A fair go, mate!

IF YOU borrow money from the bank, it holds a grip (‘death pledge’) over you.

And the bank is not in it primarily for their fun or your enjoyment, despite what its advertising schmooze says.

The shareholders in the big-four Australian banks, ie the parents of their NZ subsidiaries, get a dividend yield averaging 6.10% (source Morningstar). And those parent banks make a return on equity (RoE) averaging 12.84%.

But wait! The Australians’ subsidiary banks in NZ — ASB, Westpac, ANZ and BNZ — are reckoned to average 14-15% RoE.

The Australian Royal Commission looked at banking scandals there and told the banks, ‘Clean up your act!’ So they’ll be wanting their NZ subsidiaries to continue strip-mining every available cent out of their Kiwi customers — while they close the high street branches.

If the bank is ANZ it’ll be needing extra cash to cover its embarassing real estate dealing in Auckland, and to tidy up after the Ross Asset Management Ltd ponzi scheme, over which it now faces a class action lawsuit by Ross’s victims.

Do such banks have an enshrined right to 14-15% returns on equity — out of New Zealand? Ponder the question at 4am in the dairy shed or the lambing paddock, or on hearing the bank has devalued your farm by 25%, or that your loan is called in and it’s all over.

Then listen to the governor of the Reserve Bank of New Zealand (RBNZ), Adrian Orr. Why, he asked, are Australian owned NZ banks are so profitable relative to their parent banks. He told newsroom.co.nz that these NZ banks are “among the world’s most profitable — second highest in the world”. That’s pleasing, said Orr, “we want profitable banks… but why so profitable relative to others, in particular their parent banks?” he mused.

The obvious answer to Orr’s question is that, in a world of growing opportunism by the increasingly powerful, the banks behave this way simply because they may — subject to rules, of course… of course… of course.  

Governor Orr made these key points (the quotes are his):

First, these banks have low costs, by “significant gaps in operational capability” (read ‘closing branches’). They should reinvest to manage risks “and be better concerned for customers in the long term,” said Orr. And they should “reinvest more rather than pay dividends”, despite having to expect a decline in RoE.

Second, the banks are grumpy that RBNZ sees them as undercapitalised re the peculiar risks of NZ, ie “the nature of the economy and the concentration of the banking system”. And the banks resent RBNZ’s proposal that they hold more capital to deal with ‘disasters’ — although no more than many other countries’ banks, Orr insists. And the banks would benefit from lower risk in return for a slightly lower RoE (to about 10-11%), he says.

Third, re NZ farms, “for 10 years the banks have been over-lending… and now they’re somehow wanting to withdraw,” Orr said. “But they need to be there in good times and bad… so they’re [now] learning how to be good citizens of New Zealand.”

Many Kiwis could do two things in response.

First, keenly scrutinise and question all debt — for lifestyle, mortgaged property (buying the farm next door?), for the proper advancement of a business, and for the less proper thrill of wild speculation.

Second, you know those NZ banks, among them Kiwibank, Co-op Bank, TSB Bank and Heartland? You could shift at least some of your business there.

Lots of Kiwis still believe a fair go is still a fair go, regardless of how that works in the Western Isles.


Who is looking after farmers’ interests in the ZCB negotitations?

DESPITE THE much hyped claim by certain prophets about the ‘historic’ agreement between the farming sector and the Government over the Zero Carbon Bill, the rumblings of discontent are growing louder by the day.

Climate Change Minister James Shaw crowed about the “remarkable shift” in the agricultural sector over the last few years and in particular the last few months resulting in striking the deal to work together.

Agriculture Minister Damien O’Connor also chimed in about the agriculture sector and the Government “working together”.

While levy funded groups such as DairyNZ, Beef + Lamb NZ and even Fonterra have been overtly cuddling up to the Government over its demands to cut agricultural emissions, others in the sector wonder if these bodies and their advocates are selling the sector out.

And DairyNZ and BLNZ has joined other farming groups, eg Federated Farmers, DCANZ, FOMA and Irrigation NZ, to launch an alternative to manage agricultural emissions at lower rates than the Government is demanding – especially for methane.

