By Willy Leferink*
Farmers seem to be viewed by some as a cross between cash cow and punching bag.
If the Green’s did as they say they’d put the point of obligation for their Carbon Tax inside the farm gate.
Instead, they seemingly plan to use Synlait, Westland, Open Country, Westland and Fonterra as dairying’s IRD.
My newest farm is highly nutrient efficient and I am seriously looking at biodigesters and solar.
These could cut my energy bill and potentially make it better than carbon neutral.
But what’s my incentive if I am treated the same as another bloke pumping out CO2 like there’s no tomorrow?
That’s why the point of obligation matters and where it is placed tells you if it is green or just greenwashing for an export tax.
Since their policy paper references ‘lowering the payout’ and their emission numbers are for industry as opposed to individual farms, it tells me it is all about the ease of tax collection.
There’s also an assumption we’ve done nothing when we’ve been actively investing in greenhouse gas research since the early 2000’s.
There is nothing Green about a party that is just a fake facade for a bunch of socialists.
Provocative?
You betcha because you must contrast their rhetoric with our reality.
The United Nation’s estimates that in the global milk industry there’s 2.4 kilograms of C02 in each kilogram of milk. DairyNZ reckons here it is one kilogram of C02 per kilogram of milk.
The upshot is that we’re not just good, we’re bloody good.
In 2011, Rosie the cow was producing milksolids with 24 percent fewer emissions than her forebear did in 1990.
At an annual improvement of 1.14 percent each year, Kiwi dairy farmers have saved millions of tonnes of CO2-equivalent emissions, even well before we’d ever heard of an ETS or a Carbon Tax. That comes with a focus on being efficient users of resources. It’s about clean cow technologies.
As no one else on the planet is planning to emissions tax primary food production, what do you think would happen to global emissions if a Carbon Tax simply shifted our production overseas?
Unlike others, I started reading the BERL report behind the Green’s Carbon Tax with its appendix. It is seemingly research by Google using cost data three seasons old but applied to the current season’s forecast payout.
DairyNZ has found that a Carbon Tax will cost the “average farm” $17,000 each year but that’s the start.
A Carbon Tax also massively increases the cost of making dairy products here, which adds another $10,000 to each New Zealand dairy farm. So much for value add and local manufacturing then.
And if you farm sheep or beef it takes just one turn of regulatory knob to wallop you as well.
So instead of “just 8 cents for kilogram of milksolids” we’re actually talking $27,000 each year “for the average farm.” Since that comes off your revenue it’s like a stake into the provincial economy’s heart.
Let’s also assume the payout is $6.50kg/MS instead of the $7 forecast.
This means “the average dairy farm” will have a gross operating profit similar to the salaries of two Green MP’s. It is a lot of money yes, but just like MP salaries, is before you pay either the taxman or your bank manager.
Since farming’s in the ETS and we have a track record of ever greater carbon efficiency, we just want our urban friends serious about the environment to have a good hard think about what the greens will do for our environment.
That should be more than just taxing dairy farmers.
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Willy Leferink is Federated Farmers Dairy Chairperson.
46 Comments
Dont be silly, I mean really. Im gob smacked by how clueless and blinkered most of your comments are.
The greens have lost no votes, farmer country is blue, period. All they are doing is taxing blue voters to give to red voters a win for them, just like National has done, but in reverse.
regards
"their emission numbers are for industry as opposed to individual farms, it tells me it is all about the ease of tax collection."
Well.... of course!
You're telling us that you'd prefer the infinitely harder and more complex system of individual stats??
"
The United Nation’s estimates... there’s 2.4 kilograms of C02 in each kg of milk. DairyNZ reckons here it is one kilogram of C02 per kg of milk. The upshot is that we’re not just good, we’re bloody good."
You seriously expect us to treat DairyNZ figures as providing unbiased, balanced facts?
"There’s also an assumption we’ve done nothing when we’ve been actively investing in greenhouse gas research since the early 2000’s."
