PART III - POLICY ISSUES AND MAF POLICY POSITIONS

8.1 - MAF Position and Role

MAF recognises that organic farming can contribute to desired outcomes of sustainability of agriculture and increased export earnings. MAF will therefore encourage organic agriculture in the context of the sustainable agriculture policy, through helping to overcome identified constraints. This support does not mean that MAF endorses all the present standards and practices of the organic and biodynamic organisations. Some of the standards, such as those relating to animal health remedies, are a matter for debate. Continuous review and development are needed to take account of new technologies and market requirements. However, MAF recognises that the BPCC and BDFGA standards conform to or exceed those of most other countries, and that they are generally accepted and found adequate by producers, traders and consumers.

MAF views organic farming as one of various possible ways of achieving the outcomes of increased sustainability and increased export earnings. MAF's role will be primarily as facilitator to enable private persons and organisations to develop opportunities.

8.2 - Policy of Encouragement and Support

The number of organic farmers is small. This limits their ability to supply markets and limits the contribution to more sustainable agriculture. The real and perceived constraints identified will need to be overcome if significant benefits from organic agriculture are to be realised.

Several European governments are providing subsidies for conversion to organic farming. The present New Zealand government policy is to not "pick winners" and to not confer greater advantage to one group over others. In addition, the difficulty of predicting and quantifying the public benefits from organic farming, and the scarcity of government funds, make direct subsidisation in New Zealand unlikely. However, at present organic farmers may be disadvantaged compared to other farmers. The existing infrastructure, including marketing channels and institutions, research, education and information, favours conventional farming. MAF will work to remove these constraints.

In some cases, conventional forms of farming impose costs, such as sedimentation of rivers and eutrophication of water bodies, on the rest of society and on the environment, but these costs are not paid by farmers. Organic farming aims to avoid these impacts. The omission of these costs from farm budgets tends to overstate the real economic value of conventional farming and understate the benefits to society of organic farming. MAF can work with regional councils and farming groups to address adverse effects on the environment.

Government can also provide some encouragement for organic farming through recognising the viability and benefits of organic methods. This should result in more favourable attitudes of MAF staff and servicing institutions and of conventional farmers, as well as of the public at large.

MAF will announce and communicate to MAF staff, the rest of Government, the agricultural sector and the public at large, MAF's position on this approach to sustainable agriculture.

Some specific issues in which there could be some government involvement follow.

8.3 - Overcoming Conversion Constraints and proposed pesticides tax

Some submissions said that many NZ farms could become organic fairly easily, once adverse perceptions are overcome. Several submissions suggested the imposition of a pesticides tax and using the revenue to subsidise conversion to organic farming. The concept of using economic instruments to make resource users pay the costs they impose on the rest of society is generally agreed to be desirable. However, the form such instruments should take is controversial. Many consider that taxes should be non-selective and should be confined to collecting revenue. Others believe that taxes can be used to correct market failure.

Several European countries have found that pesticide taxes have not reduced pesticide use; their main effect has been to raise consciousness about pollution and to compensate the public in general for third party effects. Furthermore it is not considered appropriate to use any such revenue to subsidise organic farming.

In the future, regulatory agencies may impose of charges or licence fees for pesticides, that cover the cost of monitoring compliance with standards. The agencies are also likely to use economic instruments to manage risks (external costs) to people and the environment from hazardous substances. A blanket charge on all pesticides would not be a true reflection of costs, because the external costs vary considerably with different chemicals and with the way they are used. A differentiated tax on active ingredients would be preferable. A discriminatory charge on the most hazardous pesticides with the most damaging and longlasting effects would be preferable if it can be applied without high administrative costs. A pesticides charge, even if not spent on organic farming, would reduce the usage of pesticides. An indirect effect of such a charge would be to increase the profitability of organic farming relative to conventional farming.

Some modern pesticides can be used with minimal adverse effects and some scientists believe that such a system may sometimes be more sustainable than an organic system. Such pesticides are likely to be relied upon by many farmers for the foreseeable future, to protect crops from pests and disease and to fulfil overseas market requirements.

