An angry Willy Leferink gets "the impression Labour wants to tax us into the sunset"

An angry Willy Leferink gets "the impression Labour wants to tax us into the sunset"

By Willy Leferink*

Let me put my cards on the table I am a swing voter but a recent speech by David Parker had me shaking my head in disbelief.

According to him, National is allowing “public rivers and estuaries to be spoiled by nutrient and faecal contaminants from agriculture” yadda yadda yadda.

It read like something from Fish and Game’s head office.

Labour’s big idea seems to be about taxing farming into the sunset.

That will see our costs explode but consumers will ultimately foot the bill.

That’s not all.

Instead of giving more money to DoC to save Kiwi, they’re going to save lawyers by toughening up the RMA and DoC’s advocacy role.

The attack on water storage is really odd when the climate boffins say New Zealand isn’t doing enough to adapt to climate change.

In tandem with the world’s toughest Emissions Trading Scheme, Labour is going to scrap public support of irrigation.

Meanwhile, Labour will introduce a Resource Rental Tax on water but only that used by agriculture.

I can only think Mr Parker believes there is zero pollution whenever he enters the littlest room.  There’s got to be a Tui billboard in that.

When you put this together with a Capital Gains Tax (yep, targeting farms) you’ve the impression Labour wants to tax us into the sunset. 

The sting in the tail means the price of food will skyrocket but I bet Labour has a KiwiFarm policy up its sleeve. It will have collectivised state farms producing cheap bountiful food for the masses to be sold in nationalised KiwiSupermarkets. I think the Soviets tried that but it didn’t end too flash.

Parker says we have great opportunities in clean energy like it’s the new dairy. He talks about LanzaTech but misses the point they left New Zealand because of tight regulations.

Hydro must also be an in-joke given the last aborted attempt and Labour will tighten the RMA further. Meanwhile, any industry is welcome so long as it doesn’t emit a puff of greenhouse gas.

Labour’s clichéd view of farming worries me.

At the recent New Zealand Dairy Industry Awards, the only MP present was Nathan Guy.  The lack of an opposition MP surprised and disappointed me in equal measure.

One person said, ‘because the tickets weren’t free’ and perhaps, that is sadly true.

As a farming leader and as farmers, we get raspberries chucked at us and it makes you look in the mirror.

Politicians, like Parker, are surrounded by flunkies who reinforce ‘yes sir, three bag full sir.’  Those people ought to be saying, ‘boss, shouldn’t we go and see?’

While my farm gate is open to Mr Parker and Labour, can I suggest visiting the inspirational entrants of the 2014 New Zealand Dairy Industry Awards, which Federated Farmers started 25 years ago.

Charlie and Jody McCaig have gone from being 2011 Taranaki farm management winners to become 2014 New Zealand Sharemilker/Equity farmer of the Year.

How about Ruth Hone, who was named Dairy Trainee of the Year and the first ever women to lift that title.  She is smart, capable and adaptable and these words sum up our dairy industry.

Then you’ve got a 27 year old Nick Bertram, who came into dairy with a background in accounting thanks to his teacher dad, but no farming experience.  He is 2014 Farm Manager of the Year. 

These awards showcased others who’d joined dairying from fields as diverse as professional rugby, engineering and the police. As one in the eye for Kim DotCom’s party, it included an IT professional too.

Then again I suppose it shows why politicians are far less trusted than us farmers.


Willy Leferink is Federated Farmers Dairy Chairperson.

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To be fair, Labour and Farmers have never really seen eye to eye - but why not? Maybe that the rank and file labour supporters are more urban folk while national are more from the back blocks (eg Dipton and Helensville).

Thanks dh! 

But you only pay capital gains when you sell your farm, debt is a problem in the dairy industry and if we can have stable land prices it would lead to better choices on how we farm.

Dairy debt may be a 'problem' but it is highly concentrated. Not a real problem for 90% of dairy farmers.
"Graeme Wheeler noted ... that around half the $32 billion of dairy debt is held by just 10% of dairy farmers."

I think Cloin Riden said its %30. Most of the farmers  in trouble are the big ones.

10% or otherwise, it speaks for approx. 30% of production and of that group the average debt to kg is $37+.
Thats why makes it different, usually the highly geared were the small/marginal production/producers (of same proportion), not the scale operaters.
Why is it different is, the usual fix was, get an extra job at the dfactory, do contracting, do put in hours on the farm development block. Because of the scale of things, one FTE/couple working harder/smarter (selling the car) does not do the fix (ops are too big for that to have an effect).
not with standing the 20 yr back sharemilker started with 120% debt and no tools.