Now you're in complete fantasyland, Willy. Most farmers I know openly dismiss greenhouse gas research as left-wing, liberal rubbish. They prefer to dismiss the majority of world scientists as "fringe nutters".
NZ dairy emissions have increased exponentially over the last 10 years... to pretend otherwise is to live with your head in sand.
But there is no incentive for an individual farmer to seek to reduce his carbon emissions, if he gets charged exactly the same amount of tax whether he does so or not.
So the tax doesn't incentivise carbon reductions, and the revenue's going to finance a tax cut rather than being directed towards carbon reduction - Where exactly is the environmental benefit supposed to come from?
The tax is not just for farmers. The benefit to the environment will come from other industries reduction. Perhaps the answer is to have a maximum number of cows per hectare and if you are below that number you don't pay the tax.
It is a difficult issue and it is always easy to find flaws in a plan but not so easy to come up with solutions in the first place. How do you suggest we tackle the problem? I agree that there needs to be an incentive for farmers but how do you set it up so it's not overly complicated?
Well to start with if NZ farmers are truely the most efficient in the world and the most green then taxing them is plain wrong, we need to tax imports first.
So,
a) prove they are or not.
b) determine if they can improve, if not no point in increasing tax on them as an incentive. In fact if you tax them more they pay become less green in order to make more money to pay the tax, that is a lose.
regards
PeakE, the nutrient caps that are becoming popular with Regional Councils will force the reduction in cows per hectare on some soils. That's one area that this BERL Report has not considered. Though credit to them is that they do say that their assumptions are based on the staus quo. Any one with any knowledge of the industry (which the Greens don't appear to have) will know that the environmental policy changes that are/about to be implemented regarding nutrient limits/setting will have some impact regarding dairy farming profitability. This will not affect sheep farming to the same degree. e.g. Otago has caps of 15,20 and 30. It will be BAU for sheepfarmers in both 20 and 30 areas.
What I find interesting is that the Greens acknowledge that the biggest problem makers are the non dairy farmers, yet they aren't willing to go there with a tax on the biggest problem makers. In Appendix A the BERL Report shows a 2012/13 dairy pre-tax profit of $137589, and a 2012/13 sheep pre-tax profit of $181305 (Table 12). The Greens policy is that it is ok to tax the dairy farmers, but not the sheep farmers, even though their table shows sheep making a larger profit. If they are truly serious about their tax, they will tax everyone, not just dairy.
In reality, the imposition of an emissions levy would trigger an extremely complex set of reactions and outcomes that would be difficult and very time-consuming to model. BERL, therefore, opted for a simplified analysis that would result in a more transparent and comprehensible narrative, indicating how average households and average Dairy farms might be affected. The bold emphasis is mine. Taking a simple analysis option rarely proves to be valid in reality - as the devil is in those complex set of reactions that were considered in the 'too hard basket' by the Greens/BERL.
https://www.greens.org.nz/sites/default/files/berl_report_30_may_2014.p…
Steven is obliging enough to provide you with a link; I have not read it, I was simply challenging The Duke's apparent support for taxing all dairy farmers at the same rate, regardless of their actual level of carbon emissions. If that is the Greens' policy, then it's not actually a "carbon tax" - it doesn't tax carbon - and creates no incentive to reduce carbon emissions.
It would indeed be good to introduce into this discussion comments from somebody who has actually read the policy so if you're going to do so, please come back and advise us as to what it is exactly that the Greens propose to tax
Yup, which does indeed make it better than a flat tax on all dairy farmers whether they try to reduce carbon emissions or not, which is what The_Duke seemed to be advocating. And I will happily concede that a well-designed and well-administered carbon tax is superior to a poorly-designed and poorly-administered emissions trading scheme.
However, I still do not think it superior to a well-designed and well-administered emissions trading scheme, which transfers wealth straight from carbon emissions producers to carbon emissions reducers without going through the Government middleman; and hence, my view remains that the Greens would do better to focus on improving the scheme we have
So who pays for the pollution then? You, the polluter? Or do the rest of us have to pick up the bill, just like we're doing for the rivers dairy farmers have polluted too?