Submissions indicated that some regional councils favour the establishment of organic farming as a way to more sustainable agriculture. There are various ways in which regional councils can encourage this development indirectly, such as fees for discharge into waterways. One regional council also suggested direct encouragement by zoning areas for organic farming. However MAF considers such a measure would be hard to justify and implement unless all landowners are in agreement.

Charges on pollution by run off from fertilisers through setting up a traded permit system has already been tried in Colorado and was discussed by Reeve and Kaine at the Sustainable Land Management Conference in 1991 [2 Reeve,I. and Kaine,G. Ecosystem Coupled Markets: a policy approach for sustainable land management Proceedings of International Conference on sustainable land management, Palmerston North 1991.] . At present, however, it is not clear whether such a system could be introduced by regional councils under the Resource Management Act.

MAF supports the principle that users of resources should pay for any resulting damage to the environment, but considers that general taxes on all inputs do not usually target the actual problems. These problems vary more by location and circumstances than by amount of an input used.

MAF will cooperate with regional councils, agricultural sectors and community groups, in their implementation of the Resource Management Act, to ensure that structures and incentives encourage more sustainable forms of farming and encourage a move away from farming methods that are not sustainable.

8.4 - National Standards for Organic Products

Consumers of organic products want evidence that the products have been produced by an organic farming system. Establishment and maintenance of specific and processing standards and truth in labelling is therefore crucial. There are two NZ organisations which inspect and certify farms and processors according to published standards - the NZ Biological Producers and Consumers Council (NZBPCC) and the Biodynamic Farming and Gardening Association (BDFGA). Both organisations conform to or exceed minimum standards established by the International Federation for Organic Agriculture Movements (IFOAM).

Most submissions confirmed MAF's view that the existing certifying system is working well. The two organisations work closely together and there is little evidence of fraud or other forms of market failure. There appears to be no need for legislated national standards at present. There are an increasing number of overseas and international standards being developed, with which New Zealand exporters must comply. There are generally only minor differences between these standards. As New Zealand's main markets are overseas, it is important that New Zealand organic exports are compatible with the overseas standards.

To promote truth-in-labelling for the domestic market, MAF had developed a guideline definition in conjunction with the Ministry of Health and the Commerce Commission (see Appendix VI). This guideline refers VI to the system of production, which must be in accordance with the standards of one of a number of listed overseas organisations. The guideline has been published by the Commerce Commission, and can be used in case of disputes, in court proceedings under the Fair Trading Act.

MAF does not favour the introduction of legislated standards and prefers to support industry standards and self regulation. However, MAF in conjunction with the Commerce Commission and the Ministry of Health. will monitor the effectiveness of the Commerce Commission's guideline definition of organic produce for truth-in-labelling on the domestic markets. If problems arise, in relation to domestic or export markets MAF will investigate the legislation of a definition and /or standards under either the proposed Primary Products Bill or the Food Act.

8.5 - International Standards

MAF recognises the desirability of commonly accepted international standards, but also recognises that the EC, US and Australia have all developed their own standards. As NZ depends heavily on exports to foreign markets, and has obligations under the Closer Economic Relations agreement with Australia. MAF will retain a flexible approach of certifying to the standards required by the importing country.

MAF will support initiatives towards common international standards by recognising and supporting CODEX and the International Federation of Organic Agricultural Movements (IFOAM) standards.

8.6 - Food Safety

Some consumers believe that organically produced food is safer and of a higher quality than conventional products (several submissions supported this view). Research in Europe as well as consumer surveys have indicated that organic food has good tasting and high keeping qualities. Investigation of the health benefits of eating organically produced food has been inconclusive. Some experiments resulted in animals fed on organic food showing higher fertility or higher growth rate than control groups, but other experiments found no difference (Lampkin 1990).

Organic certification standards specify maximum residue limits that are usually one tenth of Ministry of Health limits. However, organic produce is not generally tested for chemical residues, and can be subject to environmental contamination such as spray drift, so does not necessarily have a lower pesticide residue level than conventional food. It should also be recognised that there can be chemical contamination by harmful natural toxins and residues of allowed pesticides.

