Rabobank sustainable farm systems manager Blake Holgate told a workshop at June’s South Island Dairy Event (SIDE) in Invercargill that regional councils throughout the country were finalising water plans and farmers needed to know whether they were compliant or not before changing what they did.
“Depending on the rules imposed and the level at which nitrogen limits are set, farmers will either be compliant already, have to refine their farming systems to be compliant, reduce production intensity by destocking or putting in less inputs or change what they do and how they do it such as building feedpads,” Holgate said.
“The proportion of farmers throughout the country that fall into each category will ultimately determine the overall impact on production costs and milk production growth and will also influence how land values are impacted.”
He said in catchments where water quality was deemed good, the nitrogen limit setting process would allow farmers flexibility and scope to intensify if they wished.
“The real challenge will come in those catchments and regions that are either fully allocated, or near full allocation.
“In these areas the right to leach nitrogen will become a limited resource.”
He said banks were still struggling to predict the likely impacts because limits were still being progressively introduced by regional councils.
“There is still a large amount of uncertainty that surrounds the setting, implementing and enforcement of limits.
“Without knowing the level at which limits will be set, the timeline by which farmers will have to meet those limits and ultimately the approach taken by regional councils to enforce those limits, it is not possible to identify the likely impact on production and land values.”
However, he said banks would be assessing the risk environmental regulations possibly posed to a client’s ability to service their debt as well as their equity position.
A study of land sold in the Lake Rotorua and Taupo catchments, which already had limits imposed, saw a drop in value of 27% for dairy land and 37% for drystock land, although the data the study was based on was limited.
“The key for banks will be identifying those situations where farmers will be required to make significant reductions or farm system changes and have limited mitigation options available.
“In these situations it will be important for banks to work with clients to ensure the risks are fully appreciated and understood and, if possible, help develop a plan to ensure the risk is addressed.”
Holgate said most councils were adopting an effects-based regulatory regime that let landowners decide how to farm within the limits.
“They’re not telling farmers how to farm, such as stocking rates and the amount of fertiliser they can use.”
By controlling effects rather than inputs there was a greater push for innovation as farmers tried to determine the most efficient and cost-effective ways of meeting requirements.
“The most competitive and successful producers will be those that can best adapt – the ones who can identify why a HerdHome suits their situation better than a low-intensity model or vice versa.”
He said investment into building knowledge, science and new technologies needed to continue.
“We have already witnessed significant advances in technology in precision agriculture over the last few years such as variable rate irrigation.
“And we are now starting to see the development and delivery of decision-making tools that provide farmers with detailed information about how their land and water and farming systems interact.
“These new tools will help farmers optimise the use of their farm’s natural resources in order to maximise profitability while still operating within defined environmental limits.”
He said the biggest risk was if the regulations didn’t work.
“What will happen if farmers comply with regional council plans and water quality is still falling? Farmers will have gone through the pain but no progress will have been made.”
He said farmers had to be aware they were living in an era of social media, where a tourist could take a photo from the side of the road and send it around the world in seconds.
“Good environmental management has to become a core function of good farming in New Zealand.”
