Download Assessment Schedule – 2012

NCEA Level 3 Agricultural and Horticultural Science (90651) 2012 — page 1 of 6
Assessment Schedule – 2012
Agricultural and Horticultural Science: Explain how market forces affect supply and
demand of primary products (90651)
Evidence Statement
Q
Evidence
Achievement
with Merit
Achievement
ONE: Market forces affecting the supply of primary products
(a), (b),
(c)
Exchange rate
The explanation of changes to recent supply
could include:
 increased / decreased returns
 increasing production to maintain level of
income
 costs of production
 main export market and the currency
involved.
Prices
The prices received by the producer are a
key driver of changing levels or patterns of
supply. The explanation of changes to supply
could include:
 changes in volume of the product in the
short term
 changes to the markets where the product
is supplied
States the recent changes
in the relevant exchange
rate that have occurred,
and explains in general
terms how the supply of
the product (timing,
quantity, etc) has been
affected by the change in
the exchange rate.
States the recent changes
in the relevant exchange
rate that have occurred,
and explains in detail
how the supply of the
product (timing, quantity,
etc) has been affected by
the change in the
exchange rate.
A
M
States the recent price
trend for the product, and
explains how the price
trend has affected the
supply in broad or general
terms.
States the recent price
trend for the product, and
explains in detail how the
price trend has affected
the supply in specific
terms.
A
M
States a specific trade
restriction implemented by
a government, and
explains how this
restriction has impacted
the supply of the product
in broad or general terms.
States a specific trade
restriction (with values)
implemented by a
government, and explains
in detail how this
restriction has impacted
the supply of the product
in specific terms.
 changes in the timing of product supply.
Production may or may not be significantly
affected, depending on price trends for
alternative products, or the ability of the
producer to change production, and the new
products’ lead-in time.
Political intervention
An explanation of how governments
manipulate the quantity of supply and / or
timing. Must include reference to current
tariffs, quotas, subsidies or phytosanitary
restrictions, free trade agreements, etc, being
enforced by named governments.
A
M
Seasonality
An explanation is given as to how seasonality
influences the pattern or quantity of the
product supplied. Examples could include:

biological processes in plants or animals

the impact of weather events

influence of having an out-of-season
supply for the northern hemisphere.
States why the product is
seasonal, and explains
how this seasonality
affects the supply of the
product in general terms.
States why the product is
seasonal, and explains in
detail how this seasonality
affects the supply of the
product in specific terms.
A
M
NCEA Level 3 Agricultural and Horticultural Science (90651) 2012 — page 2 of 6
Q
Evidence
Achievement with
Merit
Achievement
Achievement with
Excellence
ONE (continued)
(d)
The relative importance
of market forces affecting
the supply of primary
products.
Additional evidence for
Q1 (a), (b), and (c) can
contribute towards
Achievement.
Additional evidence for
Q1 (a), (b), and (c) can
contribute towards
Merit.
A
M
The justification of one
market force over the
other two must provide
evidence of the merits
of each market force as
they impact on the
supply of the product to
the stated specific
market.
Actual data must be
stated (trends in prices,
exchange rates,
seasonality,
interventions, etc).
E
NCEA Level 3 Agricultural and Horticultural Science (90651) 2012 — page 3 of 6
Q
Evidence
Achievement
with Merit
Achievement
TWO: Market forces affecting the demand for primary products
(a)
Promotion
Explanation should include actual examples of
a relevant promotional campaign, including
how the key message is conveyed, and how
demand for the product has changed as a
result of the promotion.
(b)
Consumer preference
Explanation should state the trend(s) in
consumer preference that have occurred, and
how they have affected the demand for the
product. The preferences could be within the
single product, or between competing /
substitute products.
Changes in demand could be reflected in the
price, quantity, or timing of the demand.
Q
(c)
Explanations must refer to specific
industry quality standards that are
required by the processors of the
product or are demanded by the
consumers. In most cases,
“quality” will refer to product
attributes and packaging (ie fitness
for purpose of described user /
consumer). It could also refer to
the source of the product via
traceability programmes.
(d)
Explains in detail a
relevant promotional
campaign, and the
subsequent effect on the
demand for the product in
specific terms.
