution mechanisms established.
 Effective market development program.
 Brand oriented marketing program.
 Can all product be disposed of economically?
 Possible transition from development stage to maturity.
 Funding and mechanism for research and development.
 Industry structure.
 Similarity to existing industries.
 Attitudes of mainstream industry participants.
They then go on to evaluate the potential land uses under the following headings and briefly
describe each of the land uses identified:
 Products of well established industries.
 Dairy
 Dairy support
 Viticulture
 Livestock finishing
 Arable and conventional seed.
 Products of well established industries not grown in scale in Nth Canterbury.
 Process vegetables
 Fresh vegetables
 Pip fruit
 Products for established niche markets.
 Specialist seed production.
 Blackcurrants.
 Blueberries
 Organic
 Products of new and emerging industries
 Hazelnut.
 Walnut
 Lavender
 Olives
 Truffles
 Peonies
2.2.2 Coriolis
In their review of emerging growth opportunities in the NZ food and beverage sector Coriolis2
used a screening methodology to create a short list of the categories that their analysis
indicated hold the most potential for growth. The list in this report was designed to appeal to
Coriolis (2012); An investor’s guide to emerging growth opportunities in New Zealand food and
beverage exports.
2
Potential for Diversification of Rural Production in Canterbury
8
an investor point of view. The first level screening was on the size of existing exports and
came up with 25 categories. The second level screening was based on quantitative criteria
 Where are the global markets?
 Who are the major exporting countries?
 Who are the key firms in New Zealand?
 Where do New Zealand exports go?
And qualitative criteria:
 What is the structure of the global market?
 How is the New Zealand market structured?
 What does New Zealand have to work with?
 What are the challenges facing the sector?
The qualitative criteria were further split into the following questions.
 Large global market
 Strongly growing demand
 Asian opportunity
 Premium for quality
 Rich countries do it
 Capital investment
 Large number of firms
 Required skills
 Leverage country image
 Able to differentiate
 Strong trade access.
Each element was scored and an overall score was developed and the categories were ranked
according to their relative attractiveness as shown in the following table.
Table 2: Coriolis’s ranking of attractiveness for New Zealand investors.
Good
Better
Best
Jams and Jellies
Capsicum
Peas frozen and dried
Sugar confectionary
Soups and broths
Fresh onions
Prepared fish
Beef jerky
Chocolate
Frozen French fries
Beer
Alcoholic cider
Avocadoes
Berries
Salmon
Honey
Spirits
Biscuits
Pet foods
Cherries
2.2.3 The AgriBusiness Group
In their preliminary analysis of options for Agriculture and Horticulture options for the Rotorua
District Council, The AgriBusiness Group3 discussed a range of potential options in terms of
Opportunities and Issues and then assessed them against a set of criteria which included:
 Land use capability
 Climate / site suitability
3
The AgriBusiness Group (2014): Grow Rotorua: Preliminary Analysis of Options for Agriculture and
Horticulture Development.
Potential for Diversification of Rural Production in Canterbury
9




Geothermal utilization
Existing production
Market development
Potential returns.
They then derived an overall rating for the following range of land uses:
Horticultural crops
 Blue berries
 Kiwifruit
 Avocados
 Feijoa
 Hops
 Hazelnut
 Outdoor flowers
New crops / options
 Manuka honey
 Ginseng
 Tea
 Truffles
 Maori Crops
 Biofuels
Geothermal Options
 Tomatoes / Capsicum
 Hot house flowers
 Aquaculture
 Food Processing.
2.2.4 Venture Southland
The Crops for Southland project was established in 1994 by the Southland District Council
and associated groups to investigate alternative land uses. The initiative undertook research,
technology transfer and on-farm support. It reviewed a wide range of potential crops and this
resource is still available on line at http://www.venturesouthland.co.nz/EconomicDevelopment/Regional-Projects/Agriculture-and-Food/Crops-for-Southland.
The project
fostered bio-oil and ornamental flower crop industries as well as other crops.
A review of land use innovation in regions with a similar climate or type of farming was also
undertaken.
2.2.5 Australia
The new crops research programme of the Rural Industries Research and Development
Corporation (RIRDC) – see http://newcrops.com.au/index.php. This as well as other long
established projects have facilitated the establishment of a number of new primary industries
such as the production of medicinal herbs in Tasmania.
Potential for Diversification of Rural Production in Canterbury
10
2.2.6 Oregon
Oregon, especially the North West, has a similar climate to Canterbury, has 38,100 farms and
approx. 6,875,000 ha of farmland4. It is known as a speciality crop state with over 220
recognised commodities with a value of US$5.4b per year in 20125. Some significant crops
with exports from the state in 2011 include:
 Seeds – US$331.5 m dominated by Perennial ryegrass, fescue and annual ryegrass
seed production.
 Tree nuts – US$71 m – dominated by hazelnuts
 Fruit and fruit products - US$226m – blueberries, pipfruit, cherries, other berries and
grapes.
 Animal feed – US$38.7 m
2.2.7 United Kingdom
The UK has been a traditional source of farming ideas for Canterbury farmers for many years.
Recently there has been increased interest in the production of industrial crops including the
following6:
 Crambe – Abysinnian Mustard – has high levels of erucic acid. Yields average 2-2.5
t/ha. Replacing HEAR as it does not need a separation distance.
 High Erucic Acid Rape (HEAR) – grown for its erucic acid content – yields 1.5-2 t/ha.
 Echium – this is rich in stearidonic acid used in cosmetics. Yields average 250 kg/ha
 Hemp – grown for both fibre and oil. Yields between 5-6.2t/ha of biomass.
 Borage (starflower) – yields from .2 -.75 t/ha of seed. Production is predicted to
increase in the UK with one of the reasons being that the UK has higher gammalinolenic acid (GLA) content (21-22%) than China which is 17%. A gross margin of over
1,000 UK pound/ha was predicted. Contracts in 2014 were for a min of 3,000 pounds
UK per ton for cleaned seed7.
 Camelina (Gold of Pleasure) – grown for its oil which contains a range of essential fatty
acids. Has good drought tolerance. Yields 2-2.5t/ha.
2.2.8 Land Use Change
MacLeod (2006)8 identified some of the key historical drivers for land use change In New
Zealand. The most important drivers were land use intensification and diversification while
agri-economic policies was also a key driver in certain periods such as the 1980`s.
4
http://www.nass.usda.gov/Statistics_by_State/Oregon/Publications/facts_and_figures/facts_and_figur
es.pdf
5 http://www.oregonfb.org/about/oregon-agriculture/
6 http://archive.hgca.com/publications/documents/Industrialusesarablecrops1.pdf
7
http://www.fwi.co.uk/articles/23/01/2014/142942/borage-area-set-to-rise-in-2014.htm
MacLeod C et al, Intensification and diversification of New Zealand agriculture since 1960: An evaluation of
current
indicators
of
land
use
change.
–
sourced
from
http://erg.otago.ac.nz/attachments/179_NZ%20intensification.pdf
8
Potential for Diversification of Rural Production in Canterbury
11
3 First Stage Assessment.
The range of coverage of crops that was specified was quite extensive as is shown in Table
3.
Table 3: Product Categories to be Included
Sector
Land use.
Arable Crops
Cereals
Leguminous vegetables
Root vegetables
Potatoes
Seeds
Edible Brassicas
Alliaceous vegetables
Pumpkins Squash and gourds
Sweetcorn
Tomatoes
Cucumbers and Gherkins
Oil seed and oleaginous fruits.
Herbs
Fungi
Market greens
Covered crops
Speciality crops
Eggs
Fruits and Nuts
Fibres
Grapes for wine
Grapes for table
Berries
Pip fruit
Nuts
Feijoa
Wool
Plant fibres
Honey
Cut flowers and flower buds
Bulbs, tubers, tuberous roots, corms, crows
and rhizomes.
Plant derived bio actives.
Natural health products
Pharmaceuticals
Animal derived bio actives
Blood
Bone
Vaccines
Dairy
Cow
Goat
Sheep
Dairy Support
Biofuels
Potential for Diversification of Rural Production in Canterbury
12
3.1 Identification of Products to be Included
This part of the study was a reasonably quick assessment of the range of crops and land uses
available to go further into study. It relied on The AgriBusiness Groups knowledge of what is
currently being investigated and who to contact to discuss the potential for the various options.
A list of the organisations contacted is available in Appendix 1.
3.1.1 Results of Screening
The following comments reflect the overall impression gained from the level of conversations
carried out on the situation of each sector.
Overall Comments
 We have one of the most technologically advanced agricultural sectors in the world.
 With our soils and irrigation we are capable of very high yields of high quality pasture
and crops on a reliable basis.
 We are a long way away from our markets.
 Traditionally we have been very efficient ($ cost) at commodity production (very little
value added).
 The majority of our processing sector has been owned by the producers (pastoral
sector).
