Options for farm strategy
In the modern era the farming sector has taken the opportunities market deregulation afforded it, both in increased production and access to credit.
The wealth effect and contribution to exports have been nothing short of phenomenal.
Our pastoral sector is again set for significant financial gains following the proposed Emissions Trading Scheme reforms and the ongoing sustainability of production systems but, overnight success might take 10 years.
It is hard to contemplate a stronger forward outlook for sheep
‘Our sheep and beef sector is probably the best example of doing more from less in the context of sustainable ’ production.
and beef producers, particularly given the shortening supply of livestock, continued growth in export receipts and competing land use options.
Our sheep and beef sector is probably the best example of doing more from less in sustainable production.
Our national flock has halved over the last 25 years. You have to go back to the 1920s to equal where we are today at about 26.5 million sheep. Interestingly, actual kilograms of lamb production in the last 25 years has dropped only marginally (less than 5 per cent) given gains with genetics and farming practices.
The challenge facing our pastoral sector is not deregulation but regulation, specifically the recent preChristmas announcements by Climate Change Minister James Shaw and the proposed revised settings for the ETS.
Over the last 30 years the sheep and beef sector has lost close to four million hectares to forestry, conservation estate and dairying. Pastoral sheep and beef farming accounts for about nine million hectares, half of which is probably not suited to pine production.
The plan for the balance is to take a further million hectares out of pastoral production in favour of forestry and, with the Billion Trees initiative as a mechanism, to help off-set a
‘There are potentially billions of dollars of future carbon credits on the table as the Government now proposes capping emissions at 2020 levels in combination with huge changes to ETS pricing, potentially doubling it to $50/tonne of carbon dioxide equivalent, as it looks to buy ’native time to find alternatives to fossil fuels.
proportion of New Zealand’s carbon liabilities over the next decade.
There are potentially billions of dollars of future carbon credits on the table as the Government now proposes capping emissions at 2020 levels in combination with huge changes to ETS pricing, potentially doubling it to $50/tonne of carbon dioxide equivalent, as it looks to buy time to find alternatives to fossil fuels.
Near term this has the potential to create windfall gains for farmers already looking to exit the industry but for most farmers it has much greater opportunity over the next 10 to 15 years to generate new revenue streams inside the farm gate or provide options to scale the existing farm business. Our opportunity for pastoral farmers. Farmers control the land use and given the right planning tools and advice, planting less productive ground in carbon credit-generating forest estates has the potential to enhance cashflow and underpin the longterm valuation of the farm as a sustainable, integrated pastoral farming system, particularly as pressure continues to be applied to give greater incentives for native species.
Right now carbon is driving significant capital growth across large tracts of land from the far north to the deep south and while we remain in the business of selling farms we are also in the business of leasing them too.
For farmers who see the outlook as positive and want options to hold onto their land but take a step back from the dayto day-commitments of farming there are myriad strategies available to take advantage of this fast-changing outlook.
Livestock valuations at today’s record highs can release significant cash in favour of a change in strategy to lease the farm. Options to retire part of the farm to trees in combination with a pastoral lease can also be part of the mix. Ultimately, with good advice this has to be a better investment than a bank deposit. The options now are broader than simply exiting the industry and selling the entire property to trees though that will still be attractive to some.