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Parliamentary Commissioner for the Environment says nitrogen leaching intractable problem; says Councils may need to limit dairy conversions

Parliamentary Commissioner for the Environment says nitrogen leaching intractable problem; says Councils may need to limit dairy conversions
Parliamentary Commissioner for the Environment Dr Jan Wright

By Lynn Grieveson

Attempts by Fonterra and others in the dairy industry to mitigate the effects of dairy farming on water quality were doing little to fight the "intractable problem" of nitrogen pollution of waterways, said Parliamentary Commissioner for the Environment Jan Wright.

Councils may need to limit dairy conversions in some water catchments, she said.

Appearing before Parliament's Local Government and Environment Select Committee , Wright gave a spirited defence of her office's recent Water Quality in New Zealand report, as well of her submission on the proposed amendments to the National Policy Statement for Freshwater Management.

She said the Land Use in Rural New Zealand (LURNZ) model results were reliable and she was not "being radical" in her conclusions on the threat from nitrogen.

"2012 satellite photos have yet to be converted, however we have looked at latest statistics of land uses from a number of sources and the actual land use change is happening on track with what the LURNZ model predicts and possibly a little bit faster. Year on year more and more nitrogen is getting into the water and unfortunately this is despite all the good work going on in mitigation. The model makes assumptions about mitigation going forward to 2020. They are generous assumptions. This is not a worst case scenario as some commentators have said."

Wright said it was much easier to stop phosphorus getting into waterways, but mitigation efforts such as the fencing of waterways by Fonterra, containing dairy shed effluent and planting of stream banks were not as effective in preventing nitrogen pollution.

She also said it was the conversion of land from sheep and beef or forestry to dairying that was the biggest factor in water quality, rather than intensification and in some catchments it may be necessary for councils to set limits on the number of conversions to dairy.

"When declining water quality has been attributed to dairy farming the cause is generally given as this fairly undefined word intensification - putting more cows on each hectare of land. But what this shows is the bigger problem is putting cows on more and more hectares of land," she said.

"We know that if forestry is replaced by dairy farming the nitrogen goes up 10 times regardless of mitigation. It's really hard to deal with the business of trying to control land use change in any way. We have a long tradition of allowing people to do what they like with their own land."

Wright also reiterated her criticism of the proposed amendments to the National Policy Statement for Freshwater Management, saying it would not ensure that water quality of all waterways was "maintained or improved" but allowed for some to be degraded, and there needed to be a "strategic element to that framework so councils are told to identify the most urgent problems and get going on those first".

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44 Comments

So here we go again, witness the creation of yet another NZ vested interest group viz, the existing dairy conversions/farms; who will then no doubt use the RMA to their advantage. The road to Hell is paved with good intentions!
Ergophobia

Someone shoulfd tackle National head-on. Quite clearly, growth requires a doubling, then a doubling. They are now attempting the inevitably-impossible - the last doubling of them all.
 
It's stupid.
 
And it had to show up as multiple, interconnected, compounded impacts.
 
The paving may just be with small-mindedness, not sure that it's well intended at all

The only party that could is the greens and they are on the same pork barrel wagon....
So frankly we are screwed.
Watch them claim they didnt see it coming.
regards
 

Our foreign creditors will be delighted to think we are going to constrain the only export earner keeping us afloat at the moment.
 
The trade balance minus dairy growth would be horrific and we would soon all find out what life in the real world without our dairy industry to pay the bills would be really like.
 
Growth in dairy exports is all that we have going for us export wise at the moment. We would be crazy to impact on growth in that segment in any way.
 
Very easy for the commissioner to slag dairy - please offer alternative export income streams. Remember we are already borrowing and flogging assets to pay the interest on our massive foreign debts - called a Ponzi in any other scenario.

JB - so? What's the other side of the equation? We could 'spend' less. Didn't occur to you?
 
 

So, the environmental pressures which PCE notes, will lead, as I've said (and with some inside knowledge) to two directions for dairy.

  • The rise and rise of corporates.  Because only well capitalised, well-managed entities are gonna be able to measure, manage, comply and in a sustainable fashion.  The additional advantage is that with a mixture of farms/holdings (upland, downland, irrigated, run-off, grazing, breeding, cropping, silage etc) there's an immediate way to mitigate spikes in emissions of whatever sort.