 The production sector is quite advanced in New Zealand in terms of seeking out and
finding new opportunities to grow things.
 The processed food sector is identified as the next area to grow but one of the barriers
to growth is the scale of processing.
 There is a need to concentrate on value chain development.
 The lack of food technology skills is limiting development.
Arable crops.
“Must increase the value across the whole value chain”
“At $50 K / ha there needs to be a significant shift in value to retain an arable sector from dairy
conversion”
“The relatively poor returns from growing the crop are increasingly forcing growers to take a
position further up the value chain”
Fresh and Processed Vegetables.
“We have too many growers producing too much crop for the fresh vegetable trade”
“In the process sector we are concentrating on improving the costs of growing not looking at
expanding our area”
“The thing that would turn around the decrease of tomato growers in Canterbury would be the
provision of a wide body jet to facilitate economic exports”
Meat
“The top grade products sell very well internationally, the issue is to concentrate on what can
be done to the lower value cuts”
“We need to concentrate on what can be done with the by-products of the red meat trade to
try and lift the overall return”
“On farm we need to continue to improve productivity and production of feed”
Potential for Diversification of Rural Production in Canterbury
13
Fruit and Nuts
“There is real potential for cool climate pipfruit production”
“There is a market niche for more raspberries and strawberries grown in Canterbury utilising
new North American varieties”
“There is potential to handle a doubling of the production of walnuts with an expansion in the
processing capability”
“There is no doubt that Cherry Orchards will move North into Canterbury where the climate
niches suit them”
Honey.
“The market for UMF Manuka honey is very good – what makes it interesting is the potential
to possibly establish the appropriate Manuka selection to enable the production of this honey
outside its natural range”
Bioactives.
“It should be seen as the utilisation of by-products of the meat industry rather than an industry
in itself”
Dairy and Dairy Support.
“Leading returns (and therefore growing quickly at present) quite considerably at present and
looks to be quite sustainable”.
“Environmental pressure may slow development”.
“Returns for initial processing (drying) still greatly outweigh all further processing premiums.
There is real potential for goats and sheep milk – without the same level of environmental
risk”.
Bio fuels.
“The economics of the bio fuel industry is negative at present and we don’t have the capacity
to further refine for the human consumption sector where the real opportunities exists at
present”.
3.1.2 Potential products to take into the first level screening.
As a result of the outcomes of the first level of screening and discussions with CDC the
following list of crops to put through the next level of screening was agreed. A table which
represents a list of the entire arable, horticultural and covered crops that have been
investigated by Crop and Food over the last two decades is shown in Appendix 2. It shows
that there are many crops available to be evaluated many of which have been around and
available for a number of years and have not made it into full scale production for a variety of
reasons.
Arable food crops
Edible fungi
Essential oils
Medicinals
Industrial crops
Honey – high UMF Manuka.
Animal derived bio actives.
Cool climate pipfruit.
Cherries
Strawberries
Raspberries
Walnuts
Hazelnuts
Milking Goats
Milking sheep
Potential for Diversification of Rural Production in Canterbury
14
3.2 Preliminary Screening
This preliminary level screening was primarily driven by value chain analysis starting at the
market end first and working back to the production sector. The market analysis principally
utilised the United Nations International Trade Centre – Trade Map Tool9. A summary of the
sort of data that we got from Trade Map for horticultural crops is shown in Table 3 and provides
reporting of Total World Exports and the Average Price experienced in 2012 then goes on to
record the Total New Zealand Exports in 2012, the Average Export Price and the Annual
Average Trend in growth of the New Zealand export sector over the period from 2008 to 2012.
The production analysis utilised data from Statistics New Zealand most notably from the
agricultural census.
Table 3: Horticultural Crops – Preliminary Market Screening
Crop
Blueberries
Cherries
Flowers –
cut
Flowers –
bulbs
Hazelnuts
Pipfruit
Raspberry –
fresh
Raspberry –
frozen
Strawberries
Saffron
Walnuts
World
Exports
(tonnes)
2012
Average
price
(US$
/tonne)
2012
NZ 2012
Exports
Production
(tonnes)
Average
Export Price
2012
($US/tonne)
2008-2012
NZ value
exports
annual
average
trend
289,819
431,958
NA
$4,774
$3,928
NA
1,221
1,582
1,646
$11,790
$10,650
$15,247
16%
9%
2%
NA
$5,000
2,519
$2,519
5%
218,781
8,213,806
155,750
$6,895
$866
$5,194
4
309,464
2
$8,500
$948
$16,000
NA
5%
20%
367,448
$2,041
1,122
$2,096
-38%
858,939
1,395
194,588
$2,711
$104,522
$8,042
646
NA
4
$5,868
NA
$9,500
5%
NA
10%
In Table 4 the results of the same analysis for Arable Crops are displayed.
9
Trade Map provides - in the form of tables, graphs and maps - indicators on export performance,
international demand, alternative markets and competitive markets, as well as a directory of importing
and exporting companies. Trade Map covers 220 countries and territories and 5300 products of the
Harmonized System. The monthly, quarterly and yearly trade flows are available from the most
aggregated level to the tariff line level see http://www.trademap.org.
Potential for Diversification of Rural Production in Canterbury
15
Table 4 Arable Crops - Preliminary Market Screening
Crop
World Exports
2012 (tonnes)
Average price
(US$/tonne)
121,818
4,105,841
NA
129,268
NA
NA
$546
$435
$3,000
$876
NA
Buckwheat
Pea - dried
Quinoa
Coriander
Calendula
Liquorice
NZ
Production
2012
(tonnes)
268
25,520
NA
34
NA
Average NZ
Price (US$/
tonne
2008-12 NZ
Export
Trends Value
$1,284
$889
NA
$1,706
$6 kg
$1 kg
NA
5%
NA
NA
NA
NA
The growth, or decline, of crops shown in Tables 5, 6, 7, 8 and 9 was derived using data from
Statistics NZ.
Table 5 Canterbury Region - Trends in Tree Crops (Ha)
Pipfruit
2012
2007
2002
2000
1996
238
279
419
533
1,625
Stone
fruit
102
122
95
179
204
Wine
Grapes
1,550
1,683
749
633
381
BlackOther
currants berries
948
60
660
76
846
131
567
124
577
Olives
240
437
659
299
Chest
nuts
30
66
99
Wal Hazel Other
nuts nuts
nuts
389
220
327
249
192
140
291
Source: Derived from Statistics New Zealand
Table 6 Canterbury Region - Trends in Outdoor Vegetable Crop Area (Ha)
Asparagus
Green
beans
536
537
544
486
Carrots
Onions
2012
29
823
1,035
2007
94
488
686
2002
166
343
992
2000
150
456
1,060
1996
Source: Derived from Statistics New Zealand
Peas
Process
3,619
4,705
4,820
4,611
5,026
Potatoes
Pumpkin/Squash
Sweetcorn
5,754
4,273
4,495
4,009
3,129
170
223
244
425
255
941
1,248
1,160
Table 7 Canterbury Region - Indoor Crops Area (Ha)
Capsicum
Cucumber
Tomatoes
2012
2.18
3.06
4.88
2007
1.99
3.28
8.10
2002
3.18
5.17
15.34
2000
5.13
18.09
Source: Derived from Statistics New Zealand
Ornamental
trees/shrubs
Bedding
Plants
Flower
bulb,
corm
tuber
8.63
4.78
12.54
10.83
20.51
3.73
Potential for Diversification of Rural Production in Canterbury
Orchid
Flowers
14.68
2.03
Other
Flowers
and
Foliage
Other
indoor
crops
24.34
6.49
16
Arable Crops Trends
Table 8 Canterbury Region - Trends in Arable Crops (Ha)
Wheat
Barley
Oats
Other
Cereal
Field/Seed
Peas
2012 47,787 43,597 1,907
1,788
2007 35,301 36,869 2,925
2,129
2002 18,316 16,945 4,631
1,689
2000 39,512 35,218 5,693
1996 37,169 50,779 5,166
Source: Derived from Statistics New Zealand
4,695
5,063
8,518
13,177
11,539
Other
pulses
Herbage
Seeds
1,007
352
1,424
28,623
25,420
NA
Vegetable
Seeds
7,849
5,537
NA
All
other
crops
3,194
6,191
24,131
47,823
Some high level findings as a result of this analysis as well as other observations are:
 NZ already gets a significant premium for many products. There are rapidly growing
exports from Asia, Eastern Europe for many crops – however some high cost countries
e.g. USA, Netherlands are still successful.
 There is a great variation between the average returns per tonne for many products.
 Food production can provide significant secondary benefits e.g. farming/food/tourism
linkages – Italy, France.
3.2.1 Results of Screening.
The results of this first level screening are summarised in the following Tables 9 to 25.