MAF and the Ministry of Health are responsible for ensuring that food conforms to specified limits and is therefore "safe" from pesticide and other contaminants. A "one-off" testing programme in 1990-91 indicated that 98% of all produce tested was within Maximum Residue Limits and therefore presented no threat to consumer health. MAF and the Ministry of Health are working to establish an on-going residue monitoring programme. They will propose to Government that adequate monitoring and enforcement powers are contained in new legislation. These departments are discussing options for setting up a more rigorous residues testing scheme with the fruit and vegetable industries.

8.7 - Animal Remedy Usage and Animal Welfare

The intention of organic and biodynamic farmers is to develop systems which enhance the wellbeing and health of animals, through keeping them in systems that minimise stress, and through breeding disease-resistant animals. However, some animal disease will occur and animal remedies are needed. Research is needed into alternative animal remedies for organic production. A dialogue has been started between the certifying organisations and veterinary authorities to enable agreement to be reached on recommended practices. MAF will make submissions to the Standards Review Committees of the BPCC and the BDFGA and will assist them to devise suitable animal remedy practices.

MAF will advise certifying organisations on animal health standards and practices that enable them to comply with the requirements of the Animals Protection Act 1960.

8.8 - Research, and Information Exchange

There are many FRST funded projects investigating specific technologies which could be used in organic farming. Such research provides, amongst other things, means of controlling pests affecting plants and animals by selective breeding and the use of biocontrol agents. Integrated pest management is the general goal of much research activity. There is, however, a problem when it comes to funding research which studies whole farm systems - an approach which is particularly important in the study of organic production. This type of research tends to be marked down by peer reviewers with backgrounds in specialised fields. Simply, the science is considered to be of lower priority and quality than that applied to more focused problems. Means of funding farm systems research need to be identified.

Government in its "Statement of Science Priorities" (October 1992) placed heavy emphasis on research aimed at ensuring that primary production systems are sustainable. This emphasis has been incorporated in the research strategies developed by FRST during 1993.

MAF will continue to identify key research issues and work with MORST and FRST to ensure that adequate research strategies on sustainable agriculture, including organic farming technologies and systems, are a priority. MAF will also consider direct funding research on organic farming, where this is necessary for developing policy advice to Government.

Lack of knowledge and information about organic farming methods and technologies has been identified as one of the major constraints on conversion and increasing production. Better understanding of the biological processes involved is needed if organic farming is to be understood and accepted by the farming and scientific communities. This is an area where government assistance could be appropriate. MAF no longer has responsibility for agricultural research and has few resources with which to provide any information.

MAF consultants now work on an independent, commercial basis. A few have knowledge about organic systems and a growing number are involved with sustainability issues. In future, much of the consultancy and research in organic farming may be funded by private processing and marketing companies.

Information exchange structures are needed to enable new and existing organic farmers to obtain the information they need, and to indicate their needs to researchers. There are three farmer discussion groups that discuss organic farming. Further discussion groups and landcare groups, such as those established in the South Island high country and in Hawkes Bay, could serve as useful pathways for information exchange. Research institutes could contribute significantly to collection, processing and presentation of technical information from their research farms but are not funded to do so at present.

As part of its facilitation programme on sustainable agriculture, MAF will work with educational institutions, Crown Research Institutes, BPCC and BDFGA, TDB to facilitate the collection, dissemination and exchange of information. MAF will support regional councils and other organisations in encouraging the formation of community groups, including groups of organic farmers, to focus on issues of concern, access information they need and act as a two-way information exchange with CRIs.

8.9 - Education

Most agricultural and horticultural education has included agroecological, sustainable principles, but the teaching of agroecological practises has been less common. Universities have started to offer agroecology options, several polytechnics also offer courses in organic methods and schools will also do so. Inclusion of agroecology as part of the basic courses is starting at Massey University and there are proposals for an integrated university effort to provide extramural courses, workshops etc for farmers. However, most of the university courses only provide information about substitution of some techniques within existing systems, rather than a whole system organic approach.

