Labour/Green ag policies economic poker

Federated Farmers is warning the Labour and Green parties they are playing economic poker with their agricultural policies:

“While Federated Farmers is apolitical, it would be irresponsible not to warn the Labour and Green parties of the risk carried by their respective agricultural policies,” says Bruce Wills, President of Federated Farmers.

“The primary sector generates over half of New Zealand’s entire foreign exchange earnings so we cannot afford economic poker.

“The current policies of the Labour and Green parties also risk making the family farm a folk memory. The only farmers who’d flourish would be those capable of farming on an industrial scale and I don’t think Kiwis want that outcome.

The more costs imposed on farms the more expensive farming becomes so they will get bigger to gain economies of scale.

“As a former banker I am concerned at the overall risk to farm viability. Fast tracking farm biological emissions into the Emissions Trading Scheme and introducing ‘resource rentals’, could result in farm business failures.

“Since the introduction of the ETS in 2010, farm fuel and electricity expenses have increased. Yet it’s the way the ETS has worked its way into everything from freight costs to feed and even pest control, which has bitten the hardest.

“If farm biological emissions are forced into the ETS in 2013, Beef & Lamb NZ estimates it would cost each sheep and beef farm $40,000. The cost for dairy would be much higher.

“In this season, $40,000 represents 21 percent of the average sheep and beef farms forecast profit before tax. If biological emissions were in the ETS over the past ten seasons, farms would have generated less than the average household income for five while two seasons would have seen big losses.

“While $40,000 is a conservative estimate for dairy farms, it is 12 percent of this season’s average forecast profit before tax. If applied to past seasons, 2008/9 would have seen big losses and 2002/3 would have returned just $8,759 as the average profit before tax.

Unless and until there are viable ways to reduce emissions, the ETS is simply another tax which will increase the cost of production for no benefit and with absolutely no impact on emissions.

“Resource rentals on things like water create additional financial risk. With reduced profits rural land prices could be further weakened sparking a banking crisis of our own making. There are a lot of unintended consequences at stake here.

“Federated Farmers is asking both Labour and the Green parties to recognise there are few means to mitigate farm animal emissions, aside from reducing livestock. Fewer livestock mean fewer exports and reducing exports limits public spending choices.

“I believe most Kiwis want a flourishing export sector serving a world in need of more food. Exports create national wealth and national wealth creates options for everyone.

“How to grow these exports while reducing our environmental footprint are the agricultural policies we’d like to discuss,” Mr Wills concluded.

National’s  primary sector  policy will get a much more positive reception.

It includes the establishment of the Crown Water Investment Company with up to $400,000 million from the Future Investment fund.

New Zealand’s primary sector is an economic priority and National will put aside money from the Future Investment Fund for irrigation and water storage development, says Prime Minister and National Party Leader John Key. 

“Well-designed water storage and irrigation is a win for the economy and for the environment,” said Mr Key today at the release of National’s primary sector policy.

“Irrigation increases the productivity of our farm land, protects against droughts and takes the uncertainty out of water flows for farmers and recreational users.

“It also allows the more efficient use of water.  Storage allows us to capture water at times of plenty, for efficient use at times of need.

“It is also important to our environment.  More reliable access to water will lead to more efficient use of water, and provide for the replenishment of aquifers and the restoration of stream and river flows.

“National is committed to increasing New Zealand’s economic potential while balancing our environmental responsibilities,” says Mr Key.

Irrigation will do that and it also has social benefits, increasing rural populations and decreasing the average age of farming communities.

“Should National win the election, we will provide up to $400 million from the Future Investment Fund to confirm the funding for the second phase of our water priorities, to be called the Crown Water Investment Company.  Funding will be available from Budget 2013, and will carry on for the following four budgets.

“The scheme would operate through the Crown being a minority partner, and investing with the expectation of a commercial return on that investment.  The intention would be that the stake would be sold off over time.  It would not be a grant scheme.

This is not a hand out, it’s an investment which expects to make money and will be repaid.

“Because we are using the Future Investment Fund, which draws from proceeds of the mixed ownership model, we will not have borrow more at a time when financial restraint is needed.

“Government investment in large-scale irrigation schemes can deliver high quality projects, sooner, and give confidence to capital markets to invest.

“Our plan will be good for jobs, good for growth, and good for the economy.”

Agriculture Minister David Carter said:

The development of smart irrigation infrastructure will boost economic development and also contribute to the sustainable growth of our primary sectors.

NZIER research shows the fund could support 340,000ha of new irrigation which could boost exports by $1.4 billion a year by 2018, rising to $4 billion a year by 2026. But this is not about irrigation at all costs.

One of our greatest competitive advantages is water. It’s our “liquid gold”. But to date we have not done a good enough job of storing, allocating and utilising this wonderful resource.

The Irrigation Acceleration Fund provides an opportunity to develop new water infrastructure proposals that promote efficient water use and good environmental management.

Irrigation good practice is essential if we are to protect our vital water resource for tomorrow.

Central Plains Water is delighted with the scheme and points out the benefits will flow far beyond the farm gate. CPW general manager Derek Crombie said:

“Not only is today’s announcement a good one for the Canterbury farming sector, but also for Christchurch itself.  The city’s economic prosperity lies in the agricultural sector with an estimated 70% of the city’s wealth directly and indirectly having its roots in the farm.

“Canterbury already has 350,000ha of irrigated land and we know we can cater for up to 800,000ha across the Canterbury region without too much difficulty. With a direct economic impact of between $3 – $5 billion, this is almost equivalent to the total exports through the city at present,” he said.

The red and green policies  would add costs and risks to farming.

National’s policies are designed to help it, the communities it supports and the country prosper.