Rural round-up

April 26, 2018

Land use tipped to change on Waimea Plains, near Nelson, if dam gets nod – Cherie Sivignon:

Waimea Irrigators Ltd chairman Murray King is putting his money where his mouth is to support the proposed Waimea dam.

The dairy farmer and long-term proponent of the dam project said he had committed to buy more water shares, at $5500 a pop, than he needed for his 57ha block of land on the Waimea Plains.

“We’re fully subscribed, a little bit over actually.”

His “60-something” shares would cost him more than $300,000. . .

Retaining soil carbon the answer to managing agricultural GHG emissions – Gerald Piddock:

A Matamata dairy farm has become ground zero for a team of Waikato scientists searching for ways to lower agriculture’s greenhouse gas emissions.

Soil carbon and nitrous oxide losses are being measured on the 200 hectare farm owned by Terry and Margaret Troughton and managed by their son Ben and wife Sarah.

Their findings so far in a project funded by the New Zealand Agricultural Greenhouse Gas Research Centre were outlined at a field day on the farm.

Better pasture management, genetics, feed and nutrition had been done well, but new strategies were needed to take the project the next step forward, Landcare Research’s Jack Pronger​ said. . . 

Farmers give thumbs down to new taxes:

Any move to introduce a capital gains, land or environment tax will meet stiff opposition from farmers, a Federated Farmers survey shows.

The Federation asked its members for their views last month, to help inform the farmer group’s submission to the Tax Working Group. The nearly 1,400 responses indicated strong opposition to some of the new taxes that have been suggested.

Just on 81 percent opposed a capital gains tax excluding the family home, with 11 percent in support. However, 47 percent would support a CGT on property sold within a five year ‘bright line’ test. There is currently a two-year threshold, and the measure is seen by some as a way of discouraging speculators. . . 

NZ farm sales fall 11% in March quarter as mycoplasma bovis keeps farmers nervous –  Paul McBeth:

(BusinessDesk) – New Zealand farm sales fell 11 percent in the March quarter from a year earlier, as the mycoplasma bovis cattle disease outbreak weighed on purchasing intentions and spanned a period where smaller plots of rural land were captured by the regime to screen foreign buyers.

Some 388 farms were sold at a median price of $27,428 per hectare in the three months ended March 31, down from 438 farms at a median price of $27,509/ha in 2017, Real Estate Institute of New Zealand figures show. Fewer dairy and grazing farms accounted for the drop, with gains in finishing farm sales coinciding with strong prices for beef and lamb meat. . . 

Calm ewes produce more than nervous ewes:

A calm temperament in ewes improves ovulation rate and successful pregnancies, according to a study published by The University of Western Australia.

The study, which was conducted in collaboration with researchers from Uruguay, the Department of Primary Industries and Regional Development WA and UWA, has implications for the impact of stress in human reproduction.

The team investigated the reproductive outcomes of 200 Merino ewes known to have either a calm or a nervous temperament. They found the ovulation rate and rate of successful pregnancies to be higher in the calm ewes. . .

Shearing at the end of the world –  Tomas Munita and Russell Goldman:

Life at the end of the world can be lonely.

For weeks at a time, Roberto Bitsch and gauchos like him might not see another human being. They see horses, both wild and tame. They see the dogs they work with. But mostly, they see sheep — thousands of them.

Locals mark time by the length of the sheep’s woolly coats here on Isla Grande, the largest of the Tierra del Fuego islands at the tip of South America, closer to Antarctica than to Chile’s capital, Santiago. . . 

 

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Rural round-up

December 19, 2017

The water is on, now for the hard bit – Hamish MacLean:

The $57million North Otago Irrigation Company expansion is complete — much to the relief of shareholders, with weather forecasters predicting a warm, dry summer. But irrigation is not so easy for farmers as simply turning on the water and watching the grass grow, Hamish MacLean finds out.