Table 9: Summary of analysis of Arable Crops
Arable Crops
Production Trends
Market Trends
Economic
Social
Environmental
Competitive
Position
Capabilities
Strategic Potential
Barley / Wheat
Grass
Static production
Export
estimate$12m.
Excellent
Unsure
Excellent
Unsure
Peas Dried
Quinoa
Peas widely grown
Low in NZ
Market access barriers Growing
(India)
demand
Could be a fad.
Unsure
Excellent
Unsure
Unsure
Excellent
Excellent
OK
Relatively Poor
Current small scale Existing capability
plant.
Unsure
Good
Potential for Diversification of Rural Production in Canterbury
Good
Unsure
17
Table 10: Summary of analysis of Dried Herbs / Medicinal / Essential Oils
Dried Herbs / Medicinal / Essential Oils
Production
Small scale NZ production.
Trends
Research carried out in NZ and Australia.
Market Trends
Large projected annual growth rate in the world market.
Approx. 10,000 potential species.
Relatively small scale export $ from NZ though some significant local
initiatives e.g. dried parsley, flaxseed/linseed
Some potential crops include – ginseng, valerian, echinacea,
pyrethrum, native plant extracts
Economic
Excellent
Social
Excellent
Environmental
Excellent
Competitive
Some existing production.
Position
Large number of potential crops identified.
Many low cost producers internationally.
Capabilities
Current small scale plant capable of processing.
Strategic
Potential has long been recognised for Canterbury.
Potential
Intellectual property / value added offer the potential rather than
production.
Could be opportunities in linking with Australia.
Table 11: Summary of analysis of Pharmaceutical Plants
Pharmaceutical plants
Production
Trends
Market Trends
Economic
Social
Environmental
Competitive
Position
Capabilities
Strategic
Potential
The majority of world production is from relatively low productive sites.
Trial plantings produced in NZ.
Requires a licence from Ministry of Health (MoH), Ministry for Primary
Industry (MPI).
Application for further trial plantings has been made.
Tasmania is licenced to produce and has three processors.
Very large projected growth in the Codeine and derivatives market.
Very profitable sector of the pharmaceutical market.
Increasing requirement for surety of production.
Very good returns at the farm gate. (Lift average rotation by approx.
$1,000 / ha). Excellent returns from further processing.
Potential for public concern
Excellent
Very competitively placed if gain a licence.
Potential to sell by-products for further processing. Potential to set up
processing in NZ.
Very good position if approval given.
Potential for Diversification of Rural Production in Canterbury
18
Table 12: Summary of analysis of Saffron
Saffron
Production
Trends
Market Trends
Economic
Social
Environmental
Competitive
Position
Capabilities
Strategic
Potential
Very small current production in Canterbury.
Interest from established industry in Tasmania.
Very high labour content in harvesting and processing.
Highest priced spice in the market.
Large export market dominated by relatively low cost / low quality
producers.
Tasmania maintain that higher quality production can offer very good
returns.
Expected to grow.
Very high gross return from product but it depends on the yield and
the total labour cost.
Good
Excellent.
Needs to be linked with a high value chain – NZ cannot compete with
commodity saffron
Rural Industries Research and Development Corporation
(RIRDC) reported on `Development of an Internationally Competitive
Australian Saffron Industry” in 2007.
Unsure
Table 13: Summary of analysis of Peas
Peas (dried for protein isolate)
Production Trends
Very well established industry in growing peas.
Market Trends
Potential replacement for Soya bean product.
Higher digestibility and allergen free.
Annual growth in value of world trade is 10%.
Economic
Average returns $ / ha US$3,600.
Believe that it would be a cheaper protein than milk
Social
Unsure
Environmental
Excellent
Competitive Position Unsure
Capabilities
Extensive capability for growing and drying.
Strategic Potential
Unsure.
Potential for Diversification of Rural Production in Canterbury
19
Table 14: Summary of analysis of Milking Goats
Milking Goats
Production Trends
Market Trends
Economic
Social
Environmental
Competitive
Position
Capabilities
Strategic Potential
One very successful co-operative set up in Hamilton
Have developed a range of consumer packaged nutritional powders.
An alternative to cow’s milk products that have a degree of
resistance.
Increase in demand for all milk proteins.
Growing demand from middle class Asian markets.
Very good returns for farmers and from the subsequent processing
and sale of products.
Good
Excellent.
No significant production in Canterbury at present.
Requires someone to promote the option.
Very good.
Table 15: Summary of analysis of Milking Sheep
Milking Sheep
Production Trends
Market Trends
Economic
Social
Environmental
Competitive
Position
Capabilities
Strategic Potential
Increasing slowly in size in NZ.
Most production is for frozen export or unique production of cheeses.
Very basic further processing developed.
Increase in demand for all milk proteins.
Growing demand from middle class Asian markets.
Very good returns for farmers but unsure about the subsequent
returns from scaled processing.
Good
Excellent
Excellent.
None in Canterbury at present.
Requires someone to promote the option.
Very good.
Table 16: Summary of analysis of Cool Climate Pipfruit
Cool Climate Pipfruit (Bennets Waipopo Honey Crisp)
Production Trends
Current relatively small boutique producers.
Seeking to grow the grower base.
Market Trends
Targeting a small portion of the American market
Economic
Excellent returns to the grower, less from value added.
Social
Good
Environmental
Excellent
Competitive
Excellent, counter season production to the Nth American
Position
producers.
Capabilities
Crop handling can be scaled with the development of the growing
capacity.
Strategic Potential
Very good.
Potential for Diversification of Rural Production in Canterbury
20
Table 17: Summary of analysis of Hazelnuts
Hazelnuts
Production Trends
Market Trends
Economic
Social
Environmental
Competitive Position
Capabilities
Strategic Potential
Relatively static production in NZ.
Used as an import substitute or added value product on the
local market.
Expected to drop returns as production increases.
Relatively high returns dependant on management from
growing and relatively low returns from on handling the crop.
Low
Excellent.
Mainly as an import substitute.
Co-operative company set up which processes and sells a wide
range of hazelnut products.
Medium
Table 18: Summary of analysis of Walnuts
Walnuts
Production Trends
Market Trends
Economic
Social
Environmental
Competitive
Position
Capabilities
Strategic Potential
Slow but steady growth in the planted area.
Rapid expansion of both the volume and value of walnuts exported
internationally.
Mainly based around import substitution.
Relatively high returns dependant on management from growing
and relatively low returns from on handling the crop.
Low
Excellent.
Climatic conditions appear suitable.
Processor set up maintains that it will require grower support for
expansion of processing capability.
Medium
Table 19: Summary of analysis of Cherries
Cherries
Production
Trends
Market Trends
Economic
Social
Environmental
Competitive
Position
Capabilities
Strategic Potential
Relatively small area of cherries grown nationally with the majority in
Otago.
Only 32 ha grown in Canterbury although they can be grown here on
dry sheltered sites.
Growth in world trade around 10% annually.
High returns (dependant on yield) from growing and relatively low
returns from on handling the crop.
Medium
Excellent.
Climatic conditions appear suitable though not ideal.
Most Canterbury orchards set up to service local demand.
Low
Potential for Diversification of Rural Production in Canterbury
21
Table 20: Summary of analysis of Strawberries
Strawberries
Production Trends
Market Trends
Economic
Social
Environmental
Competitive
Position
Capabilities
Strategic Potential
Unsure of total market size because the majority is for local
consumption.
Continuing demand for total all year round production including
imports.
High returns from growing for a relatively short period (Jan / Feb).
Medium
Excellent.
Highly competitive for a relatively short time.
Potential land available but very few skills
Exports require airfreight
Low
Table 21: Summary of analysis of Raspberries
Raspberries.
Production Trends
Market Trends
Economic
Social
Environmental
Competitive
Position
Capabilities
Strategic Potential
Declining national production
Potential for productivity gains through the use of new varieties.
NZ imports a reasonable amount of frozen raspberries at a relatively
low value.
Any development of the industry would be based on import
substitution.
Low returns to the grower.
High
Medium
Not in a strong position to compete with low value imports.
Barkers in Geraldine would be the main processor.
Low
Table 22: Summary of analysis of Blackcurrants
Blackcurrants.
Production Trends
Market Trends
Economic
Social
Environmental
Competitive
Position
Capabilities
Strategic Potential
Grown in Canterbury for over 35 years.
Area grown has doubled in the last 10 years.
Steady demand for the juice concentrate.
Expansion of powders and medicinal extracts.
Grower returns are average but the added value potential is quite
large.
Low
Excellent
Strongly placed in terms of development of non-juice
characteristics.
Industry product group and co-operative marketing group.
Comprehensive research program has identified varieties.
Medical research into the medicinal properties.
High
Potential for Diversification of Rural Production in Canterbury
22
Table 23: Summary of analysis of Truffles
Truffles
Production Trends
Market Trends
Economic
Social
Environmental
Competitive
Position
Capabilities
Strategic Potential
A few successful operations established in NZ.
