Where to Next?Our Agriculture + Future Water Quality in NZ

Alison Dewes

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A Painful Transition for NZ Agriculture

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Ag Growth Agenda is Testing Limits• Business Growth Agenda

• Boost exports from30% to 40% of GDP by2025 (KPMG, 2013)

• Double rate of growth to 7% CAGRcompared with 3% CAGR past 20 years.(Ridett Institute, 2010)

• Drive to Realise the Potential of 960000Ha of Maori Owned Land(300,000 Ha class 4-6 land intensifiedto higher performance each year for next 3 years) (Price Waterhouse Coopers,2013)

• Irrigation Infrastructure Fund (Govt + CrownInvestment Schemes to Accelerate Water Storage + Irrigation: eg: 4-500,000 hamore irrigation around NZ

• Business Growth Agenda

• Boost exports from30% to 40% of GDP by2025 (KPMG, 2013)

• Double rate of growth to 7% CAGRcompared with 3% CAGR past 20 years.(Ridett Institute, 2010)

• Drive to Realise the Potential of 960000Ha of Maori Owned Land(300,000 Ha class 4-6 land intensifiedto higher performance each year for next 3 years) (Price Waterhouse Coopers,2013)

• Irrigation Infrastructure Fund (Govt + CrownInvestment Schemes to Accelerate Water Storage + Irrigation: eg: 4-500,000 hamore irrigation around NZ

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Economic AgendasGDP as the measure of success…?

• Government and Regions use GDP as their metric.They show GDP impacts when a new regional plan is introduced.

• GDP only measures gross turnover( + jobs)at any point in time.

• GDP fails to measure public wellbeing, environmental health(cost of clean up), scientific integrity, or regional and nationaleconomic vitality.

• Fallacy of GDP: Christchurch earthquake was good for GDP but notthe people.

• Growth, production and intensification lifts GDPbut no relationship to “profit and resilience” at farm level

• Government and Regions use GDP as their metric.They show GDP impacts when a new regional plan is introduced.

• GDP only measures gross turnover( + jobs)at any point in time.

• GDP fails to measure public wellbeing, environmental health(cost of clean up), scientific integrity, or regional and nationaleconomic vitality.

• Fallacy of GDP: Christchurch earthquake was good for GDP but notthe people.

• Growth, production and intensification lifts GDPbut no relationship to “profit and resilience” at farm level

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Production +More Output+ DevelopmentEqualGDP increases

SWEETZONE

How central + local government + processors see it

Environmentaleffects and costs

Inputs

Magnitude

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Is “BIGGER + MORE” Really Better? Or is it More Problem?

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ON FARM REALITY: More Production BUTLESS Productive + Additional RISK

7While total dairy output has increased 60% last decade, debt has increased300% and net productivity has not increased at all

SWEETZONE

Environmental Effectsand costs

Production

The Sweet Zone Business IndicatorsFarmers pushed to rightby processors

Profit (ROC)

Productivity

Inputs

Magnitude

Can we keep growing agriculture in New Zealand?

- THEO SPIERINGS 30th of OCTOBER 2014 –Says New Zealand dairying can continueits expansion in the next decade – “with 60% based on conversions andmore animals and 40% is productivity”.

- THEO Disagrees with Environment Commissioner’s comments that more dairyingmeans a drop in water quality –

- “New Zealand can easily grow for the next ten years by 2%, 3% a year”. “Notworried” about sales of productive land to foreigners so long as we are “workingtogether” with foreign owners

(Saturday, 25 October 2014,- The Nation; Lisa Owen interviews Fonterra CEO Theo Spierings)

NZ will need 22 million tonnes of extra feed(10X current) imported + create extraeffluent and nutrient challenges. Revenue will NOT cover extra costs (MR<MC).

Biological systems have natural limits:Limits = energy, capacity and resource availability.

Can we keep growing agriculture in New Zealand?

- THEO SPIERINGS 30th of OCTOBER 2014 –Says New Zealand dairying can continueits expansion in the next decade – “with 60% based on conversions andmore animals and 40% is productivity”.

- THEO Disagrees with Environment Commissioner’s comments that more dairyingmeans a drop in water quality –

- “New Zealand can easily grow for the next ten years by 2%, 3% a year”. “Notworried” about sales of productive land to foreigners so long as we are “workingtogether” with foreign owners

(Saturday, 25 October 2014,- The Nation; Lisa Owen interviews Fonterra CEO Theo Spierings)

NZ will need 22 million tonnes of extra feed(10X current) imported + create extraeffluent and nutrient challenges. Revenue will NOT cover extra costs (MR<MC).

