Prime Minister Chris Hipkins talking to farmers at the Fieldays

It’s time to stop the sheep jokes; a Government report out this morning confirms what many have begun to realise over the past few years, and that is that sheep farming is a dying industry.

The annual Ministry of Primary Industries’ Situation and Outlook for the agriculture sector has a new set of forecasts showing meat and wool earnings will barely move over the next four years.

In contrast, dairy earnings are expected to rocket ahead by nearly 30 per cent, with dairy exports earning $2.40 for every dollar earned by beef, lamb and wool exports.

The importance of the dairy industry was underlined yesterday, with Prime Minister Chris Hipkins rejecting any idea of a fertiliser tax.

“I don’t support a broad-based tax that doesn’t provide the nuances that are inherent in He Waka Eke Noa,” he said.

“So I can confirm today, the government will not be implementing a fertiliser tax; we want to work hard with you (farmers)  to make He Waka Eke Noa work.”

The tax was vaguely supported by Groundswell, the rural protest movement, which is predominantly supported by sheep and beef farmers, particularly from the South Island.

But livestock farmers in hill country do not use much nitrogenous fertiliser, whereas dairy farmers who use large volumes of urea were aghast at the idea.

Now Hipkins says the Government will try and reach an agreement on He Waka Eke Noa, the proposal to price emissions put forward by 13 agriculture sector groups, but to which the Government has been stalling on agreeing.

That won’t be easy politically.

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This morning a coalition of 30 environmental organisations led by Greenpeace will release a 10-point plan calling for urgent action on the climate.

The plan includes proposals to reduce dairy emissions: “Transition intensive dairying to low emissions farming by phasing out synthetic nitrogen fertiliser and imported animal feed, reducing herd size, and banning new large-scale irrigation schemes.”

But despite there being no current requirement to pay for farm, methane and nitrous oxide emissions, dairy cow numbers are already dropping, yet production is not.

Figures from the 2021/22 New Zealand Dairy Statistics released by the Livestock Improvement Corporation (LIC) and DairyNZ show that total dairy cow numbers were 1.2 per cent lower than the previous year at 4.8 million.

“The total number of dairy cow numbers is estimated to have decreased by 176,000 cows since its peak in 2014/15,” the report said.

“Similarly, the land area under dairy farming has also decreased.

This slight downward trend in the national dairy herd and land use area is expected to continue over the next few years due to practice change.”

The report said that would include freshwater regulations and possible restrictions on fertilisers.

But the changes may not have any impact on production.

“Despite falling cow numbers, improvements in dairy cow genetics, advances in farm management practices and development of new technology are expected to keep increasing on-farm productivity,” the report said.

The report’s section on sheep farming was much more gloomy, with a forecast of falling meat and wool prices and, consequently, a fall in farm profitability.

Longer term, the outlook was negative.

“Livestock numbers are forecast to fall in 2023/24 and over the longer term,” the report said.

“This decline is driven by competition for farmland for afforestation (carbon farming), urbanisation, freshwater regulations and agricultural emissions pricing as well as productivity improvements.”

However, sheep and beef farmers may have got some relief from the pressure to plant forests on their hills after yesterday’s auction of Emissions Trading Scheme units resulted in no successful bids.

Susan Kilsby, ANZ agricultural economist, said the result was to be expected.

“A review of the Emissions Trading Scheme is currently taking place, which could result in some significant changes to this market,” she said.

“While the review is being undertaken, participants have little confidence in trading the market.”

But perhaps ominously, the report warns the sheep and beef sector about the growing importance of environmental considerations.

“Globally, environmental regulations are also becoming a stronger focus and being reflected in free trade agreements, regulations, investment programmes and product sourcing trends,” it said.

“Environmental credentials are likely to be contested to a greater extent in global trade negotiations over time.

“Many consumers want lower-impact products but are not willing to pay a premium at this stage.”

If there is a question mark hanging over primary sector exports, it is the reliance on China.

Thirty-four per cent of all primary exports go there, followed by 10 per cent to the USA and Australia, eight per cent and the EU six per cent.

The UK now does not feature on the list of top exporting destinations.

The big exception to that is horticulture, where both of the two big star performers, kiwifruit and wine, have countries other than China as their largest market.

For kiwifruit, it is the EU, and for wine, the US, where the value of the market at just over $1 billion, is almost the same as dairy exports to that country.

The Government, which has been courting farmers at the Fieldays in Hamilton, was keen to put a positive stamp on the report.

“The economy is through the worst with inflation having peaked and returning to the target range next year, tourism bouncing back, and record numbers of workers arriving to plug skills shortages,” Prime Minister Chris Hipkins said. 

“This Government has always backed our farmers, growers, fishers, and foresters to achieve success – investing significantly to support the sector lift its sustainability credentials to maintain our competitive edge,” Agriculture Minister  Damien O’Connor said.

“I want to thank our food and fibre sector for this outstanding result. These record results show that the future is bright as the worst of the economic headwinds look to be behind us, and we look to climb to $62 billion by 2027.

“Our strategy to position our food and fibre sectors for future export growth dovetails with our trade agenda and is reflected in our investment decisions through consecutive Budgets.

“By working together, our plan is delivering.”

How much “togetherness” is happening between the Government and farmers may be evident this morning when the Prime Minister and O’Connor meet with the agriculture sector leaders at the Field Days.

The number one item on their agenda will be the future of He Waka Eke Noa, and the leaders may learn more about what the Government is willing to agree to – and what it is not.