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Damien O’Connor at Meat NZ annual general meeting,

This is a tumultuous time in the meat industry. Not only is there potentially huge disruption internationally because of the second Gulf War and the attendant security concerns, there is also considerable change happening here in New Zealand.

It is impossible to say exactly what the current conflict will mean for our trade. The Middle East is an important market for us, but it is still a small percentage of our trade overall.

There is a great deal of uncertainty about how long the war will last and whether it will spill over to other regions. We can safely predict that the uncertainty will probably have a negative impact, affecting levels of confidence, economic growth, and exchange rates.

There is also likely to be increased shipping and insurance costs, which will hit your industry as well.

Apart from the current international uncertainty, MAF's latest situation and outlook for agriculture and forestry says that your industry is in good heart, and benefiting greatly from its responsiveness to markets and its productivity gains.

While sheep numbers have fallen over the past 20 years, lamb weights have increased significantly. Stock management and processing is geared to the needs of higher value markets. Exports of sheep meat are less seasonal than in the past, as exporters manage year-round supply through inventory and procurement management, and thus achieve price premiums in the market.

The outlook for the sheep industry over the next three years is that sheep numbers are expected to continue to fall because of land use changes, but that sheep meat production is projected to increase due to productivity gains and increased animal weights. Given the excellent results of the past two seasons, we should have expected a lower rate of conversion from sheep farming to other forms of land use.

Sheep meat producers are leading the game in the red meat sector with their productivity gains. While beef producers are also more productive, with more meat being produced from fewer animals, you have a way to go to meet the productivity gains of sheep meat producers.

MAF analysts tell me the trends in the beef industry for the next three years are more difficult to identify because of changes in the Asian market, market access issues, and the impact of the dairy industry on dairy cull beef production. Beef exports are expected to decline somewhat to 2006 because of decreased beef and veal production.

However, agriculture as a whole leads the entire economy when it comes to demonstrating the ability to grasp new technology and new ways of doing things and becoming more productive. My colleague Jim Sutton is fond of using the statistics that show since the deregulation of our economy in the mid-1980s, productivity in the agricultural sector grew 3.9 per cent a year. Productivity in the economy as a whole during the same time period grew at less than half that.

This Labour-Progressive Government is keen to encourage innovation, in an effort to provide more growth and better productivity, in our country. Your sector is a key part of that. Just over 100 years ago, red meat producers seized upon the new technology of refrigeration and adapted it to send our product overseas, creating the frozen meat trade on which this country became a significant world player.

Peter Drucker, the father of the catch-phrase "the Knowledge Economy", highlights agriculture as the sector most receptive to that message. He sees our sector as the lead sector - which it is.

Change is of course a continual process.

Markets have in the main moved on from frozen meat. Again, the red meat sector has responded to that with new technology enabling long-life chilled product.

More change will be needed in the future.

As well as the continual production developments, your sector in New Zealand is currently working through a process focused on the major restructuring of the traditional producer board structures.

I know Jeff Grant and Mike Petersen have been holding meetings around the country to brief farmers on proposed changes. Some meetings have been a steep learning curve, or so I hear.

The Labour party's policy on producer board reforms has always been that it must be supported by the majority of industry players; it must be fair to minority interests; and it must be in the national interest.

The Government has not yet received a formal proposal for this restructuring, which proposes forming a joint body between Meat NZ and SheepCo to fund meat and wool industry good activities. It is essential when we do receive a proposal that it has the overwhelming support of beef and sheep farmers. Indications from the dairy industry process should warn us that endorsement through the Commodities Levies Act even for industry good funding is not easy.

Farmers have a reasonable income at present. But their independent spirit and cautious economic management could prevent endorsement of a levy, unless they fully understand the disastrous alternatives.

Funding for biosecurity and in particular TB control, market access advocacy, and ongoing research and development are vital industry investments. You must achieve a positive outcome from this process.

Additional to this is the challenge of attracting young, enthusiastic, and innovative people to the agricultural industries.

The importance for New Zealand to attract and retain high performance in agriculture is because our economy depends on that performance. International urbanization is a trend we cannot reverse, but maintaining rural communities and a healthy workforce is our lifeblood. This Government has committed a huge amount of effort through regional initiatives, communications development, and rural health funding to protect our economic base and acknowledge your importance. We will continue to do that but it is essential that the meat industry is a key player in working with us on these challenges.

The previous National Government committed New Zealand to the Kyoto Protocol. This Government now has the task of implementing that commitment. It would be fair to say that in spite of opposition claims, we are taking a cautious approach. We must remember that without widespread international support, the protocol will fail. That does not seem likely. Neither does the possibility that emissions will reduce through some ad hoc voluntary country-by ?country arrangement. As an industry reliant on stable climate, we are aware of our exposure to adverse climatic events. We can't afford to ignore international issues.

At this stage, we have exempted the significant methane emissions from agriculture from any direct charges. Our challenge is to develop through research ways of converting grass to protein with less waste. In my terms, that simply means more efficiently.

This Government is not afraid to tackle the big issues.

It has been well ov



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