 

  • The move to concentration of pollution sources, from extensive grazing to intensive, covered sheds - Europe style.  Concentration or point-sourcing allows for engineering solutions, exactly as for cities.  Instead of the rural equivalent of a thousand long-drops and septic tanks, an engineered collection with multiple stages of treatment and by-product such as fertiliser, gas, compost etc. Which all of course takes lotsa capex, hence only available to - corporates.

Incidentally, precisely the sort of limits that PCE notes are already there and for some years, in the Horizons District's One plan.
 
Ya wants result X, ya gots to accept method Z. 
 
Unless, of course, the 'let's export less, grow less, earn less' types gain the upper hand, in which case Managing Decline Gracefully and Equitably will be, shall we say, very Interesting....

They won't have to 'gain the upper hand'.
 
They'll be the only option left standing. The GFC wasn't causal, and hasn't been remedied. Ultimately, all corporates are compromised if the growth-requiring fiscal system crashes.

3rd
Less oil means less intensive, which means less output so less if any exports.  A different lifestyle.
regards

Corporates corporates everywhere, no thanks
And as for cows in byres, that's our point of difference and our dairy industry, gone.
The world is mad

Have you been watching the skiers in Russia.
Look at/count all the countries that claim the cow bell as their own....

They value their rural roots HT and are prepared to subsidise their farmers to ensure the romance of cows lives on ;-)

Fact, the majority of milk comes from the north island 720m kgsms v 400m kgms from south island. http://www.stuff.co.nz/business/farming/dairy/9723389/Milk-production-up
Fact, The majority of dairy farms (numerically speaking) in the north island are smaller family owned/operated farms. I would wager that the majority of these farms are not/will not be in a position to spend the capex required and make management changes (it is a vastly different management system) that barns/homes require and remain profitable. And they may well have an alternative to leave dairy and change the land use of their farms e.g. rear beef/grazing etc. While I note a lot of comment regarding barns/homes etc is made it is almost always made in regards to south island dairying.  So what about north island dairy???  That is where the majority of milk is, so is where the majority of the change has to happen.  
 
I agree waymad that we may see more barns etc as a condition of conversions - but only in some regions.  I don't believe that we will see wholesale change to barns/herd homes in all regions.

Bulldust, if sticking cows in byres becomes a more competeitive way to farm then more and more cows will be stuck in them, the grass fed farms will become as boutique as organic and maybe that will be all of the grazed farms in the future and guess who won't be able to afford to buy the good stuff from their own country.
You are talking sure fire methods to kill the golden goose.
We have got to find something other than dairying to rely on, simple as that. Why we are flat out producing and sending basically raw products (not confined to the dairy industry) is beyond me. Do we have what the world wants or don't we? If we do, then maybe we get some say as to what we do with it

What's the bulldust, raegun?  Cows in barns/herdhomes (you do know the difference?) is not about being more competitive it is more about the environment.
 
So what are you putting on your farm, raegun - barn or herd home or neither?

are you giving away free byres, raegun?  If not how does the capital expenditure and infrastructure inc staff & maint   magically have negative cost?

Have they compared newly converted dairy soils to long established ones in terms of the types of living organisms, enzymes and what not?
 
Traditional soil scientists think about soil in nineteenth century Germanic Reductionist terms - ie only yer calcium and yer nitrogen and yer other physical elements count. We'll have none of yer new age, namby pamby soil biology rubbish here, thank you very much.
 
What really counts is the soil biology of cause, the link between the plant and the soil chemistry. It is plausible that a long established dairy pasture would have a soil that had lots of stuff that fed happily on nitrogen; whereas newly converted soil would might not have the right bacteria, fungi or what not. The bacteria and fungi in a pine forest are going to be completely different from that in fertile pasture, particularly after the application of soil sterilisation and bactericides with the likes of Roundup.
 

Im more worried about where the milk is going, that goes for our wool beef and lamb too.
 
http://www.shanghaidaily.com/Business/consumer/Record-dairy-exports-to-C...
 
http://www.nbr.co.nz/article/export-concentration-china-concern-rbnzs-wh...
 
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1120...
 
