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Productivity Commission gets it wrong on farmers

MEDIA RELEASE

4 September 2018

Productivity Commission gets it wrong on sheep and beef farmers

Beef + Lamb New Zealand (B+LNZ) acknowledges that the Productivity Commission’s final report on a low-emission economy endorses a split gas approach for long-term and short-term greenhouse gas emissions, but fundamentally disagrees with some of the economic modelling, assumptions, and therefore the pathways identified to get to carbon zero that they’ve used in relation to sheep and beef farmers.

Several of the Commission’s assumptions and models underpinning their conclusions relating to the profitability of sheep and beef farms, land use, and carbon offsets simply do not match up to the realities in the sector.

“With inflation adjusted average sheep and beef farm profitability having nearly doubled since 1990, and with 2018-19 looking like the third best year for profit for the average sheep and beef farm since deregulation, the Productivity Commission’s description of sheep and beef farming as “marginal” simply doesn’t add up,” says B+LNZ’s Chief Insight Officer Jeremy Baker.

Along with issues in the Productivity Commission’s understanding of the profitability of sheep and beef farms, the Commission has also erred in assuming sheep and beef livestock numbers will continue to contract.

“While total livestock numbers may be down on 1990 levels, we’re now seeing the decline in sheep numbers plateau and beef cattle numbers level off,” says Mr Baker.

With research showing growing international demand for New Zealand’s premium grass-fed, free range, hormone and GMO free red meat, B+LNZ broadly expects that, contrary to the Productivity Commission’s findings, these livestock numbers will remain relatively static as farmers look for more efficiency gains from the same number of animals.

Since 1990 sheep numbers have reduced by 50 per cent and beef cattle numbers by 23 per cent, with the sector reducing its carbon emissions by over 30 per cent on 1990 levels. At the same time, there have been major productivity improvements which have seen the volume of sheepmeat production remain at similar levels and the value of exports double. Our sector has made a major contribution to carbon reduction already, and has set a target of being carbon neutral by 2050.

“We absolutely accept that there is more scope on sheep and beef farms for additional planting of native and exotic forestry, but this needs to be driven by accurate economic information so that farmers can be confident in the investment decisions they’re making on their land,” says Mr Baker.

“With the sheep and beef sector directly and indirectly supporting the jobs of 80,000 New Zealanders, generating some $7.5 billion in exports for New Zealand, and representing 3.2 per cent of New Zealand’s GDP, it’s vital that these decisions are informed by accurate information.”

B+LNZ also notes that the Productivity Commission has failed to accurately account for the existing contribution made by sheep and beef farmers to climate change mitigation. In a recently released report from Professor David Norton of the University of Canterbury, it was highlighted that there are 1.4 million hectares of native forest on sheep and beef farms, which are already playing a role in carbon sequestration.

“It’s good that the Productivity Commission has endorsed the split gas approach for treating long and short lived greenhouse gases separately,” says Mr Baker.

“Focusing on emissions is just one important part of playing our role in combating climate change. However, when considering the implications of including agriculture in the Emissions Trading Scheme it’s also important to look at the carbon sequestering that’s already taking place on sheep and beef farms through the 1.4 million hectares of native forest and 180,000 hectares of plantation forestry found on farm.

“Doing so will help ensure that sheep and beef farmers are incentivised to make decisions that benefit both New Zealand’s environment and our economy. Our farmers are onboard with Beef + Lamb New Zealand’s sector target of being carbon neutral by 2050 and it’s vital we get the framework right to support that goal.”

ENDS

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