Betting the farm on it – how rural land use (may) change with recent commodity prices and land sales

By Zack Dorner

Farming is a risky business, as is forestry. You are at the whim of the weather and international commodity prices which, as we have been reminded by recent dairy prices, can drop rapidly without much warning. Meanwhile, farmers have to make long term decisions about capital investments, or decide whether to convert from one type of a farm to another. Foresters must plant trees which won’t pay off for several decades. Given the importance of rural land use for New Zealand’s economy and environment, it is important that we understand better how land use changes in response to economic drivers.

For my honours thesis last year I decided to look into recent rural land use changes in New Zealand and whether changes may be associated with recent commodity prices and land sales. I’m very happy that my thesis has now taken the form of a Motu Working paper, which has just been released. In lieu of you having to read the full paper (though of course I encourage you to do so!), here is a quick summary of some things I learnt along the way.

"Origin Green" - certifying the sustainability of Irish primary products

Rural News recently ran this article about a quality assurance scheme initiated by Bord Bai (the Irish Food Board). Called "Origin Green", the scheme guarantees the sustainability of certified foods to consumers. As the article explains, Beef and Lamb New Zealand Chair Mike Petersen thinks that there is scope for New Zealand to do something similar.

The Irish scheme is very similar to an idea developed within New Zealand by the Agricultural Emissions Dialogue and a version of it is already being developed by one of the members, Mike Barton, through his Taupo Beef programme. Mike discusses Taupo Beef in our short film.

More information on Origin Green is available here.

 

Farming within environmental limits

Here is a copy of a brief article by Dr Dan Marsh, which was recently published in the new magazine Primary. It discusses the "Natural Capital" approach to setting limits of runoff from farms (for water quality reasons) as adopted by Horizon regional council.

The idea of farming within environmental limits has attracted a lot of attention in recent months. Some of the debate has been around the allocation and setting of nitrogen leaching limits; limits on the amount of nitrogen that can be allowed to leach from a farm or catchment into rivers or lakes. The recent environment court decision on the Horizon's Proposed One Plan (POP) has put the spotlight on the Natural Capital Approach (NCA) which allocates nitrogen leaching rights at a flat rate per hectare that varies with land use class (LUC).

Motu has done a bit of work looking at an alternative approach of nutrient trading - trading the nutrient emissions that pollute waterways within their catchments under a total cap. This ensures waterways can be protected, while the allowable amount of nutrient run off can happen where it can be most efficiently utilised. Dan Marsh touches on this approach in his article too.

Some of Motu's 2009 work on nutrient trading around Rotorua is summed up nicely in this paper.

Nutrient trading for water quality of course has some interesting parallels with emissions trading for greenhouse gases. A similar Motu working paper on allocating units for the New Zealand ETS (Emissions Trading Scheme - covering greenhouse gases) can be found here, with Suzi Kerr's latest thinking on the contentious issue of allocation and fairness in the ETS is covered in this recent presentation by her.

It's all very interesting and contentious stuff - lots of material to look into! Luckily Dan Marsh's article gives a good summary of some of the issues which we are having to confront as we look seriously at farming within environmental limits.

Thanks to Dan Marsh for providing us with the article for this blog.

The New Zealand Farming Story: Tackling Agricultural Emissions

Today we are very excited to release our new short film on New Zealand’s agricultural emissions. Although the topic may sound dry (though hopefully not too dry if you visit this blog!) our filmmaker Jess Feast has done an excellent job of making an engaging film on an extremely important topic for the future of our country, our planet, our people and our stomachs. (She also made our films about improving the water quality in Lake Rotorua).

The film covers a wide range of topics, and many of the ideas in it come directly from what we learnt through the AgDialogue process. Importantly, we cover how we might be able to achieve some real reductions in New Zealand’s agricultural GHGs (greenhouse gases). You will get to meet some of the participants and experts from AgDialogue, including two of our star farmers, Mike and Megan.

The film speaks for itself, so you are better off watching it than reading about it. But before you do that, I’d just like to acknowledge all the hard work that went into making the film. To all those in the AgDialogue who gave their time and those who have done related research in the past few years, this film is dedicated to you and the hard work you have done.  Also thank you to our filmmaker Jess and the Ministry for Primary Industries for its support. The work will pay off in creating a more sustainable and prosperous future for us and future generations.

Oh, and if you like the film, please share it far and wide. New Zealand is uniquely placed to be able to make a big difference to levels of agricultural GHGs (greenhouse gases) around the world. And everyone in this country can make a difference.

UPDATE: Teaching materials to accompany the film have now also been released. These can be found here.

Looking forward: what NZ rural land might look like in the coming decades under a carbon price

This blog post is by Motu Research Analyst Zack Dorner.

A couple of years ago, my sister brought her partner to visit New Zealand for the first time. We picked them up in Auckland, and drove down the North Island back to Wellington. He asked “Why are there so many golf courses here?”

Of course, they weren’t golf courses, but the lush, green grassy farmland that New Zealand is so well known for, and that he was not used to.

Motu has just released a new working paper, modelling what our rural land might look like in the coming decades, including with a price on agricultural GHGs (greenhouse gases). Luckily, for our “golf courses”, even with the agricultural sector facing a price on its GHGs, New Zealand probably won’t look much different to the way it does now.

The really cool thing about the model used is that it is based on real world observations of how rural land use in New Zealand has changed in recent decades in response to commodity prices. It is slow to adjust – farmers don’t want to switch immediately to the new best thing for their land (see final graph below), which is understandable. Changing your whole farm can’t be easy or cheap to do, and who’s to say market conditions won’t change again.