Many critics still fairly believe that both industry groups are advocating emissions reductions far greater than what current technology and farmer wallets can attain and/or afford.

Even the Government concedes that the technologies to solve on farm emissions problems are not proven or haven’t even been invented. However, it along with both the dairy and red meat ‘industry-good’ bodies seem intent on ploughing ahead and lumping NZ’s agriculture sector with major problems and unaffordable costs for years ahead.

At the same time, the Government is either refusing to accept or acknowledge that carbon sinks on farms – in the form of small tree plantations, shelterbelts or pasture – lock up the carbon there and go some way to mitigating the sector’s emissions profile. And it is allowing – even encouraging – heavy emitting industries like transport and power generators to buy up good farmland and plant trees to reduce their carbon footprint.

Yet when farmers dare to question the sense of the Zero Carbon Bill – especially in its penalising the world’s most carbon efficient farmers and risking our low emissions meat and dairy products being replaced in world markets by less efficient overseas goods – they are either accused of being climate change deniers or criticised for being negative.

Many of these accusers and critics are within the ranks of the highly paid executives at DairyNZ, BLNZ, Fonterra or their surrogates. It is frankly insulting to farmers to have such cowardly quislings hiding inside the very bodies they fund.

Now is precisely the time our agriculture industry bodies and its executives should be fighting the good fight for its levy payers. They should be fighting stupid and dangerous regulations being imposed on the sector by the Government – not appeasing it.

Change the tune

Farmers are doing much environmentally, socially and economically

NEW ZEALAND’S farming sector is often targeted by any number of different pressure groups wanting to blame it for one or other of the world’s problems.

This is not helped when merchants of doom such as Greenpeace, Fish & Game, Forest and Bird, SAFE and various politicians continue fanning the flames of discontent. They use the agriculture sector as the whipping boy for a myriad issues such as degraded freshwater, high meat and milk prices, foreign ownership sales, farming animals and now climate change.

So the development of the agri sector’s blueprint and commitment to dealing with climate change – He Waka Eke Noa (Our Future in Our Hands) is a big move for the sector. It is unprecedented to have all 11 partners in livestock, processing, horticulture and arable, Maori, apiculture and irrigation, and Federated Farmers, sign such a document.

The 14-page document outlines the sector’s collective commitment to working with the Government on the challenging issue of climate. The document is both aspirational and pragmatic.

But it also points out the obvious – which industry critics either choose to ignore or refuse to concede – that currently there are no practical actions farmers can take to meet the Government’s proposals to reduce on farm emissions.

It argues that the fastest progress towards managing NZ’s biological emissions will be by focusing on farm based technologies that reduce emissions, rather than the Government’s proposal to impose an interim processor level cost on emissions.

As National’s Todd Muller eloquently put it: “To tax the world’s most emissions efficient food producing sector, before there’s an opportunity to apply technology that hasn’t appeared yet, is nonsense.”

It is hard to disagree with Muller’s view that imposing a new tax – instead of encouraging the actual reduction of emissions produced on farm – will do nothing to arrest climate change. It will simply fill the Government’s coffers.

The document also shows the huge amount of work done by many agriculture sectors to benefit the environment. And it notes the value of competitions such as the dairy industry awards, the Ballance Farm Environment Awards and the Ahuwhenua Awards, all promoting industry role models.

The doom merchants must now note the facts and acknowledge not only the unique problems NZ’s agriculture sector has in reducing its carbon footprint, but also the huge amount of work being done to achieve this goal.

These critics may gain satisfaction in seeing NZ’s agriculture sector taxed out of existence to meet this country’s climate change obligations. But this would be a pyrrhic victory with the gap left in the market by our exiting producers filled by less carbon efficient farmers around the world.

Get with the programme

MPI needs to up its game in th way the M.bovis programme is run and managed

NEARLY TWO years have passed since Mycoplasma bovis was first discovered on a dairy farm in South Canterbury.

This devastating disease has since severely impacted many farmers, their families and livelihoods.

