Good morning everyone, it's a pleasure to be opening the AGM of such an important contributor to our farming industry.

Thank you, Greg for your introduction and I would also like to acknowledge the Board of FMG, your chief executive, Chris Black, members and guests.

I understand your theme today is "Navigating Rough Seas" - and this is about as topical as it can get.

We're all navigating some pretty rough seas as the moment, in fact the roughest seas we've had since the Great Depression.

Like all developed countries, New Zealand is facing some real challenges.

The whole economy is affected - and the primary sector is not immune.

Over the last five years, there has been a huge expansion of rural debt in New Zealand, doubling to around $45 billion.

The dairy industry is clearly under pressure as it has seen a rapid turnaround from $7.90 to a Fonterra prediction of $4.55 next season.

And to add insult to injury, Mother Nature hasn't helped many farmers this year either.

Drought hit some regions hard, and a colder, wetter winter has done little to help grass growth.

For some farmers, the rough seas have become a very rough storm.

But in the face of this, I am very optimistic about the future of farming and the future of our economy.

This comes from the knowledge that New Zealand agriculture has gone through tough times before - and managed to bounce back.

We can do it again.

New Zealand farmers are remarkably resilient. They know how to adapt to cope.

As the world moves through the current recession and economies start to recover, demand for New Zealand product will improve because we have many advantages over competing nations.

Firstly, we are an unsubsidised true market.

Some time in the future, the Europeans and the Americans will have to realise that subsidies are economically unsustainable. They simply won't be able to afford to subsidise.

Secondly, we have world-class expertise in agricultural management systems.

We are regarded internationally as the most efficient converters of grass to protein.

Thirdly, we have a huge natural advantage of water. This country gets plenty of rain. It doesn't always fall in the right place at the right time, but with a sensible approach to water storage, we can certainly harness this potential to our advantage.

Finally, we have farmers who are renowned for experimenting with a drive to increasing productivity.

Look at the record of our productivity growth in agriculture over the last twenty years.

While the rest of the economy increased productivity by 1.1% each year, agricultural productivity grew by 3.2% per annum.

The primary sector is our economic foundation and it will drive us out of recession.

New Zealand is the world's largest dairy and sheep meat exporter and a major player in the world trade of horticultural products. These industries generate 64 percent of our merchandise export earnings. They are the only major industries in which we have sufficient scale, market share and supply chains to be truly competitive in international trade.

But in saying that, the decision by the Europeans and the US to reintroduce export subsidies was hugely disappointing.

I can understand the political pressure from the European farmer constituency who genuinely fear for their economic survival, particularly after they have lived with taxpayer support for years.

Many of us experienced the same fear in the 1980's when, as farmers, all government agricultural support was removed literally overnight.

When I subsequently analysed my accounts, I was astonished to find that 43% of my income was, in fact, government support. Taxpayers allowing me to farm.

The transition was painful. But 20 years on, I challenge you to find a farmer in New Zealand who would want to revert to being financially supported by central government.

Rather, New Zealand farmers have become totally focused on rational economic decisions, and we have experienced 20 years of impressive on-farm productivity gains.

Productivity of our breeding ewes has risen over 60% since 1991. Milk production from our dairy herds by over 20%.

This has led to a huge change in the way New Zealand's agricultural goods are now positioned in the world market. We are no longer a low-cost producer. That mantle has passed to countries like Uruguay and China.

New Zealand's brand has shifted to a higher cost, higher quality product aimed at a more discerning customer. A customer with a conscience who demands integrity. Let me expand on this integrity.

There are three important components - environment, animal welfare and food safety.

In the last 10 years, our customers, both domestic and international, have started to ask searching questions around the environmental impact of our agricultural systems.

In this regard, my message to New Zealand farmers is clear - no farmer has a right to pollute.

Animal welfare is also critical. In this debate, science may well be overshadowed by emotional perceptions. But at the end of the day, the customer is always right.

The third leg to integrity is an absolute assurance of food safety. Purchasing food is an act of faith. Breach that faith and expect no mercy from the market.