 Now some scarry stuff
 
Prudent beaar.
 
Representative Frank Lucas: “…When we undo quantitative easing, what is the effect going to be on things like farm land prices or stock market prices or, for that matter, equities?” 

Federal Reserve chair Janet Yellen: “I would agree that one of the channels by which monetary policy works is asset prices, and we have been trying to push down interest rates, particularly longer term interest rates. Those rates do matter to the valuation of all assets, both stocks, houses, and land prices. And so I think it is fair to say that our monetary policy has had an effect of boosting asset prices. We have tried to look carefully at whether or not broad classes of asset prices suggest Bubble-like activity. I’ve not seen that in stocks generally speaking. Land prices I would say suggest a greater degree of overvaluation.” 
 
Antal Fekete: She is well-heeled to kick the can further down the road, 

as they say. This road leads to a series of crashes, the blowing and 

pricking of bubbles. We are already in a depression, masked by  

 

unlimited money creation which is pouring oil on the fire of deflation. If 

50+ percent youth unemployment does not indicate depression, then I 

don’t know what depression is. Bond purchases by the Fed lead to 

halving interest rates and halving them again and again. This is 

tantamount to destruction of capital as we mentioned a moment ago. 

Lower interest rates mean higher bond prices, which measure the 

increase of the burden of debt, the proverbial straw that breaks the back 

of the camel. Not only is the debt increasing exponentially in absolute 

terms; the burden of debt is increasing as well on the top of that.
 
 
 Bloomberg: “Chinese banks’ bad loans increased for the ninth straight quarter to the highest level since the 2008 financial crisis, highlighting pressures on asset quality and profit growth as the world’s second-largest economy slows… Chinese banks are struggling to keep soured loans in check and extend earnings growth as the slowing economy and government efforts to curb shadow financing make it harder for borrowers to repay debt. Standard & Poor’s… said this week that loan quality will decline in 2014 as banks remain at risk from debt-laden local government financing vehicles and manufacturers with too much capacity… Chinese banks added 89 trillion ($14.6 TN) yuan of assets, mostly through loans, in the past five years, equivalent to the entire U.S. banking industry’s, CBRC data show. By comparison, U.S. commercial banks held $14.6 trillion of assets at the end of September…” 

China today illustrates all the key perilous facets of Credit Bubble excess: self-reinforcing over-issuance and mispricing of Credit; government market intrusions, interventions and attendant risk misperceptions; gross misallocation of financial and real resources; overinvestment and malinvestment on an epic scale; corruption, malfeasance and obfuscation; systemic dependency on ever-increasing amounts of high-risk Credit creation; and policymaker confusion and lack of resolve to deal forcefully with Bubble excess. 

China’s “shadow banking” problem today encapsulates the inherent risks of contemporary “money” (“financial claims perceived as safe and liquid stores of nominal value”), most prominently money’s dangerous attribute of virtually insatiable demand. Incredible amounts of perceived safe “money” have flowed freely into risky Credits, while people have no idea what they’ve invested in. Credit risk has been further elevated by system-wide Credit excess, resource misallocation and corruption. The historic scope of the Bubble was made possible because of the faith Chinese have in their government and government-backed banking system – as well on an international basis by the perception that Chinese policymakers have everything under control (within a backdrop of massive QE and seemingly unlimited liquidity). 

There was a crucial policy debate from the late-twenties that has become increasingly pertinent, especially for Beijing and Washington. In the “Roaring Twenties” there was recognition within policy circles that heightened speculation was fostering financial excess including Credit financing speculative trading and other ventures. At the same time, heightened economic vulnerability and downward pricing pressures had policymakers searching for ways to direct Credit into productive investment and away from speculation. Yet, at the end of the day, the intensity of 1927-1929 “terminal phase” speculative excess ensured that liquidity and Credit flowed disproportionately to inflating market Bubbles. Thoughts, efforts and hopes that policy measures could redirect finance away from market Bubbles and to the real economy ended in complete and utter failure. 
 
