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Federated Farmers To Fight Environment Regulations

Federation President
Charlie Pedersen’s Address to National Council
9.50am, November 20, 2007
Te Papa Tongarewa, Wellington

Good morning, and welcome to your National Council meeting.

We meet twice a year as representatives of New Zealand farmers to make decisions about issues which are crucial to our industry and the wider New Zealand economy.

We also listen to the views of key decision makers and commentators, and scrutinise the Federation’s work plan and budgets for the next 12 months.

On behalf of our members, thank you for attending this important meeting.

Your input as leaders in agriculture is hugely appreciated, and critical to our success as the advocate for farming.

The issue I want to talk first about today is perhaps one of the most serious that we as an industry will face over the next 10 years.

But let me be clear that the problems are already with us and will only get worse unless we force some re-thinking at the highest levels of government.

Many of you will know that some councils are set to impose region-wide rules that in essence restrict farming practices.

These rules are becoming increasingly draconian and threaten the viability of farming in some parts of New Zealand. The Resource Management Act is the device being used.

The rules are intended to improve the quality of the water in regions. This is highly laudable. But not one council has made any effort to do any cost benefit analysis. Why? Because the public taking of property rights without compensation is legal when using the RMA.

The Federation has come to the conclusion that the RMA is not working as it was envisaged. It needs a serious overhaul before it damages agriculture and the economy. We also believe the attitude of some councils and their use of the RMA threatens the relationships essential for the best environmental outcomes.

The key issue affecting water quality is the flow of nutrients into water bodies. Most nutrients occur naturally but councils are moving to regulate and restrict fertiliser inputs on properties, and in some cases even the number of animals a farm can run.

This has the effect of capping farms at current production or even lower, which will increasingly impact farm profitability and viability as costs rise, but without the ability to offset these costs by increasing production.

Capping production means that we as farmers cannot continue to develop and grow our businesses, a restriction that no other sector in New Zealand faces.

Some well-established farmers may be willing and able to withstand these restrictions, but young farming couples with lower equity may even be forced to exit their farm business, take the huge capital loss on the chin, and let someone else be the farmer.

One thing is for sure, farming under the RMA with these new rules won’t be as profitable or productive as it has been in the past.

Forcing a farm to reduce its productivity is equivalent to forcing a building owner to remove the top two or three floors of a 10 storey building.

This is a huge capital loss, as well as a loss to income – neither of these losses is recognised under the currently deficient Resource Management Act.

Increasingly some regional councils are requiring landowners to apply for consents just to carry out their ordinary farming operations. Clearly something has to give.

There are three main areas where the right to farm is being threatened:

First, Taupo

Under the current rules, each property is given a maximum discharge allowance which is the average of the property’s nutrient discharge over the years 2001 to 2005.

Staying within the maximum discharge allowance then becomes one of the conditions of a consent required to continue farming.

My second example is Rotorua

The Rotorua lakes catchments are currently controlled by ‘Rule 11’, which also places a cap on nutrient discharge from properties.

Farming is a permitted activity so no consent is needed if you remain within your nutrient discharge allowance, which is the average nutrient loss from 2001 to 2004.

‘Rule 11’ is currently being replaced with specific rules for each individual lake catchment, so the exact nature of the rules that will impact farming may be different for each lake catchment.

So far two new sets of rules have been proposed. Each one still uses the nutrient discharge allowance based on the property’s average from 2001 to 2004.

In one catchment, farming has remained a permitted activity, but in another it is proposed to have farming by consent, as in the Taupo catchment.

My third example is in Manawatu-Wanganui

The Horizons Regional Council has proposed rules that make farming a consented activity and place restrictions on nutrient discharge from properties, as in the Rotorua and Taupo regions.

The nutrient cap is not static, however, but gradually decreases nutrient levels allowed, which will require farms to increasingly lower their nutrient inputs and therefore their production and profitability, over time.

Horizons says that new devices may be available in time so that farmers may improve their efficiency and environmental performance. We wish we could be as optimistic, but we must deal with what is possible now, and fear that in the meantime farm productivity and viability will suffer.

Farmers are fearful of being caught in the position of having to reduce stock numbers as the only way of reducing nutrient loadings. We recognise that the One Plan may increase trout numbers in the Manawatu/Wanganui region, but ask: do the public really wish to trade off farm viability for better recreational opportunities?

Federated Farmers has tried to convince Horizons that its Farm Strategy proposal should be withdrawn from the plan until further research is completed and more farms have actually been trialled through the Farm Strategy process. We have also asked for an economic impact analysis.

Both requests have so far been ignored.

The Federation has urged Horizons to use sound science and economics in its decision-making, plus aim for reasonable, achievable water quality values based on what is achievable with current scientific knowledge.

