Comment: Contrary to popular belief, farmers can not produce whatever food they want on their land, and if they can - it costs them money, writes Dr Jacqueline Rowarth.
Farmers can do many things – but they cannot do all things.
Contrary to the belief of some vegans, they cannot produce whatever food they want on their land.
Climate and topography determine what is possible, in conjunction with prices and costs.
In general, farmers and growers in New Zealand have identified the food, whether plant or animal, that suits their land.
Part of 'suiting' is managing a financial return.
This is obvious business economics, but the current national push for change is putting considerable pressure on financial viability.
The Landcorp (Pāmu) Annual Report is the latest example. A net loss of $11 million has been declared – this despite the considerable buying power achieved through large orders (the bulk discounts not available to individual farmers).
The loss equates to an average $90,000 per farm, which is more than the current budget for farming household income.
Factors in Landcorp's loss were identified as drought affecting milk production (particularly in the central plateau where almost half the milk is produced), diversification and the costs of changing farm system.
In addition, the land value was written down by $47 million, reflecting lack of purchasers as well as environmental pressures.
The question must be asked how individual farmers can remain viable if Landcorp is struggling.
And will 'diversifying and changing farm system' really make the difference?
Avocados, intensive high-tech beef, A2 milk and organic milk have been identified by Landcorp as having potential for the future.
In America avocado are described as 'one of the most chemically-treated fruit'. In Australia top yields are associated with high (350-450 kg N/ha) inputs of nitrogen fertiliser.
New Zealand Avocado does a great job of providing information about growing avocado, including Avogreen, but details aren't available to non-members.
Basic information on the web site includes an estimate of $45,000 to $60,000 set up costs per hectare, and a recommendation for irrigation in areas with moisture deficit.
High nitrogen and irrigation appear to be fundamental requirements for a profitable yield but might not fit in the new environmental approach. In addition, avocado cultivation, processing and ripening is considered greenhouse gas (GHG) intensive globally.
Intensive high-tech beef systems have GHG implications, and the activity will require consent under the new freshwater reforms.
A2 milk is attracting value at the moment but in my opinion, the science is still under question.
Organic milk production has significant challenges, including those to do with procurement of supplementary feed during drought.
Research at Massey University concluded that without guaranteed grass growth (insurance being provided with irrigation, for example) organic milk production was likely to be uneconomic.
This is the crux of the problem – that farmers can do most things but doing them costs money. Restricting operations and adding compliance costs will tip the balance in the wrong direction. Landcorp has shown this to be the case.
The solution has already been aired by journalist Eloise Gibson. Her interview in August of Professor Mark Howden, Director of the Climate Change Institute at the Australian National University and a member of the Intergovernmental Panel for Climate Change, is on the web.
Professor Howden stated that a "move to sustainable management option for food production requires effective prices for agricultural production which actually cost in the negatives and pay for the positives."
At the moment consumers are suggesting that farmers change what they are doing but are generally not willing to pay more for food.
We know this because of ongoing concerns about food prices – even though they increase at a slower rate than increases in wages. The Reserve Bank Inflation Calculator has the information. In the last year, wages have increased 5 per cent but food prices only 1 per cent.
In the last decade wages increased 30 per cent but food only 12 per cent. Of course these are averages but the divergence is clear.
For the farmer and growers at the bottom of the food chain, costs of production (which include wages) have increased, but prices being paid to them have not kept up.
In other countries, subsidies are paid to in order to keep farmers and growers solvent.
Children want to grow up to be part-time farmers (recognising another income stream is necessary) and sustainability is paid for by government taxes.
The US Agriculture Department has allocated an extra US$14.5 billion to its farm support, trying to keep farmers on the land while trade wars loom. In Britain two thirds of shoppers expect food shortages as a result of Brexit.
Governments overseas don't want to lose the capacity and capability to feed their people. They have recognised that sustainable businesses are important for attracting the next generation of food producers.
In New Zealand the increased costs of compliance are not being offset with subsidies. Landcorp has shown the difficulties in maintaining economic viability. The diversification options being investigated are unlikely to be without environmental impact.
Fundamentally, food production requires resources and isolating the impacts takes infrastructure which adds dollars to costs.
It is time to embrace Professor Howden's solution and start 'actually valuing food'.
If we're not prepared to value it, are we prepared to accept the consequences?
Landcorp's losses will be just the start ...
- Dr Jacqueline Rowarth CNZM CRSNZ HFNZIAHS has a PhD in Soil Science and has been analysing agri-environment interaction for several decades.