Thursday, August 11, 2022

The ag sector’s budget 2022 wish list is for science

If increasing productivity is the name of the Government’s game, then the agriculture sector’s wish list for Budget 2022 is all about science. 

The farming sector helped bankroll the economy through covid-19, generating 30% of the country’s export income at a time when sectors like tourism were at a standstill.

Rather than being rewarded, however, the sector is under immense pressure from rising costs, scarce labour and, increasingly, regulation and compliance.  

You’d be hard-pressed to find a farmer who doesn’t want to increase productivity and farm for better environmental outcomes but – across the board – they want more research and development to help them get there.

“If you provide farmers with good science and a rationale, they will respond, they will adapt and they will make the changes,” Beef + Lamb New Zealand chief executive Sam McIvor said.

“The Government has signalled that this budget will be focused on health and climate change. So, we would expect to see increased investment in science and R&D to help farmers reduce their emissions, and increased funding to improve rural mental health outcomes,” DairyNZ chief executive Dr Tim Mackle said. 

More research and development are “more vital than ever”, added the Forest Owners Association. 

NZ Kiwifruit Growers’ (NZKGI) chief executive Colin Bond is also lobbying for more R&D.

NZKGI “advocates for policies which support innovation and R&D to alleviate the labour challenges impacting our sector”, Bond said.

Such policies include, for example, accelerated depreciation and subsidies for investment in productivity-improving automation.

The government spent $758 million on R&D in 2020, excluding higher education, according to Stats NZ. 

Of that $671m was on scientific research. 

The country’s total R&D spend was $4.6 billion.

While Prime Minister Jacinda Ardern made little or no mention of the sector in her pre-budget speeches, Finance Minister Grant Robertson did acknowledge the sector kept “income arriving during the pandemic”. 

Mind you, he was talking to an audience at the Rabobank breakfast. 

He also said the budget was being set up to ensure the ability to make “significant investments” regarding climate change and will recycle the proceeds from the Emissions Trading Scheme (ETS) into a Climate Emergency Response Fund. 

“If you provide farmers with good science and a rationale, they will respond, they will adapt and they will make the changes.”

Sam McIvor
Beef + Lamb NZ

That, coupled with news it was piloting longer-term funding for the natural resources area will hopefully mean some action on the R&D front. 

McIvor said the idea – at least on paper – pointed to more certainty of funding and also meant that policy could span an “integrated landscape”.

In terms of what he’s hoping for in the budget, he said there is a need for concrete investment to understand the warming impact of the agricultural systems in NZ, carbon sequestration and the role it plays and technologies that will actually make a difference.

The key would be to accelerate the development of the 10 or 15 top technologies and to create a regulatory process that enables their use. 

This seems like a good idea, considering things like Bovaer. 

The methane-reduction feed tool is said to have the potential to cut methane emissions by 30% but hasn’t yet been approved for use in NZ, despite Federated Farmers consulting on the issue two years ago.  

McIvor, like dairy giant Fonterra, underscored the need for infrastructure to support science. 

For example, the country could potentially lead the world on a variety of methane reduction tools but is hampered by the fact that there just aren’t enough testing facilities. 

Fonterra said recently methane measuring facilities are in hot demand, with a year-long waiting list. 

Why aren’t there more of them? 

McIvor also called for increased investment in soil investigation. 

Water also tops the list, as does investment into what future scenarios might look like, given the changing climate. 

So far the only agri-related allocation in budget 2022 is $110.9m for biosecurity and no one is arguing about that, particularly as the borders open. 

A total of $42.9m is to help bolster NZ’s readiness for any future incursions while $68m is to chase down the last remnants of Mycoplasma bovis.

McIvor says the government needs to invest to ensure the right expertise for different scenarios that might hit and there also needs to be more investment in things like databases, artificial intelligence, and surveillance tools. 

Lessons gleaned from the M bovis outbreak need to be applied to other situations. 

If anything, covid-19 has underscored just how reliant the country is on its export sector. 

On the immigration front, he says the government is looking to build a higher cost structure to ensure a higher standard of living. 

That policy, however, needs to go hand in hand with investment in technology and other tools that may not use people but do lift productivity. 

Take genetic research, for example.

Finally, there’s trade and the ability to extract greater value from the marketplace.

Meanwhile, Federated Farmers president Andrew Hoggard doesn’t have a wish list but does want some action on the inflation front. 

“Basically, from our perspective, it would be mainly that they are going to focus on controlling inflation, sensible spending and quality of spend, rather than drunk sailor type spending, that would be our main thing,” he says.  

While farmers may be benefiting from high export prices they are also getting hammered by high costs. 

Take the milk price, for example. 

Fonterra’s latest forecast is a record, with the mid-point at $9.30 per kilogram of milk solids (Kg MS).

It’s not quite that simple. 

Inflation-adjusted, the midpoint of Fonterra’s current forecast would be $6.50/Kg MS, according to NZX dairy analysts.

Not only that, but actual costs have risen faster than inflation. 

For example, the cost of fertiliser rose 53% between Q1 2021 and Q4 2021 – but the price of urea has risen 87% compared with this time last year.

In the end, however, ANZ bank economists figure Hoggard will be out of luck on the inflation front. 

The “catch-22” budget is all about alleviating inflation pressures while delivering an expansionary budget but “those looking for government initiatives to address sky-high inflation may be disappointed”, they say.

Hopefully, the science side does better.

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