Read the policy closely and you'll find good farmers are rewarded with tax credits...but if you pollute, you pay. That's only fair.
It's a shame that Willy has missed a few important facts about this policy.
The impact of the carbon tax on dairy farmers is the equivalent of 8 cents per kg of milk solids. To put this in perspective, if the exchange rate fell or rose 2% and stayed that way over a year, it would have the same impact. Similarly, a 2% move in the international price of whole milk powder would have the same impact. On any given day the baseline milk price can fluctuate by many more times than that. It’s now 26% below its February peak. On average, NZ dairy farmers spend 47 cents per kg of milk solids on fertiliser alone. 8 cents is a nudge, not a big stick.
Willy neglected to mention that good farmers will be able to earn tax rebates for the good work they do to reduce or mitigate their emissions. This will be done through a certification scheme. Under our policy, the Ministry for Primary Industries will independently certify low emission farmers enabling them to claim a tax rebate.
It's great to hear about your biodigesters and solar Willy. We hope putting a price signal on carbon will encourage other farmers to do the same.
Applying the tax at the processor-level, with a claw-back for good farms is the smartest way to do it. if we had proposed assessing and taxing individual farms, then Willy would be complaining about more red tape. As it stands, the policy will cost less to administer than the $19 million we currently spend annually administering the failed ETS.
Another advantage of applying the tax at the processor-level is this will actually give them a tool to achieve their own goals. Let's take Fonterra as an example: they can can decide how the tax will be distributed among their suppliers - giving them the choice to differentially reward farmers that achieve Fonterra's own sustainability targets.
We hope processors will develop ways to reward good farmers and we look forward to working with them on this. It is as much in their interests as anyone’s to encourage less intensive, lower emission farming.
Willy also didn't mention that the many km of riparian planting farmers are undertaking will qualify for carbon credits - something that doesn't occur now. How about the 1% company tax cut that's part of the package?
The fact is, dairy emissions in NZ have more than doubled since 1990. Tens of thousands of hectares continue to be converted from forestry land to dairying. We can’t continue to ignore the sector’s contribution to NZ’s emissions profile. The carbon tax is designed to give a price signal. It’s not designed to drive farmers out of business. To suggest that farmers won't adapt to this, or that the policy will drive production offshore shows a lack of faith in our farmers.
If Federated Farmers wants to play its part in the long term future of sustainable agriculture in New Zealand, we need to start having better conversations, not throw rocks at each other. The Green party is ready if you are Willy.
John Hart
Wairarapa Farmer and Green Party Candidate
adding cost through carbon tax decreases the uptake of solar and biodigestoers, and increases the move towards corporate style megafarms.
the only "advantage" for thieves to put pressure on Fonterra, is that it prevents activity by individual farmers to protest, as the fonterra just folds to buy political favour, and since Fonterra has no direct cost in the implimentation it has no real protest grounds.
It also results in industry level action...which negates further the claim of process improvement.
If the government can afford a 1% company tax cut to farmers, then I would expect to see a minor increase in wages, but you can guarantee it would be given with one hand and claimed back with another... looking over the last year, probably through RBNZ saying the "economy is performing 1% better than permitted"
John, I note you are a sheep and beef farmer, which the Greens have conveniently excluded from this tax. ;-)
You state 8c/kgms where as BERL Report refers to $29.25 per cow. Which is it? If you divide $29.25 by 8c you get an average production of 365kgs/ms/cow. On our farm it is 420kg/ms/cow which equates to $33.60/cow - 12.47% higher than the BERL Report.
good farmers will be able to earn tax rebates for the good work they do to reduce or mitigate their emissions....Applying the tax at the processor-level, What constitutes a 'good farmer'?None of this has been reported in the MSM nor can I find it on the Greens website. Please provide the url to this as I am most interested to read the 'detail'. Thanks.
giving them the choice to differentially reward farmers that achieve Fonterra's own sustainability targets. Fonterra has already canvassed suppliers on rewarding farmers for sustainablilty targets and you may be surprised at how the farmer shareholders replied. ;-)
Willy also didn't mention that the many km of riparian planting farmers are undertaking will qualify for carbon credits. Perhaps like me Willy hasn't heard of it!- again where can I find an URL where I can read the detail. BERL have not factored that in to their report - why not? Who gets the carbon credits - the processors to distribute or the individual farmer.The BERL report is silent on the credits etc that dairy farmers will be able to claim. Where are these credits coming from? How many credits per km of riparian planting can be claimed?
