Transcript A NITROGEN CAP

THE N CAP IN TAUPO
A FARMER PERSPECTIVE
Deer Industry Conference
25th May
Mike Barton.
CONTENT
• An outline of the process leading to
capping Nitrogen Emissions from farms in
the Taupo catchment
• A brief look at the current NZ farming
business model and the interface with
emissions capping
• What about your catchment?
TAUPO CATCHMENT
THE HISTORY OF THE N CAP
FROM A FARMERS PERSPECTIVE
• We became aware of the issue in 2000
• Incorporated Society formed Taupo Lake Care
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(TLC) to represent farmer interests in
negotiations with EW
Negotiated to balance Lake protection with
economic viability
Advocate for and participate in research
Represented the majority of catchment farmers
and Maori incorporations - 105 farms
NITROGEN LEACHED
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Tussock, Native Forest Plantation Forest
Sheep Beef and Deer Farms
Dairy Farms
3kgs/ha
3kgs/ha
17kgs/ha
45kgs+/ha
• Farming emits 93% of the Manageable Nitrogen
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entering the Lake
4 Dairy farms -101 Extensive Sheep, Beef and
Deer farms
A NITROGEN CAP -THE REALITIES
• Is a cap on stock urine
• Essentially a cap on stocking
rate/production
• A production cap is an income cap under
existing commodity regimes
• To remove 20% of manageable N we
needed to covenant 35,000ha.
CONSENTED FARMERS • Applying for a consent that limits our production
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in perpetuity-significant implications for farming
business models and property values
Six farms modeled for Environment Court –
insolvent in 5-9 years
Length of consent about the length of an
average mortgage or less than one rotation of
trees, but at least we know what we can do for
25 years
OUR FARM- THE IMPLICATIONS
• Discontinued with breeding cows based on gross
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margin per kg of N leached
Need to grow young animals as rapidly as
possible –no 2nd wintering
Spraying or cultivating for pasture renewal may
not be viable/allowable (permanent pastures?)
Top B+L quintile for beef production - can’t do
any more
LESSONS TO DATE
• Taupo farmers have had a ‘Clean Streams
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Accord’ since 1983 and have consistently won
environmental awards yet we still have a
problem!
Environmental impacts will likely define
production limits for all farmers in the future
We cannot rely solely on science to solve this
THE CURRENT SHEEP AND BEEF
FARM BUSINESS MODEL
• Declining returns for the last 25 years• Profit before tax: B & L NZ Class 6
Marlborough/Canterbury Farmland
1984/5 - $80.92/ha – ROI +ve 3%
2007/8 - $21.36/ha – ROI -ve 0.4%
2009/10 - $128.78/ha- ROI +ve 0.3%
2010/11 - $293.49/ha ROI +ve 1%
BEEF FARM BUSINESS MODEL
• My current winter stocking rate is 3.5
cattle/ha. In 1985 - 2 animals/ha
• Farmers have taken up science driven
production increases to counter static
returns and rising costs yet look at ROI
• We have reached the limits of that
business model under catchment nutrient
caps
DO CONSUMERS PAY A PREMIUM FOR BEEF
PRODUCED UNDER A CATCHMENT MANAGEMENT
PLAN THAT PROTECTS LAKE TAUPO?
TAUPO BEEF- WHAT IS IT?
• RADIO FREQUENCY TRACKED FROM
THREE FARMS
• GROWN AND FINISHED QUICKLY
• CHARLOLAISE/ANGUS CROSS
• AGED FOR A MINIMUM OF 4 WEEKS
• SOLD AT A PREMIUM IN TAUPO
RESTAURANTS AND BUTCHERY
Taupo Beef Certification
TAUPO BEEF – THE RESULTS
• CONSUMERS HAVE PAID A SIGNIFICANT
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PREMIUM
OUTSTANDING FEEDBACK FROM CHEFS AND
DINNERS
DEMAND EXCEEDS OUR ABILITY TO SUPPLY
NEED TO BUILD A BUSINESS MODEL THAT
RETURNS A PREMIUM TO CAPPED FARMERS
FARMING UNDER AN EMISSIONS
CAP – THE FARMER’S CHALLENGE
• We can farm under emissions caps
• Livestock numbers and classes will need to
be capped to do so
• Do we accept a consequent cap on
income or are we willing to invest to
redefine the NZ Agricultural Business
model?
FOOD AND WATER QUALITY- THE
CONSUMER’S CHALLENGE
• Do you actively seek out food that is produced
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in a manner that protects water quality?
Do you know where to source such food?
What premium are you prepared to pay for
that food?
Is this the real test of how much you value
water quality?
CONCLUSIONS
• As a Nation we cannot continue to have
conversations about protecting water
quality without having a parallel set of
conversations that redefine the NZ
Farming Business Model
• We cannot continue to occupy the
agricultural commodity market space and
impose emissions caps at the same time
OPPORTUNITIES FOR THE DEER
INDUSTRY
• Build on your significant brand advantage
• Your target market is concerned about water
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quality anywhere in the world
Develop industry wide water quality protocols in
conjunction with Regional Authorities
Verifiable/robust water quality mark for deer
Turn this into a brand value that allows you to
grow income under constrained production