Of course, the results in the working paper are just from a model. They do not predict the future, but give us an idea about the types of changes to land use and their magnitude under certain scenarios. There are on-farm mitigation options that farmers may be able to do to reduce their GHGs before changing land use, but to keep things simple, the model does not include these.

The working paper models three scenarios out to 2030: no carbon price, a carbon price ($25) just for forestry, and a greenhouse gas price for forestry and agricultural emissions.

The model shows several interesting things.

First, as I have said, land use change is quite slow. Even with a $25 carbon price on forestry and agriculture, there is actually relatively minimal changes in land use. This provides evidence that our agricultural sector may be able to respond efficiently to a price on carbon without huge disruption to rural life in New Zealand.

However, although changes to land use are gradual and small, they actually make a big difference to our emissions. The extra trees are especially helpful in this regard. From the paper directly:

Under our ETS [emissions trading scheme] scenarios there is substantial reforestation. The extra removals associated with this new planting mean that the additional sequestration in 2024 is from 17.6 to 20 percent of national inventory agricultural emissions in 2008.

That’s a huge amount of emissions, and would help New Zealand immensely in our quest to lower our emissions.

In terms of cows and sheep, we actually see more dairy cows, and fewer sheep and beef farms. This is because dairy farms are so much more profitable, and the balance is tipped even more in their favour once a price is applied to farming emissions. This is already happening to a much larger extent, and only the already marginal sheep and beef farms are converted to dairy or forestry under an efficient response to a carbon price. The overall change is only minor in the scheme of things, and even when you exclude agricultural emissions from a carbon price, this still happens (see the first graph below).

So these results suggest that there are large benefits to having a $25 carbon price in New Zealand for forestry and our country’s emissions profile. As for agricultural emissions, if dairy and sheep and beef farmers face a price on their emissions, the sky won’t fall in, but the adjustments that are already taking place will just continue to a greater extent. By creating an efficient, economy-wide price signal which includes agriculture, we should achieve more mitigation overall (see the second graph below). If on farm mitigation is encouraged optimally, and technologies continue to improve, we might well see less of the minor reduction in farming in the model and instead end up with more efficient farms on our rural land.

Bringing agricultural emissions into the ETS or some other pricing mechanism must occur once farmers are ready and on board. Through research like this, and having a dialogue with all interested parties, we can hopefully move forward together, and work towards future-proofing our golf courses, and our farms.

And now, for those of you who get a kick out of graphs (like me), here are some relevant ones:

This graph above shows the projected change in land use share for each type of land use. The solid lines give baseline projections. Short-dash-dot lines give a $25 carbon price, but not on agriculture. Dashed lines show a carbon price with agriculture. Note the y axis is the same scale for each graph so direct comparisons can be made (page 9).

This graph shows the amount of emissions that are reduced or sequestered. The red line is with just forestry, the blue line shows including agricultural emissions as well increases the emission reductions (page 16).

  

This final graph below shows why sheep and beef farms have been declining over the years, and how land use change is gradual (page 4 of Kerr and Olssen 2012).

Thoughts on land use from a young Māori woman

The following post is by AgDialogue participant Ana Ngamoki.

Climate change. Global warming. Greenhouse gas emissions. Fossil fuels.

These terms, and others, have now been ingrained into everyday conversation. As a young Māori woman, what do they mean exactly? It suggests damage to our tribal lands. Or even a loss of food resources and biodiversity. This leads to loss of land, culture and identity. A familiar pattern is emerging; a new form of ‘colonisation’ maybe? This time however, Māori have an opportunity to shape and partake in discussions to control, to an extent, the climate change situation.

Sustainable development. Renewable energy. Emissions trading scheme. Carbon Credits. AgDialogue.

These terms are perhaps a step in the direction towards recognising our role in managing the effects of climate change. The AgDialogue discussions have been an interesting experience. I am not a farmer, a policy analyst, a scientist or even consider myself an expert in this field. However, I have a vested interest and understanding in Māori, and more specifically Te Whānau a Apanui use of land. Our role as kaitiaki (guardians/ steward) over our lands and foreshore is a part of our culture and identity. It is our responsibility to put in place systems now to ensure future generations have continued access to the resources which our ancestors have left us.

Entering the AgDialogue discussions partway through was a daunting experience. I was suddenly thrust into a room of individuals whose years of experience in their respective fields almost equalled my age (and I am quite old!!). Following my first meeting in November 2011 and an exchange trip to Japan, I was able to reflect on my role within AgDialogue. Sometimes it is not until you travel abroad and participate in other processes that you realise how privileged a position you have been put in. This is what I discovered while I was in Japan. As a member of Kaitikiatanga – Caring for our lands and foreshore; a whānau and hapu not-for-profit organisation and, as tangata whenua, we have been allocated a voice in a process which some people and organisations can only dream of. We have been placed in a position where the voices of tangata whenua can be shared within a National Working group and climate change policy can now reflect these voices, aspirations and values.

The most interesting experience for me has been learning and absorbing information and stories from experienced individuals. Nitrification inhibitors were a foreign language to me prior to joining this group, so too were some of the scientific terms associated with climate change. This process has been a window by which I have been able to view how they can be simplified and turned into appealing prototypes such as a cooking show, an educational farming game, and so forth. So as a young Māori woman, witnessing this process has made it a lot easier to understand and work through a complex issue and turn it into a more manageable situation for tangata whenua.