 

Antal Fekete: As money flows from the commodity market to the bond 

market, commodity prices fall along with interest rates (because bond 

prices rise). Under a gold standard this process would be stopped sooner 

or later as commodity prices cannot fall to zero. Under our global fiat 

money experiment, however, the central bank is compulsively halving 

interest rates again and again, unwittingly causing further price declines 

in the commodity market. There is a vicious downward spiral in 

operation: falling commodity prices chase interest rates lower, and 

falling interest rates chase commodity prices lower. It is crazy. It is 

unbelievably stupid, but there it is. The central bank in blind faith in the 

Quantity Theory of Money is destroying the economy. Everybody is 

expecting hyperinflation, but what we are getting is hyperdeflation.

 

http://www.professorfekete.com/articles/AEFThirdDailyBellInterviewRev117...

I think Fekete is brilliant but I have difficulty following his thinking, whereas mainstream economists' thinking seems confused and useless. 
 
Fekete is obviously talking about the same process that happens with house prices - during periods when interest rates are high, the house purchase price is low relative to income and so it becomes possible to pay down the principal out of income. During periods when interest rates are low, the house prices become so high that it becomes effectively impossible to pay down the principal out of income.
 
So higher interest rates favour a productive economy since capital is channeled to the highest use, whereas low interest rates favour a speculative economy. Presumably this explains the Auckland obsession with housing speculation (which they mistakenly think is housing investment).

Thats funny, you are confused by his thinking but other "mainstream" economists seem confused and useless.
I might suggest you find better economists to read.
The rest of what you are saying is as confused as he is, but that's the Austrian school for you, ie its backwards, though there is some self reinforcment going on.
 
regards

Why are u so disparaging toward the "Austrian School"...???
Most of the successful Market Commentators that I follow have their grounding in the Austrian School of economics....
What is it about the Austrian view that u find so worthless..???
What economists would u recommend to read...??
thks   Roelof

At least the Austrian schools had debt in their thought process, unlike most of the other pointy heads in the bank captured economic orthodoxy.

Many of my friends in their 50's are debt free. However they do intent to use that capital to pay for retirement.
 Its where the production is going to come from to pay the debt back that I want to know.

No where, hence default, though confiscation will happen before that.
regards

Thanks ZZ. There I was thinking I was onto something. I'm most definitely confused now.

and where is the hyper-inflation so promised?
No where....
Cover off the zero bound trap? a keynesian only perspective.
I suggest reading as many economic schools as practical and look at the results of their predictions/thought.  and that they are right for the right reasons. ie not right due to chance or for the wrong logic.
From my perspective for the situation we are in right now Keynes nails it.  However for different situations other schools may have the best model.  So you have to know them all to an extent I think.
regards

and where is the hyper-inflation so promised?
Who promised that ..??
How does Keynes nail the situation we are in...???    How does the Keynes model offer any insight to the future....????
A twisted perverted version of Keynes' ideas might have got us into this mess in the first place, but I can't really see how his ideas give any insight to the future from here..???
 

LOL, you dont even know.
regards

A theory that frankly shows little substance. 
Oil has fallen? not really...
Commodities I think drop as the futures market, hedge funds and finally manufacturuers see a lower demand in the future so buy less.  In turn they see a downturn and flee to safety, US bonds.
As we go into a recession the RB lowers Interest rates to try and keep the economy afloat, its a symptom and not a cause.
Now I can accept there is financial gambling going on with cheap money but that is a perverse unertaking as opposed to making real goods.
I agree on deflation, but not his reasoning.
regards
 
 
 

Apple have moved production of the Mac book pro back to  Austin Texas. They are now moving more production back to the States
 
http://www.mactrast.com/2014/02/mesa-az-provides-playbook-cities-wooing-...
 
 Cheap cost of finance, makes revamping old Foxcom plants uneconomic and it cheaper to build a new robot plants in Arizona.  Low interest rates have just destroyed alot of capital at Foxcom.
 
More
 
http://www.theverge.com/2013/7/24/4549624/made-in-america-2-behind-new-t...

Lost cost of energy as well...and yes Fab plants are often not refurbed I understand, its cheaper to green field them.  Given the political risks in china its also safer IMHO. Also of course they can say made in the USA which will I think only help sales.
regards
 

possibly also not as attractive to create new greensite operations and take all the old problems and spin them off into a deathcompany (like a famous petroleum company recently got punished for doing).  facing their mess either way makes clean up more feasible.

Roger at 8.17.  Great thinking.