It could be a couple of years before North Otago’s newest irrigators get to grips with their new resource, but with a big dry spell predicted this summer, farmers are pleased to have a guaranteed water supply.

While the water on the North Otago Irrigation Company’s expansion began flowing in September, it was the end of November when all 85 off-takes of the expansion were commissioned, reaching the end of the line at All Day Bay. . . 

Rabobank New Zealand announces new CEO:

Rabobank New Zealand has announced it proposes to appoint Todd Charteris to the position of chief executive officer, subject to regulatory approval.

Rabobank New Zealand chairman Sir Henry van der Heyden said Mr Charteris “will bring significant experience with Rabobank on both sides of the Tasman to the role of CEO, as well as a deep knowledge of agribusiness and extensive relationships across the global Rabobank network”. . . 

Jonni keeps quality core at Stirling cheese – Sally Rae:

You could call Jonni de Malmanche a jack-of-all-trades, or more accurately, a Jane of them.

The South Otago woman is one of the long-serving staff members at Fonterra’s Stirling cheese factory, having worked there for the past 23 years.

“I still enjoy coming to work every day. I love the people, I love basically what Stirling stands for which is we make great cheese,” she said.

The factory, which opened in 1983, was built by the Otago Cheese Company, formed after the merger of three small South Otago dairy companies. In 2010, Fonterra spent $7.75 million upgrading the factory. . . 

 

Westland Milk Products soon to announce new products – Alexa Cook:

New Zealand’s second largest milk company is planning to step away from selling dairy products alone and expand into alternative protein and blended products.

Westland Milk Products has bounced back from a $14.5m loss in 2015/16 to break even this year.

Chief executive Toni Brendish says the co-operative worked hard over the past year to become more efficient.

The company’s purpose was now “nourishment made beautifully for generations” which she said gave it freedom to go beyond traditional dairy products. . . 

Dry summer weather prompts farmers to offload stock, AgriHQ – Tina Morrison:

(BusinessDesk) – Dry summer weather is denting grass growth, prompting farmers to reduce their livestock numbers, with the increased volumes of animals hitting the market starting to weigh on prices, according to AgriHQ’s Monthly Sheep & Beef report for December.

“The common factor pulling values down throughout NZ is the weather,” AgriHQ analyst Reece Brick said in his report. “It was a rapid transition from a particularly wet early spring into one of the driest late spring/early summers in recent years, catching many farmers off guard.”

For the sheep industry, below-average growth rates through November kept a lid on the number of lambs being sent to slaughter, keeping prices higher than anticipated. However numbers were now coming forward in significant volume and the long awaited fall in prices has finally begun, Brick said, noting that meat companies had dropped lamb slaughter prices by 15-20 cents per kilogram over the past fortnight, bringing the price to $7.10/kg. . .

Capital gains tax may be on the horizon with the new government:

With the new government reversing National’s tax cuts in April 2018, the government has now announced the items that are on the tax agenda, and have also signalled other potential changes. Tony Marshall, tax advisory partner for Crowe Horwath, predicts how the government’s new tax agenda may affect farmers.

As promised, the government is forming a Tax Working Group and has stated one of the focuses of the group will be looking into capital gains associated with property speculation. Capital gains tax has always been a contentious topic and sends nervous tension through the farming community. . . 

Monthly Dairy production report November 2017:

Key Statistics:

• NZ milk production for November 2017 was up 4.2% (+3.4% on a milksolids basis)
• NZ milk production for the season-to-date was up 1.8% (+1.8% on a milksolids basis)
• NZ milk production for the 12-months through November 2017 was up 1.3% (+1.9% on a milksolids basis)

Full report here.


Let’s not tax this

September 16, 2017

Labour backed down on introducing a capital gains tax without putting it to the electorate in 2020, but they’re still planning plenty of other taxes.


Vision based on science and experience

September 11, 2017

David Clark writes:

I also have a Vision…
…of where NZ is going to be taken.