Meanwhile, at the same time, both the dairy and beef sectors – working with the Government – agreed on eradication of the disease as the best way ahead for New Zealand.

NZ is the only country ever to try eradication and unfortunately many mistakes have been made. This has left many affected farmers frustrated, disillusioned and in some cases devastated.

MPI director-general Ray Smith has apologised to all farmers and he claims his organisation is working tirelessly to make the necessary improvements. But his apology will ring hollow unless his colleagues make these changes — fast!

Two reviews recently published throw light on the M. bovis eradication programme and the search-and-destroy ‘surge in activity’ that happened leading up to this year’s Moving Day. These expert reviews looked into the causes and impacts of the disease and recommended how the MPI programme could be improved.

One review was by MPI’s chief science advisor Dr John Roche, and the other – an independent review – was by a South Australia animal disease management expert, Dr Roger Paskin.

Roche’s review discovered a backlog due to poor management of the flow of information between functions, and in the disease management team’s structure and resourcing.

Paskin identified issues related to the eradication programme’s structure, staffing, training, management and supporting tools. The reviews’ findings, among other things, included:

•       A ‘silo type’ organisation structure which discouraged communication and collaboration across the response

•       A lack of a common data management platform across the response which led to valuable data not being shared

•       A cumbersome, centralised decisionmaking process that was slow and not well informed by local knowledge

•       Staff hastily recruited and sometimes lacking the skills, qualifications and experience to work efficiently in a disease response.

None of this will surprise the farmers dealing with MPI’s M. bovis team. The real surprise for most will be the time it has taken the powers to identify these issues and start fixing things.

The reports made 43 recommendations to improve the systems and processes in the M. bovis programme. These include greater regional decisionmaking, the importance of farmer involvement, and improving structures, systems and resourcing.

It is way past time for everybody involved and responsible for running and managing the M.bovis eradication programme to actually ‘get with the programme’. They must now move promptly, efficiently and comprehensively to enable all the affected farmers to get on with their lives.

Fantasy meets reality

Undoubtedly, the Fieldays spin doctors will soon be breathlessly trotting out all sorts of fanciful facts and figures claiming this year’s event was the biggest, brightest and most money spinning ever.

WITH ANOTHER National Fieldays done and dusted for the year it is an opportune time to reflect on the current state of New Zealand’s primary sector.

However, back in the real world, we need to take a more realistic and truthful look at the state of the farming sector.

At first glance, things do look pretty rosy.

According to the latest SOPI report from MPI, exports of NZ’s primary produce have increased by $7.5 billion over the last two years and now stand at $45.7b for the year ended June 2019.

The report shows all primary sectors performing well except for the perennial straggler strong wool. Dairy revenue is up 5.7% to $17.6b, meat and wool earned over $10b for the first time (up 6.4%) and forestry earned $6.8b. However, horticulture is the real star, growing faster in export dollars than all other sectors. It will hit $6.1b – an increase of 13.7% on the previous year.

Recent reports from the various banks – ANZ, Rabobank and BNZ to name a few – also predict positive outlooks for commodity prices. And KPMG’s annual Agenda report also predicts that NZ’s agri food sector is well positioned to take advantage of international opportunities arising.

However, despite the plethora of ‘good news’ reports, all forecasters convey a strong thread of nervousness, unease and concern from the sector. This is mirrored by feedback on the ground from Fieldays and around the country.

Much of this negative sentiment comes from concerns about potential costs and impediments imposed on the sector by the Government and other regulators. For all the Government’s talk about wanting to support and encourage the sector, it is failing to match all this talk with any actual walk.

It is all well and good making nice speeches and taking selfies at Fieldays. But it is more the actions – or potential actions – the Government is taking that are causing this underlying apprehension among farmers.

The Zero Carbon Bill and its nonsensical methane reductions, uncertainty about what the proposed emissions trading scheme will mean for agriculture, the looming National Water Policy Statement, pro afforestation policies at the expense of farming and regular biosecurity incursions are all things that will not and do not inspire or build confidence in rural NZ.