I like the way he thinks. He challanges me.
 
 Changes are underfoot. 
 
http://kielarowski.net/tag/munich-security-conference/
 
http://www.japantimes.co.jp/opinion/2013/09/18/editorials/mr-abes-ominou...
 
I dont see Putin being happy about this
 
At least $1.2bn from Gulf governments has been pumped into supplying Syrian rebels in the south since July, sources involved with the funding programme said.
That amount is set to rise to as much as $2bn, with Saudi Arabia, which oversees the fund according to rebels, seeking to put in between $400m and $800m in additional money over coming months.
“The money moves through a Saudi account, administered by a very senior official and Saudi intelligence, and they buy the weapons in Eastern Europe,” said a senior Syrian rebel privy to the workings of the supply chain.
Russian-made weapons and munitions, including anti-tank missiles, mortar bombs, artillery shells and small arms, are purchased in the name of the Jordanian military, the rebel said, then shipped and stored in three major warehouses in Jordan.
Jordan’s GID then co-ordinates the transfer of weapons to rebels, in cooperation with the MOC, involving US, Arab and some European states, Syrian rebels say.

Read more: http://www.thenational.ae/world/syria/cash-boost-for-syrian-rebels-to-pressure-assad#page2#ixzz2tQNMawgc 
Follow us: @TheNationalUAE on Twitter | thenational.ae on Facebook
 
 

Why we need OBR
 

Western Bank Exposure to Mainland China Explodes Higher – Australia Vulnerable
 
http://www.zerohedge.com/news/2014-02-14/western-banks-and-china-interes...

While I think the OBR is essential, its not a direct link to this...hmm, unless the banks find their dealings with china send them insolvent?
In which case yes its really essential.
Indirectly a huge recession/depression will nose dive house prices in OZ and in turn here in NZ, roll in the OBR.
What worries me though is the OBR wont be used, our guttless pollies facing an OAP voter annihilation at the polls will bail the banks anyway.
regards

the polls will bail the banks anyway.  Which begs the question, 'what with'?
I got it, Kiwisaver

So, should I buy houses, or should I trust the OBR, the Government, the Russians, the Chinese, the Americans, the Australians, or buy a dairy farm to make Fonterror happy, so each and everyone can milk it, for example.
Should I hedge my bets with another currency?. Will it rise, or sink into oblivion?.
Should I just rely on inflation, derivatives, short selling, going long, or fixing my mortgages with bankA, bankB, or or just trustbankC.
I know they only have a Fraction in Reserve, tis the norm.
I know they rely on over leverage, as investors pile in.
I know that all houses are over leveraged to the hilt too, because only a fool pays cash, don't they. And it is non-taxable, non negotiable, they allways rise in price, ask any Real Estate guru, ask any polly, with an axe to grind.
And we are all billions and trillions in debt to each others countries, so they can borrow as well and tax each others benefits.
So, please advise.
What would you do if you inherited a million dollars today and wanted to keep it out of the thieving mitts of all the above.
Maybe Nigeria is the answer?, or Gold Munny Sucks.
Or should I just trust QE and pumping and dumping and Standard and Poors and insider trading.
Which one is right?.
As I say, please advise,
Thanks,
Mrs Yellen.
 

ZAZA,
Thanks, I needed an unbiased opinion, you are so kind.
love,
Janet.

I think that's what Fekete talks about - manipulated low interest rates destroy the information that is usually present. So no one can tell where to invest capital. When interest rates are not manipulated capital is attracted to the most useful application.
 
This seems pretty uncontoversial to me but for some reason it seems to stir some people up. To me the important distinctions are between honest businesses and dishonest ones. Honest businesses produce something that leaves the buyer and seller better off after a transaction. Dishonest ones leave the seller better off but cause a loss to the buyer. Dishonest ones are unfortunately very good at conning people, this is their speciality. In doing so they give all business a bad name.