When I was a young fella growing up, all I wanted to do was go farming, just like my Dad, my grandfather before him and my great grandfather who had jumped ship in Thames as an orphan in the early 1870’s. I knew that there was something very special about being able to farm the land and grow food.

Then along came the 1980s and the brutal recession brought on by the changes made the Lange Labour Government. As a teenager I still vividly remember watching Television News coverage of a farmer by the name of Dan Dufty being escorted off his North Waikato farm like so many other families were at the time. I remember the tears running down his face and the anguish in his voice.

I remember worrying about whether that would happen to us, things where pretty tight on our family’s small South Auckland Town Supply dairy farm during this time.

When I left school I was very fortunate to be employed by a family at Orere on their large Sheep and Cattle farm. They demonstrated to me that there was a future in farming if you worked hard and this set me on my course.

I wanted to get ahead and found that by starting a small contracting business, initially as a fencer, with a lot of determination, late nights and early starts I would be on a path to make my own way. There was no O.Es, no leering up. In 1994 my parents and I each sold up our assets in Clevedon and set off for the South Island to take up arable and stock farming in Mid Canterbury.

We started contracting out of necessity to help us fund the development of irrigation on the then dryland farm and in 2010 sold that Contracting run to then fund the installation of Centre Pivot Irrigators that were much more water efficient and resulted in less leaching than the earlier machines.

My wife Jayne and I farm here with our three young sons and my parents still live here on farm. This is our Turangawaewae.

But I sit here, thirty years on from that farmer being dragged off his farm and I wonder, no, I fear we are heading back to those very grim days. In my view we are standing in 1984.

Since I wrote my last article, I have seen overwhelmingly positive feedback who buy into the idea that poor water quality has many causes, urban, rural and industrial. Those many causes have many solutions best worked through on a catchment by catchment, community by community basis.

But sadly I have also seen the hatred and vitriol, and I’ve paid a lot of attention to the policies being proposed or hinted at by Labour and the Greens. I have come to the view that these policies, not in isolation, as a compounding effect will likely result in the biggest drop in agricultural economic confidence since the ‘80s.

A Water Tax levied on irrigation, primarily on the East Coast of the South Island to fund a payment of Koha to Iwi and then pay for waterway restoration across the Nation is inequitable and will be ineffective. There is no correlation between areas of poor water quality and areas of intensive irrigation; in fact quite the reverse applies. The tax will exempt all other farming systems and all urban and industrial takes from municipal supply even though it is very clear that poor water quality is also caused by other activities.

The Greens Nitrogen Tax intends to levy Dairy Farmers initially and other farming types soon after for Nitrate discharge even though other land forms leak Nitrogen, as does the DoC estate, Plantation Forestry and of course the discharges of treated and untreated human effluent and storm water, all of which will be untaxed. The cost of compliance with an Audit Quality Overseer assessment required on every farm, every year would be enormous. The suggestion that funding be used in part to coach farmers on Organics is nonsense.

Overseer was never designed to be used to levy tax and it is not reliable – up to 30% margin of error.

I fully understand that the agricultural sector must work to address water quality issues and I believe that we are already making very good progress with riparian fencing and plantings, upgrading of older irrigators to precision application of water, more targeted fertiliser usage and a major rebuild of farm effluent systems in the last 15 years. We have reduced our calculated Nitrogen loss here by 25% in the last six years. Progress is being made, largely voluntarily, however nationally and certainly in Canterbury, Regional Plans have been introduced to put significant onus on land owners to demonstrate a measurable reduction in agricultural externalities.

Farming under the Canterbury Land and Water Regional Plan will, is, delivering results for the environment, but it is expensive to make the changes required in our faming systems, taxing more money out of our business will slow the progress that we can make on farm due to cashflow restriction.

An inclusion of all agricultural emissions into an ETS will see us as farmers compete in the International Marketplace with another layer of cost as we compete against produce that is largely directly or indirectly subsidised and will see farmers struggling to compete with the same overseas product in our domestic market. An ETS on Agriculture in NZ will simply move food growing to a less efficient producer elsewhere in the world.