Those 70% (not 90%) are causing everyone a problem by not ensuring a proper return on their asset, this has allowed other parts of the process chain to become lax, and property to over-inflate.

The best way of dealing to this is separate the operation from the property part of the business.  Then check that the property is returning fair rental.

In many of those 70% the rental is negligible, so the operational side looks very profitable.
However because the rental side is depressed, the tax that should be recovered from rental of property isn't paid, and since the operation has deductions it can reduce the overall share of tax burden by operating in a cash-rich, profit-poor manner.  ie There is plenty of money for that 70% to pay great wages and get depreciation from lots of steel and toys... but had they actually have to account for the wealth stored in their asset, and declare rental income like every other property owner, it would be very obvious that the operational side for many of those 70% has been allowed to operate at a loss!     Some other business do similar but farming has the greatest differential.
 I was wondering if that was what our old mystery man Gordon was going to be claiming...but he never stayed around long enough to come up with the goods.

The offshoot of that kind of operation is new-entrants to the market, and those caught by insane corporate & government activities, do not have the "slush funds" to reach into, and must rely on debt.... working harder, spending more time on farm, going without.   Those who do have the slush funds, spend more time in town, attending meetings, and kissing butt with hobnobs.

Let 's be totally realistic.
If farmers and particularly dairy farmers were not being subsidised on environmental issues the result would be:
1. Lower capital farm values - same capital in non-land and lower land values
2. Lower debt because the property cost less to buy in the first place
3. Lower interest cost because less has been borrowed.
4. Similar net return because of the above saving in interest but higher environmental contribution
OK that is simplistic but the facts are broadly correct.
The problem is how to make farms contribute over time to their real costs without lowering capital values too fast.
A long term policy from a Government would help hugely. A bit like the facts that we know the retirement age has to rise over 20 years or so so could a farming policy on the cost rebalancing.

Agree - Well said BB3

it is taking us a while to get our heads round the environmental issues - (look overseas for what comes/constrained next).
we don't think it a case of subsidy on environmental issues, rather its a gap/timing mismatch of environ. regs and operations. More poor planning to recognise what development (all forms of agricultural/horticultural intensification) really means.
In this respect ag development is not different to urban development. (all subject to poor planning).
Our point being people have done what they were allowed (at time) to do. Often regulations have been different to local accepted norms, so when folk outside of the island come in have kept to legal letter (due to lax above the letter has been a wide grey line, rather that fine black), but run over local norms....
So, what to do now?
As noted before, when buying land, folk have always backed themselves to increase production by 150%+ over 5 years (look at grasslands dev. reports/papers of watering/lucerne dev back in the 60's/70's). The environ regs as they should have been (but turning up late) now make that very hard for some (depending on soil type) who are already set. This gap in expectation seems an equity risk. Creditwise, expect no Rural banktype debt capital reduction. This is the equity thought to be there never turned up.
Remove comparative valuation method: The suggestion is making it illegal for lenders to rely on comparative valuation method for making loans, pulling loans, meeting prudential reserve ratios (this could be for any non-residential (consumer regulated lending) mortgage advance).
We see then, low cap rates would be in the case of identified growth (as the otherwise cap rate divisor is the equity return less perpetual growth rate). Rather than just putting 2% of 3% capital value growth as a spread sheet line item - cause that is what its always been.
This we see this as putting front and centre the issue we are all nutting out. The point being the whole deck/house of cards is based on continued and on going growth (and in ag, thats volume not price).
and in export, volume can more as much as price.
thou' the oz supermarkets seem to have stuffed the home market :(

where do I sign for these subsidies?

Nathan Guy at the awards. I was expecting a speech full of national political bull dust. Surprise surprise that's what he gave, it was a night to celebrate the 33 finalist not a bloody national party do. 
I'm sick of the irrigation bull from those on high, you want irrigation you pay for it, and yea why shouldn't that include a use of tax. Just because there is a nice river running past the farm gives no rights to its use/overuse.

was at a meeting recently where those in the know suggested:
1.We will see a major change in the dairy landscape in the next five years due to environmental policy/regulation (regardless of who is in govt)
2.Dairy farms/land in areas that have little or no substantial need for environmental contraints, eg Taranaki, will become more valuable. Those in areas where there are numerous/onerous environmental regulations will drop considerably in value.
3.Shifting cows from one region to another region, e.g. Southland to Otago, for wintering will no longer be allowed.
4.Class 4, 5  and 6 land will no longer be able to winter cows.
5.Discussions have been started with banks re the drop in land values on farms, if the above comes to pass.

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