I think thats the big challenge. How do we encourage investment away from speculation in non productive assets back to investment in productive enterprises. After such a long time winning in the housing and land market its hard to imagine a poor outcome, and most of this has been done with debt attached to a non poductive leveraged asset. Where else can the average guy use leverage, except in the housing market.
 In Hawkes bay we had the easy money chasing dairy and spectacular gains were made. The Regional Council threw water consents away like confeti, unaware of the enourmous water requirements of these ventures.. Now we have moratorium on new bores. So if you want to plant an orchard or a vineyard good luck getting a water consent even though your earnings per hectare are multiples what dairy is returning. All consents are only for 5 years.
 I wouldn't be brave enough to go into dairy today, many of these ventures started when Fonterra shares were free, they rode on the back of previous generations of dairy farmers. The big money was made in free shares and tax free capital gains, its created a world of speculation. The banks walk hand in hand with many of the big players.
 Now we are facing  in many circumstances, corporatised farming communities, very much divorced from the old family farm, weilding a lot more control over who gets discounts and premiums.
 I have no idea where to invest, Ive given up trying. Im going to expand my vineyard but slowly and with a great deal of care. Grapes are now the domain of  big boys with big money. Family vineyards continue to disappear.
 
 I think fekete is onto it, its hard to get my head around it but, low interest rates destroy capital.
 

LOL...Janet, youre going to be a great chairman

AndrewJ has touched upon an important point, and the PO types, another.
 
'The Regional Council threw water consents away like confetti, unaware of the enormous water requirements of these ventures..'
 
This is yet another side to the general economic cluelessness of Councils:  those early, first-come, first-allocated decisions about (in Canterbury) aquifers and in other areas, river flows, have been  handled in a straightforward bureaucratic fashion.  Receiving and processing applications, each in its own little silo ('the merits of this applicationare, the impacts are...), with little or no regard to the entirety of the catchment, alternative/better uses of the resource, the complete lack of measurement, let alone costing/selling/leasing of the resource - it's a long and extremely disappointing list.
 
As a classic example, it's only since the Canterbury Regional Council was thrown under a bus, commissioners brought in, and a fixer CEO - Dame Margaret Bazley - plugged in to upend the ghastly corporate culture that had developed there, that three initiatives got traction:

  • Measuring takes.  Unbelieivably, there was no compulsory monitoring of aquifer takes, for the better part of two decades.  Measure, then manage.  Don't require measurement, how to expect to manage?
  • Set up ten Zone Committees with a wide range of membership (farmers, officials, iwi, fish/game, locals etc) which are tasked with delivering local results consistent with the long-term aims of the Water Management Strategy (itself a latecomer to the scene - ECan having failed to deliver one for the first 19 years of its existence...)
  • Establish a science-based Management Strategy.  The issue with the old ECan was that, with elected members exactly balanced rural/urban, there was a polarisation that was quite insoluble in a democratic system.  Urban members tended Left and Green, with very little grounding in nor appreciation of the rural or business scene, and with incomes not derived from ag.  Rural types leaned Right and business-like, and had a livelihood to protect, living as they did on ag.  The result, perfectly predictable in hindsight, was complete stasis, as evidenced by the lack of said Strategy/Plan.

 
ECan was an extreme example, but an instructive one:  most Regional Councils were at the less-competent end of the continuum.  The examples of Horizon DC's One plan, and the Ecan's 'pour encourageur les autres' conversion to a commissioner-led epiphany, have raised the standard in Regional Councils, but of course, variably.
 
In general economic terms, until a price is placed on water, rights to take are tradeable, and a market develops, we simply can never know what is the best use of a limited (aquifer) resource.
 
As to river flows, these are uniquely susceptible in NZ to flood flow harvesting, which is where the action now is.  The typical Canterbury flood flow is 10-30 times average flows (as a glance at say Waimak or Rakaia flow gauges will show), so ponding, settlement and usage is perfectly feasible with zero impact on other flow uses, which typically depend on run-of-river average flows only.  So harvesting multiplies the effective resource - the pie gets bigger.  Even a few days harvesting a year, at a Rakaia flood flow of 2000+ cumecs, is a lotta dihydrogen monoxide to go around.
 
As to energy use, much of dairy is simply electricity.  Sheds, pivots.  So with Tiwai falling off in 2017 or so, releasing 20% of NZ's generation capacity to new uses, and the Southland lignites (300 years of transport-fuel-equivalent) sitting there, my own view is that an orderly - say - 30-year - transition to better sustainability, can be engineered.
 
Just not politicked....vide Ecan.