Together with the relevant education authorities and institutions, MAF will review the present provision of education in sustainable agriculture methods and work to encourage the incorporation of the principles of sustainable agriculture and information about options such as organic farming in educational programmes.

8.10 - Legislation

Much of the agricultural legislation, and particularly the marketing legislation, has been developed on a commodity basis. This legislation may in some cases disadvantage organic producers who produce a large range of differentiated organic products by a different system. MAF considers the benefits of commodity based legislation outweigh the disadvantages, but recognises that in some cases it may be necessary to make special provision for organic producers.

The BPCC has made representations concerning the application of the Commodity Levies Act 1990. This Act enables product groups to apply to the Minister of Agriculture for compulsory levies on sale of specific products. Levy monies can be used for a variety of functions, and particularly for research. The BPCC has pointed out that much of conventional research is irrelevant to organic farming and therefore organic farmers should be exempt from such levies. If the amount of expenditure relevant to organic growers is significantly less than their contribution, it may be appropriate for product organisations to exempt organic farmers from some compulsory levies in future.

When levy orders are proposed, organic farmers can discuss with the product organisation how their needs can be met or whether they should be exempted from the levy. Granting of a levy order by the Minister is conditional on satisfactory consultation taking place. However, some levies such as those for disease control must be compulsory for all producers, as all producers benefit.

Statutory marketing arrangements should take account of minority product groups such as organic producers. However this is not always practicable and all products have to comply with requirements such as export phytosanitary requirements set by importing countries. Where organic products are marketed through the same organisation as conventional product, the organic product will also have to comply with quality standards where appropriate.

MAF will seek to ensure that the marketing institutions, particularly those with single seller powers, accommodate and assist the development of export channels and markets for organic products and that organic farmers receive benefits from any levy monies paid by them. If statutory marketing arrangements are found to be hindering the marketing of organic products unnecessarily, MAF will advise Government on measures to remedy the problems.

8.11 - Marketing

There has been very little organised marketing of organic produce so far. A few cooperative or wholesale distributors have been successful in organising domestic marketing in some areas. Some individuals have developed their own export market channels, but other firms that were set up to export organic produce have been unsuccessful. It is likely that existing firms with marketing expertise and established export links for conventionally produced products will be more successful in establishing markets for organic products. Watties Frozen Foods has demonstrated this.

Mention has already been make of exporting problems to be overcome, including meeting overseas certification requirements and establishing a regular, reliable, sufficiently large supply. Export of processed products overcomes most of these problems and may provide the best opportunities for export of organic produce.

For products for which statutory or voluntary marketing and processing arrangements exist, there has been a reluctance by some of the institutions involved to accommodate or assist the marketing of organic products as pointed out above. There has been a perception that supply is too small and unreliable and future demand uncertain. This attitude is beginning to change. The Apple and Pear Board and the Kiwifruit Marketing Board and some horticultural product groups under the Horticultural Export Authority (HEA) are now actively involved in the export of organic produce. However, considerable effort and finance are required to develop structures for organic product marketing. Significant premiums on a larger volume may be necessary to justify the added expense. The HEA favours the provision for organic product in the export marketing strategies of product groups. In each case, organic product must comply with the industry's quality management plan for that product.

Opinion in submissions varied as to whether there should be an organised united approach to marketing organic products or whether development should be left to individual entrepreneurs.

The TDB has organised workshops and initiated a market overview to determine the nature and size of markets for organic produce. At present markets are small but supply even smaller, so opportunities exist. Some products have greater potential than others and some are easier for New Zealand to supply than others. The best opportunities appear to be for horticultural products, particularly processed products. It is likely that the main alternative consumer demand will be for low residue products produced in systems that have regard for the environment and animal welfare, not specifically organic food. However there will be niche markets for organic products. Even if this is a small percentage of major markets, it would represent a sizeable opportunity for New Zealand.

