Bruce Wills says the Greens policy of wanting to penalise farmers for being the world’s most carbon efficient seems an odd policy position

Bruce Wills says the Greens policy of wanting to penalise farmers for being the world’s most carbon efficient seems an odd policy position
Bruce Wills says the Greens are hiding behind some superficial rhetoric

By Bruce Wills*

Heading to Wellington’s airport my 70 year old taxi driver was musing about retirement when unexpectedly he hit the brakes, in one of his more commonly occurring ‘senior moments.’

Unfortunately my nose and forehead wore the brunt of his carelessness and before I knew it, there was good stream of blood dipping onto my suit and shirt with a full day ahead of me.

Maybe I should have gone to A&E but I was heading to Taranaki for our province’s Golden Jubilee and the prospect of hospital waiting times and missed flights didn’t thrill me.

With a name that is regularly misspelt as Die Hard’s Bruce Willis, I also felt that I just needed to toughen up a bit, just like my Hollywood near namesake.

So I got to the airport, paid the fare and made a bee line to Air NZ’s Koru lounge to sort the damage out as best I could.

The cut and bruising to my nose and forehead remained for all to see but soap and warm water put paid to most of the blood. A quick coffee gave a little relief to a sore head and a stiffening neck and I still made the flight.  After landing in New Plymouth and a lot of funny looks at a rather beaten up Feds President, it was time for some running repairs.

I popped into Unichem Ducks Pharmacy in Inglewood and they were marvellous.

They dispensed some pain killers, a few more tissues for the blood and recommended Thin Lizzy to hide some of the damage. 

Never in my days did I think I would wear makeup but the show must go on because I was speaking alongside Energy and Resources Minister, Simon Bridges, Green MP Gareth Hughes and Trade Minister Tim Groser.

The Green’s Gareth Hughes used a verbal concealer since their plan to ditch the world’s most stringent Emissions Trading Scheme for a Carbon Tax wasn’t mentioned.

With Labour scratching the immigration sore ahead of the General Election, the Green’s are seemingly hitting their farming button.

This may reflect the pressure they’re facing from the Mana-Internet hookup.

Stranger bedfellows I have never seen but it is hellishly clever branding.

Just as the word Green provides a cuddly cloak, covering up less than cuddly policies, the Mana-Internet Party is even more left wing but in the smart dress down clothes of a programmer.

All will be fine until Internet Party’s leader and spin doctor are publicly put on the spot with a highly technical question, like the relative merits of Dual stack, 6rd, DS light, 4RD, MAP-T, MAP-E.

That’s when the cynical branding will be revealed for what it is. 

Meanwhile, the Green’s rhetoric around agriculture maintains the illusion that agriculture is not in the ETS when we most definitely are. 

From fuel to electricity to the famous number eight wire, all farming inputs are covered by the current ETS.

While surrender obligations for farm biological emissions have been deferred, what Victoria University’s Professor Martin Manning told the Science Media Centre should be noted: “Agricultural emissions increased over 2009 – 2012 due to more export of dairy products. However, the longer term trend shows our CO2 emissions are increasing by more than those of methane and nitrous oxide from agriculture ... substantial reductions in CO2 emissions are more important than changes in the other greenhouse gases.”

While biological emissions account for half of our emissions, that “more export” means we send offshore some 90 percent of the food we produce. 

There’s no free lunch because any Carbon Tax price would likely find its way into the retail price of milk among other staples.

The targeting of farming also denies the reality that New Zealand agriculture has been cutting emissions in each unit of agricultural output by 1.3 percent each year. We’re also world leaders in agricultural greenhouse gas research.  This makes a strange combination the Green’s view of farming as both fall-guy and cash cow.

Penalising our farmers for being the world’s most carbon efficient will not only reduce production and jobs but push production offshore to more carbon heavy farmers.

Now where’s the global or local benefit in that? 

While the Green’s say sheep and beef biological emissions will be initially excluded that’s an all-too obvious sweetener.  In a Carbon Tax, sheep and beef farmers would still pay what they are paying now under the ETS and making them pay later for biological emissions is as simple as turning the regulatory knob.

Yet the reference to the cost of this economy of drought will stick in the craw of farmers who have been stung by Green Party opposition to rainwater storage.