More policy certainty and a willingness by Government not to place too many impediments in the way will help temper primary sector unease and allow it and the country as a whole to profit.

A recipe for disaster

The Govt has its head in sand over the impact of its billion trees programmme

THAT OLD saying about not being able to see the wood for the trees could well describe the government’s infatuation with forestry at the expense of farming.

Objections are growing stronger in rural New Zealand to the impact the ‘one billion trees’ programme will have on the regions’ farming landscapes, infrastructure and communities.

Concern is such that a new lobby group has formed, wanting to preserve the economy, health and welfare of the NZ provinces. Named 50 Shades of Green, it aims to convince politicians and decisionmakers that the current push to plant a billion trees will destroy the provinces and ultimately may endanger the national economy.

The group is made up of farmers, business people and other supporters. As spokesman Andy Scott says: “Taking whole farms out for trees – often by foreign companies – is a recipe for disaster”.

He points out that in Wairarapa alone seven farms have gone out of pastoral production, and in Pongaroa some 6000 to 8000ha have been planted in trees.

These are not non-productive or erosion prone areas of farms we are talking about. They are, in fact, entire productive food producing properties. Similar moves are being reported in other regions. Good productive farms are being bought out by often foreign owned entities and planted entirely in trees.

“You can’t eat wood,” Scott pithily adds.

The government’s desire to use forests as carbon sinks to contribute to the country’s climate change commitments will impose devastating economic and social cost on rural NZ. This ignores warnings by the Parliamentary Commissioner for the Environment that planting pinus radiata is not a credible way of removing CO2 from the atmosphere.

It is ironic that the parties that make up the coalition government – Labour, NZ and the Greens – all promised at the last election to tighten the Overseas Investment Act. They did this in respect of housing and farm ownership. However, they loosened the rule under which overseas investors may come in and buy farmland and plant trees.  So now overseas investors can come to NZ and buy up farmland, allowing the likes of oil companies, airlines and big power generators to use the land to carbon farm.

Once a tree is planted, little else is done with it for 30 years – aside from the odd pruning – until it is harvested (much longer if it is not a pine). Therefore jobs, communities and infrastructure in rural NZ will decline and fast. It is already estimated that the land now taken out of livestock production for forestry will mean the end of one meat processing facility. Consider the financial and social costs that will have on regional NZ.

As 50 Shades of Green warns: “Instead of revitalising the provinces this tree planting will destroy them.” Let’s hope this warning is heeded before it is too late.

Killing our golden cow?

Let’s hope the Government’s propoosed methane targets don’t cripple farming sector and end up a pyrrhic victory for NZ’s economy.

TARGETS PROPOSED for cuts to methane in the Government’s Zero Carbon Bill have left the agricultural sector aghast at just exactly how it will meet these targets without the necessary technologies or major culls to livestock numbers.

The bill, backed by Labour, NZ First and the Greens, is due to go before a select committee in June and proposes reducing methane by 10% from 2017 levels by 2030 and 24-47% by 2050.

Proponents of the bill claim the methane cuts match what was deemed feasible by a farm gas working group. Farm sector leaders say achieving this goal would only be possible if science were able to deliver methane-shrinking technologies such as inhibitors for cows and sheep. However, these are not yet available.

Beef + Lamb NZ, DairyNZ, Deer Industry NZ and Federated Farmers have all condemned the 2050 methane target as being far too draconian. They say that without the necessary methane reducing technologies farmers and the NZ economy will suffer grave economic consequences.

One possible way out for the agricultural sector would be via a review of the provisional target range by the soon-to-be-created Climate Change Commission in 2024, and taking account of (any) changes in scientific knowledge and other developments for reducing livestock emissions.

DairyNZ says it is “understandable” that the Government might have taken the methane shrinking technology into consideration in setting its provisional targets. But this assumes “… a target range set of expectations based on technological solutions that are not yet available…. We do support the target being reviewed if and when those technologies become widely available.”