MAF recognises the need for market research and development, but also recognises that this is best done by market entrepreneurs. MAF will not restrict or compel the way marketing is developed. In some cases commercial marketers and industry may develop markets and seek suppliers, in other cases farmers or groups of farmers will find market outlets themselves. MAF will collaborate with the TDB and private marketers in the collection and analysis of overseas market research. (PS)

8.12 - Market Access

Overseas countries are beginning to require evidence of the standards of production for imported produce labelled as organic. Some countries are developing national standards with which all domestic and imported organic products must comply. Organic product exports also have to meet all importing phytosanitary requirements. This limits the ability of NZ to export fresh organic produce.

The EC has developed standards which will replace the standards of member countries. The EC now requires third country government assurance that imported organic products meet its standards. The MAF Regulatory Authority has applied to the EC to be the competent authority to audit and certify the systems of inspecting organisations. A detailed dossier is being prepared, which sets out details of the certification systems. It has been agreed with the organic industry that MAF Quality Management (MQM) will act as the certification body under contract to MAF Regulatory Authority. MQM will evaluate and audit private inspection bodies and will certify product for export to the EC. Private inspection bodies will continue to inspect and certify individual producers. Once sufficient documentation is assembled, MAF will forward the complete application to the EC.

In the future other countries may require similar certification audit. The US is developing standards for organic produce. The Japan MAFF has published guidelines for labelling organically grown products, which apply to domestic and imported products. Uniformity of country standards is desirable to avoid the need for different production systems for different export markets. The Codex Alimentarius Commission (CODEX) is developing guidelines for the production, processing, labelling and marketing of organically produced foods. These guidelines may be ready for adoption in 1995.

MAF will provide information and advice to meet market access requirements. This will include monitoring overseas requirements and, where necessary, certification that products labelled as organic meet overseas standards.

8.13 - Cooperation with Australia

The Organic Produce Advisory Committee (OPAC), which includes the three major Australian certifying organisations, has developed national standards for organically produced products. At present these standards have been implemented only for exported organic produce, but eventually the standards may apply to domestic markets also. At such time, organic product from New Zealand may need to conform to OPAC standards to gain entry to Australia. The BPCC and the BDFGA maintain contact and coordinate activities with their Australian counterpart certifying organisations.

MAF recognises the need for market research and development, but also recognises that this is best done by market entrepreneurs. In some cases commercial marketers and industry may develop markets and seed suppliers, in other cases farmers or groups of farmers will find market outlets themselves. MAF will collaborate with the TDB and private marketers in the collection and analysis of overseas market research.

There is also scope for pooling of research and systems data between Australia and New Zealand. In future it may be possible to set up information links between New Zealand CRIs, their counterparts in Australia and Australian and New Zealand organic farmers.

MAF will maintain contact with the Australian Organic Produce Advisory Committee and AQIS to ensure coordination of standards and policies where appropriate, in accordance with the spirit of Closer Economic Relations. (PS)

8.14 - IFOAM Conference

The International Federation of Organic Agriculture Movements has been active in promoting organic agriculture internationally, setting guideline standards, and assessing certifying bodies. New Zealand's two certifying bodies have based their standards on IFOAM guidelines. New Zealand has become further involved through representation on the IFOAM Board of directors. Bob Crowder from Lincoln University has been the New Zealand representative and has sought to broaden IFOAM's outlook beyond Europe.

As countries and trading blocks such as US and EC are defining their own organic standards, there is some uncertainty as to the future role of IFOAM. IFOAM is seeking to change its assessment process to provide recognition to those certifying bodies that do meet its standards, and to establish itself as the auditing body for the EC standards.

The biennial IFOAM conference is to be held in Christchurch in December 1994. This provides an excellent opportunity for New Zealand to obtain international recognition as a producer of organic products. It will also be an opportunity for the promotion of more sustainable agriculture, and specifically organic agriculture, as a viable alternative farming method.

MAF will provide support for the organisation of the IFOAM conference and general assembly in Christchurch in 1994. MAF is represented on the conference organising committee.

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