Surprised by the biosecurity issue

By Bill Kaye-Blake 08/08/2013

The issue with botulism bacteria in Fonterra’s whey powder has been in the news all week. There’s been lots of talk of milk prices, exchange rates, marketing images and damage to brands. Most of it is fairly simple. A lot of it, at least over the weekend, was speculation about what could or might happen — filler more than news.

I have one small note to add. I have been working in agricultural economics in New Zealand for the last ten years, all across the sector. Dairy, sheep/beef, apple, kiwifruit, potatoes, forestry, wine, lettuce — lots of different products. I’ve also worked on many different issues: trade, technology, consumer trends, productivity. One area in particular has been biosecurity, which in New Zealand refers to keeping bugs out (in other countries, it refers to biological terrorism, which led to some confusion once when I visited the OECD).

In the biosecurity work I’ve done or seen in New Zealand over the last ten years, the focus has been primarily on (a) trade and tourism, (b) farm-level practices and (c) the environment. There’s a big programme called Better Border Biosecurity, which should be self-explanatory. They are trying to keep the bugs out of the country (although there’s nothing they can do about the occasional organism swept across the Tasman by the wind). Farm-level research on the potential impacts of biosecurity issues has been around things like foot and mouth or tuberculosis. Or, take a look at this webpage that lists biosecurity publications for New Zealand — lots of marine pests, on-farm pests, etc.

And then a dirty pipe lets the side down. It wasn’t the biosecurity scare we expected. Just a guess, but the systems may therefore not really have been in place to deal with it.

Why weren’t we ready? Again, a guess. The work I do and see tends to come from Ministries or the public good science system (FRST, MoRST, MSI, MBIE, CoREs). Environmental biosecurity is a public good (non-rival, non-excludable), and so gets funded through those channels. Farm-level biosecurity is also a public good, but in a different way. Agricultural production has long been acknowledged as an appropriate area of public funding because of the non-rival, non-excludable nature of knowledge.

On the other hand, cleanliness in the supply chain is seen more as a private good — embedded in a commodity product that is rival and excludable. Therefore, it is seen as the domain of private firms — Fonterra, in this case. They should invest in cleanliness or biosecurity in proportion to the business risks, without public funding.

This is a debatable proposition, of course, depending on the spill-over impacts on marketing image and exchange rates. We are now getting some data on how big those spill-overs might be. I hope someone gets a chance to do a proper analysis of the whole situation when it is over.

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