Spreading The Word

Spreading The Word

Speech by Don Nicolson, President of Federated Farmers, to the 54th annual conference of the New Zealand Groundspread Fertilisers Association, 28 June 2010 in Invercargill

I am delighted to be with you here today in Southland and my home town of Invercargill.

I’d like to acknowledge your President, Peter Callander, executive members and distinguished guests.

Agriculture has been a force behind Southland’s economic renaissance.

With a certain log of wood in hand and a booming economy, you get the feeling Southland could almost become the Farmers Republic of Southland.

The FR.S for short.

Having mused on this we could split New Zealand off at 45 degrees south. The F.R.S’ economy will boom off the back of agriculture, minerals and tourism. Let’s face it the F.R.S would have Milford Sound, fantastic pinot noir, the best oysters and fishing on earth and great water quality with booming agriculture. None of those things are mutually exclusive, yet that’s not the impression we seem to get.

Telling the success story of economic recovery through farming is instructive and important. It’s something those outside Southland seem to have forgotten. It’s also something ground spreaders have helped achieved.

Southland may be a land of milk and honey and sheep too, but you are in a land of minerals. Whether that’s our region’s 600-years of proven lignite reserves, which has potential to generate $1.5 billion in import substituting income by way of the lignite to urea project, currently underway between Ravensdown and Solid Energy.

There is also the prospect of black gold in the Great South Basin, which has real potential to transform Invercargill into a Kiwi Dallas. Covering an area 50 percent greater than New Zealand’s land mass, the Basin is believed to hold up to 38 trillion cubic feet of gas and 2.25 billion barrels of oil.

The environmental tragedy of the Gulf of Mexico aside, the Basin holds real potential to jumpstart economic growth. If you always thought something could happen, you would never get out of bed.

That is if we have the public policy and political will to get it. A gold mine is just dirt unless it you go out and mine it, so Federated Farmers fully supports the Government’s determination to enable strategically planned mining.

You see the issues that mining faces, the issues that geneticists and biotechnology pioneers face and the issues we face as farmers, who drive demand for your product, are similar.

Fearing tomorrow is big business
I
t’s a strong human condition that we cannot view tomorrow or the near future without some ‘bogeyman’ saying the end is nigh.

Look at Al Gore’s An Inconvenient Truth. It cost US$1 million to make but has grossed fifty times that at the box office. A couple of years ago 261 acolytes flew into Melbourne from 19 different countries including 15 from New Zealand, to hear from him about how to spread the word. The irony of flying long distances to learn about fighting climate change was lost on the media who covered it. I won’t make much of his now discredited ‘hockey stick’ graph that has influenced so many.

In the past 11 years we’ve had the Y2K bug that was going to destroy the west when computer clocks got confused with the millennium. 120 countries got together to face and coordinate the state response. The fix was estimated at up to US$600 billion with policymakers taking the worse case, the media built things up and there was general hysteria about what could happen. At the stroke of midnight in 1999...nothing much happened, aside from the sound of consultants cashing in some handsome pay cheques.

In 2003 the Severe Acute Respiratory Syndrome or SARS took just three weeks for much of Asia's economy to shut down. 40 percent of airline flights in and out of Taipei, Hong Kong, Bangkok, Singapore and Shanghai were canned. Major conferences and events were called off. In 2008 came Swine Flu that had a similar impact.

I don’t wish to belittle pandemic preparations, as they are absolutely vital, but there is always a best, middle and worst case scenario. The more the worst case scenario is played up, the more the public will switch off to some vital messages. It’s the boy who cried wolf.

Overlaying this entire period was a growing fear humanity was either going to be wiped out by a super bug or a super storm brought about by climate change.

Yet a lot of this is based on computer modelling.

The 2010 volcanic eruptions in Iceland, something which wreaked havoc on passengers and cost the airline industry more than $1.7 billion, stunningly revealed this blind trust in models.

After closing European airspace the airlines literally rebelled against the computer models. BA, Lufthansa and others flew flights to where the ash was meant to be to find nothing but air. Yet computer modelling is what much of the climate change debate is centred upon.

I don’t wish to spike a sceptics versus believers debate suffice to say, the science needs to be more robust. I mean, Britain’s Royal Society has reversed an earlier position that climate change was unquestionable. Here you are treated as a pariah for raising the subject.

The challenge of public expectation

New Zealand Groundspread Fertilisers Association was formed in the 1950’s to protect the interests of the groundspread fertiliser industry and to represent your interests.

Last year and into early this year, hundreds of farmers in the lower North Island were up in arms over a radical new approach to environmental regulation that was labelled ‘license to farm’. We’ve seen this in Taupo where nitrogen caps have fundamentally forced farmers to sell up.

