Many in the primary sector were not surprised to hear recently that New Zealand farming has about five years before the developing world eclipses us in becoming the lowest-cost producer of agricultural commodities.
This was the verdict from accounting and advisory firm KPMG, which in its inaugural Agribusiness Agenda report said the looming world food shortage meant formerly marginal land in South America, some of the former Soviet Union, Mongolia and western China as well as large tracts of Africa would become profitable for large-scale, intensive farming.
The cost of labour and land in these developing regions is much lower than in New Zealand, and our farmers have relied on more modern, efficient methods of production that have more than compensated for the advantages of these competitors.
A more efficient system of production has been achieved largely through advances made by our world-class agricultural science research and development.
The work of scientists in areas like animal genomics has increased the reproduction rates of the national sheep flock, and significantly improved the productivity of farming.
Despite this, the aforementioned global market conditions mean that producers in developing countries are quickly closing in.
The likes of Fonterra and PGG Wrightson subsidiary NZ Farming Systems Uruguay have countered with a move to producing agricultural commodities in developing countries and, in doing so, combine access to cheaper land and labour with Kiwi farming know-how.
However innovative, off-shore production doesn't help New Zealand farmers based in this country compete with low-cost producers overseas.
There are two strategies that New Zealand's primary sector can employ and they both involve using science and technology.
The first is to continue to utilise new knowledge and techniques developed by New Zealand's world-class science infrastructure to further improve productivity on and off farm; and the other is to develop new, high-value products from agricultural commodities.
This second tactic enables New Zealand businesses to avoid the boom and bust cycle of global commodities markets, leave behind low-cost competitors and enter valuable new markets.
One example is a therapeutic icecream developed by Fonterra and Auckland University through their LactoPharma collaboration.
Known as ReCharge, its bio-active properties have the potential to assist the body in coping with the side effects of chemotherapy.
Currently undergoing phase two human clinical trials, if successful, it could prove to be a big seller to thousands undergoing chemotherapy around the world.
Unfortunately, niche products such as this do not sell in significant enough quantities to affect the overall milk-solid price.
But there is a plethora of different avenues for creating new products that command a premium in the marketplace.
And, as New Zealand is home to some of the most innovative agricultural science in the world, we are better placed than most to develop these new products.
However, it is clear that as a country we need to further expand our foray into added value.
Despite the investment required, pharmaceutical development is an area where the rewards are potentially huge.
One company that is making huge strides in this area is Living Cell Technologies, which is extracting cells from a herd of genetically pure Auckland Island pigs and implanting them into diabetes sufferers, with the aim of alleviating the need for insulin injections.
Already a significant way through phase two human clinical trials in New Zealand, the company is hoping to expand its Southland-based piggeries if results continue to be positive.
If the development of the company's Diabecell drug is successful, the Southland economy stands to gain significantly from spillover benefits.
This is something that has not gone unnoticed by Mayor Tim Shadbolt, who has already been to Europe courting investment in animal-based pharmaceutical development in Southland.
Technology must also play its part in improving the competitiveness of our primary sector.
One exciting project that springs to mind is automation in meat processing.
Ovine Automation Ltd, which is a collaboration involving several meat-processing companies, Industrial Research Ltd and Dunedin engineering firm Real Cold Milmech (Millers Mechanical), is working to develop new automated systems for lamb-meat processing that is expected to provide significant productivity gains for the industry.
The fact that this collaboration includes most of the big players is encouraging in an industry better known for fierce competition.
If the industry can share the gains from this new technology, all New Zealand meat exporters will stand to gain significant advantage over foreign competition.
It is clear that New Zealand's primary sector needs to take a multi-pronged approach to the increasing threat of competition from low-cost producers in developing countries.
Science and technology will enable efficiencies on and off farm, and also avenues for the development of new, high-value products that will ensure our world-leading primary sector stays ahead of the pack.
•Shaun Coffey is chief executive of Industrial Research Ltd, a Crown research institute.