A
M
Explains the change in
consumer preference, and
the subsequent effect on
the demand for the
product in broad or
general terms.
Explains in detail the
change in consumer
preference, and the
subsequent effect on the
demand for the product in
specific terms.
A
M
Achievement
Achievement
with Merit
Explains the
specific industry
quality standard, and
the subsequent
effect on the
demand for the
product in broad or
general terms.
Explains in detail
the specific industry
quality standard, and
the subsequent
effect on the
demand for the
product in specific
terms.
A
M
Additional evidence
for Q2 (a), (b), and
(c) can contribute
towards
Achievement.
Additional evidence
for Q2 (a), (b), and
(c) can contribute
towards Merit.
Evidence
Quality requirements
Explains a relevant
promotional campaign,
and the subsequent effect
on the demand for the
product in broad or
general terms.
M
A
Achievement with
Excellence
The justification of
product quality over
promotion and
consumer
preference must
provide evidence of
the merits of each
market force as they
impact on the
demand (price or
quantity) for the
product.
E
NCEA Level 3 Agricultural and Horticultural Science (90651) 2012 — page 4 of 6
Appendix: Examples of possible answers
Question One – Market forces affecting the supply of primary products
Example answers for parts (a), (b), and (c)
Exchange rate: Beef into the US
New Zealand beef is receiving record prices in the USA at over US$2.20 per pound, well up on the US$1.80 per
pound in the USA before Christmas. However the return for the beef farmer in New Zealand is only slightly up on
last year’s prices, as the record prices being paid by the consumer are being eroded by the strength of the NZ
dollar against the US dollar. The average return is only NZ$30 more per head. One NZ dollar is currently buying
US$0.82, compared to US$0.74 last December and US$0.49 in 2009.
Price: Wool
Lamb prices are dropping dramatically as the high NZ dollar reduces returns to growers. Farmers were
experiencing returns of $8 / kg in early February 2012, but now the returns are closer to $6 / kg. As the NZ / US
exchange rate continues to worsen, farmers are rushing to sell stock.
Political intervention: Milk powder into the US
China and New Zealand have signed a free trade deal where tariffs on New Zealand’s agricultural products are
being phased out gradually. However, in March 2012 China increased the tarriff on New Zealand’s milk powder
imports from 5.8% to 10%, as New Zealand has filled its 100 000 tonne quota. Any milk powder supplied within the
100 000 tonne limit is subject to a reduced tariff; above this limit, the milk powder is charged the “regular category”
tariff.
Seasonality: Grapes
An unseasonally wet summer has seen grape harvests for wine dramatically down on last season. It is estimated
that only 300 000 tonnes of grapes will be obtained from the 2012 harvest, down 30 000 tonnes on last year. The
summer growing season has been unusually wet, and lacking the usual summer sun, which is needed for the
production of the grape crop, according to NZ winegrowers.
Example answer for Question One (d)
Milk
(1) Price.
(2) Exchange rate.
(3) Political intervention.
Recent trends in the price paid to farmers for milksolids have had a greater effect on the supply of milk than either
the exchange rate or political intervention.
Farmers are very responsive to farm gate prices. Dairy farmers have a number of options to quickly increase their
level of production if the outlook appears favourable. The increase in payout over the past few years (Fonterra’s
payout in 2010 / 2011 was $7.90 / kg milksolids) has resulted in large-scale conversions from sheep, beef and
forestry operations. The feeling that this trend will either continue or at least stabilise has resulted in the large
capital investment required for these conversions. This has been a major factor in determining the supply of milk.
Despite the increase in the NZ$, a factor that would normally reduce returns, the rise in price received to $7.90 / kg
milksolids has negated the downside of the exchange rate, encouraging more dairy farm conversions and higher
production volumes.
While the exchange rate can play a large role in determining the payout farmers receive, we have seen in recent
years that despite a strengthening NZ$ (up to $0.80 against the US dollar in April 2011) the payout received by
farmers has remained favourable. They would not be looking to change their production, as they have committed
financially and physically to this product, and any other product produced would need to be exported and would
face the same unfavourable exchange rate.