But farming has to be profitable and to remain profitable requires ever evolving strategies and practices. That’s why since 1990 we’re producing seven percent more lamb but from 55 percent fewer sheep.

With beef, our meat volumes are up 23 percent but from 11 percent fewer cattle. Meanwhile dairy production growth per cow has averaged an amazing 26 percent since 1990.

All this off 20 percent less farmed land than was in production back in 1990.

The four big issues according to Non Government Organisations (NGOs) are water quality, water quantity, biodiversity and sustainable land use.

Economics are not part of their sphere of thinking. They want to deny they are beneficiaries from the environment’s use, as they use the fruits of the environment every moment of every day, just like the rest of us. That’s what humans do. We harvest from the environment.

So my beef is this. For all the tension generated by these NGOs and after the massive investment by farmers at the behest of council’s and Government for better biological systems inside the farm gate, why can’t anyone admit there has been a massive environmental step forward? In failing to admit this, are they really saying their directives have been a failure? I would sincerely hope not.

Elements like phosphorous, like nitrogen, are expensive. Converting it into protein and fibre makes economic sense and practices like effluent capture and then strategic application back to land must be a sensible practice.

Yet this focus on nitrogen may be a mirage. You may end up with a smaller nutrient problem but reduced water quality too. The problem is so much more than just nitrogen and so much more than just farming.

What concerns me is the development of a bureaucratic ‘farming by numbers’ approach. You need to be concerned. If what happened in Taupo and the consent to farm approach of Horizon’s One Plan spreads, it is a step backwards. Backwards environmentally, agriculturally and more vitally, surely, economically.

Farmers are always looking for resource efficiency. The consistent negativity of the NGOs is wearing a bit thin. A sense of perspective is really needed, instead of the conversation that denigrates all farmers. The slogan that sticks in my craw, ‘dirty dairying’ invokes a seething sense of economic treason in me. It slips off ones tongue so easily but is so damaging to the lifeblood of our economy. All New Zealanders enjoy the benefits from the use of the land and sea who give up enough to generate 65 percent of our exports and 100 percent of the view. Real New Zealanders know that too.

If we’re so bad, how come Yale University and Columbia University beg to differ?

70 percent of the earth's surface is covered in water, with only three percent being freshwater. It seems missed that livestock cannot consume fetid water and thrive. Farmers need plentiful access to clean water too.

Only last year, the country's media labelled the Manawatu River ‘one of the most polluted on earth' off the back of a study done by the Cawthron Institute. Cartoonists like Tom Scott, frequently include pastoral images telling readers that farmers are ‘polluters' and I've literally been the butt of his pen.

Educationalists would never belittle a primary school class like how the vast majority of farmers who farm responsibly have been treated.

Yet given the propaganda, our nation's livestock and people must surely be wading in a fetid e-coli rich cocktail of muck?

A joint study between the US Ivy League universities of Yale and Columbia, actually ranks New Zealand second out of 163 nations for water quality. I'll repeat that, New Zealand was second out of 163 nations for the quality of its water.

Iceland was number one but I suspect a certain volcano may have taken it down a peg or two. For those who doubt the reports veracity then go and take that up with Yale and Columbia.

What this is, is a dispassionate world view looking into New Zealand using the same metric rather that our self-critical presumption about what we think the world thinks of us.

But what about the Cawthron's charge then? It might have taken five months but the Institute finally conceded, in April, that ‘it NEVER said the Manawatu was the most polluted..." The damage was well done by then in blogs, newspapers, on radio and on television. Having seen the list of rivers used, you will find the Manawatu wasn't compared to the Thames, the Seine, the Ohio or even, Australia's toxic King River. It is apples with watermelons.

Giving credit where credit’s due
While we have a problematic relationship with some councils, Taranaki Regional Council takes a proactive and not reactive approach to the environment. Farmers are not genetically different in the Taranaki than in the Waikato. Taranaki makes policy changes based on science not hearsay and has a good understanding of issues to start with.

This season also saw a spectacular improvement in dairy farm compliance in the Greater Wellington Regional Council area. Hawke's Bay Regional Council also has a constructive relationship with farmers based on education and not regulation.

Federated Farmers also works closely with stakeholders and the industry good bodies, Beef+Lamb as well as DairyNZ. We have a team effort when it comes to policy but engaging at local and regional levels is a core Federated Farmers function. We have a number of PhD policy staff and we are actually darn good at what we do. Our view is prevailing at hearings not because of intimidation as one opponent virtually accused us of, but because we present the facts logically and cohesively.

Getting our research together

Federated Farmers fully supports far greater research. Our manifesto and policy work wishes to achieve bipartisan spending on research and development of three-percent of Gross Domestic Product by 2029.