That includes the sheep and beef sector who are looking to water storage to reduce climate risk and improve business and farming models. 

The differential tax treatment for biological emissions they propose may reflect that the Greens are starting to understand our farming system is world-leading in low carbon protein production.

It is a pity they’re not yet ready to admit it. 

-------------------------------------------------------------------------------------------------

Bruce Wills is Federated Farmers President

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

24 Comments

Comment Filter

Highlight new comments in the last hr(s).

I think it is absolutely great that Brice Willis cites what he is quoting from, giving links. I applaud him for the practice. That said, did he actually read the linked Science Media Centre article. When the most positive thing in it is the sentence he quotes, which in context boils down to "greenhouse gas production from dairy has only gotten really bad in recent years" the link doesn't really support the overall theme of the article.

Hope the nose heals soon Bruce.

Good point put forward and not the most surprising but I suppose it's big news to most of the popuation.   
 considering how NZ actually beats most of the world on Food Mile efficiency, and we are quite a small producer emissions wise (agriculture) it is difficult to see what improvements the Public expect.
 Many farmers already use Rumensien which reduces the number of methanogenic bacteria in the cows gut, as those bacteria compete with the ones which return nutrient for milk and meat production.
Likewise research is ongoing for Nitrogen compounds, and I don't hear of any farmers pouring on the Urea like they did 20 or 40 years ago.  With the tighter margins, we've had to get more productive from every dollar spent, and those chemicals haven't got much cheaper.

What bugs me about the Greens approach, is what actual -solution- do they have to the emission per kg food product question?   A carbon tax does nothing but make a business less efficient, and tax-as-a-barrier ONLY works as an elasticity of demand factor.  ie it puts the price up so people buy less because of the prices.   It acts as an inhibitor to technology and research because it removes the funds available to do such work.
 I'd like them explain exactly HOW their tax is supposed to work that is advantageous to anyone or anybody.

The Watermelon's adoption is entirely consistent with their oft-quoted mantra:  Think Globally, Act Locally.
 
Think Globally:  

  • oh, how little NZ contributes to any global stat including the Demon CO2, compared to They who Must Not be Mentioned:  viz. China (CO2 King) and India (PM10 Queen).
  • oh, how little all those teeming billions Over There Somewhere, have voting rights Here in Godzone.
  • oh, how very, very convenient.....

Act Locally:

  • orright then let's ride the Doity Disgoosting Dairy horse - er - Bovine - till it dies under us and generates Gaia Compost Credits
  • oh lookee How Much Moolah those 'orrible DDF's are making - so from them who Makes it, to Them as what Covets it, let redistribution Rule.
  • Oh lookit that 'Orrible 'Arre, that Apostate Defector, Scarpered knowing where All the Bodies are Buried (and generating Gaia Compost Credits, natcherally).  Haveta outflank That buncha Party Vote Stealers.

 
It's actually perfectly Logical, don't y'all see???  Ferget Kumbayah - there's an Election to be won.  The Means justify the End, surely?
 
To the Barricades!  
 
Rent yet another Crowd!
 
Onwards!

Great post!  I too will be voting greens!  

Rod Oram quotes that the Greens tax is 8 cents per kg of milk solids.
Gee , you have to feel real sorry for having to find that from the payout of $7+
Frankly if you pay too much for the farm and the mortgage is higher as the result....... Tough.
While I have little respect for Bob Jones, I can recall him once commenting that under the revenues being generated at that time farms were severely over valued compared to what you would pay to buy any business elsewhere.
I suspect the same applies today.

BB III - the Berl Report which the Greens commissioned refers to a charge of $29.25 per cow.  You can't say that translates to 8c/kg as farm production per cow varies from around 250kg/cow upwards to 600kg+/cow in a barn situation.  So the Greens have to decide which it is they are charging - per kgms or per cow.
https://www.greens.org.nz/sites/default/files/berl_report_30_may_2014.pdf

I bow to your knowledge. However, I quote RO's figure verbatim.
Either figure is insignificant in relation to the $ yield per cow and is small even in relation to the annual variation in Fonterra price.
The dairy farmers just pay too much for a farm or expansion by acquisition /aggregation of land and the banks are complicit in lending. Time for the RBNZ to step in and make it harder to finance farming capital. It may need some OIO help too.

