A new report from Lincoln University probes how to 'optimise land use to accelerate New Zealand’s financial, environmental and social progress'

This is the Executive Summary of the Lincoln University report: The Future Use of Land and How to Fund it. It was a full academic study, funded by ASB, and involving 25 contributing and Association stakeholders. The full 60 page report is here.

New Zealand’s economic success is tied to a resilient and prosperous food and fibre sector. Of our merchandised exports, 80 percent derive from our biggest natural asset – our land. Further to this, one in seven New Zealanders are employed by the sector; and within some regions up to 60 percent of regional GDP is linked to food and fibre. Yet while the sector’s absolute contribution to New Zealand’s economy is growing, it is at a slow rate. Today a subset of farmers are struggling to maintain profitability (the expected average profitability across all classes of sheep and beef farms is forecast at $45,300 for 2024/5*) which is impacting intergenerational transfer. These struggles are likely to increase with climate change.

The sector is encountering a dichotomy – how to achieve economic prosperity while meeting environmental targets and managing social impacts. Our dedication to environmental sustainability is crucial for marketing New Zealand’s high-quality, sustainably produced goods at competitive prices. As market demands and climate impacts evolve, there is increasing pressure on farm incomes, affecting generational transitions and regional employment. It is now essential to transition from recognising the challenges and robust discussion to informed action at the farm, industry and national level.

The team, led by Professor Alan Renwick, has conducted research to understand if productive and diversified land use can generate strong economic outcomes (on-farm revenue, regional prosperity, GDP) along with positive social and environmental outcomes. Beyond this, and what differentiates this report from prior research into land use, is a focus on what is needed to fund land use change. The following report summarises the academic study titled "Future use of land and how to fund it". The study reviewed and consolidated existing insights into land use and engaged with 25 representatives from across the food and fibre sector, including farmers, industry bodies, government agencies, advisors, accountants, insurers, processors, wholesalers, fertiliser companies and investment managers. This informed the development of scenarios which allowed an in-depth examination of the impact of known targets, goals and viable market outcomes on land use and the food and fibre sector. Each scenario focuses on the achievement of a single goal, at the expense of other objectives, but together they create a platform of evidence to better understand the risks that exist across environmental, social and economic factors. It is important to understand that the outcomes of the scenarios are reflective of today’s technologies (i.e. no vaccines or genetic improvement) and farm systems and do not account for progress anticipated in these areas which would materially alter scenario outcomes.

The scenarios are as follows:

1. Reduced Greenhouse Gas (GHG):

Achievement of New Zealand’s domestic and internationally agreed 2030 greenhouse reduction targets* with no advancements in technology and science.

2. Alternative dairy protein:

Market disruption from alternative proteins.

3. Low-input dairy:

Reduced application of nitrogen fertiliser is put in place in the dairy sector.

4. Increased exports:

Doubling the value of New Zealand exports through increasing existing primary production.

Two of the scenarios provide an extreme and oppositional view of the impacts of potential trajectories for food and fibre: reduced GHG and increased exports. These two scenarios have led to the conclusion that there is a driving need for a less binary approach that enables achievement of both economic prosperity and environmental targets.

Key insights:

The scenarios provide strong evidence that a single focus is not a tenable way forward for New Zealand, based on existing technology and farm systems.

For example:

• Reduced GHG scenario – Scenario results in a 10 percent reduction in emissions, 72.9 percent loss in land value and 3,000 jobs, assuming no advancements in science and technology. These changes are considered high risk for most of the North Island, with moderate social and environmental risks in the South Island.
• Increased exports scenario – Focussing only on increasing production of existing produce "disregarding GHG emissions targets" results in an increase of up to 16.9 percent in emissions, a land value increase of +12.2 percent and 69,000 jobs created. Despite these economic gains, risks are identified in the eastern North Island, particularly in the economic and social domains, and across all three domains (economic, social and environmental) in parts of the southern South Island.

While optimising our status quo within current systems is useful, more transformative action is required given the rate of external changes impacting the sector – from factors such as climate change and weather events to market dynamics.

Seven pathways have been identified. There are examples of these pathways being employed in New Zealand and this report provides case studies of these, but adoption at scale will be needed.

The right pathway to optimise land use and increase productivity will be different at the farm and regional levels; however, two pathways were recognised by stakeholders as being essential for transformation:

• Diversification of on-farm systems and income from land – a shift from a tendency towards single land use, to diversified and optimised use of every hectare.
• Facilitating Māori to grow value from their land holdings – enabling access to capital for multigenerational and iwi-owned land.

The role technology plays in enabling scaled land transition cannot be understated. Advancements are critical to the ongoing mitigation and adaptation requirements of climate and environmental impacts, and it is clear greater investment is required to enable on-farm access to new technologies.

Shifts in both debt and equity funding is required at all levels of optimisation and transformation. Traditional lending approaches will be challenged due to factors such as risk, and the ability to provide start-up capital and create finance models that facilitate upfront investment while accepting delayed returns.

Outcomes and action required:

Given that the majority of New Zealand’s total land area is used for food and fibre production, how we optimise the use of this land is of fundamental importance to the country. Optimising land use also provides the opportunity for significant gains. The report shows that if we optimise land in the right way, we can win on both fronts. For example, unlocking even a 10 percent lift in productivity through the right action would concurrently reduce hidden environmental costs within the food and fibre sector by 10 percent, resulting in an additional $10 billion to GDP from the food and fibre sector within five to seven years.