Reported yields in Nth Canterbury are some of the highest in the
world.
Potentially very high returns, dependant on yield (0 to 100kg /ha)
and quality.
Demand exceeds supply.
Potentially very high.
Low.
Excellent
In an excellent position to compete on the world market.
There is a good infrastructure set up to support the industry in
Canterbury.
High but at high risk.
Table 24: Summary of analysis of Manuka Honey
Manuka Honey (UMF)
Production Trends
Productivity varies considerably according to the climatic
conditions.
Number of hives has steadied and is rising again.
UMF honey has been produced in Canterbury.
UMF Manuka plantation trials
Market Trends
Manuka honey is the most expensive honey in the world.
Demand is continuing to rise as the UMF message spreads.
Economic
Potentially very high from growing and packaging.
Social
Low.
Environmental
Excellent
Competitive
In an excellent position to compete on the world market.
Position
UMF is only found in NZ and Australia.
Potential problem with the current weak standards of description for
UMF.
This is causing some problems with counterfeiting of the product.
Capabilities
There is a good infrastructure set up to support the industry in
Canterbury.
Strategic Potential
High
Potential for Diversification of Rural Production in Canterbury
23
Table 25: Summary of analysis of Animal Derived Bio actives.
Animal Derived bio actives.
Production Trends
The raw materials are derived from the slaughter of livestock.
Therefore the availability depends on the number slaughtered.
New Zealand has been active in the industry but has recently been
able to produce more refined high quality products.
Market Trends
The value of NZ’s exports in this sector has increased at a rate of
36% per annum over the last 5 years. From a relatively small base.
Economic
Very high from recovery and further processing.
Social
Low.
Environmental
Excellent
Competitive
Starting from a very low proportion of world trade but the value
Position
proposition means that location is not important.
The quality of slaughter facilities is very important in terms of
recovery of the glands etc.
Capabilities
There are already a number of specialist companies in Canterbury
as well as the major processors increasingly getting involved.
Strategic Potential
High
The results of this screening of potential crops was presented to CDC and the decision was
made to take the following crops through to the second stage of screening. This decision was
made to examine a mix of crops from ones that are all already well established in the region
but show promise for further growth through to crops which are completely new to Canterbury.
In making this decision the factor of the potential for added value income being created in the
region was a strong factor in the decision.
Crops chosen to progress to the second stage of screening.
 Pharmaceutical Plants
 Milking Sheep
 Manuka Honey
 Walnuts
 Blackcurrants
 Pea Isolate.
Potential for Diversification of Rural Production in Canterbury
24
4 Second Stage Results
The following results of the second stage screening of the six selected crops with potential are
variable in their results as a result of the difficulty or ease of gaining information on them.
Where access to reliable information was good we have a high degree of confidence that the
results reported here are a fair assessment of the crops potential within the constraints of the
time available to carry out this assessment. Where access to reliable information was difficult
to access some of the assessment parameters have had to be constructed from limited data
or information then we are less confident about the quality of the results.
Each crop has a background which includes a summary of the information gained in the first
level assessment and an overview of the sources of information. In the second section we
have listed the scale of investment required to either start or expand the scale of the crop up
to taking up 5,000 ha of land in Canterbury. In the potential returns we have reported the Gross
Returns, Net Present Value which is a value of a variable income stream for 25 years, the
Internal Rate of Return which is able to be used to compare the performance of different crops
and, where possible, the Return on Invested Capital. Then in the final section we have
provided a strategic analysis of each investment and a list of recommendations on what should
be done to take the concept further.
4.1 Pharmaceutical Plants
Pharmaceutical plants were chosen as an example of a completely new arable crop which has
high added value potential.
4.1.1 Background
On farm
Trial evaluations of the growing of poppies (Papaver somniferum) have been recently
undertaken in Canterbury. For this reason poppies have been examined in more detail in this
study. There are other pharmaceutical plants that may also show potential if examined in more
detail.
The species of poppy trialled in Canterbury provide alkaloids for use in pharmaceuticals
including morphine, thebaine, codeine, oripavine, papaverine and noscapine, and poppy
seeds which are used in the culinary trade and for bio oil extraction. The alkaloids are extracted
from the “poppy straw” which is the dried mature seed head plus a small amount of the stem
minus the seed. The types of poppy that could be grown in New Zealand are morphine and
non-morphine species including thebaine and codeine producers. This assessment includes
the development of a processing and extraction facility to establish New Zealand as a supplier
of the pharmaceutical raw materials.
The growing of poppies in broad scale agriculture has been carried out in Tasmania for more
than 30 years and this area is now seen as the reliable source of the highest quality product
on the market. The potential to grow poppies in New Zealand is partly driven by the
Tasmanian’s having reached the productive limit of their area to grow the crop aa well as the
ability to gain a more assured level of production from irrigated agriculture in New Zealand.
This is aided by the fact that the top group of New Zealand growers are much more capable
agronomically than the average Tasmanian grower.
Potential for Diversification of Rural Production in Canterbury
25
In 2013 there was US$663.m of concentrates of poppy straw traded internationally (HS Code
293911). There has been a 28% per annum increase in the value of exports between 200913 however the annual growth in quantity has fallen by 15% per year over the same period.
The UK is the largest exporter with 55.5% of world exports. In 2013 it exported 52 tons of
product at an average price of US$5.7m tonne. Spain was the next largest exporter with 8.6%
of world exports (104 tons at an average price of US$447,837 tonne.) In 2012 the UK imported
US$86.3m of poppy straw concentrate - US$40.7 of this from Australia (HS Code 29391100).
These figures indicate that there is a very high value added component in the further
processing of the crop to at least Concentrate of Poppy Straw (CPS).
Codeine is used for mild pain relief and as a cough suppressant, and is the most commonly
used product. Global production of codeine has risen from 210 tonnes in 1991 to 337 tonnes
in 2010, an increase of 60% over this period. The majority of codeine, 90-95%, is currently
produced semi-synthetically from morphine. The production of codeine concentrate of poppy
straw (CPS) derived from the newly developed ‘Tasman’ poppy variety enhances access to
markets such as the United Kingdom. There is expected to be substantial use of codeine in
the future in the areas of treatment for obesity and for addictions. Therefore the demand for
the product is very strong and is growing rapidly with growing average incomes.
Growth of the crop is considered to be relatively straight forward for our arable farmers.
Poppy straw sits within the top group of performers on a gross margin basis. Poppy production
would be considered a specialist crop for several reasons, e.g. the requirement for specialist
harvesting equipment, but the gross margin on offer would lead us to believe that poppy straw
production will be seen as very attractive to growers.
This change in the crop mix over the whole rotation would lead to a significant increase in the
average gross margin by 12% with the inclusion of poppies and an extra winter grazing.
Processing.
There is the potential for investment of capital in extraction capacity in New Zealand. This
would lead to additional employment and greatly enhanced economic benefits for the
Canterbury area and the wider New Zealand economy.
The business case for construction of a locally based extraction plant in New Zealand would
depend on the following factors:
 The capital cost of providing new capacity in New Zealand in order to take advantage
of expanding international prices.
 The potential for enhanced cost efficiency of a new factory in New Zealand, with new
extraction technology, compared with the capacity of older existing processors.
 The ability of New Zealand producers to be able to market their product effectively in
the world markets.
4.1.2 Investment Required
The capital cost is considerable to establish the sort of plant which could process all of the
output from 5,000 ha.
4.1.3 Potential Returns
The potential additional returns on farm of growing the crop over 5000 ha is as follows.
Potential for Diversification of Rural Production in Canterbury
26
NPV
$118.5m
The potential returns from establishing a further processing facility in Canterbury are.
NPV
IRR
R O Cap
$160.2m
32%
32%
In addition there would be considerable additional employment created around the industry
which grows the crop and harvests it and also around the processing facility. For example one
of the processors in Tasmania has over 60% of its staff with a first level university qualification
or higher.
4.1.4 Strategic Analysis
Our summary of the strategic factors is as follows:
Strengths
Weaknesses
Very strong product champion.
Fits well into the arable rotation.
Increased returns above what is available.
Very high NPV both on farm and in
processing.
Very high value added component.
High level of graduate employment.
Regrowth plants
Operator harm from poppy dust.
Potential establishment of a competitor for
growing area.
Large investment in processing capability
and technical staffing.
Opportunities
Threats
Rapidly increasing global demand.
Public concerns around illicit use.
Ability to set up latest technology processing. Not granting of the application for a licence.
Recommendation
 Pharmaceutical plants should be considered as excellent new arable
crops for Canterbury.
 If required approval to grow pharmaceutical plants is gained and the
regulatory regime is designed to meet the requirements of the crops.
 Support should be offered to potential growers to locate either a joint
partner investor in processing facilities or support in sourcing the
required funds.