Given that around 10% of farmers hold around 80% of the debt, it suggests that 90% of dairy farmers have not paid too much for their farm. Some dairy farmers may have paid too much for their farm/have too much debt, but to paint that as the situation for all dairy farmers is simply ignorant.
 
A 12.5% reduction in after tax profit is not insignificant - especially given the BERL report is based on costs staying what they are now. The report also states that it is expected that power and fuel companies will simply pass on costs to consumers - which includes farmers so immediately it calls in to question the relevance/robustness of the data used.

Combined with a one percentage point reduction in the company tax rate, the levy would 

reduce the post-tax profits of the average dairy farm by 12.5%  https://www.greens.org.nz/sites/default/files/berl_report_30_may_2014.pdf

However the trend is for more debt.  ie as the farmers with no debt retire, the replacements will be taking on high debt. As farmers convert they will be taking on high debt.
regards

Not sure that is right. It might have been the standard narrative in 2009 and earlier, but things have changed, and changed a lot. Firstly debt is not increasing materially. And what debt is being added is being held by very few. Less that 20% of all dairy farmers hold most of the dairy debt, for example.
 
Secondly, the age transition is well underway. Yes it used to be that farmers were all 'old' but less so now. And that is being done without significant debt increases. One reason may be the growth in corporate farming. Companies operate with much more equity than debt compared with sole traders. This shift makes the whole financial side of farming much more resilient.
 
I think what you refer to is the 'old' family farm model. Things moved on from that a decade ago, even though it is still an urban myth.

Do you have a chart showing ownership %s? ie family / sole trader v corporate? going back say 20 years?
That chart is interesting, thanks, quite a bump there in 2008 when we had the GFC take off.
"old family model" all I can go on are the few farmers I know and their comments in one area. You are right though not a good data base.
It was also a comment on the future, I mean electricity was growing at about 2%? pre-GFC and now its flat(ish) Maybe we can say the same about your chart. As the economy picks up and hence (milk solids) price we might see that chart start to rise again.
regards

I'd like to see some figures on the age of farmers and the change to the "family farm". While it may be more true of the South Island I didn't think it had changed much if at all in the north. Has anyone actually done any studies in the last ten years, prior to that Massey certainly had  done some.

It is only the new entrants into farming that generally hold most of the debt.......given that farm prices move upwards overtime the initial high debt is not problematic as the debt to equity ratio adjusts.
What is problematic is interferring policies that increase onfarm costs.
I'm not sure why you focus on high debt and appear to see it is a bad thing.....there is always going to be a percentage of new entrants into farming and this is a good thing.  Farmers have to be efficient and they monitor costs closely.  A stable environment for doing business is highly important as changes in any NZ policy have an effect which usually adds to costs.
 
The Greens do not have the necessary business or environmental experience and this is shown in their fragmented policies.

Farm prices can also drop, that is a risk.  a) Debt and high %s of it when you consider the leveridge/gearing banks have means a decent % drop could technically send the banks insolvent.  b) Farms use a substantial aount of fossil fuels, what happens to their profitability and hence asset value as fossil fuel prices get more and more expensive? and maybe rationed? see a)
Im not really focusing on debt.  Though sitting here seing you assume never ending BAU ie growth "given that farm prices move upwards overtime the initial high debt is not problematic as the debt to equity ratio adjusts" sets a clear point of difference.
Green's and the environment, well that is absolute rubbish frankly. National just wants to dig it out no matter the cost to the environment, "NZ version of drill baby drill" or its resulting waste compared to how much future NZers will need it.  Business experience, well again running a country is not the same as running a business, we can see how clueless National's "best" are on that.
regards

A) Growing world population has to eat so demand for protein is going to remain.  Competitior countries not as efficient.
Risk side

  • a major food contamination scare that is not able to be resolved quickly. Would have to be a significant event and widespread. I think there is a low risk of the type of event I'm talking about happening. The type of event could be a widespread animal or soil issue.
  • Government and bureaucratic policies.

 
B) Innovation will solve any problems that might develop. Individuals are best left to develop and implement alternatives. All other countries would face the same issues. Food scarcity would put the price up not  down.
 