With the New Zealand economy so dependent on food production and international marketing, we can't afford to rest on our laurels.

That is why the announcement of the Primary Growth Partnership in this year's Budget is so important.

Access to markets is only useful if we're doing the business well at home.

Productivity gains over the last twenty years have been impressive, but we can't rely on ‘business as usual' to retain our position as a world leading food producer.

The Primary Growth Partnership is a government-industry partnership that will invest in significant programmes of research and innovation to boost our primary sectors.

It is an ambitious project and it has ambitious scope.

PGP provides $190 million of government funding over four years - starting at $30 million this year, rising to $70 million per year from 2012/13 onwards.

With a matching commitment by industry, up to $140 million will be invested annually.

And that's the important feature; it has been closely developed with industry. It will be industry-led.

The Primary Growth Partnership is about innovation on a grand scale. But there is innovation taking place every day on-farm, by farmers who see the need to change, and just do it.

Recently, I had the pleasure of hosting the Ballance Farm Environment Awards at Parliament and I was very heartened by what I saw.

The eight finalists were all fine examples of truly ‘smart' farming: recognising that farms are a system - all inputs affect other outputs.

What this demonstrated was that we need solid on-farm practices, as well as smart research and innovation, because developing countries are beginning to compete very effectively in the global market.

Fortunately our farmers have a wealth of expertise in farm management. But if we are to hold this advantage, our farming sector must attract and retain a quality workforce, at all stages of the supply chain and at every level.

Attracting the right people to meet employer demands, and to cope with the changing nature of farming, is critical.

As I said earlier, the demands of today's consumer are increasing and diverse.

While New Zealand is a significant figure in global food trade, we only produce a small fraction of commodities such as beef, lamb and dairy product - between one- and six-percent of the world's total .

Other countries are increasing their agricultural production and positioning themselves to compete with us in our markets.

What's more, our farmers have to contend with pressures on the resources they rely on - like land and water.

And all of this is happening in the context of a world where consumers are increasingly aware of carbon footprints, climate change and environmental performance.

Climate Change is a major issue on the agenda. Changes must be made, particularly as New Zealand agriculture faces more and more difficult summer seasons.

For our primary industries to remain productive and resilient, we need to be ready to adapt.

But how?

New Zealand is taking a major leadership role in addressing agricultural emissions, which account for around half of our total greenhouse gas emissions.

Well-directed research will offer solutions that reduce emissions while increasing on-farm productivity and enhancing our environmental branding.

We are currently reviewing the Emissions Trading Scheme and domestic climate change policy to ensure that the right measures are in place to balance economic needs with environmental responsibilities.

The Government believes it is important that we align our strategies to Australia and we will be looking at where it would be sensible to do so, while continuing to recognise our different national circumstances.

This is certainly an area I have been focusing on and will continue to do so to ensure that agriculture is treated in a fair, realistic and economically sensible manner.

The Prime Minister has always said that his government would not put environmental requirements ahead of our economy. As the old saying goes, "you can't be green when you're in the red."

Our primary sector is simply too important for us not to get this major piece of legislation right.

I want to conclude now by revisiting your theme - "Navigating Rough Seas". Just as New Zealand farmers survived the economic pain of the 1980s to emerge stronger, so too will the primary sector help navigate our economy through today's rough seas.

But it won't be easy.

It will require you as farmers to adopt new ideas, abandon old ways of thinking and embrace different farming methods. It will require you to focus on quality.

This is a challenge, but when I look at the history of New Zealand agriculture and New Zealand farmers, I am confident it can be done.

In fact, if you ever want to look at an example of adapting to survive - it's right here. It's FMG.

The 104-year history of FMG is one of constant adaptation to new challenges. You are now the most successful farm insurer in New Zealand, a position gained by facing the challenges of last century, with a determination to ‘get through'.

FMG's record is a great record.

Similarly agriculture will continue to adapt and survive.

It will continue to play a critical role in lifting New Zealand's productivity, the value of our exports, and the growth of our economy.

That's why I have absolute confidence in the future of New Zealand's primary sector.

Thank you again for inviting me - and all the best for the remainder of your forum.