By Horizons’ own analysis, river and stream water quality has improved substantially over the last 40 years. Farmers in the region have done a great deal to achieve this improvement. Fishing in most places is better than any time in living memory. Why risk crippling farmers with so much haste as we move to the next level of improvement?

There are many ways to reduce nutrient losses, as our ‘10 in 10’ campaign has identified.

Even when using all the tools available, some farmers will have to reduce their current stock numbers to meet the Horizons’ One Plan limits.

Amazingly, Horizons has not yet made any attempt to assess the economic impact to the region of its One Plan. Surely that is essential if the plan is to succeed. A farmer in the red cannot possibly be green.

Though there are flaws in the One Plan, there is no doubting that farmers want to reduce their effects on our waterways.

Recently the Federation held a two-day forum attended by most New Zealand scientists involved in research into nutrients and waterways.

All of the current tools available, and those on the way, were showcased.

The meeting concluded that there is no point in pushing farmers to reduce productivity ahead of research breakthroughs that will allow better outcomes for the environment and productivity. To do so is like demanding that hospitals cure all cancers when we know the cures don’t yet exist.

There must be a trade off between environmental goals and economic progress that leads to higher standards of living for all New Zealanders.

So far severe restrictions are only in catchments deemed sensitive, and it is bad luck for farmers who find themselves in one.

Other catchments will likely soon follow. It is no secret that other regional councils are watching progress with interest, and planning to follow the examples I have mentioned.

My message to the government is: are you aware of the enormous threat posed by these new rules to farming? Agriculture generates 17 percent of GDP and 55 percent of merchandise exports.

Federated Farmers cannot let this issue lie.

YES, New Zealand farmers take their environmental stewardship seriously, and are proud our systems currently deliver the best water quality in the world.

YES, we want to do better and are prepared to invest in new technologies as they evolve. Farmers will change farm systems to achieve better outcomes.

And YES, we will vigorously fight any attempt to slow down New Zealand agriculture and in so doing cost individual farming families the benefit of their life-long efforts. We need time to adopt new technologies as they evolve.

The regional councils of Waikato, Bay of Plenty and Manawatu/Wanganui need to know the Federation will not lie down on this issue, and that ignoring economic impact and the lack of compensation are two elements allowing the RMA to take a heavy toll on New Zealand farming families.

__________________________

The next topic I want to talk about is the meat industry.

Sheep farmers have had a gutsful.

Recently there was an opportunity to achieve economies of scale through a proposal to merge Alliance and PPCS.

We understand PPCS wanted to merge and Alliance, it seems, do not.

Many farmers see Alliance’s refusal to merge as a wasted opportunity for the wider sheep and beef industry.

The merger had clear farmer support, and there were many reasons why it would have been a success and taken meat procurement, processing and marketing to a new level.

But Alliance decided to take an overly cautious short-term option, pointing to the erosion of their equity as the main reason for not merging.

There are strong analogies here with the dairy industry around the turn of the millennium.

The analogy between PPCS and Alliance on the one hand, and the two largest dairy co-ops in the 1990s on the other hand, is remarkable

One was an aggressive dairy co-op with a strong vision that set about to rationalise and take risk.

It merged with other dairy companies and created critical mass, increasing productivity and profit.

Meanwhile the other dairy co-operative was focussed on the details of operating its business, and building up its reserves. Eventually the forces of reason prevailed and Fonterra was formed.

Fonterra might have its critics but I’d wager that few farmers would want to turn back the clock to what we had.

We needed a leading company with strong farmer support and a unity of purpose.

We can all see in hindsight the sense of that merger, and it was worth the effort.

I call on farmers to encourage meat company directors to take the brave steps that will build a company large enough to bring stability to the whole meat industry.

Farmers too have another important change to make.

Strong companies require strong supplier loyalty. But this is a two-way street.

Trading at the gate must stop and be replaced by long-term supply arrangements from the farmer to the processor of their choice.

Finally, I talked earlier of the deficient Resource Management Act. Tonight the Federation launches the next phase in its two-year campaign to improve the RMA. We will be launching a booklet clearly setting out the RMA’s flaws and our six-pack of solutions. This booklet will be sent to key decision makers in coming weeks.

Holding a two-day council meeting is expensive, and we are grateful to our business partners for their support in funding this event. I acknowledge our gold sponsors FMG, Telecom, Transpower, Tenix, and Westpac, our silver sponsors Canon, Rural Post, and Ravensdown, and our advertising partner ACC.

Thank you also to all of you here today.

As members of the National Council of Federated Farmers you bear a huge responsibility for the stewardship of this organisation and for the future success of farming in New Zealand.

ENDS

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