Jun 14 2017

New Levy Proposed

At the 2017 AGM on July 12th, TomatoesNZ will be asking fresh tomato growers to support TomatoesNZ’ s  commitment to sign up to Operational Agreements for biosecurity readiness and response, and to approve a new Biosecurity Levy on fresh tomatoes which will fund that activity.

Download the operational agreement and biosecurity levy information document

Next year we will also be asking growers to support a new Commodity Levy Order for fresh tomatoes.

Operational Agreements

When TomatoesNZ first consulted on signing the Government Industry Agreement for Biosecurity Readiness and Responses Deed (GIA Deed) way back in 2014, we committed to giving growers further information before we signed up to any “operational agreements” under the GIA Deed.

Operational agreements are between the Ministry for Primary Industries (MPI) and one or more industries, and provide for joint decision-making and investment. They are where “the rubber hits the road”, and we start committing money and resources to biosecurity readiness and response.

Operational Agreements create a management plan to:

  • keep the named pest (or pests) out of NZ;
  • identify how to respond if the pest/s is/are found;
  • how costs will be shared;
  • and sets in advance a fiscal cap on spending during a response.

Back in 2014, when fresh tomato growers agreed to become GIA Deed signatories, there were no operational agreements in place and we did not know what they would look like for the tomato industry and what the costs were likely to be.

Now there is an Operational Agreement for fruit flies in place, and as a signatory to the GIA Deed we are in a position to become a signatory to that Agreement. Current industry signatories to the fruit fly Operational Agreement are kiwifruit, pipfruit, avocado, vegetables and citrus. 

TomatoesNZ has been “at the table” throughout the negotiations, which included deciding “cost shares” for signatories. We have committed $23,000 in “voluntary contributions” to the cost of running the readiness programme (including the fruit fly trapping surveillance network) for the 2017-18 year, which for now is being paid from Commodity Levy. This amounts to 4.6% of the total value of all industry contributions to running the readiness programme and operational agreement.  This will be an ongoing annual cost.

Estimates for possible “response” costs, should there be a fruit fly incursion, vary depending on the level of the incursion and are outlined in Table 1 below.

Table 1:  Potential fresh tomato industry cost share in the event of a fruit fly incursion.

Response level

Description

Cost for TomatoesNZ

Level 1

Response Level 1 is triggered when a male fruit fly is detected in one of the fruit fly surveillance traps, or reliable evidence is presented that fruit fly are present in New Zealand. This is the minimum trigger level.

The objective of Response Level 1 is to determine if an establishing population is present. It is not an eradication response.

Govt pays 70% and industry pays 30%

$16,500

Level 2

Response Level 2 is when it is believed that a fruit fly population is establishing. The objective of Response Level 2 is to eradicate this population.

Govt pays 80% and industry pays 20%

$110,000

Level 3

The move to Response Level 3 may be initiated when the infestation is found to be more widespread. Such a response will likely be a multiyear programme that includes significant extension of the Controlled Area and additional eradication actions Govt pays 90% and industry pays 10%

$110,000

Maximum over 5 years

This is the agreed “fiscal cap” or share of the maximum costs the fresh tomato industry has agreed to pay, over any five year period.

$148,000

 

The reality is that the fresh tomato industry will be required to pay a share of the cost of “readiness” (research, surveillance) and “response” (when incursions occur) activities, whether or not we do so up front and as a signatory to the Operational Agreement – because MPI plans to “cost recover” from those industries that benefit from this work but are not signatories.  By being a signatory, we get a say on how much it costs, and how it is carried out, to ensure the maximum benefit to fresh tomato growers.

In addition to fruit fly, an Operational Agreement for Brown Marmorated Stink Bug is in the final stages of development. Cost shares are still being negotiated but look likely to be lower than those for fruit fly because there are more “beneficiary” groups, including a large “public good” component, because the pest is a public nuisance and attacks many native species.

We have also started developing a Fresh Tomato Operational Agreement which will cover off the top few priority pests that are of the most concern to our industry, such as Chilli Thrips, Leafminers, and viruses such as Tomato torrado virus and Pepino mosaic virus.  Some of these pests may be in common with other indoor or solanaceous crops, and we will be talking to those product groups about joint agreements and cost shares.

When there is no Operational Agreement in place for a specific unwanted pest that arrives in New Zealand, then MPI and industry Deed Signatories who are directly impacted by that unwanted pest would enter into a ‘rapid OA’ process to agree response cost shares and an Operational Agreement fiscal cap. MPI will respond until the rapid OA is up and running.

 The TomatoesNZ board will be asking fresh tomato growers to agree to give it the mandate to enter into Operational Agreements on their behalf, via a vote at the AGM on July 12th.

A new Biosecurity Levy on fresh tomatoes

In September last year, TomatoesNZ Incorporated signed up to the Government Industry Agreement for Biosecurity Readiness and Response Deed (GIA Deed).

The Deed outlines the principles of the partnerships between MPI and each industry that signs the deed. Signing up to this agreement has meant that we have more of a say in how biosecurity risks to our industry are managed. It means we have a “seat at the table” when decisions are made about whether to respond to new pests that will have an impact on fresh tomato growers and exporters.  It also brings us into a “partnership” between the Ministry for Primary Industries and other horticulture (and agriculture) sectors. That partnership means that we are talking about and assessing potential biosecurity risks together, and commissioning research and readiness plans that reduce the chances of new pests establishing.

Since September 2016, TomatoesNZ Chair Alasdair MacLeod, myself, and consultant Gisele Irvine (Market Access Solutionz) have been closely involved at the “GIA table”, and have been impressed with the high level of cooperation and openness among the signatories (including the Ministry for Primary Industries - MPI), who are keen to work together to achieve the best outcomes for all.