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UNDERSTAND the MYTHS that got us here

o “Farming for the good year to maximise the benefits from the high pay-outs”

o “More milk production = more money”

o “More cows = more milk and more money”

o “More Nitrogen + Fertiliser and Grass = more money”

o “Growth is limitless and demand is continuous”

o “The environment will always to absorb our legacies (N toxicity in NOF)

o Science and technology will give us breakthroughs to overcome limits”

o “New Zealand’s Clean Green Image will never falter”

o “Farming for the good year to maximise the benefits from the high pay-outs”

o “More milk production = more money”

o “More cows = more milk and more money”

o “More Nitrogen + Fertiliser and Grass = more money”

o “Growth is limitless and demand is continuous”

o “The environment will always to absorb our legacies (N toxicity in NOF)

o Science and technology will give us breakthroughs to overcome limits”

o “New Zealand’s Clean Green Image will never falter”

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OVERFERTILISATIONHigh Phosphorus levels in soils and still rising: Many dairy farms now importing enough PalmKernel to meet ongoing P requirements… Most do NOT need more POveruse of Nitrogen: N fertiliser increased 800% last decade.

But - Total N test in Soil: discovered 1995 – many farms could've used around half theN…….. but there hasn’t been active “extension of this knowledge”. (AgResearch + Ballance)

Rotorua Lakes example:

PUBLIC IS PAYING

$500 M Clean UpCosts around NZ.

Cost of nitrogen removalfrom receiving water i.e:floating wetlands inRotorua range between$246,000 T N

And up to $400,000/tonne($400/kg) paid to farmers toreduce it ex the root zone:i.e: Lake Taupo Catchment +$40 Mill in Rotorua

PUBLIC IS PAYING

$500 M Clean UpCosts around NZ.

Cost of nitrogen removalfrom receiving water i.e:floating wetlands inRotorua range between$246,000 T N

And up to $400,000/tonne($400/kg) paid to farmers toreduce it ex the root zone:i.e: Lake Taupo Catchment +$40 Mill in Rotorua

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NOW “The Transition”Growth Agendas Inside Limits

Economic Agenda vs Environment, Public & Farmer Wellbeing vs The Science, the Lag Phases… Meanwhile the Public Gets Frustrated, Rivers Get Worse & Law begins to set Bottom Lines.

AN IMPASSE?

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Growth Agenda is pitting one farmeragainst another in regions.

The “Growth Agenda Inside Limits” → FARMER FEUDING

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Upper Waikato Pine to Pasture could add 1000T N extra to Upper River = Public Cost could be$400Mill?

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Intensification and Growth in Already Overallocated Catchments – Selwyn, Waikato, Hinds, Tukituki…

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Hawkes Bay

HAWKES BAYNationally: COURTS and HEARINGS shape outcomes

Hawkes Bay

Tukituki River + Ruataniwha Dam Proposal - HBRC/Dairy NZ + Fonterrasupported toxic N in river + single nutrient mgt – EPA ruled limit to be 0.8mg N,ecosystem health. Economics didn’t stack up: No longer LOW COST DOWNUNDER due to price of land for pasture -Water costs $1000 per ha per year. COP$5.00-5.50kg Milksolids. + Debt servicing = need $8-9.00 kg MS long term to beviable.

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How are Regional Councils dealingwith allocation of nitrogen loss rights

to farmers?

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The Regions: N Transitions RequiredREGIONALCOUNCIL

NET DROP IN N LOSS FOR DAIRY

Waikato Don’t know plan yet (2016)

Bay of Plenty 40% drop N loss.

Taupo No more than grand parented allocation

Hawkes Bay Must < LUC limits. If >30% LUC non compliantMust maintain or improve all water bodies.

Hawkes Bay Must < LUC limits. If >30% LUC non compliantMust maintain or improve all water bodies.

Horizons 25% drop over 20 Years – must prove reductions(LUC allocation)

Selwyn 15% reduction by 2017 then a further 30% dropto make headroom for CPW

Ashburton –Hinds Area

15% initially then a further 30% drop to makeheadroom for new irrigation

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FARMERS ARE GETTING MIXED MESSAGES

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RELIABLE MEASURES OF A FARMS“RISK TO ENVIRONMENT” IS

ESSENTIAL (Overseer)

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OVERSEER: a nutrient budget modelbeing used as a regulatory tool

Decision support model – to give a N output for a farm. We cant not modelsediment, pathogens, P loss farm level.