Potential for Diversification of Rural Production in Canterbury
27
4.2 Milking Sheep
Milking Sheep were chosen as a completely new pastoral crop that has the potential to be
relatively low in the amount of nutrients that it leaches to water.
4.2.1 Background
To date the sheep milking industry in New Zealand has been made up of a few small scale
artisanal producers that have produced yoghurts and cheeses for the local market. That has
then expanded into the production of frozen milk which has been exported to Australia and
the production of ice cream. Lately the one big commercial producer and processor in New
Zealand (Blue River Dairy in Southland) has developed the capacity and technology to
produce milk powders and has further diversified into the production of infant formula milk
products for export into Asia (particularly China). They aim to be the only manufacturer of
sheep milk products that is licensed to export to China.
There has been comparatively little research lately or commercialisation of sheep milking
however the production of milk products internationally from sheep is significant with
approximately 2% of total milk being produced by sheep globally. In New Zealand the Blue
River Dairy Company has successfully established a sheep milking operation which includes
the production of cheese, ice cream and milk powder. Revenue is estimated at between $1015m per year. The company suggests that sheep milking provides a way forward for the NZ
sheep industry and would more than compensate for the decline in returns from wool. The
company has a 10 year development plan and hopes to see an industry with at least 10 million
sheep within 10 years. The Parliament Primary Production Committee looked into the sheep
milking industry in 2013.
It is believed to be superior to cow’s milk for the following reasons:
 It is a complete protein containing all the essential amino acids without the heavy fat
content and catarrh (mucus) producing materials of cow's milk.
 The fat globules of Sheep's milk are finer than those of cow's milk, allowing for a greater
surface to volume ratio for enzymatic attack. This enables the fat of Sheep's milk to be
broken down and digested more easily.
 Medium Chain Triglycerides which are higher in Sheep's milk than cow's milk, have a
unique ability to provide energy to the human metabolism, as well as an ability to lower,
inhibit and dissolve cholesterol deposits.
 The lactase enzyme provides for the digestion of lactose, or milk sugar. People who
do not possess this enzyme are lactose intolerant. Sheep's milk contains less lactose
than cow's milk, and people can generally tolerate Sheep's milk better than cow's milk.
 Lactose is the most important carbohydrate present in milk. The lactose content of
Sheep's milk is about 10% lower than that of cow's milk.
 Milk protein is comprised of about 80% caseins and 20% whey proteins, the caseins
are present in the form of micelles: these are large aggregates of protein and calcium
phosphate. The number of small micelles is much greater in Sheep's milk than cow's
milk.
 The fatty-acid composition of Sheep's milk exhibits substantial differences from that of
cow's milk. Sheep's milk fat contains more short-chain and medium-chain fatty acids.
The seasonal variation in the fatty-acid composition is lower than that of cow's milk.
Potential for Diversification of Rural Production in Canterbury
28
Therefore sheep’s milk is seen as an excellent source for infant formula to market into the
Asian market where there is a relatively high degree of lactose intolerance and an
increasing awareness of the benefits of the product.
Some findings from the market are:
 Sheep milk sells for around four times the price of cow’s milk. It has higher solids
content and offers twice the amount of cheese per litre of milk than cow’s milk.
 There is a high demand for sheep milk products a driver being that approximately 50%
of Asians are intolerant to cow’s milk though not to sheep (or goats) milk.
 Though the current East Friesian sheep were suitable for milk production there was
significant potential for improvement in their productive capacity.
 The Blue River Dairy Company believes that sheep milking can get substantially higher
return on investment than cow’s milk off the same area of land.
There are few models for sheep farming for milk production in New Zealand however there is
extensive research on sheep husbandry. There is also good knowledge by farmers on sheep
husbandry as well as support networks and markets for by products e.g. wool, milk lambs.
There has however been limited research into the optimal breeds for sheep milking.
Nutrient loss (P and N) from sheep is known to be lower than from cows because there is less
concentration in the individual urine patch, however these assumptions will need to be
reviewed in relation to the more intensive management systems and stock types used for
sheep milk production. Blue River Dairy believe that their loss of Nitrogen is approximately
half that of cow systems.
This has become an important issue in Canterbury with the majority of irrigated producers now
being limited in the amount of Nitrogen that they can leach by regulations in the recently
released Canterbury Land and Water Regional Plan. Early estimates find that, for dairy
farming in particular, the total amount that they will be permitted to leach will be about half
what they are at present. This will mean either the adoption of less intensive farming systems
or further investment in mitigation techniques to allow them to continue to produce at current
or higher levels. For new development of irrigation capability (approximately 80,000 ha
consented in Canterbury in large irrigation schemes at present) sheep milking could offer an
alternative which both met the N leaching requirements of the regional plan and the return on
investment targets of investors.
In the following discussion on the modelling of potential returns the information on the on farm
operation of the sheep milking option has been taken from discussions with Blue River Dairy10
the assumptions on the processing capital costs, operational costs and returns are based on
similar models used in the dairy Industry.
Sheep milk for a lactation length of 180 days. The length of this lactation period coupled with
the shape of the pasture growth curve or irrigated land in Canterbury means that you would
require approximately 1.5 times the peak number of ewes to be able to maximise the
productive capacity of the land for the full period of pasture growth. These ewes would be
required to have staggered lambing dates to best meet the pasture production curve.
10
Anne O Connell: Farming Systems Manager Blue River Dairy. Personal communication.
Potential for Diversification of Rural Production in Canterbury
29
Sheep produce an average of 1litre per day with a milksolids concentration of approximately
11.5% meaning that they produce 20.7 kg milksolids in each lactation.
The capital costs for set up of the milking operation are very similar to dairy cow costs.
It is estimated that for the addition of 5,000 ha of sheep milking in Canterbury there would be
at least an additional 125 jobs on farm and the additional jobs required in the processing
industry.
The following analysis is based on the entire processing of the production into milk powder
which is then further combined into infant formula and then sold into the Asian market.
4.2.2 Investment Required
On Farm
Development Costs
$61.6m
Processing
Capital cost of plant
$48.5m.
4.2.3 Potential Returns
On Farm
Gross Returns
Net Returns
NPV
IRR
Return on Investment
$33.75m
$15.2m
$107m
24%
25%
Processing
Gross Returns
Net Returns
NPV
IRR
Return on Investment
$48.5m
$16.5m
$134m
34%
34%
Potential for Diversification of Rural Production in Canterbury
30
4.2.4 Strategic Analysis
Our summary of the strategic factors is as follows:
Strengths
Weaknesses
Long experience with farming sheep.
Huge potential in the Asian market for the
product (unproven as yet).
Relatively low cost of development on farm.
Relatively high returns on investment.
Potentially meets Land and Water Plan’s
nutrient discharge limits.
No experience in Canterbury.
The ultimate efficient system as yet
unproven for irrigated production.
No product champion in Canterbury.
No processor keen to take the production as
yet.
Opportunities
Threats
Establish a relationship with existing
processor in Southland.
Develop a model of the most efficient system
for irrigated Canterbury.
Promote the concept.
Insufficient uptake of the idea amongst land
owners.
No one keen enough to take up the
processing opportunity.
Market resistance in Asia.
Recommendations
 Further investigation into sheep milking as a new land use in Canterbury
should be carried out with a more detailed analysis of the potential
market, the optimal on farm production system, the economics of
farming and the potential for nutrient discharges.
 The organisation carrying out this further investigation should engage
with Blue River Dairy to ascertain if they would be keen to process the
production in Canterbury.
 The concept of sheep milking in Canterbury should be promoted initially
with Environment Canterbury and the major irrigation companies.
Potential for Diversification of Rural Production in Canterbury
31
4.3 Manuka Honey
Manuka Honey was chosen to represent the expansion of an existing activity into a higher
return operation.
4.3.1 Background
Market Trends
In 2012 there was 526,193 tonnes of natural honey fresh (HS Code 040900) exported worth
US$1,732m. Argentina had 12.4% of world trade (by value) while other large exporting
countries included China (12.4%), Germany (7.3%) and New Zealand (6%). Between 2008
and 2012 the annual growth in world trade was 4% while the annual growth in value was 9%
for the same period. In 2012 the average price per tonne was US$3,293 per tonne with a
range in average from a low of US$1,952 per tonne for Chinese honey up to US$11,999 for
honey from New Zealand (UNITC Trade Map).
In 2010 NZ produced 12,553 tonnes of honey with exports of 8,606 tonnes worth US$103.3m.
Major markets are the UK (21% of exports), Hong Kong (13%), Singapore (11%), Australia
(11%) and Japan (9%). Between 2008 and 2012 the value of honey exports grew by 20% per
annum while the volume of exports increased by 4% per annum.
