It’s a privilege to be able speak with producers from across the industry who freely share views and perspectives, enabling me to see the big picture. From my recent conversations, we are clearly at critical time of change.
The pace is relentless. While I am amazed at the ability of our members to adapt, it is taking its toll with exhaustion and frustration starting to really show. When the dust settles - and it will - our industry will look fundamentally different and will have moved to the next level.
Pressure has been building for a few years, so adding a pandemic and war to the mix has sped things up. You can see this right through the system, from rising input costs, supply chain delays and intensifying labour and skills shortages. Almost everything feels constrained and uncertain.
At the start of 2022 things were looking ok for our sector. We were anticipating coming out of the Covid crisis a bit bruised, but still intact and were encouraged by continued strong demand. We are only just finishing the first quarter and our predictions are already out the door.
We envisaged that input costs would increase, but not at the high levels we have seen. Supply chains have been affected across the economy, but our sector has been impacted more than many others with shortages and delays driving serious cost increases. If inflation in the general economy is running at 6%, in plant production it may be around 15%.
This is driven by price increases for equipment and materials that are made overseas. These supply chains have seen higher demand and then been constrained by materials shortages and delays in shipping and trucking. Everything from fuel, fertilisers, agrichemicals and containers have been affected and the resulting price increases and delivery delays are expected to continue for the next 12 to 18 months.
The biggest impact has come from wage bills, that are also continuing to climb. These increases are driven by labour shortages and wage rises to cover the escalating cost of living. The economists are saying that this is from real wage growth that is catching up after being effectively stagnant since the 1980’s. If this is the case, it’s tough on producers who are meeting these costs today.
Having the borders shut for the past two years has exposed the lack of skilled, young horticulturalists in NZ. This is the result of 30 years of underinvestment by Government in our education programmes. We have done well to attract good workers from other sectors and plant producers that offer good conditions will continue to be able to do this. It is expected that many countries will train and then retain their skilled horticulturalists as they seek to increase their domestic food production. This means that NZ will be required once again invest in training our own.
Despite all of this, our members are continuing to improve and grow their businesses. This includes buying businesses, building new production areas and introducing systems and innovation. Whether it is about getting bigger, or getting better, fortune favours the bold and our industry will soon see the benefits of this change.
Recasting a prediction for 2022 is difficult. While consumer confidence has tanked since the start of the year, there is still a strong backlog of demand and firm prices for plants. The supply chain issues are expected to ease over the next 12 to 24 months, then settle into a new normal. What our industry looks like at that time depends on how we respond to these challenges today. If we hang in there, think we are in good shape.