This will literally necessitate a doubling of Government spending matched by the private sector. The breakthroughs we need for reducing nutrient loss is locked up in there, somewhere.

Take White Clover. White clover contains ‘condensed tannins’, which are able to bind to and protect protein from breaking down in the stomachs of ruminant animals. An inoperative gene could be fired to boost these tannins further. This is all promising stuff but may be a massive cul-de-sac. The benefits of this research is up to twenty years away from being realised and that’s on the assumption, it works. Time will tell but there are no magic bullets.

So the Government is to be commended for the $11.25 million it is spending via the Global Alliance on agricultural greenhouse research. Anything that delivers more production with less emissions is welcome. Yet the sum in Government terms pales when compared to the $1.06 billion budgeted for in Budget 2010 for the Emissions Trading Scheme (ETS).

Over four years, we taxpayers will be spending some four-fifth less on greenhouse gas research than on Eden Park’s redevelopment ahead of the Rugby World Cup. $11.25 million is about a quarter of what’s spent supporting our Members of Parliament too.

So even if you believe climate variation to be hokum or holy writ, our research priorities seem completely wrong in a world where 1:6 human beings live in food poverty. Surely we ought to flip these priorities and be spending that $1.06 billion in Budget 2010 for the ETS, on research instead. We ought to be spending, if we need to, just $11.25 million per year over four years on the ETS.

Imagine what this research could have meant for next generation product development like new forages that produce more but of high quality and with lower fertiliser inputs?

Imagine products that could unlock even more productive potential for farms, yet mitigate concerns society has over land use in places like the Taupo region

Methane and nitrous oxide are greenhouse gases that farmers will be required to pay for from 1 January 2015, if the ETS isn’t hit for six. Worse, farmers will start voluntary emissions ‘accounting’ from 1 January next year before that becomes compulsion from 1 January 2012.

If anyone doubts Federated Farmers resolve on the ETS they better think again.

Yet that greater focus on nutrient leaching means we farmers and you groundspreaders need more tools and more solutions. Ravensdown, Ballance and others offer these tools but we will always need more and that costs money and time to develop.

So the biggest current influence on emissions per animal is the quantity and type of feed eaten. Age also affects emissions per animal so farmers' ability to influence things is limited to animal husbandry and the economics of farm management. Genetic engineering may offer solutions but that opens up a fresh can of worms.

About one-sixth of New Zealand's CO2-equivalent agricultural emissions is said to be nitrous oxide. Options to reduce it include removing animals from pasture during wet periods, stand-off pads and using feeds, high in energy but low in nitrogen.

Farmers ‘could' reduce their CO2 emissions by ‘investing' in fuel efficient farm machinery, no-tillage technologies, maximising irrigation efficiency and improving fertiliser application accuracy for example.

Yet given agriculture's year-on-year multi factor productivity growth since 1990 has been 1.8 percent, efficient resource use really defines New Zealand's agricultural sector.

So it just seems odd that we are taxing the outcome by way of the ETS instead of solving the problem by way of research.

A bottom line for Federated Farmers is that any efficiency drive needs to boost productivity and make commercial sense. There’s no point of developing something that costs more to implement than what it saves.

Research is absolutely vital and Government must flip the signals it’s sending that a tax and not research is somehow the solution.

That’s why the ETS won’t work, can’t work

Earlier I mentioned the massive efficiency gains of agriculture. We’ve made such great strides and apparently our emissions growth has gone up by a mere 12 percent since 1990.

Compare that with a 72 percent growth in transport related emissions or the 120 percent growth in electricity related emissions. You don’t hear many aside from Federated Farmers being agriculture’s cheerleader. Frankly I think our efficiency gains are an economic miracle.

Yes agriculture is said to account for half of New Zealand’s emissions profile but in global terms, that’s a mere 0.1 percent. New Zealand’s farms do not produce 99.9 percent of the world’s emissions.

Efficiency is a driver for the ETS but I would argue the market is so more effective. Look at a 1950’s era Fords versus the cars of 2010. Today they are much more efficient, better specced, safer, more reliable and a more pleasurable to drive. Dollar for dollar, they’re actually cheaper to.

The ETS cannot drive market efficiencies. Using the automotive industry again, state-led efficiency initiatives have developed such wonderful marques as East Germany’s Trabant or the Soviet Union’s Lada. For luxury (or for executions), who could pass up a Zil?

Cars have become better because the purchasers and a competitive market have made manufacturers respond or be forced out of business. The state can send signals yes, but the carbon market relies on compulsion and that’s no genesis for a free market.

Yet if our lamb, milk or fibre was oil, it wouldn’t even attract the ETS and why? The ETS only accounts for oil products consumed within New Zealand. Oil is now one of New Zealand’s major commodity exports.