Honey was identified by the MED/Coriolis 201211 as one of the top opportunities for investment
and growth. It specifically identified Manuka Honey as a significant opportunity and that it was
only naturally present in New Zealand and Australia providing a competitive advantage. Some
honey from nectar collected from Manuka flowers has antibacterial properties and is now the
most expensive honey in the world. The report identified opportunities for further value
creation through:
 Further development of medicinal products to the medical sector
 Industry consolidation
 Further research to identify the active ingredients in honey
 Greater promotion and distribution to Asia
 Production of added value products e.g. cosmetics, natural health products, flavours.
Production Trends
Canterbury has a strong and active beekeeping industry which is involved in the production of
White Clover, Varietal, Manuka honey as well as the provision of pollination services to both
the arable and pastoral industries and the sale of queens or whole hives to the North Island.
Over the last decade we have seen a consolidation of the number of hives into fewer operators
which has seen a corresponding lift in the performance of honey production per hive and
profitability.
At the same time there is substantial investment in the extraction and marketing of the product
in Canterbury.
The drive to harvest Manuka honey is caused by the differential being paid for it compared to
the other sorts of honey available. For this exercise we have assumed $20 / kg for Manuka
honey, $6 / kg for clover and $7 / kg for varietal honey12. Therefore the price premium between
11
Coriolis Investment Opportunities in the New Zealand Honey Industry. Part of the Food and Beverage Information
Project May 2012 – www.foodandbeverage.govt.nz
12
Prices supplied by large beekeeper and processor in Mid Canterbury.
Potential for Diversification of Rural Production in Canterbury
32
Manuka honey and the alternatives is very high. This partly reflects the difficulty in producing
it at present but mainly reflects the premium that the markets are prepared to pay for a
relatively rare but special product.
An economic analysis of plantation Manuka production was reported as part of a MPI
Sustainable Farming Fund (SFF) project that looked into alternative land uses for marginal
lands (class 6/7) in the Raukawa rohe (Edlin J, Duncan A 201313). One option was via a profit
share model with Comvita. It calculated an income of between $180 - $360/ha with investment
return (Marginal IRR) of between 6.7% and 14.5%. This compares with a suggested $95/ha/yr
return from sheep and beef farming on this marginal land. The report also reviewed a selfmanagement scenario which projected an income of between $350- $900/ha. The Edlin report
suggests a minimum of $2,000/ha to plant out a Manuka plantation– with additional costs if
land clearing is required. Based on this it was suggested that it would take at least 9 years
from the establishment of a Manuka plantation to make a net profit. The performance detailed
in the Edlin model is used in this analysis.
The following strategic level issues were identified in the Coriolis report.
 Introduction of other diseases and the monitoring and control of established diseases
(e.g. American foulbrood, varroa mite)
 Market issues – counterfeiting; exaggerated claims (e.g. non-active being sold as
active), False claims bring disrepute on the industry; Identification of active chemical
in honey threatens the supply of raw product to the medical sector (e.g. willow bark vs.
aspirin); Increasing amount of regulatory restrictions; could be classified as medicine;
Scares/contaminations/disease damaging consumer image of New Zealand
 Other countries launching “active” honeys (e.g. Chile’s Ulmo active honey)14
Other issues identified in the production of Manuka honey include:
 There is significant variation in the yield of Manuka between seasons and sites. There
are also regional variations in UMF levels with uncertainty on the factors creating these
variations.
 Manuka is susceptible to Manuka blight (sooty mould) however the host (scale insect)
is susceptible to a parasitic fungi.
 Limited resource – there are limits on the numbers of hives that can be carried on land
– overstocking results in significantly depressed overall yields as nectar is used by the
bee for foraging rather than stored as honey. Bees can forage over large distances
(i.e. 3km). It is possible for neighbouring apiary sites to harvest honey from a Manuka
plantation – degrading any returns for those that have invested in establishing a
Manuka plantation.
 There is some confusion on the production of UMF honey from Manuka and Kanuka15
and as well the `weak’ standards for describing UMF honey.
The model that has been developed for analysis in the case of enhancing the Manuka honey
production capacity in Canterbury involves the purchase of 100 ha of lower quality hill country
land which is planted in Manuka by an existing beekeeper who has all of the hives and skills
necessary to run them. Therefore the analysis is for a beekeeping operation as it is at present
13
http://maxa.maf.govt.nz/sff/about-projects/search/M12-168/headlands-alternative-land-use-scoping-study.pdf MPI
SFF Grant No: M12/168
14 http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11134305
15 http://www.radionz.co.nz/news/rural/105546/kanuka-honey-research-divides-scientists
Potential for Diversification of Rural Production in Canterbury
33
compared to a bee keeping operation with 100ha of Manuka from which to harvest the honey.
Therefore the analysis shows the operation with the Manuka stand minus the operation without
the Manuka stand. There is no production from this block until year seven.
At the same time the bee keeping operation is set up as a very efficient operation with revenue
from White Clover and other varietal honey as well as Manuka honey with additional revenue
from pollination services into the arable industry. Total Revenue per hive is $440 and costs
are $170 / hive. The product is sold direct to a processor and packer of honey so there is no
analysis of the added value component.
For the sake of a fair comparison between the options chosen for this report the figures have
been scaled up to the area included as Manuka producing being 5,000 ha.
4.3.2 Investment Required
Development Costs
Time to first Manuka harvest
Yield / hive (Manuka)
Price / kg.
$47.5m
7yrs
15
$20
4.3.3 Potential Returns
Beekeeping
Gross Returns
Net Returns
NPV
IRR
Return on Investment
$7.5m
$0.15m
$0.560m
15%
16%
4.3.4 Strategic Analysis
Our summary of the strategic factors is as follows:
Strengths
Weaknesses
Existing
beekeeping
industry
well
established.
Processors and packers well established.
Currently a very high premium for Manuka
(high UMF) product.
Poor returns for alternative land use of the
class of land required.
One income stream as part of an intensive
beekeeping operation.
Long period from planting to first harvest.
Variable production based on seasonal
weather conditions.
Unsure of the resultant UMF factor in the
honey.
Opportunities
Threats
Continuing to expand our knowledge into Other beekeepers bees can harvest the
how we can maximise the UMF factor in the product (exclusivity).
honey.
The market may offer lower returns as a
result of the increased production.
Potential for Diversification of Rural Production in Canterbury
34
Recommendations
 The industry should keep a watching brief on the results of the current
trial work into establishing a Manuka honey plantation.
 The local beekeeping industry should investigate the possibility of
extending the current trial work into Canterbury on suitable sites.
Potential for Diversification of Rural Production in Canterbury
35
4.4 Walnuts
Walnuts were chosen as an example of an existing industry which has grown rapidly from a
small base.
4.4.1 Background
On Farm
Canterbury has a relatively small (389 ha in 2012), but steadily growing area planted in
Walnuts. A processing facility was established in 1996 (A Cracker of a Nut) which purchases
walnuts in-the-shell from properties throughout New Zealand. Walnuts are then stored,
cracked and separated into a variety of sizes and grades for sale to the hospitality,
manufacturing and retail sectors.
Over the years, further development and processing has enabled A Cracker of a Nut to
become a year round business and extend the range of products available to include walnut
oil, paste, flour, dukkah, chutney and pickled walnuts. Grinding and grading the walnut shells
has seen the development of products for the abrasives, cosmetic and wood turning industries.
At the same time a NZ Walnut Industry Group (NZWGI) was formed which has tried to enhance
growers knowledge around what to grow and how to go about it.
In 2012 there were exports of 194,588 tonnes of fresh or dried, shelled or peeled (HS Code
08232) walnuts worth US$1,564 m. The USA has 41.5% of world trade while other large
exporters included Mexico (10.3%) and Chile (9%). Between 2008 and 2012 the annual
growth in world trade was 10% while the annual growth in value was 5% for the same period.
In 2012 the average price per tonne was US$8,042/tonne with a range in average from a low
of US$3,597/tonne for walnuts from the Ukraine up to US$12,842 for walnuts from Chile.
(UNITC Trade Map).
In 2012 New Zealand imported US$5.5m (600 tonnes) at an average price of US$9,227/tonne
with $4.2m coming from the USA and minor amounts from the China, Australia and India.
Exports in 2012 were only US$38,000 (4 tonnes) with most of these going to Fiji and Australia
at an average price of US$9,500/tonne.
It is apparent that there is very little potential for further value added for the crop beyond the
shelling of the walnuts.
The New Zealand Tree Crops Assn walnut production guide provides a good summary on the
management of walnuts. This reports that for Canterbury, areas with lower rainfall are
preferred because higher rainfall areas are more likely to have problems with blight. It also
highlights the need for frost-free conditions during the growing season. Soils need to be fertile
and free draining as water logged soils will quickly kill trees.
It is interesting that the largest growing areas in the world are China, where by far the majority
of production is for local use, and the USA where there are large areas planted for commercial
production and export mainly to Europe. It should be noted that the areas planted for
commercial production are predominantly in California which is subject to the required amount
of winter chilling but is frost free during the growing season.
