The battle lines are becoming clear for this election. It is becoming increasingly apparent that the establishment party politicians don’t want to scare the cows amongst the farming lobby. Yet new research shows that if we do it right, the cost of cleaner fresh water won’t be as great as many think in terms of reduced farm profit. So what are they afraid of?
If you want real action on fresh water, in a rational fashion, then The Opportunities Party is your only bet. Let’s start with a brief look at other parties’ fresh water policy.
We know where National stands on fresh water; they will only stand in fresh water, and even then only with gumboots on. Their swimmable river policy is an oxymoron, an exercise in fiddling the numbers. Under their definition rivers can be swimmable when they have no water or are clogged with algae. National’s plan is to take small steps forward on issues like fencing out stock when our environmental is going backwards – and fast.
Labour got themselves into a tangle trying to gild the lily on water charging in order to not scare the cows at a Fed Farmers convention. As a result they had to issue a clarification on water charging which wasn’t very… clear. The upshot? They want to use regulation to fix water quality, and will definitely charge water bottlers. They are still keen on a wider water charge, maybe, but aren’t pushing that point at the moment.
The Greens haven’t released their fresh water policy yet, but we know they aren’t keen on using market mechanisms. In other words, they will regulate instead of providing incentives. This has two drawbacks – it doesn’t allow farmers to have flexibility in how they meet targets, and doesn’t raise any money to spend on good stuff.
Finally, NZ First showed their cards at the Fed Farmers convention last week and as is typical for that party they just grovel for the vote rather than doing anything that improves the environment or actually is even in farmers’ long term interest. They have no intention to charge irrigators or polluters for the water they use nor the damage they do. In fact they don’t seem to want to regulate farming at all, which means a vote for Winston is a vote for even worse water quality than we have now. Yet another giant step backwards from NZ First for our regions, which rely on the environment for their survival. As the most regressive conservative party on offer, NZF offers to lead us down a hole on almost all fronts.
TOP’s Clear Water Action Plan will be released on tonight at 6pm. It will build on our Environmental Policy and will set out a plan for improving our fresh water, making polluters pay and ensuring water available for commercial use goes to where the economic benefits are greatest. It is just rational, best practice, evidence-based policy at work.
This won’t be a cowpocalypse
The current regressive stance on freshwater care and allocation has no economic basis and certainly is no good for farming long term. There is increasing evidence that the recent rash of putting more and more cows on the land hasn’t increased profit by that much. Indeed there are plenty of examples now where less intensive farming, with better farm practices is far more economically efficient, environmentally sustainable and profitable for farmers. The key is moving all farmers to best practice. The challenge is using market mechanisms to provide incentives for that to happen.
New research by Anderson & Ridler puts the discussion about a cow apocalypse into perspective. Using data from a Waikato farm they model how farm profit changes as more cows are added to the farm at different milk prices. As more cows are added the farm faces higher costs - more feed, more staff and more machinery. This in turn increases debt and makes the farm a riskier proposition.
This modeling shows that only above a milk price of $7 does a very heavily stocked farm become a more profitable business (the current price is $6.50 which is relatively high for recent times). Below that a heavily stocked farm (System 4 and 5 in dairy farming terms) will actually do similar or worse than a more lightly stocked farm. And it takes a milk price of $10 and above to justify some of the most heavily stocked farms (System 5). Incredibly, the use of feed has been growing the fastest on these heavily stocked System 5 farms.
The billion dollar question remains, if farmers haven’t really been increasing cow numbers for profit, why have they done it? There are three reasons:
1. As we have discussed previously farmers are chasing tax-free capital gain rather than profit. That lends itself to overinvesting on the farm so per hectare earnings are maximised.
2. The lack of costs faced for environmental degradation; and
3. Pressure from the likes of Fonterra to increase production volume flowing through all their factories.
Mollycoddling farmers is no answer. Policies like National’s and New Zealand First’s will only cause greater contamination of our fresh water resource and over-allocation of water use. Even more debacles like what has happened in Canterbury are guaranteed under such an approach, leading to an even greater public backlash than currently prevails. Such an outcome would usher in Labour and the Greens using blunt regulations in an over-reaction to the problem.
Meanwhile the world is demanding produce that is environmentally friendly. That’s the opportunity, the rational policy response is to ensure that market signal is delivered loud and clear to producers. Internalising the cost of their pollution is one such mechanism.
In many of our industries our economy would benefit from more policy smarts being applied so we see a shift away from volume towards adding value. Why should we try to compete on volume with massive economies like the US and China, when instead we can produce high-quality, environmentally sustainable products. This is as much the story with dairy as it with tourism. It’s income we want to maximize, not volume or tons of product produced.
At the moment only TOP is charting that course.