Risk side

  • Government and Bureaucratic Policies.

 
Running a country and running a business should be exactly the same. It is only political parties propaganda that tries to persuade people they should be different. Business has to operate efficiently and so should Government. Business has to have a social conscience and so should Government. The trouble is social conscience includes anything anyone wants it too hence the number of differing political opinions and policies.

a) In a BAU, grow for ever assumption, yes. 
"a major food contamination scare" small, short term, no bigge.  A far more likely is a major weather event like the Russian drought or mid-west USA, or both together. An El nono is die t make OZ (and I assume NZ dryer) while california a lot wetter, we could see a serious food issue emerge in the next 2 years.
You also miss a crude oil production output collapse.   Bothe the above look very certain, othe only unknown is just how big.
"Government policies."  Not a scale issue.
b) Frankly rubbish.
Well we agree not to agree on a country as a business. I guess its a case of the economics model differs greatly between a business and a country and hence policy responses.
regards
 

BTW any carbon tax will be internal to the farm and not transferable to local shop prices.
Why? Because farmers are price takers and their final income is determined by the price the overseas buyer is prepared to pay and not by what the producers would dearly like to charge.
So the buyer cares nothing for farmers costs but just what they can get the product for from world markets.

In effect we already pay the maximum the market will stand, ie a rentier price, so yes I tend to agree.
regards

Here we see a mis-direction, "All will be fine until Internet Party’s leader and spin doctor are publicly put on the spot with a highly technical question, like the relative merits of Dual stack, 6rd, DS light, 4RD, MAP-T, MAP-E."
You dont need to know the highly technical stuff to set and manage policy, which is what a Political party is about.  You get specialists such as myself to do that for you. ie the Policy is "we want to go east, Mr techy tell us how", "well Mr manager I think east is a bad idea SE is much better. To  do either we can use a compass as that's the cheapest way. A GPS is more accurate and can tell you the progress, it does however need batteries so I recommend both in case the battery runs out as a compass is so cheap anyway"
A classic is "dual stack", we have run out of IPv4 so have IPv6 as a technical replacement that has in effect no limits to addressing (mind you they didnt think ipv4 would either!)   The Internet party shouldnt care about "dual stack" all they say is "we want every electronic device to have a unique address so it can connect and we want to never runout"  Its my job as a specialist to provide that solution.
regards

I'll agree that the Internet party is looking like a bit of a joke though btw,
"former Alliance Party leader Laila Harré was announced as the Internet Party's first leader"
and from an agreement with mana the second seat will be for the Internet party and that I can but assume is Laila, a far left wing pollie at heart.   So real Internet representation? I have to wonder.
regards

I think she passed the technical bar, having been told to shut up about the technical details when on the Q&A TV program.
Her husbands a software developer, which suggests she must be comfortable around techies at a personal level.

Im a firm believer that a political party cannot have 2 masters. One has to win over the other. Hence I dont "care" whether she's like my wife and comfortable, around IT. The point is I dont see it as her main leaning, being pro-left is and the link up with mana with nothing really in common except left ideals doesnt bode well for the "Internet"  On top of that the Internet is pretty cheap these days.
regards 

Painful article. Should have been called "A Day in the Life of Some Guy I Don't Know", in which case I wouldn't have read it.
I have to say I am confused, given that he quotes about the fact that CO2 emissions need to be reduced. Further, they have been increasing despite the fact that farmers have become more carbon efficient. Therefore this seems to be an out of control problem, but the article suggests that the farmers are on the right track?
Personally I don't support a carbon tax without buy-in from other countries, but at least the Greens are trying to be the leaders.

Yes well think of his politics as somewhat around Act and that then makes the picture of his articles a lot more clear.
One point is correct, Simplistically, NZ reducing output from grass fed cows while other countries use feed whoch produces more co2 per cow makes no sense. My issue is apparantly we are importing palm kernels etc, so how "green" are we really and is that deteriorating? suspect so.
"carbon tax" I think we can and should lead.  I'd suggest that as a small country we can sell our produce, where its green and high quality for a fatter margin.  We have a rep so we need to enhance ir, not knee cap it.
regards