If we farmers were an international airline, carting tourists and expatriate actresses from far distant shores, we’d be ETS free too. International aviation fuel is ‘100% Purely’ exempt from the Kyoto Protocol.

Since the European Union has voluntarily enrolled long haul aviation into its ETS and ‘clean green’ New Zealand hasn’t, does that not make a total mockery of the ‘trade backlash’ argument? Europeans won’t buy our lamb shipped by the most efficient means possible, but they’ll fly here guilt free?

So what is the ETS? It’s a tax pure and simple

We have not done a policy 180 degree turn but National has. It stood shoulder to shoulder with us in 2003, again in 2005 and in 2008 with Labour’s old ETS. Come 2009 suddenly the ETS is the solution. Where are you National?

1 July does not mark the end of opposition to the ETS but merely its start.

Soon, very soon, Federated Farmers will launch its Switch Off campaign for the public to switch off the ETS.

In a world of increasing food poverty, are we seriously choosing to grow trees?

Switch Off isn’t for sceptics or deniers. It’s for those who believe the ETS is a stealth tax that won’t make one jot of difference on curbing emissions growth.

With ACC levies, increasing interest rates, excise taxes and these ETS imposed cost increases, come October and the tax cuts, the public may actually find themselves worse-off than the previous year.

The risk National now faces is a winter of discontent.

So what are the ETS alternatives?
The London School of Economics and East Anglia University’s Hartwell Paper paints a picture of a post-Kyoto world that is markedly different from the path New Zealand is on.

The successor to Kyoto will focus on research and not emissions trading. It will focus on developing the global economy instead of putting the poorest into shackles. It focuses on community resilience instead of trying, King Canute like, to order back the climate by way of treaty.

If the ETS is all about growing trees, we could plant thousands of hectares for far less cost than the ETS.

If the ETS is about saving the planet, ‘it’s the research stupid’, if I paraphrase former US President, Bill Clinton.

Instead of helping meet the needs of a growing world population by efficient food production, we will say, instead of cake or profiteroles, Marie Antoinette like, ‘let them eat trees’.

Finally, we could kick for touch as many other countries are doing. Socialise New Zealand’s Kyoto liabilities, bearing in mind we have a Kyoto surplus right now and focus on Cancun and the end of Kyoto in 2012.

Now some accuse Federated Farmers of denying the windfall gains for farming, which, according to the proponents, ‘could’ be substantial.

Over 111 years, Federated Farmers has seen get rich quick schemes come and go with ‘could’ all over it. Often that’s been led by a flush of Government funded enthusiasm only to be followed, some years later, by a Government funded retreat.

Could ETS-led carbon forestry be different from the ‘quick rich’ rush that in recent decades has bedevilled the wine industry in the 1970s, through to the tax-dodge led boom then bust in angora goats, deer and forestry?

Could I have a foreboding fear of here we go again?

But what will the international reaction be?

There is no way we’ll face a trade backlash just as airlines flying tourists into New Zealand won’t face a backlash for being Kyoto exempt on fuels. Remember Europe does include international aviation fuels in its ETS but ‘clean-green’ New Zealand does not.

Silver Fern Farms Keith Cooper recently told Federated Farmers that international buyers don’t know about our ETS, don’t particularly care and won’t pay a cent more for it.

Time Magazine’s Top 100 most influential people list, released in May, did not feature one mention of New Zealand. So much for the ETS getting us noticed.

Searching the New York Times for mention of an Emissions Trading Scheme brings up two hits, both related to Europe’s. The UK’s Daily Telegraph returns three passing references to New Zealand in connection to the ETS going back to 2006.

This is not front, middle or even back page news. It’s not even news at all

Of real concern to me is what the Wall Street Journal said about us last year. This is what the international investment community really thinks of us and I quote
“The global warming religion runs so deep today that most politicians figure it's best to enact some sort of green policy, regardless of whether or not that policy actually reduces global warming. Exhibit number one is New Zealand..it doesn't really matter what New Zealand does. The island nation contributes 0.2% of total global emissions. The amended scheme isn't expected to reduce even that already-miniscule figure much.”

There are no ETS success factors
And here’s the clincher. What is success for the ETS policy? No one knows.

The Crown is putting $1.06 billion of our money that will cost us all at least another $527 million more - no one can tell us how success will be measured.

Is it 10-20 percent below 1990 levels? Not according the Prime Minister who said before Copenhagen, that would be a ‘hard ask.’

Are we are seriously pouring over $1.5 billion into a policy that is immeasurable?

Well yes we are. Unbelievable but true.

This is why it’s time to switch off the ETS and switch on to a whole new policy that has buy-in from farmers, businesses and the public.

Thank you.

ENDS

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