Along with this greater opportunity for representation, influence, and shared work on biosecurity readiness, comes a requirement to directly contribute to the costs of running biosecurity readiness and response programmes.

At the moment we are funding the “minimum commitments” of being a Deed signatory from Commodity Levy funds.  Minimum commitments include taking part in governance, development of Operational Agreements (e.g. Fruit Fly and Brown Maromorated Stink Bug); and developing TomatoesNZ’s biosecurity resources, such as describing and providing information about our industry’s “priority pests”. 

Now that Operational Agreements are being developed and signed, the funding commitments are rising. As such, the TomatoesNZ board is proposing a Biosecurity Levy on Fresh Tomatoes, with an initial rate of 0.10% (10 cents per $100) and maximum rate of 0.25% (25c per $100) of value at the first point of sale (for domestic sales) or the free on board value for exports (table 2). The Levy will only fund biosecurity-related activities. It will not fund other non-biosecurity TomatoesNZ activities.  This proposal will be voted on at the TomatoesNZ AGM on July 12th.

The TomatoesNZ board is proposing to use the biosecurity levy to build a biosecurity reserve fund of about $120,000 per year (assuming no responses need to be funded), with a cap of $1,000,000.  This fund could be used to pay for response costs if and when they occur, or for readiness activities. If required, the rate of levy could be moved up to no more than the maximum (0.25%). This could happen if multiple responses to fresh tomato pests occur within a few years. 

 

Table 2: Proposed initial and maximum rates for a new Biosecurity Levy on Fresh Tomatoes, calculated on value at the first point of sale on domestic sales or free on board value of exports:

Maximum levy rate.

Initial levy rate

Initial income per year*

$ maximum income per year *

0.25%

0.10%

$120,000

$300,000

*Based on an industry value of $120m

As a GIA partner, TomatoesNZ has a seat at the table of “response governance” for any new pests that affect fresh tomatoes; and therefore have a say in how much will be spent in any response.  MPI will cover the cost of a biosecurity response initially, and then calculate and invoice each industry's share using a pre-agreed cost share model and repayment terms which will be set out in Operational Agreements.

The Biosecurity Levy on Fresh Tomatoes Order would be made under the Biosecurity Act, and will be separate and additional to the Commodity Levy on Fresh Tomatoes. It will be levied on all New Zealand commercial tomatoes grown for export and the domestic market. Currently the Commodity Levy on Fresh Tomatoes is being collected from all commercial tomato growers at its maximum rate of 0.35% (excluding the HortNZ component of 0.15%).

To date, only one GIA signatory (Kiwifruit) has a Biosecurity Levy in place which came into effect in March 2017. A number of other GIA signatories are planning to apply in the near future (including Onions NZ, Summerfruit NZ, and Vegetables NZ). 

If the vote at the AGM is successful, then TomatoesNZ will prepare an application for a Biosecurity Levy Order for Fresh Tomatoes. It is expected the application and Levy Order drafting process could take up to 12 months before coming into effect. TomatoesNZ will notify growers directly when the Biosecurity Levy is to be activated, through existing communication media including this magazine, the TomatoesNZ.co.nz website, grower forums and meetings.

It is proposed that HortNZ would provide a collection service for the Fresh Tomato Biosecurity Levy, and pass the funds on to Tomatoes NZ, just as they currently do now with the Fresh Tomato Commodity Levy, with the two levies showing as separate lines on growers’ accounts (for those paying the Levy through collection agents).  TomatoesNZ would report on Biosecurity Levy income and expenditure in an annual report and at the annual general meeting.

More information on the Biosecurity Levy and operational agreements will be sent to fresh tomato growers in late June, and a vote approving the Biosecurity Levy and operational agreement mandate will be held at the AGM on 12th July. 

Commodity Levy

The Commodity Levies Order (for Vegetables and Fruit 2013) under which TomatoesNZ is funded (along with HortNZ, Vegetables NZ and Process Vegetables NZ), expires 12th May 2019.  To ensure continuity of funding, we will need to apply for a new Commodity Levy Order by September 2018.  Now that TNZ is an Incorporated Society we will be required to apply for our own Fresh Tomato Commodity Levy Order, separate to HortNZ.

The TomatoesNZ board plans to propose that the initial levy rate under a new commodity levy order for fresh tomatoes will be the same as the current levy rate; 0.35% (35 cents per $100 of sales), which is also the maximum rate under the current levy order.  However the board also plans to propose that that the maximum levy rate under the new levy order be increased to 0.50% (50 cents per $100 of sales).  On the current industry value of $120 million, the 0.35% levy rate raises $420,000 per year; and the higher levy rate would provide a maximum of $600,000 per year.

Over the past six years, TomatoesNZ has been running deficit budgets, with a small surplus last year and this year. This was a deliberate strategy to reduce the TomatoesNZ retained levy (“reserves”) amount down from around $900,000 in 2013.  We now have “reserves” of $600,000, which the board felt is a more appropriate figure.  The 0.50% maximum would bring the maximum rate back up close to where it was prior to 2013 (a maximum of 0.525% under the 2007 levy order), and give the TomatoesNZ some room to invest in more research, industry development and advocacy to supports and manage risk for growers, should it be required in the future. The rate would only move up from 0.35% by vote at an AGM, after the commencement of the new levy order in around May 2019.

The Commodity Levy proposal will be fully consulted on in the first half of 2018, and a grower referendum will be held in around July next year.  In the meantime, the board felt it was appropriate to flag the Commodity Levy proposal alongside that of the Biosecurity Levy.

I would welcome any comments and feedback on these proposals.  Please contact me at Helen.Barnes@HortNZ.co.nz or phone  (04) 470 5666, or contact any of the TomatoesNZ Board members to discuss. 

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