I hear people regularly saying we all must pay our dues to fight climate change, but I note that International Air Travel is excluded from the Kyoto Protocol because of the damage it would do to global tourism. Research and Development is the way to reduce livestock emissions, not Tax.

A Land Tax with an annualised charge levied over the value of an asset is just simply a new tax, not based on productivity or profit, just a tax and in my view a tax of envy. Farms have high asset values and low profitability, the affordability of an annualised charge will further undermine farming, especially in the sheep and beef sectors.

A Capital Gains Tax and its’ necessary partners, Death and Gift Duties will threaten the very core of New Zealand Agriculture, but not only Agriculture, but intergenerational ownership of all types of businesses across New Zealand and will result in more land and productive assets being lost to long-term corporate and offshore ownership.

Many families struggle to meet the cash flow and capital raising requirements of family succession at the time of the intergenerational transaction, which is done at or near to market values. The new generation of farmer invests their own capital and relies on either internal family or external borrowings to then buy out non-farming siblings; help expand the business to accommodate multiple siblings and provide money to buy a house for parents or otherwise fund their care and welfare.

If Government put their hand out for a Capital Gains Tax on the lifetime growth in the value of the asset, then that cash removed by way of a tax would be the very cash that was so badly needed to complete the intergeneration handover. I certainly understand the extreme difficulties caused by Death Duties in years gone by in New Zealand. They were abolished for very good reason.

Capital Gains Tax and Death Duties will make continued family ownership of the farms and businesses, on which New Zealand is built, extremely difficult.

In Argentina death and gift duties stall farms sales. People hold onto land and lease it rather than selling.

In Australia, CTG stalls farm succession and sales.

In my view the most significant policy of this election is Labour’s Employment Relations Policy which hands total control of workplace pay, conditions and terms across all sectors and all skills and puts the Unions in a centre role of negotiation and “Remove the ability for employers to deduct pay from workers taking low level protest action during an industrial dispute” . I would argue that most New Zealanders have a relationship with their employer built on mutual trust and respect and I don’t believe that most Kiwis wish to return to the ‘70s and ‘80s were the Ferries went on strike at the start of the school holidays, the works went out just as the lambs came on in January or Unions went out in sympathy for a workplace scrap going on at the other end of the country.

In my opinion, this election has got nothing whatsoever to do with the House Prices or Swimming in rivers, this election and the campaign of Labour is a desperate attempt by the Trade Unions to seize control of the New Zealand workplace.

At present we are living with an asset bubble, certainly in house prices in the upper North Island and arguably in farmland, this is no different to most Western economies that have binged on cheap and plentiful credit generated by the madness of Quantitative Easing. Arguably it is not the Government’s fault that we have “traded up” our family home, put a boat or overseas holiday or new car “on the house”, or generally lived beyond our means and racked up massive private sector debt secured against the family home.

We are enjoying interest rates well below the recent long run average and a credible statistical correction could easily see cost of borrowing lift from 5% to 8-9%, I’m not convinced that many home owners would not find their financial situation severely compromised by a near doubling of interest rates, nor do I think many farming businesses could stand such a shock.

I fully support the need for our society to have a robust and compassionate Social Welfare system to provide an outstretched helping hand to our fellow man as they go through a vulnerable time, but this must be a based on the principle of a hand up, not a hand out, and for us to be able to provide that compassion, we need to have a robust and stable economy in the first instance.

It is a culmination of all of these policies, not just one in isolation that I believe has the very real potential to create a collapse in economic confidence not seen in New Zealand since the 1980s.

The brutal and stark reality is that even with our business, which is very sound and holds only a very modest level of debt, there is simply not the money to pay these taxes and increased costs. The cumulative total of these taxes will far outweigh the taxable profit of our farm and will leave us cash flow negative and therefore un-bankable.

