Ardern government seeks to butter up farmers with bold export forecasts and on-farm sequestration changes

Farmers  had plenty to digest this week:  first, the Ministry of Primary Industries assesses exports from the sector will hit a record high $55bn  in 2023; second, the government took an important step back on the on-farm sequestration programme; and third, Field Days at Mystery Creek engrossed  those who attended (though perhaps not the Prime Minister, given the cool reception).

The MPI data showed Dairy again NZ’s largest export sector with forecast revenue due to top $23.3bn. That underlines how important the dairy sector has become in the NZ economy.  Red meat and wool exports are also expected to hit a record at $12.4bn.

Horticultural export revenue is projected to grow 5% to $7.1bn and processed food by 3% to $3.3bn.

Agriculture Minister Damien O’Connor doesn’t mind taking the credit for the primary sector’s success, but please, don’t mention  soaring costs.

“Accelerating our export growth is a major cornerstone of the government’s economic recovery plan, and today’s report shows further evidence that plan is working.”

O’Connor takes comfort knowing demand for food and fibre should remain strong throughout any global economic downturn.

He thinks NZ’s economy remains better positioned when compared  with others. But there is a caveat: so long as we maintain our international competitive edge.

The fisheries sector, which took a significant hit at the start of the Covid-19 pandemic, appears to have bounced back and is expected to grow 4% and hit $2b in exports in 2023.

“Our seafood export revenue took a substantial hit at the start of the pandemic, as food service shut its doors around the world, but hard work, combined with strong demand from food service and tourism reopening, is seeing a swift and continued recovery in export revenue,” Fisheries Minister David Parker said.

Exports by Māori businesses, the majority of which are in the food and fibre sector, have climbed by 38% since 2017, to $872m.

Meanwhile the government had  a positive spin on the issue of sequestration, saying  it  wanted  to work with the primary sector on developing a sequestration strategy. It says the government is committed to sequestration being recognised from 2025 and there will be transitional arrangements in place from 2025. with entry into the ETS to follow later.

Ardern  and her ministers, Damien O’Connor and  James Shaw, have confirmed the next steps in the Government’s partnership with the primary sector to develop a strategy for on-farm carbon sequestration.

The recognition of on-farm sequestration will be a core component of the government’s work to reduce NZ’s agricultural climate emissions.

The PM said:

“We want a plan for reducing agricultural emissions we can all agree on. We’ve heard sequestration is a top priority for farmers and critical to making He Waka Eke Noa work.

“The government has already committed to sequestration being recognised and compensated for from 2025. The He Waka Eke Noa partnership, the Climate Change Commission, and the government all agree that it needs to be done in a way “that is fair, cost-effective, and scientifically robust”.

So what’s  different:

“The recent consultation process has highlighted how important the issue of sequestration is to farmers. This is work we already had underway, but next step will be to work closely with farmers to develop the scientific, and policy approaches needed to best recognise sequestration that occurs on farms.

“The best way to achieve sustainable emissions reduction is by working together. The government remains committed to He Waka Eke Noa and we are pleased to undertake this important work on sequestration with farmers to help deliver it,”  Ardern said.

O’Connor took up the story, saying:

“The industry has asked for a plan that covers all forms of scientifically robust sequestration possible on-farm, and we support that. There is more work to do, much of it technical, but today we affirm that this will be undertaken in close partnership with the sector”.

The sector partnership recommended that the Emissions Trading Scheme be “improved” and updated to allow more vegetation categories to be included and that vegetation types eligible under He Waka Eke Noa could be transitioned into the NZ ETS as it is expanded and improved”.

That’s the important bit.

“This builds on the government’s commitment to establish native forests at scale to develop long term carbon sinks and improve biodiversity,”  O’Connor said.

But don’t miss out on hearing from the Greens’ James Shaw:

“What we are proposing represents a significant shift in the way the Emissions Trading Scheme works,” says Climate Change Minister James Shaw.

“It means farmers will get full recognition for scientifically proven sequestration on their farms. This should unlock a wave of research, science and innovation into forms of emissions removal that also enhance biodiversity and other important values that aren’t always achieved through exotic forestry plantations.

“Bringing new categories into the ETS may take some time, so there will also be a need to ensure transitional arrangements from 2025.

“In-line with the Primary Sector Partnership’s original proposal, the government is committed to sequestration being recognised from 2025,” James Shaw said.

As other commentators have noted, the government has taken note of the view that except for riparian planting (mainly on dairy farms), it would be too difficult to take account of other planting on farms and thus, farmers could get no credit for the carbon sequestration the planting enabled.

Modelling by the Ministry for Primary Industries indicated revenue on some sheep and beef farms could drop by as much as 20%  as a consequence because their revegetation was not generally riparian planting.

Yesterday’s announcement would appear to open the door for the inclusion of blocks of bush on sheep and beef farms to be included to earn a credit and thus reduce the levy payments for those farms.