Situation deteriorates on-farm as multiple demands escalate

In my working career within the primary industry I have never quite seen the wave of new and proposed regulatory and legislative changes that are now occurring at farm level. The sheer scale and velocity of these changes shows no signs of slowing. Many farmers and rural professionals are struggling to keep up and navigate a pathway forward as regulators and policy-makers forge ahead in setting new environmental standards along with highly ambitious targets for our industry.

On 5 September 2019, the Government announced National Policy Statements for Freshwater which proposes tighter restrictions for further intensification of land use, and significant nitrogen loss reductions in certain catchments. Further to this, the Zero Carbon Bill continues to weave its way through the parliamentary process, which includes some very aspirational targets for biogenic methane emissions levels out to 2050 that largely rest on some yet to be discovered scientific breakthrough.

While our farmers have always shown great aptitude in adapting and shifting their farming systems where circumstances and actions have demanded it, somehow this feels different given the overwhelming scale of new environmental regulations and standards coming down the pipeline.

There is an expectation by farmers and the public of the need to continue to improve water quality entering our waterways and to reduce greenhouse gas emissions. Unfortunately, many farmers and rural professionals are battling to understand what this look likes on-farm and how it can be effectively achieved while ensuring the future viability of farming businesses.

The opportunities for science to find applicable solutions to enable farmers to respond to new environmental regulations seem few and far between as our science institutions also try to come to grips with proposed changes. Once known they then have to embark on the long-winded process of seeking research funding to explore new areas of research that can help farmers apply practical and affordable strategies to mitigate their environmental impact.

Against this backdrop, the Reserve Bank of New Zealand is still considering whether it will require banks to increase the amount of capital they hold. It is widely acknowledged that increased capital requirements will be an additional cost to borrowers as banks build their capital positions. Banks are already tightening up their lending arrangements through greater focus on the repayment of loans and tighter access to credit facilities.

The potential for increased debt repayment comes at a time when farmers will be asked to implement strategies to mitigate their environmental risks. Many of these strategies require additional capital without necessarily increasing on-farm profitability, including the ongoing development of riparian margins, building feed or stand-off cattle pads, establishing wetlands to name some.

Competing interests for on-farm capital in meeting new environmental regulations, along with increased pressure from banks for debt reduction, will continue to feature highly in farmers' thinking as well as that of their advisors. More so now on the back of static or declining equity positions, where capital gains in land values can no longer be relied upon to beef up the balance sheet.

The conundrum of being drawn in multiple directions by regulators, banks and the public must seem overwhelming and frustrating to many farmers, particularly where the interests of various groups? priorities are misaligned or directly challenge one another.

Such sentiment and agitation is being seen in a number of farmer and business confidence surveys. Most recently, a Federated Farmers survey showed farmers had the lowest level of confidence in the economy since July 2009 in the wake of the Global Financial Crisis. In this survey farmers were most worried about tougher emissions reduction targets under the Zero Carbon Bill, followed by increased regulation and compliance costs, and then bank debt.

So in spite of reasonably good commodity prices, we have a farming sector down on confidence. In a climate of low confidence there is less inclination to want to change and try new things, which potentially limits the type of step change hoped for by so many.

Building confidence within the farming community has to become critically important if we are to be successful in implementing meaningful on-farm change. This does not solely rest on industry sectors, but needs to extend to central and local government as well as through other influencers, such as media. A core component of this is to better articulate what the future of the primary industry can look like and to enhance the knowledge base of farmers and rural professionals in the application on-farm environmental risk management strategies based on robust science.