I don’t know where the Labour Party think the cash will come from, I can assure you it is not under the pillow in a cake tin.

I can very accurately tell you where the money for these taxes and charges will come from. These costs will come straight out of the till of the businesses in our local town that supply us with goods and services. I fear for the future of those business and the families employed by them, I really do. The ‘80s was very tough for service industries as well.

Land and CTG taxes will hit businesses big and small including health professionals like doctors and physiotherapists, shops, hair dressers, and trades people.

Will the people who think these new taxes are a good idea also think paying more for the goods and services these businesses provide is a good idea?

We have already suspended all none urgent expenditure pending the election outcome.

I and many other New Zealand farmers today are proud to have grown the grain for your cereal or toast; multiplied the seeds that were planted by other farmers to grow your vegetables and spuds; raised your tender meat; clipped wool for your warm clothes; produced the milk for your coffee and supported a multitude of local businesses along the way.

The words that resonate with me are those of retired US Secretary of Agriculture Tom Vilsack…

“Every one of us that’s not a farmer, is not a farmer because we have farmers. We delegate the responsibility of feeding our families to a relatively small percentage of this country… so the rest of us can be lawyers or doctors… or all the other occupations because we never have to think – Do I actually have to grow the food for my family? No, I go to the grocery store and buy it.”

I am proud to be a farmer, doing what’s right, we are not in the ‘80s, please don’t let us go back…

If you support what I have said, please stand together with me and I would really appreciate you sharing this post.

This vision is built on experience, science and facts not political theory.

A lurch to the left under a Labour-led government would undo much of the good that National’s careful economic management has achieved.


Gift tax by stealth

September 15, 2014

Labour yeah-nahed over whether or not capital gains tax would be due on the family home if it was sold by the beneficiaries of a will,  but would which make CGT a death tax by stealth.

It will also be a gift tax by stealth.

Baker & Associates latest AgLetter examines the tax and finds:

Gifting an asset will be considered a CGT event, except in the case of inheritance upon death. The person gifting will be liable for CGT based on the market value of the asset, and this will include farm property.
National removed gift duty because the amount raised didn’t justify the costs.
The major beneficiaries were accountants and lawyers and that would be the case should labour CGT be inflicted on us too.

Labour’s CGT no good – NZIER

September 10, 2014

A report by the New Zealand Institute of Economic Research (NZIER) reinforces Federated Farmers concerns over Labour’s proposed capital gains tax:

“The NZIER say the Labour Party’s proposed Capital Gains Tax would not be a good addition to New Zealand’s tax mix as it is proposed, we agree,” says Dr William Rolleston, Federated Farmers President.

“The nature of politics will see the Labour Party try to dismiss the NZIER report.  Yet they must listen to the message because the messenger is credible.

“We commissioned the NZIER to examine Labour’s CGT proposal since it represents a major change to New Zealand’s tax system and has been devoid of critical analysis. 

“Perhaps the most concerning aspect of the report comes down to the Labour Party’s revenue assumptions.  In 2011, the Labour Party estimated a 15 percent capital gains tax would raise $17.5 million in its first year, rising to $3.7 billion by 2026.

“The NZIER tell us these estimates are high, since the revenue potential of its proposed CGT is more likely to be half that sum.  In fact it may be smaller.  If this key policy is out by such a margin it asks fundamental questions about the Party’s shadow budget. 

“What’s more, the Labour Party’s estimates of CGT revenue were revised up this year.  The NZIER noting Labour’s “…2014 estimates are less believable than the 2011 estimates.”

“Labour also expects to raise at least $1.3 billion from the farming sector but a more realistic estimate is half that sum in 15 years’ time.  NZIER further estimates that the loss in current farm values will be between $2.4 billion and $7.6 billion.  But this will be a one off hit for farmers.

“Lower land values mean lower tax revenue too.

