Peering into 2021
Forecasting isn’t about identifying one single exact future but understanding the multiple potential future scenarios which may occur and preparing with the resilience and agility to adapt to those. From scientific breakthroughs to geopolitics, from environmental challenges to spontaneous consumer trends – the future will be decided by a range of interconnected and independent variables and leaders must prepare for any of several different combinations to occur.
Building on recent articles from across our KPMG Agri-food team, here are some of my expectations for food and fibre in 2021, and what opportunities that may bring for New Zealand.
Innovation in distribution will accelerate.
As noted by Ian Proudfoot’s recent article, one thing that has become clear in 2020 is that the global distribution network which transports the world’s goods is not fit for purpose, and the inefficiencies are contributing to global emissions, food waste and economic loss. Whether this is a courier van having to make a return visit to a drop-off address, or a shipping container spending half its life empty on one-way trips around the world. The necessity of transport networks to maintain food supply and economic stability will push both regulatory and economic incentives for transport innovations.
The opportunity?
New Zealand can focus on its specific distribution challenges and develop innovative solutions for ourselves within our domestic food system and our role as food exporters, with the opportunity to then sell some of these solutions to the world. Emissions free transport has a massive value proposition both for environmental benefit and market demand, whether that be wind-powered sailing, a concept already used by Tres Hombres or perhaps new innovative solutions such as multi-drone delivery networks, one-way bio-containers made from timber or other biomass which can be further processed upon arrival in market, or even solar-powered semi-submerged automated submarines!
Investment in cultured meat will double… again
From 2018 to 2019, investment in cultured meat increased over 120%. By July 2020, investment in all alternative proteins for the calendar year so far reached over $1.1 billion, doubling the 2019 value – despite the global pandemic. After Singapore became the first country to open the door to cell-based meat last week in the form of chicken nuggets, this is the first of a slow-moving domino effect that will only further boost investor confidence and no doubt see the increased investment of global capital flowing to large and small players in the emerging proteins space.
The opportunity?
As discussed in my article last month, New Zealand could position itself as the destination of choice for innovation investment in cellular agriculture. Scaled cellular ag requires significant energy demand. New Zealand can leverage its latent renewable energy potential as an incentive for international investment. This coupled with our Covid-free status, reputation for safety and quality, and resource availability combine to make us an excellent location for this future food opportunity. Next steps: Further national investment in renewable energy, ensure legislation incentivises this investment and reduces regulatory barriers, communicate the opportunity worldwide.
Global price volatility will continue
Supply chain challenges discussed above; worker shortages (as experienced in the New Zealand horticulture sector), international trade tensions (such as the current experiences between Australia and China), Pests and diseases (including African swine fever) and climate change impacts will all see food prices rise and fall to varying degrees, in different sectors and across different parts of the world. The current market value of the global food system is USD$10 trillion, but the “hidden costs” of this system including impacts on health (e.g. obesity and undernutrition), environment (including greenhouse gas emissions and other pollution) and the economy total USD$12 trillion. That leaves a USD$2 trillion shortfall between prices paid and world impact.
The opportunity?
New Zealand can use a combination of our diversification (in export location, production systems and product types) in addition to a focus on pricing strategy (as discussed by Andrew Watene’s recent article) to incorporate not only the ‘true price’ of what is being produced, but also the value of the positive societal impacts our nutritious and environmentally friendly products can deliver. This must be embedded in the New Zealand story as we communicate to the world, to articulate the true value represented in our production systems and goods.
If 2021 is anything like 2020, then we need to be prepared for consumers getting used to ‘waves’ of lockdowns, less extreme demand-surges, reduction or removal of Government subsidies and perhaps a maturing of letting some industries ‘die’. It will be a telling year and one where efficiencies may separate the successful from the unsuccessful. This year has produced few winners and many losers, but it has also highlighted areas that require accelerated innovation while presenting opportunities to the economy, the community and the planet for doing so. As we close the door on 2020, and start peering through towards 2021, we don’t need to make a single perfect plan for achieving success, but to position ourselves for resilience and agility for the many different futures that next year may bring.
Jack Keeys
Agri-food research & insights analyst
KPMG Auckland