What is the total cost for this Greens policy? It appears that there is more than an emissions tax involved.
To suggest that farmers won't adapt to this, or that the policy will drive production offshore shows a lack of faith in our farmers. It also shows the Greens lack of iunderstanding of the undermining this will do to family farms (still the majority by number) and dairy pathways for young kiwis. Dairy will remain but expect to see a rise in corporate farm ownership/overseas ownership.
Casual Observer, the full policy as announced is here (PDF) https://www.greens.org.nz/sites/default/files/green_party_climate_prote…
The credits we are referring to are tax credits to individual farmers - to offset the cost of the carbon tax. The full range of activities and practices that will attract credits will be determined by the independent Climate Change Commissioner, in consultation with industry. Much of what we already consider to be good farming practices, like riparian planting, nutrient budgeting, lower stocking rates, better effluent management etc would qualify.
The policy is costed out in the document and is revenue neutral to taxpayers. Admin costs should be considerably lower that the $19 million per annum we spend now on the failed ETS.
I'm happy to discuss the policy further if the policy doc doesn't give you everything you need to know.
Thanks for the link - much appreciated. :-)
So dairy farmers pay a milksolid levy, not a per cow levy as suggested in the BERL Report - good to have that clarification. When farmers are making good profits they willingly invest in 'green' strategies. When their after tax profits are reduced - as they will be by 12.5% according to BERL - they don't.
I would be interested to know what the Greens consider a 'low' stocking rate - 2.5cows/ha?
As farmers who were ahead of the pack with regards to riparian plantings, QEII covenants etc we no longer invest in 'green' strategies. With Council now charging dairy differential rates in addition to higher General and Roading rates for dairy farmers, plus bringing in nutrient limits that will mean BAU no longer, there is simply no incentive to go over and above what is required as financially our profits are being quietly eroded by others 'milking the cash cow'. Much more fun to invest in technologies that assist with management decisions. I have no problem paying tax on income earned, but I do have an issue when dairy is being singled out, despite it being acknowledged that it is not the major contributor to the problem - the Greens are joining the list of those 'milking the cash cow'. Oh, well, nothing new there I guess. :-)
When farmers are making good profits they willingly invest in 'green' strategies. When their after tax profits are reduced - as they will be by 12.5% according to BERL- they don't.
Good you are willing to invest in green strategies
there is simply no incentive to go over and above what is required as financially our profits are being quietly eroded by others 'milking the cash cow'
But clearly there is - the carbon tax rebate for individual farmer action means you don't just have to be willing, it will be worth your while. And any farmer who is unwilling and does not will miss out.
Right now the good guys - those "willing" to invest in green strategies - come last. With the carbon tax the good guys come first.
mjpwelly - I have yet to see how much the carbon tax rebate will be for farmers. A heat exchanger for our farm dairy will cost approx $15,000. It does not make sense to spend $15,000 in order to receive a $500 rebate.
You (and you are not alone) do not understand the psyche of the majority of farmers. They invest in green strategies because 1) they can afford to and b) they believe it is the right thing to do. In order for a farmer (or any business) to be 'green' they must first be 'in the black'.
Riparian plantings have been mentioned. Fencing off waterways is now a condition of supply to Fonterra, so nothing special in that, if you are a Fonterra supplier.The devil will be in the detail. e.g. farmers who fence off waterways that are on flood plains waste their time planting as the floods will simply wash the plants away and take more sediment in to the waterway. So you have two farmers - both who have fenced off the waterways. However one plants up (which is becoming the bane of fishermen on some waterways as it stops access if closely planted) and another whos land regularly floods and is a flood plain. The tax rebate will go to the farmer who has planted, but the farmer who is still 'doing the right thing' receives nothing. Also not stated is will every farmer who plants up receive the rebate or will you have to have a minimum length of waterway to qualify.