Farming groups are arguing that the sector should not be required to reduce its current contribution to warming because carbon emitters in transport and other sectors are not being asked to do that. BLNZ says being asked to do that isn’t fair. It insists the goal for all gases should be “no additional warming”.

BLNZ spokesman Jeremy Baker points out that if methane inhibitors were to arrive on the scene the organisation would be happy for the 2050 target to be revised upwards. “At moment the only option is to reduce livestock numbers.”

The Government’s methane targets appear to be drawn from a range of calculations in an IPCC report that said countries must cut methane by 35% by 2050. 

Climate scientists generally agree that methane does not need to fall to zero or even close to zero to reduce warming. Methane mostly disappears from the atmosphere within a decade or two. That makes its lifetime short compared to carbon dioxide which lasts forever.

Farmers will not have the option of offsetting methane via carbon sequestration, ie planting trees, which other industries will have in reducing their emissions. As BLNZ argues, it’s unfair to ask farmers to help reduce their warming from methane unless getting to negative emissions by CO2 capture is also part of the picture.

The way the proposed livestock methane target reduction looks now it is very much a case of the Government killing the golden goose – or more correctly the cow, sheep and deer – of the NZ economy.

That would indeed be a pyrrhic victory for the Government and the country as a whole.

A sensible outcome?

How will the ETS treat agricultural gases?

NOW THAT any notion of a capital gains tax has been struck down the agriculture sector nervously awaits the Government’s plans for tackling climate change and the resulting impact.

As this issue of Rural News goes to print, there are reports that it is close to announcing a deal on its climate change legislation and how it will deal with agricultural emissions.

Last week, Climate Change Minister James Shaw received a report on agriculture from the Interim Climate Change Committee (ICCC). It is understood that this report – and another on transitioning to 100% renewable electricity – will be held back until the Government decides on its response. 

However, according tothe Stuff media outlet, the Government has decided on a ‘split gas’ target which would see methane treated differently from other long-lived gases like carbon.

If so it’s a good thing.

The farming sector has been rightly concerned about any proposed climate change legislation because agriculture accounts for about 50% of NZ greenhouse gas emissions – mostly methane from livestock. The country’s methane emissions will need to drop significantly for global warming to be limited to 1.5 deg C, which would have major repercussions for NZ’s farming sector.

The agricultural sector believes it, and our economy as a whole, would be unfairly disadvantaged, as NZ’s methane emissions are six times the global average and there is no clear way to reduce our levels other than by culling livestock numbers.

Earlier this year, Parliamentary Commissioner for the Environment Simon Upton argued that the biological greenhouse gases methane and nitrous oxide do not need to go to zero and that farming should be allowed to offset emissions using forests as sinks. Upton’s report departed from widespread calls to drag agriculture into an expanded ‘all gases, all sectors’ version of the current Emissions Trading Scheme (ETS).

Critics claim this lets the farming sector ‘off the hook’ and they demand that the Government reduces all gases to zero in its proposed Zero Carbon Bill.

But industry bodies Dairy NZ and Beef + Lamb NZ welcomed Upton’s more nuanced approach. They have been calling for just such a change in policy makers’ views on methane and other carbon emissions. The agriculture sector argues there is growing authoritative evidence that methane – a biological emission from animals – differs from carbon dioxide in its impact on global warming.

Let’s hope the Government has listened.

A licence to farm

Farmers need to be seen doing the right thing — environmentally, socially and economically

THE GOVERNMENT has a clear message for farmers: ignore climate change at your peril.

Consumers worldwide are demanding sustainably produced food and are keen to know how the food that lands on their meal table is produced.

They expect farmers to be part of the climate change movement and leading the march on sustainability onfarm.

With that in mind Fonterra this month announced an initiative that focuses on sustainability at all levels and prioritises the value  of milk, rather than the volume, into the future. Its programme The Cooperative Difference focusses on five key areas: environment, animals, milk, people and communities, and our co-operative and prosperity.

The firm intention is to make clearer to farmers what their co-op expects of them today and in the future, and to duly recognise the many farmers who conscientiously produce high quality milk in a more sustainable way. Those who produce will be rewarded, but those who persist with continuously poor milk grades will face the consequences.

