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THE N CAP IN TAUPO A FARMER PERSPECTIVE

THE N CAP IN TAUPO A FARMER PERSPECTIVE. Deer Industry Conference 25 th May Mike Barton. CONTENT. An outline of the process leading to capping Nitrogen Emissions from farms in the Taupo catchment A brief look at the current NZ farming business model and the interface with emissions capping

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THE N CAP IN TAUPO A FARMER PERSPECTIVE

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  1. THE N CAP IN TAUPOA FARMER PERSPECTIVE Deer Industry Conference 25th May Mike Barton.

  2. CONTENT • An outline of the process leading to capping Nitrogen Emissions from farms in the Taupo catchment • A brief look at the current NZ farming business model and the interface with emissions capping • What about your catchment?

  3. TAUPO CATCHMENT

  4. THE HISTORY OF THE N CAP FROM A FARMERS PERSPECTIVE • We became aware of the issue in 2000 • Incorporated Society formed Taupo Lake Care (TLC) to represent farmer interests in negotiations with EW • Negotiated to balance Lake protection with economic viability • Advocate for and participate in research • Represented the majority of catchment farmers and Maori incorporations - 105 farms

  5. NITROGEN LEACHED • Tussock, Native Forest - 3kgs/ha • Plantation Forest 3kgs/ha • Sheep Beef and Deer Farms 17kgs/ha • Dairy Farms 45kgs+/ha • Farming emits 93% of the Manageable Nitrogen entering the Lake • 4 Dairy farms -101 Extensive Sheep, Beef and Deer farms

  6. A NITROGEN CAP -THE REALITIES • Is a cap on stock urine • Essentially a cap on stocking rate/production • A production cap is an income cap under existing commodity regimes • To remove 20% of manageable N we needed to covenant 35,000ha.

  7. CONSENTED FARMERS - • Applying for a consent that limits our production in perpetuity-significant implications for farming business models and property values • Six farms modeled for Environment Court – insolvent in 5-9 years • Length of consent about the length of an average mortgage or less than one rotation of trees, but at least we know what we can do for 25 years

  8. OUR FARM- THE IMPLICATIONS • Discontinued with breeding cows based on gross margin per kg of N leached • Need to grow young animals as rapidly as possible –no 2nd wintering • Spraying or cultivating for pasture renewal may not be viable/allowable (permanent pastures?) • Top B+L quintile for beef production - can’t do any more

  9. LESSONS TO DATE • Taupo farmers have had a ‘Clean Streams Accord’ since 1983 and have consistently won environmental awards yet we still have a problem! • Environmental impacts will likely define production limits for all farmers in the future • We cannot rely solely on science to solve this

  10. THE CURRENT SHEEP AND BEEF FARM BUSINESS MODEL • Declining returns for the last 25 years- • Profit before tax: B & L NZ Class 6 Marlborough/Canterbury Farmland 1984/5 - $80.92/ha – ROI +ve 3% 2007/8 - $21.36/ha – ROI -ve 0.4% 2009/10 - $128.78/ha- ROI +ve 0.3% 2010/11 - $293.49/ha ROI +ve 1%

  11. BEEF FARM BUSINESS MODEL • My current winter stocking rate is 3.5 cattle/ha. In 1985 - 2 animals/ha • Farmers have taken up science driven production increases to counter static returns and rising costs yet look at ROI • We have reached the limits of that business model under catchment nutrient caps

  12. DO CONSUMERS PAY A PREMIUM FOR BEEF PRODUCED UNDER A CATCHMENT MANAGEMENT PLAN THAT PROTECTS LAKE TAUPO?

  13. TAUPO BEEF- WHAT IS IT? • RADIO FREQUENCY TRACKED FROM THREE FARMS • GROWN AND FINISHED QUICKLY • CHARLOLAISE/ANGUS CROSS • AGED FOR A MINIMUM OF 4 WEEKS • SOLD AT A PREMIUM IN TAUPO RESTAURANTS AND BUTCHERY

  14. Taupo Beef Certification

  15. TAUPO BEEF – THE RESULTS • CONSUMERS HAVE PAID A SIGNIFICANT PREMIUM • OUTSTANDING FEEDBACK FROM CHEFS AND DINNERS • DEMAND EXCEEDS OUR ABILITY TO SUPPLY • NEED TO BUILD A BUSINESS MODEL THAT RETURNS A PREMIUM TO CAPPED FARMERS

  16. FARMING UNDER AN EMISSIONS CAP – THE FARMER’S CHALLENGE • We can farm under emissions caps • Livestock numbers and classes will need to be capped to do so • Do we accept a consequent cap on income or are we willing to invest to redefine the NZ Agricultural Business model?

  17. FOOD AND WATER QUALITY- THE CONSUMER’S CHALLENGE • Do you actively seek out food that is produced in a manner that protects water quality? • Do you know where to source such food? • What premium are you prepared to pay for that food? • Is this the real test of how much you value water quality?

  18. CONCLUSIONS • As a Nation we cannot continue to have conversations about protecting water quality without having a parallel set of conversations that redefine the NZ Farming Business Model • We cannot continue to occupy the agricultural commodity market space and impose emissions caps at the same time

  19. OPPORTUNITIES FOR THE DEER INDUSTRY • Build on your significant brand advantage • Your target market is concerned about water quality anywhere in the world • Develop industry wide water quality protocols in conjunction with Regional Authorities • Verifiable/robust water quality mark for deer • Turn this into a brand value that allows you to grow income under constrained production

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