Loss-making farmers can't afford environmental mitigation   21 Jul 2015

Loss-making farmers can't afford environmental mitigation, says Fed Farmers boss

By Fiona Rotherham

July 21 (BusinessDesk) - Federated Farmers president William Rolleston says progress made in the last few years on farming’s environmental impact can’t be sustained when farmers are making a loss.

Speaking to the Local Government New Zealand conference today, Rolleston says if agriculture is to continue its contribution to New Zealand’s economy, it has to address the issues of productivity and environmental impact.

A recent survey by Dairy NZ and Federated Farmers showed dairy farmers have spent $1 billion on environmental initiatives in the past five years.

Rolleston said a growing economy can support a healthy environment but a shrinking one doesn’t stand much of a chance.

“To make fast progress it requires strong balance sheets and good cash flows. While it’s unacceptable to go backwards, regulators, environmentalists and the public need to understand that the rapid progress in the last few years cannot be sustained when farmers are making a loss.”

The dramatic fall in global dairy prices and forecast low payouts for two seasons is expected to cause a significant number of dairy farmers to be unprofitable. If prices are sustained around current depressed levels for an extended period, some farmers are likely to leave the industry owing to unprofitability.

Rolleston said as a farming leader, he’s looked for solutions which enable economic progress while supporting a healthy environment, which does away with the need for punitive resource rentals, taxes and similar instruments.

Parliamentary Commissioner for the Environment Jan Wright said last month dairy intensification was increasing nutrient pollution to New Zealand’s waterways and the water quality is continuing to decline. While she said farmers had made a turnaround in their stance on environmental impacts, nitrogen continued to be a problem that needed to be controlled through tougher limits by regional councils.

Rolleston said nitrogen, which is in chemical and organic fertilisers, is a significant expense on farms. He said he was “always shocked” at how little of the nitrogen applied in farming practice was embedded in products that left the farm, by comparison with how much is lost to waterways and the atmosphere.

Technology improving the efficient use of nitrogen would continue to be worth investment by reducing nitrogen input costs as well as delivering environmental benefits.

Getting the science right was important to making economic gain as the global demand for both food and a healthy environment increases, he said.

“A lot has been said about farming to limits and for councils numbers make decision-making much easier.

"But I would remind you that the RMA (Resource Management Act) was set up to be effects-based and that blunt tools lead to dull outcomes. We need to remind ourselves the farmers have only been talking nitrogen for about a decade. The science is progressing quickly. The challenge for regulators is to ensure that regulations are flexible enough to cope with the evolving evidence and to take account of improvements or reductions in water quality.”

Rolleston said the RMA works on a first-come, first-served basis, which becomes problematic when a resource like water reaches its limits and does not allow a more strategic approach. Creating property rights through tradeable quotas is not the solution, he said.

Three potential answers lie in resource expansion, science to increase efficient use, and collaboration. He pointed to water storage where farmers were willing to pay for the benefits they receive but local and central government should directly contribute.

Federated Farmers holds up the Opuha Dam in South Canterbury as a leading example of water storage for irrigation because, as well as providing economic benefit, it has increased river flows, generated electricity, provided Timaru with water and a recreation resource for water craft, fishers, and campers.

“Solutions for Maori economic aspirations in water could well come through storage. By contributing to the development of water storage, government can help create the headroom for negotiation and settlement, if such as settlement is justified,” he said.

(BusinessDesk)

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