Political intervention does impact on the returns for milk products in some markets, eg Taiwan has a tariff of 23%
on all milk powder imports. However, with the development of free trade agreements with many Asian countries,
including China, and the fact that our milk products are exported to more than 70 countries, the effect of political
interventions on the quantity being able to be supplied or the price received by the producer is minimised.
NCEA Level 3 Agricultural and Horticultural Science (90651) 2012 — page 5 of 6
Thus, market trends, in terms of the price paid to farmers for milksolids, remain the most significant factor in
determining the supply of milk on an annual basis and into the medium to long term.
Question Two – Market forces affecting the demand for primary products
Example answers for parts (a), (b), and (c)
Promotion: Beef
New Zealand beef producers are meeting the demand for the health-conscious Japanese market. This market is
becoming aware of the healthier, grass-fed New Zealand beef. Beef and Lamb NZ are targeting the decisionmakers from the distribution, retail and food sectors, plus chefs and the media. A Masterchef-style competition was
held recently where New Zealand beef was the primary ingredient. In 2010 we exported just under 35 000 tonnes
of beef to Japan, three times the volume of 2003.
Consumer preference: Kiwifruit
Changing consumer tastes and preferences for the Gold kiwifruit variety has seen its volume produced increasing
over recent years. In 2012 there are 20 million trays of the Hort 16a variety being produced for export – up on the
previous year. At the same time we are going to harvest 70 million trays of the Hayward green variety, which is
projected to decline as global demand shifts to the sweeter gold variety. The growth in demand has been in the
Gold variety. There have been more licences made available for the new Gold 3 variety to keep up with the
increase in demand for this variety.
Product quality: Wool
New Zealand’s Merino wool is procured by the New Zealand Merino Company for Icebreaker. Icebreaker produces
high-end base layer clothing products for export to the US and European markets. These high-end products are
comparatively more expensive than their synthetic competitors, and must maintain their high-quality reputation. To
be able to supply Merino wool for Icebreaker clothing, growers must demonstrate that their production is
environmentally sustainable, and meets the requirements of micron diameter, length of crimp and wool colour.
Buyers will continue to demand this product, and Icebreaker will increase its $120 million annual turnover if its
customers feel the product meets their requirements.
Example answer for Question Two (d)
Lamb
(1) Price.
(2) Promotion.
(3) Consumer preference.
Price is the key market force that determines the demand for lamb. While promotion and consumer preferences
have some effect, they are not as significant as price.
Lamb is often priced towards the top of the range of meat options available to consumers. From $10–$15 / kg for
chops and up to $20 / kg for a leg for roasting ($30–$45 per leg), it represents expensive meat when the fat / bone
content is considered. Consumers are very sensitive to the price of meat, and when lamb prices are high (at times
of high export lamb prices) there is a noticeable drop-off in lamb meat sales as consumers switch to alternative
meats, eg chicken at around $15 / kg (skin off breast). TV promotion by sportswomen has, according to Meat and
Wool New Zealand, increased demand for lamb by 5%. However, when the price for lamb rose in 2004, demand
dropped in favour of cheaper meats such as pork and chicken.
Promotion, such as campaigns like the TV ads featuring the Evers-Swindell sisters and Sarah Ulmer, attempts to
target the female / sporty sectors of society and increase demand from those sectors. However, campaigns tend to
be neutralised by high prices.
Consumer preference for lamb as a popular barbeque meat remains, because it is quick and safe to cook (unlike
pork and chicken which must be cooked fully). There are still some traditional roasts being sold; however, these are
often bought as a special once-a-week / month meal, rather than for common day-to-day consumption, due to its
cost, and to its cooking time not fitting into many people’s busy schedules. Even so, it can still often have a higher
fat / bone content than many other meat options.
NCEA Level 3 Agricultural and Horticultural Science (90651) 2012 — page 6 of 6
Price variations have been shown to produce significant shifts in consumer demand, with high prices for lamb
reducing demand, while demand for pork has increased. The promotional activities of Meat and Wool NZ have at
best maintained market share in the meat trade, and while a minor 5% increase in New Zealand consumption is
desirable, it must be remembered that 90% of lamb is exported. So to greatly influence demand overall, an
increased demand from overseas consumers is vital. Price is the most significant market force in the major export
markets, except during times of major animal disease outbreaks, when consumer preference has had a significant
impact on demand for New Zealand lamb.