The co-op is also assuring farmers there will be no nasty surprises. The Cooperative Difference will enable farmers to better understand the changing expectations of global markets, customers, consumers, communities and regulators so they can plan and prepare for what they must do.

Fonterra says new sustainability regulations won’t be dumped on farmers overnight, and it acknowledges that change cannot happen overnight; it plans to provide farmers with more advance notice of new requirements and changing expectations. 

Meanwhile, Beef + Lamb NZ has also moved in the same direction. Last year, it launched its environmental sector strategy and a biodiversity report showing that sheep and beef farmers have 24% of NZ’s native vegetation on their farms.

These were not developed just for the fun of it, but as BLNZ chief executive Sam McIvor told the organisation’s annual meeting, “the social licence to farm is a real issue”.

“We need to understand the perspectives of the public and our markets; they influence government policy and buy our products.”

Just as the public attitude to water quality has changed in recent years, so too will the public stance on climate change. Farmers, their industry bodies and companies selling their products need to understand this and ‘get ahead of the game’.

While farmers may not get any extra financial incentives in the form of better prices, they need to understand that this is the cost they have to bear to continue to farm and have their products bought by customers.

It also underscores that sustainability concerns are more than the environment: they extend into the detail of looking after people, caring for animals, adapting to changing customer and consumer expectations, and respecting the communities and land where farmers operate.

The reality is that while farmers risk having to pay higher compliance costs and face pressures in their quest to farm sustainably, these moves are a huge step in the right direction.

Some gases worse than others

Parliamentary Environmental Commissioner Simon Upton latest report makes for interesting reading

THE LATEST report from the Parliamentary Commissioner for the Environment Simon Upton makes interesting reading for the agricultural sector and its constant critics.

Upton’s report marks a departure from widespread calls to drag agriculture into an expanded ‘all gases, all sectors’ version of the current Emissions Trading Scheme (ETS).

Instead, he has proposed separate trading systems for fossil and biological emissions to help tackle climate change. This so-called ‘landscape approach’ would deal with agricultural greenhouse gases and forest sinks together – and separately from CO2.

Upton’s new report suggests that forestry carbon sinks should only be used for offsetting biological emissions like methane. Carbon emissions from, for instance, fossil fuels should be brought to zero by other means.

The agricultural sector has been calling for just such a change in policy makers’ views on methane and other carbon emissions. This has been backed, in the past 18 months or so, by numerous scientists supporting the setting of a separate methane target in the Zero Carbon Bill, to reduce and stabilise methane, while carbon dioxide and nitrous oxide reduce to net zero.

This is aligned with work by the Productivity Commission, research by Dr Andy Reisinger of the New Zealand Greenhouse Gas Research Centre, and most recently by Professor Myles Allan, of Oxford University, a member of the Intergovernmental Panel on Climate Change (IPCC).

Farming organisations are calling on the Government to take note of these new findings – which align with the latest and emerging science.

As Beef + Lamb NZ chairman Andrew Morrison says, it is now essential that ministers considering the shape of the Zero Carbon Bill, and that members of the Interim Climate Change Committee and the future Climate Change Commission, take the parliamentary commissioner’s findings into account when setting policy.

“This work adds to the growing evidence base developed over the past few years about how methane — a biological emission from animals — differs from carbon dioxide in its impact on global warming,” adds DairyNZ chief executive Tim Mackle.

Professor Dave Frame, the director of Victoria University’s Climate Change Research Institute, said Upton’s report is “thoughtful and constructive” and acknowledges the cumulative differences between gases.

Critics claim this alternative approach would be ‘letting farmers off the hook’. Although these same critics have always argued about the ‘science of climate change’, they seem to conveniently forget this when the science does not back their narrative.

As BLNZ says, the PCE report shows a clear way forward for NZ on climate change and recommends a science-based approach, which fits with the principle of each sector being responsible for its own emissions — and for tackling them.

Ministers, policy makers and farming critics must take note: it is difficult to argue against the science.