Many farmers who planted up in the early days received funding assistance from the farming biodiversity fund. Some have also received funds from Landcare Trust etc. Most farmers who have newer plantings have funded the cost entirely themselves.
A potential scenario: 1km is the trigger for the rebate. Farmer A has 1km of riparian planting, and has received 50% funding assistance. Farmer B has 500m of planting and has funded it themselves. They receive no rebates and yet potentially their cost has been equal to the Farmer A, but won't receive the rebate benefit.
It also needs to be remembered that the Greens intend to spend the first year thinking about how it all will work, the second year consulting and introduce it in the third year - which will be an election year.
I find it interesting that you are silent on a view of the biggest emitters - the non dairy sector - being exempt.
For all I'm not a Green, that's a mighty broad brush you are tarring with. If we adopt that logic we could speculate about the ultimate goal of the ACT party based on their various MPs that have been involved with fraud and dishonesty events (John Banks is, after all, the latest in quite a line of ACT MPs quiting/getting forced out over such issues).
Willy's article mentions, but doesn't highlight, the staggeringly high GHG emissions of dairy farming. 1kg of CO2-equivalent emissions per litre is huge! Even petrol is only 2.3kg/litre. If a household is using 1 litre of milk a day, that's 365kg of GHG emissions a year, quite a significant part of typical emissions. Say you drive 20km a day @ 7.5l/km, that works out to 1250kg of emissions.
If you compare them on a national level, NZ produces 14.5 billion litres of milk a year and uses 4.5 billion litres of fuel. That's 14.5 million tons of GHG from milk and 10.4 million tons from fuel.
Now lets get some balance to that comment Robert M - what are the economic and social benefits to communities - rural and urban - that dairy brings.
There are externalities in every business. e.g. In the Bay of Plenty a mill was given a 25yr consent to continue to pollute a river due to the the economic and social benefits to the area - the incredible thing to me was that they had no requirement to even try to mitigate/improve their pollution of the river.
Oh, and Fonterra has the biggest fleet of trucks in NZ. ;-)
I lived next to that river CO. Unbelievable. The black hole of calcutta. How could NZ possibly allow that of Tasman. Back in the day, this 18 year old was disgusted as disgusted could be. I dont know what Kinleith does right now, but it wasnt all that long ago their discharges were damn near as vile. Into the Waikato no less.
Casual Observer - I agree with you that there are externalities to every business, in fact to every human activity. They should be treated on an equal footing. Many NZ industries emit a lot of GHG - steel, oil & gas, aluminium, horticulture come to mind. (There was an item on Rural Roundup about a tomato grower in Christchurch who used thousands of tons of coal a year to heat a 1ha greenhouse). They all create extremely important jobs and income. The question is whether the dairy industry should be treated differently from any other. The Greens are proposing a carbon charge of $25/ton for most emissions, and $12.50/ton for dairy, with all revenue returned to the public and businesses via a tax cut.
Here's another way to look at the dairy industry. A hectare produces 11,000 litres of milk a year. The farmer gets about $5500 in revenue and makes a profit of $2000 (figures from Fonterra). That's a nice profit margin. If the milk is sold in a NZ supermarket, it retails at $22,000. A nice cut for the processor, retailer, and GST. The Green's carbon charge would be $12.50 x 11 tons = $137.50.
There's something funny about the dairy industry, and the opinion pieces from Federated Farmers that are regular features in the farming newspapers are just the start of it.
PS - in my original comment I wasn't trying to be balanced, I was genuinely suprised that a litre of milk has almost half the GHG emissions of a litre of petrol. Or does everybody else know that already? I guess it is because methane is such a potent GHG.