Potential for Diversification of Rural Production in Canterbury
36
Australia has one large producer with land in Tasmania and South Australia, totalling 2,235
ha, which again combines the two ingredients of the right amount of winter chilling but being
frost free during the growing season. Most of their planting is relatively new and is highly
mechanised in both its production and processing facilities and it sells the majority of its
product in the shell to either export or further processors. It is interesting to note that they
project that their productivity will be relatively low at approx. 1.5 tonnes per planted ha when
it reaches full production.
The jury is still out on the viability of growing walnuts in Canterbury16. Because the time from
planting walnuts until they first fruit in harvestable volumes is 10 years and then up to a further
10 years before you reach potential peak production there is no hard knowledge of how much
that walnuts will yield in Canterbury. This is further clouded by the fact that the crop has been
affected by frosts in Canterbury. So the picture is of some seasons when the yields have been
very promising, up to 40 kg / tree, and others when there has been no production at all because
of frost impact.
Processing
It appears that the processor can handle the volumes produced in New Zealand at present
(100 tonnes) but would require significant investment if it were to upgrade its processing plant
to handle any further volume17.
4.4.2 Investment Required
The following on farm costs and returns are taken from the NZWGI Growers Manual.
Development Costs
Time to first harvest
Yield / ha
Price / tonne.
$12,000 /ha
10 years
1500 kg / ha
$4000
4.4.3 Potential Returns
On Farm
Gross Returns
Net Returns
NPV
IRR
Return on Investment
16
17
$30m
$22.5m
$85m
17%
38%
Nelson Hubber Chair NZWIG personal communication.
J Lawrence Cracker of a Nut personal communication.
Potential for Diversification of Rural Production in Canterbury
37
4.4.4 Strategic Analysis
Our summary of the strategic factors is as follows:
Strengths
Weaknesses
Strong group of initial investors.
Long period from planting to harvest.
Industry organisation set up.
Potential for frosts to impact on yield.
Very high potential returns once fully Relatively weak local demand.
productive.
A long way from key markets (Europe).
Potential to be high yielding.
Very little value added.
No real product champion.
Opportunities
Threats
Limited until the potential is realised.
Potential for blight.
Inconsistent production.
Recommendation
 A watching brief on developments in the walnut industry over the next 10
years should be maintained.
Potential for Diversification of Rural Production in Canterbury
38
4.5 Blackcurrants
Blackcurrants were chosen as an example of an existing industry which had the opportunity
to expand into further added value activities.
4.5.1 Background
On farm.
In 2012 Canterbury had 948 ha of blackcurrants which reflects a steady increase in planted
area from the 567 ha in 2000. In 2012 there were 1,408 ha planted in New Zealand with the
balance of production in the Tasman region. Blackcurrants have been grown in Canterbury
for more than 40 years. Over the years the area has waxed and waned according to the world
market price which has fluctuated quite considerably during that time. Over the last 10 years
the area planted in blackcurrants in Canterbury has doubled in size as a result of the increased
interest in payment for the crop from Glaxo Smith Kline which markets the concentrate juice
as Ribena. They take just over half of the New Zealand production of blackcurrants.
Canterbury growers have long been held up as the leaders in global production both for the
yields which they receive but also the high quality of the product. The crop requires a fair
degree of winter chill and then fine frost free weather during flowering. Sometimes yields are
variable as a result of poor weather or frosts at the time of flowering.
The industry is loosely structured around a mix of individual sales of products, sales to Ribena
and other processors and sales to the industry cooperative NZ Blackcurrants. There are a
number of processors who concentrate the juice and some who manufacture a range of
powders and market them.
There is also a long established and reasonably active industry product group Blackcurrants
NZ (BCNZ). This group operates under the New Zealand Horticulture Export Authority (HEA)
Act 1987 since 10 August 1990.
It is the view of BCNZ that the blackcurrant industry will most effectively develop and grow
with a structure that supports tight cooperation, yet still encourages innovation through
development of new products and markets. The base of the industry comprises product forms
which are included in the provisions of the HEA Act, and NZ does have a superior position in
the market as a supplier of these products. This will be maintained by:
 rigorous maintenance of quality standards, including the residue free status of
concentrate,
 retention of production efficiencies,
 adherence to an international marketing plan, that is developed for the industry and
tailored to suit individual market requirements,
 attention to servicing overseas markets in an efficient, controlled and cost effective
manner,
 use of reliable market intelligence to control and plan overseas market development,
presentation of a consistent product, and excellent promotion by exporters which
includes all elements of product knowledge, research, plant breeding and quality
standards, development of strategic alliances by exporters on behalf of the industry,
providing assurance of orderly supply in recognition of their investment in blackcurrant
product and market development.
Potential for Diversification of Rural Production in Canterbury
39
The most significant roles that BCNZ has undertaken over the last decade has been the
trialling and introduction of superior blackcurrant varieties, support of the identification of the
health benefits of blackcurrants and development of the market in Japan.
Despite these significant achievements the returns to blackcurrant farming has not improved
materially to the growers. It appears that the product returns are stuck in a commodity cycle.
Market Opportunity
In 2012 there was US$11.711m of blackcurrant juice concentrate exported from New Zealand
(HS Code 2009892015) with US$7.446m to Malaysia and US$1.074 to Australia.
 There are some well established capabilities in the region including:
 Blackcurrants NZ 18– an industry product group with a marketing strategy under
the Horticulture Export Authority.
 New Zealand Blackcurrant Co-operative19 – made up of 40 growers in Nelson
and Canterbury who have co-ordinated research and marketing.
 Just the Berries20- produce a range of extracts from blackcurrants including
powders and trademarked product- Delcyan a powder formulated to improve
brain function. The company is linked with NZ Pharmaceuticals and uses their
processing facility in the Manawatu.
Blackcurrants are marketed mainly as a fruit juice which is high in Vitamin C and has a
relatively high amount of antioxidants in it.
In 2007 the Blackcurrant Cooperative had a research scientist review a range of trials carried
out in Japan on the impact of taking blackcurrant juice. These were clinical trials which proved
that extracts from blackcurrants and other berry fruit have been shown to increase blood flow
with the following range of statistically significant physical outcomes:
 Vasodilation (widening) of blood vessels
 Reduced muscle stiffening under repetitive work
 Reduced eye visual fatigue.
These results are attributed to the presence of relatively high proportions of anthocyanins in
blackcurrants.
In 2011 Plant and Food reported in the results of their research into the health benefits of
blackcurrants that the following soft marketing claims could be made which were backed by
science:
 Controlled oxidative stress and inflammation
 Controlled muscle damage and soreness
 Assisted immune protection -enhanced immunity
 Speedier tissue repair, recovery and performance in exercise
 Train/work harder …….and for longer.
In 2013 Plant and Food reported that:
“We found that, compared to a placebo, taking an enriched blackcurrant extract before
performing stressful mental tests helped trial participants maintain accuracy, and that their
mental fatigue was significantly reduced. Our next stage is to identify exactly which
18
http://www.blackcurrant.co.nz/aboutus.html
http://www.nzblackcurrants.com/
20 http://www.justtheberries.com/blackcurrants.php?pg=82
19
Potential for Diversification of Rural Production in Canterbury
40
compounds are creating this effect, and using this knowledge to develop new whole and
processed foods or ingredients that deliver optimised performance.”
However it is proving difficult to trade on these health benefits without hard extensive human
health trials. These are very expensive to set up and run which to date has proven too difficult
for the growers and processors to fund themselves and they have been unsuccessful in raising
the funds to carry out such research from elsewhere.
This analysis takes a high order view of the nature of the industry in Canterbury, and assumes
that the health benefits were irrefutably proven with human health trials and the industry size
had expanded to incorporate the 5,000 ha size seen as possible in this project. The entire raw
product is concentrated and dried into a powder form and marketed as such into the ever
expanding and highly lucrative health and wellbeing market.
In this analysis the returns to the growers are kept at a level with the highest return from the
sale of blackcurrants being the present return from the sale of Blackcurrants to Ribena. The
capital cost, yields, costs and returns from the processing of the powder are taken from
indications of likely costs, known relationships, assumed proportions of costs and what the
product is selling for on the market at present.
We feel that there is a high degree of reliability in the on farm calculations but the processing
costs and returns are less accurate.
4.5.2 Investment Required
On Farm
Development Costs
Time to first Harvest
$130.25m
3 seasons.
Processing
Capital cost of plant
$70m.
4.5.3 Potential Returns
On Farm
Gross Returns
Net Returns
NPV
IRR
Return on Investment
$56m
$32.8m
$156.9m
16%
25%
Processing
Gross Returns
Net Returns
NPV
IRR
Return on Investment
$78.8m
$27.6m
$235m
39%
39%
Potential for Diversification of Rural Production in Canterbury
41
4.5.4 Strategic Analysis
Our summary of the strategic factors is as follows:
Strengths
Weaknesses
Well established growing industry.
