Environment Minister David Parker has announced his Essential Freshwater initiative — Healthy Water, Fairly Allocated.
The Government wants to see evidence of improvement in water quality by 2023. Does Fonterra's current stance on nutrient allocation fit with the Minister's aspirations?
In my opinion, with the Waikato Waipa Healthy Rivers PC1 hearings drawing nearer Fonterra is heading into a lonely space. Waikato Regional Council (WRC) notified Plan Change 1 (PC1) in October 2016 and received more than 1000 submissions with the overwhelming majority opposing a grandparenting rule that manages nitrogen allocation except for two notable exceptions — Fonterra and Dairy NZ — which were instrumental in influencing the outcomes of what should have been a collaborative process prior to the notification of PC1.
The grandparenting principle is based around historical use of nitrogen (N) by giving each property an N Discharge Allowance. Overseer nutrient budgets are used to assess the nitrogen each property leached over historical years of production.
High leachers of nitrogen are allowed to carry on leaching nitrogen in an unsustainable manner, noting under PC1 the top end will need to come down to the 75th percentile. Nitrogen gets into our waterways through the soil profile or overland flow.
Grandparenting effectively protects the polluter by offsetting nitrogen loss onto other farmers with farm systems with low nitrogen loss rates, primarily sheep and beef and low input dairy farmers. Their N-leaching is capped at low levels. This locks them into a situation which gives no flexibility for system development or land-use change.
Grandparenting incentivises perverse outcomes where nitrogen loss is indexed against the farm values.
Those that leach/pollute the most nitrogen have the highest land value.
Fonterra supports a grandparenting approach, rather than advocating for intensive farmers to take responsibility for their nitrogen/contaminant loss.
Why is Fonterra obsessed with protecting suppliers who farm intensively, relying on excessive amounts of nitrogen and palm kernel?
Since Fonterra's inception they have been focused on cranking up the volume of milk supply. In 2012 Fonterra formalised this into their V3 strategy — Volume, Velocity and Value. So has that strategy performed for their business and most importantly their shareholders? It has clearly failed.
Fonterra has had the foot hard down on the Volume and Velocity pedals, exporting plenty of product in brown paper bags with the Value pedal somewhat neglected. Fonterra is the second biggest milk processor in the world for volume, but it sits at 18th for revenue per kilogram of milk.
And why wasn't there an 'E' pedal for environment in Fonterra's strategy? It appears to be virtually non existent. This was plain for all to see when two years ago, to the dismay of their environmental champion suppliers, Fonterra withdrew sponsorship from the Ballance Environmental Farm Awards.
At the time the $8 million-man Theo Spierings would have probably had the sponsorship money floating around in his back pocket.
If we think back to the way we farmed back in the 70s, 80s and even into the 90s, both dairy and sheep and beef farmers farmed to the grass curve. Nitrogen was used in a strategic and sustainable manner.
The milk companies back then budgeted on milk supply from their dairy farmers based on season grass growth as per the grass curve, water quality then was relatively benign and the people of New Zealand could enjoy swimming without risk of sickness.
With the emergence of Fonterra's V3 strategy and the obsession for 'Volume', nitrogen use has increased in New Zealand from approximately 50,000 tonnes in 1990 to 500,000 tonnes today, and on top of that is the excessive use and reliance on PKE (palm kernel extract) which has spelt disaster for many of our waterways with nitrogen leaching well in excess of environmental limits.
These intensive farming practices tend to be driven by the large corporate farmers and not so much by the smaller family farming businesses.
The dairy farmers I talk to who run sustainable family businesses are wanting to win back their social licence to farm and demonstrate to their fellow Kiwis that they are operating environmentally sustainable businesses. Many of these farmers have taken the stress out of their farming practices by reducing inputs, dropping cow numbers and farming cows to their genetic potential.
This was the hallmark of the growth of dairying in NZ prior to 2001.This means less production but on the upside less stress and more profit. Their nitrogen leaching is in the bottom 25 per cent. They clearly demonstrate that successful dairy farming is not all about production and volume. These farmers detest grandparenting!
In my opinion, by supporting a grandparenting approach to manage nitrogen within PC1, Fonterra is totally out of touch with both the majority of their own shareholders and also with the environmental aspirations of the New Zealand public, who have woken up to the fact that this approach not only protects the polluter, it also incentivises perverse behaviour and in fact, water quality gets worse.
We don't have to look any further than Canterbury to see the evidence over six years with their Regional Council adopting a grandparenting type approach to improve fresh water quality. It has totally failed, with nitrogen levels going from bad to worse in the rivers and deep water aquifers. We could expect something similar in the Waikato if a
grandparenting approach is adopted.
Fonterra appears hell bent on keeping their stainless steel full, with complete disregard for the environment. In my opinion this demonstrates their selfishness and arrogance, which flies in the face of New Zealand selling itself as "clean and green". This surely is a major concern for our tourist industry and must be an embarrassment to the majority of their farmer shareholders.
With all the pressures bearing down on Fonterra, surely this is the time for the Board to take a new direction. If they publicly admitted the V3 strategy had failed, a lot of the tension would start to go away. This should be their first step to win back social licence.
How about adopting an E3 strategy? Energise — listen to your farmers, make them proud again, let them take back their industry. Extra Value — reposition out of the commodity trade and sell high quality, high value dairy produce to the most discerning customers in the world. Environment — demonstrate that Fonterra farmers are the most sustainable dairy food producers in the world through responsible procurement linked to environmental limits and denounce grandparenting!
I hope Fonterra's new chairman John Monaghan and his board can steer the big ship in a new direction.
I want to send a clear message to John Monaghan and the PC1-appointed Commissioners: Farmers For Positive Change (F4PC) and supporting groups, who are advocating for the vast majority of farmers in the Waikato, will not comply with a grandparenting approach to manage nitrogen regardless of the outcomes from the Waikato Waipa Healthy Rivers PC1 hearings.
But F4PC will put their resources and mental energy into getting our farmers on the journey of improving water quality which will be far more meaningful than what's contained in PC1.