“Aside from simply delaying sale, the NZIER notes there would be significant opportunities to avoid taxable ‘realisation’ events by keeping assets in the family. The CGT tax proposed would not treat transfers to family members as events where capital gains are assessed.

“A CGT genuinely risks capital lock-in with the housing market.  To avoid taxable gains people will choose not to sell achieving the opposite of what is desired for productive investment.

“Since the housing market has been part of a CGT’s rationale, the NZIER found Labour’s CGT will not aid affordability and is not as progressive as many would like to think.  Indeed, a CGT may lead to higher rents. 

“What is more, speculative property investment is already subject to income tax on capital gains.

“The lesson we can draw from countries with a CGT is that they are not immune from rising house prices, indeed, two weeks ago, the Sydney Morning Herald reported that Sydney and Melbourne had their strongest winter price surge since 2007.

“Federated Farmers, NZIER and others like Victoria University’s Tax Working Group agree that a CGT, of the kind proposed by the Labour Party, would not be an efficient and effective option,” Dr Rolleston concluded.

The party has criticised the criticism to which  Feds replied:

The New Zealand Labour Party has issued a media release calling into question the efficacy of the report authored by the New Zealand Institute of Economic Research (NZIER).

Federated Farmers notes the NZIER details Victoria University’s Tax Working Group consideration that a CGT, of the kind proposed by the Labour Party, would not be an efficient and effective option going forward.

This media statement confirms that the NZIER stands by its report and Federated Farmers deliberately selected an independent organisation to prepare the CGT report.

The NZIER report was issued to generate discussion on what could become a major change to New Zealand’s taxation base. In doing so, it casts doubt about Labour’s revenue projections and assumptions about the capital gains tax.

The Federation believes it is incumbent on the Labour Party to release detailed calculations supporting the basis for its policy allowing independent scrutiny ahead of the General Election.

Particularly, the analytical basis underpinning the Labour Party’s estimates of CGT revenue, which were revised upwards earlier this year.

The comments we have read do not represent the report NZIER wrote . . . 

Other objections raised by the Labour Party are reflective of debates around the world, in which the Labour Party holds a different philosophical view.

The NZIER fully stands behind its key findings and messages.

 

A simple and comprehensive CGT which was combined with lower personal and company taxes might work.

Labour’s is complicated, has several exclusions and is in addition to existing taxes.

It won’t do anything to cool the housing market, will distort investment and reduce the reward from risk taking and hard work.


CGT death duty in drag

September 4, 2014

Larry Williams interviewed David Cunliffe on Labour’s capital gains tax yesterday and established that it will be complicated and arbitrary.

One example of that is managed funds.

KiwiSaver managed funds will be exempt but anyone owning exactly the same shares in a managed fund will be taxed.

The Taxpayers’ Union highlights another aspect that Labour has not – a CGT will be a death duty in drag:

Responding to confirmation that under Labour’s capital gains tax policy children would have to pay the tax if they sold a family home after both parents have passed, Ben Craven, Spokesman for the Taxpayers’ Union, says:

“Labour’s capital gains tax is looking more and more like a death duty in drag. The vast majority of estates are liquidated, even where the family home is in a trust to the children.”

“The last time death duty existed in New Zealand was 1992. It appears that Labour are looking to reintroduce it but under another name with far more complexity. When children lose their parents they should be encouraged to put the inheritance to good use. Instead, Labour’s policy would whack them with a tax bill.”

“If Mr Cunliffe’s comments to media are correct, his policy will create a cruel tax incentive to quickly sell the family home while parents are still on their death beds. Mr Cunliffe’s statements to the media must be mistaken, or Labour really haven’t thought this one through.”

The tax won’t be levied if the house is sold in 30 days but few estates are settled and houses sold that quickly.

CGT wouldn’t be imposed if a family member lives in the house but that doesn’t happen very often.

When it does, unless it’s an only child, it’s usual for only one beneficiary to buy the shares of other family members and those gains would be taxed.

 


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