At the forefront of world production.
Reasonably profitable at present.
Some health benefits proven in a limited
form.
Existing processors producing a limited
amount of the target market.
Some variability in annual production caused
by adverse weather.
Lack of scale amongst existing growers to
fund the sort of investment required.
Opportunities
Threats
To prove the health benefits in clinical trials. Failure to prove clinical health benefits.
To develop a marketing plan and branding Copying the product by other countries and
around New Zealand blackcurrant powder.
under cutting the market.
Recommendations
 Assistance should be given to the blackcurrant grower group to help in
raising funds to finance the required clinical human trials.
 Assistance should be given to the blackcurrant grower group in
developing a New Zealand brand around the product.
Potential for Diversification of Rural Production in Canterbury
42
4.6 Pea Isolate
Pea isolate was chosen because it was seen to offer the potential to the arable industry of
further value added processing of the crop.
4.6.1 Background
Pea Isolate is the product of the further processing of dried yellow peas (Pisum Sativum).
Canterbury has a long history in the production of yellow peas which were once a corner stone
crop in our on farm cropping rotation. They were sold into Europe and Asia where they were
seen as a good source of protein in prepared meals. Consequently the arable growers were
seen to be very efficient in the production of the crop and achieved yields and product quality
that were right near the top of production in the world. Ultimately the demand for New Zealand
grown yellow peas dropped off as a result of intense price pressure from large scale low cost
producers such as Canada.
Since then there has been the development of the powdered pea isolate which is widely used
in the food industry. Pea protein is a food additive with a neutral taste that is used in dairy
alternatives such as cheeses and yogurt.
Pea Protein Isolate powder is a high quality hypoallergenic protein powder containing a
balanced supply of amino acids, good digestive quality and a protein level of 85%.
It is an alternative for people wishing to avoid dairy and soya based proteins due to food allergy
and intolerance, and is also gluten and GM free. It is high in valuable Branched Chain Amino
Acids (BCAAs), it has a healthy nutrition profile, low in carbohydrates and low in fat. The
digestion rate of Pea Protein Isolate is slow compared to sources like Whey protein.
The processing of the dried peas entails dry grinding them to obtain pea flour which is then
hydrated and after separation of the starch and fibre then the protein coagulation occurs. It is
then purified and carefully dried in an atomizer. Scientists at Plant and Food CRI have
indicated that the processes are relatively straight forward and should be able to be replicated
in New Zealand once some of the details of the individual processes are further researched.
Pea Protein Isolate is increasingly being marketed into the growing health and wellbeing
market as a powder which can be rehydrated and drunk. It is growing in popularity in the body
building and health sectors because it is:




Natural (additive and flavour free)
Great for Vegetarians and Vegans
Free of additives and GMO free
Hypo-allergenic
Packaged and marketed into those sectors it is retailing at about $50 / kg.
In the following modelling the on farm returns are calculated as the additional return from
including dried peas into the rotation, which have been calculated as $350 / ha. For the
processing sector the capital costs and operating costs have been impossible to determine so
they have been taken at the rate for standard differentials for the processing sector determined
by the final sale price of the product.
Potential for Diversification of Rural Production in Canterbury
43
4.6.2 Investment Required
On Farm
Development Costs
nil
Processing
Capital cost of plant
$77m.
4.6.3 Potential Returns
On Farm
Gross Returns
Net Returns
NPV
IRR
Return on Investment
$1.75m
Processing
Gross Returns
Net Returns
NPV
IRR
Return on Investment
$48.1m
$19.2m
$137.7m
25%
25%
4.6.4 Strategic Analysis
Our summary of the strategic factors is as follows:
Strengths
Weaknesses
Experienced growers.
High ultimate returns from the product.
High amount of value added.
Lack of an existing processor.
Lack of knowledge in the process.
Little additional return on farm.
Opportunities
Threats
To re-establish a welcome crop for growers.
To find out more about the processing of the
crop.
To establish a New Zealand brand around
the quality of the product to extract the
maximum returns.
Competition from growers of the crop
internationally that can grow the crop
cheaper than in New Zealand.
Unwillingness for a processor to become
involved.
Recommendations
 More detailed analysis of the opportunity to ascertain the true capital
cost, processing cost and detail of the processes should be carried out.
 The organisation carrying out this additional work should also engage
with existing processors to ascertain under what circumstances that
they would be willing to enter the industry.
Potential for Diversification of Rural Production in Canterbury
44
4.7 Comparison with Alternatives
In order to carry out a comparison of the financial returns generated with what is being
achieved at present the following analysis was carried out.
Pastoral Sector
The analysis of the potential returns from the pastoral sector reports the marginal return to the
investment. In this way the common investment elements like cost of the land and the cost of
irrigation equipment are left out of the comparison to allow comparison of the choice to adopt
one system or the other.
Table 26: Marginal returns to investment in the pastoral industry (/ha).
Capital Invested Return on Capital
Dairy Farming
Sheep Milking
Dairy Support
Sheep and Beef
11,500
9,500
3,500
4,200
28%
25%
22%
18%
As can be seen from Table 26 Dairy farming still offers the best return on capital but Sheep
milking is very close behind and offers the non-financial advantage of creating lower Nitrogen
leaching.
Arable Sector
Comparison of the two arable examples are different because they do not require the
investment of any additional capital. Therefore the comparison between them and what is
occurring at present is the return received from the total rotation, expressed as Cash Farm
Surplus, compared to the total amount of capital invested in the farming operation, Total
Assets.
Table 27: Return on Total capital invested in arable operation.
Capital Invested Return on Capital
Rotation including peas & pharmaceutical plants.
Rotation including pharmaceutical plants.
Rotation including peas.
Existing rotation.
9.9%
8.9%
8.5%
7.5%
As can be seen from Table 27 the inclusion of both pharmaceutical plants and peas into the
rotation offers a significant lift in the return on total capital above what is being achieved at
present. The addition of either pharmaceutical plants or peas alone also offer a significant lift
in overall returns. However it is the returns from processing which really offers the most in
terms of additional value added to the arable industry.
Horticultural Sector
The returns from the Horticultural sector are worked out on the marginal returns from the
investment. The comparison is made with the existing returns achieved from Blackcurrants
and the potential returns that can be made from Wine grapes. These are the only two
horticultural crops that we had recent analysis on
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Table 28: Marginal returns to investment in the horticultural industry (/ha).
Capital Invested Return on Capital
Walnuts
Future Blackcurrants
Wine Grapes
Existing Blackcurrants
12,000
26,000
40,000
26,000
28%
25%
19%
13%
As can be seen from Table 28 both Walnuts and the future Blackcurrants offer considerably
better returns than both Wine grapes and existing Blackcurrant production.
Potential for Diversification of Rural Production in Canterbury
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Appendix 1: Organisations Contacted for First Stage
Assessment
Organisation
Foundation for Arable Research
Plant and Food
Midland Seeds
McCains
Tomato Grower
MG Marketing
Berries
Aoraki Business Development
Enterprise North Canterbury
Grow Mid Canterbury
NZ Food Innovations
NZ Horticultural Consultants
Cracker of a Nut
Beef and Lamb NZ
Silver Fern Farms
ANZCO
AgResearch
Plant and Food
Dairy Goat Co-operative
New Zealand Hops
Ngāi Tahu
Lincoln University - BHU
Potential for Diversification of Rural Production in Canterbury
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Appendix 2: List of crops investigated by Plant and Food.
Crop
Arable
Productive Requirements
Intensive
Marginal Soils
Require Shade or a
Horticulture
host
Food & Herb Crops
Buckwheat
X
Coriander (herb & seed)
X
X
Elderberry
X
Gevuina (nut)
X
Horseradish*
X
X
Konjac*
X
Maté (tea)
X
Saffron
X
Ulluco
X
Wasabi*
X
Yacon
X
-Edible fungi
Black Truffle*
Borchii truffle
Burgundy truffle
Saffron Milk cap*
Shoro
Plant Extracts
-Essential Oils
Clary Sage*
X
Coriander
X
X
Dill
X
Lavender
X
a,
Natives oils *
X
Oregano
X
Pepermint
X
Rose*
X
Sage*
X
Thyme
X
-Medicinals
Arnica*
X
Calendula
X
Echinacea*
X
Ginkgo
X
Ginseng*
Goldenseal
Licorice
X
Milk (variegated) thistle
X
Rosehip*
St John’s Wort
Valerian*
X
Industrial Crops
Pyrethrum
X
Biofuel/Biodiesel*
X
Hemp
X
Meadowfoam oil
X
*: an economic assessment of the potential crop returns has been
a: Requires market development.
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
undertaken for this crop
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