That's a nice profit margin. Maybe, but many farmers employ contract and lower order /50/50 sharemilkers so that $2000 is shared between the farmer and contract/share milkers
8c a kilo is being widely reported as the cost to dairy farmers. On that basis with the average kgms/ha being 1028*, at 8c a kilo it is $82.24 not $137.50 as per your comment. And therein lies one of the issues for farmers - 8c/kg being quoted in some media and $29.25 per cow in BERL Report.
*http://www.dairynz.co.nz/publications/dairy-industry/new-zealand-dairy-…
Genuine question: I'm curious, What is the GHG emmissions of sheep meat, cattle beast and horticulture?
As a general observation, I would have thought that it is every farmer's best interest to try and be as green as possible?
No matter what type of farmer you are, the weather and climate are hugely impotant to your business.
A few die hard deniers aside, it is now generally accepted that an increase in CO2 emissions is heating the planet/oceans, which in turn is having a detrimental effect on short term weather and long term climate.
Isn't it a no-brainer to practice good animal and land husbandry?
Nope. It is in every farmer's best interest that everybody else try and be as green as possible. Then everybody else will bear the costs, and he will get the benefits. This being the case, no self-interested individual farmer will want to incur costs to be green - others will get the benefit without reimbursing his costs.
This is the classic economic "free rider" case, one of the reasons why economists agree that sometimes markets can fail.
Which is not the same thing as saying Governments are always right to intervene in markets, nor that whatever Governments do is bound to be better than what markets might do. There are many, many examples of Government failure and they're often far worse than any market failure.
How exactly are they two different things? Could you give a simple example to demonstrate how something can be less profitable, but not more expensive, for the producer of a good?
Where it is the case that adopting green technologies makes economic sense from the point of view of a individual producer - ie, the benefits to himself exceed the costs to himself - then there is no need for Government intervention; the economically rational self-interested producer will do it voluntarily anyway.
What he will not do voluntarily is adopt a green technology when the costs fall on himself and the benefits fall on other people.
DFTBA it is in every farmers best interest to firstly be financially viable. Some parts of the country have been having some dry years, but some areas have been wetter. We live with a constantly changing climate.
Dairy is light years ahead of other primary industries in regards to the environment. A combination of carrot and stick has over the last ten years seen a change in dairy farmers to things such as fencing off waterways. It takes time to get people to change attitudes. Imagine how much could be acheived if the powers that be stopped saying other sectors can't afford to pay their dues and started to expect those sectors to pay their dues - or part of them. Often innovation comes from such measures.
If destroying the environment is required in order for your business to be viable, then....it's not really viable.
Again, a general observation, not directed at dairy farmers in particular.
I agree that all businesses, and all individuals for that matter, should bear the responsibility in caring for our habitat/air/water/land.
GHG emissions of sheep, cattle, and horticulture. That's a good question. I found a 2011 AgResearch report that put GHG emissions at 20kg per kg of output for sheep and beef, or 4 tons per hectare. So it's 1/3 as much as dairy by the hectare, but 20 times as much by output. Even though they emit less GHG, their income is so much less than dairy they would be more impacted by a GHG charge.
NZers eat 80kg/year of meat each = 1600kg of GHG from meat. Driving is starting to look positively eco.
For horticulture, I don't know on average, but if there a carbon charge, I suspect almost the entire impact would fall on a few heavy users. For example the EECA award this year went to K&L flower nurseries in Christchurch who were formerly heating their greenhouse with coal. Replacing it with a biomass boiler saved 3500 tons of CO2 per year. You can see their greenhouse on google maps, it is about 1ha.
Driving is starting to look positively eco.
I laughed, but the point is well made.
It has long been said that we Western consumers of livestock products have a HUGE footprint. I once saw some calculation comparing the carbon footprint of a peanut butter and jam sandwich vs a salami and cheese one - multiplied by the lunches of those in just one small city for a single week. The savings to the planet of the PB&J option was staggering.
Don't forget though that dairy is mainly sold in powdered form. I imagine the process of evaporating water from milk is an energy intensive one adding a significant amount to its final carbon footprint? I know all of the milk factories around Canterbury use Coal as an energy source for this process. I assume it is the same in the rest of NZ.
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