IDEALLY it would FOSTERS INNOVATION ON FARM – No Input Controls

BUT THE MODEL(N Loss for a farm) HAS BEEN FLUCTUATING but up to -300% upwards and 50% downwards, for the same farm and same systembetween years - TRUST and TRANSPARENCY is now questioned by farmers +Advisors.

Around half of NZ regional plans and variations rely on itfor assessing farm N Loss Risk.NEEDS MORE FUNDING + TRANSPARENCY + FUNDING ($750K allocated4/8/2015)

Decision support model – to give a N output for a farm. We cant not modelsediment, pathogens, P loss farm level.

IDEALLY it would FOSTERS INNOVATION ON FARM – No Input Controls

BUT THE MODEL(N Loss for a farm) HAS BEEN FLUCTUATING but up to -300% upwards and 50% downwards, for the same farm and same systembetween years - TRUST and TRANSPARENCY is now questioned by farmers +Advisors.

Around half of NZ regional plans and variations rely on itfor assessing farm N Loss Risk.NEEDS MORE FUNDING + TRANSPARENCY + FUNDING ($750K allocated4/8/2015)

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Stage 3: “The Delivery”Agriculture in NZ in 2020

Will it be…Lucky to be Here? or Healthy + Vibrant?

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Leaders

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TOMORROWS FARMS TODAY

SAME SOILS AND RAINFALL – UPPER WAIKATO PUMICE, 1000 mm rainfall25 FARMS at $5.50 and $6.20 milk price

MORE MILK -MORE STOCK -MORE N use, -MORE pasture harvested -DID NOTcorrelate with higher profits in 2010-2015.

“farmers don’t know what they don’t know”Kirsten Watson – vet + sharemilker & TFT participant.

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Are we heading towards input controlsBest Practice for Profit and Lowest Risk

Problems….Over fertilisation,OverstockingOver- use of Marginal Land Classes

Solutions…• Nitrogen Tax or Fertiliser Limits?• Only winter cropping on best land use classes?• Controls on land use change?• Fully fund Overseer and ensure transparency.

Problems….Over fertilisation,OverstockingOver- use of Marginal Land Classes

Solutions…• Nitrogen Tax or Fertiliser Limits?• Only winter cropping on best land use classes?• Controls on land use change?• Fully fund Overseer and ensure transparency.

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APPENDIX SLIDES

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What Causes Higher N Loss• Higher rainfall, Coarse/Vulnerable Soils• Irrigation and Intensity of Farm System• Higher N fertiliser – esp autumn winter• High protein diet (fertilised ryegrass)• Higher Cow numbers with no sealed

loafing/effluent capture.• Winter cropping + high stock densities on crop• Effluent irrigation – too heavy, too deep.

• Higher rainfall, Coarse/Vulnerable Soils• Irrigation and Intensity of Farm System• Higher N fertiliser – esp autumn winter• High protein diet (fertilised ryegrass)• Higher Cow numbers with no sealed

loafing/effluent capture.• Winter cropping + high stock densities on crop• Effluent irrigation – too heavy, too deep.

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SELWYN PLAN

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There will be a couple of ways to go

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Eg: Dairy Farm in Selwyn 2015

• 650 Cows, irrigated, 165 ha, 250 kg N use,40% feed imported

• Must drop 15% N loss by use of Industry GMPby 2017

• Must drop 30% additional N loss by 2025• From 50 kg to 32 N loss by 2025.

• 650 Cows, irrigated, 165 ha, 250 kg N use,40% feed imported

• Must drop 15% N loss by use of Industry GMPby 2017

• Must drop 30% additional N loss by 2025• From 50 kg to 32 N loss by 2025.

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SOLUTIONS?

Option 1Stay intensiveBusiness as Usual SystemBuild Loafing + Feeding barn

Cost $3 MIncrease debt, risk, need forhigh outputBUTis the POLICY CERTAIN?Will current policy fix things?

Option 2Destock by 20%Reduce bought in feedsWhole farm soil test

Higher milk from fewer wellfed cows.No Elaborate InfrastructureRequired

Option 1Stay intensiveBusiness as Usual SystemBuild Loafing + Feeding barn

Cost $3 MIncrease debt, risk, need forhigh outputBUTis the POLICY CERTAIN?Will current policy fix things?

Option 2Destock by 20%Reduce bought in feedsWhole farm soil test

Higher milk from fewer wellfed cows.No Elaborate InfrastructureRequired

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