Repurposing some agricultural land for horticulture has revenue consequences

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New Zealand is incredibly dependent on its primary industry sector for revenue so I thought it worth looking at the current situation. If we are proposing that we reduce our dairy in order to reduce our methane and nitrous oxide emissions, it has export revenue consequences. If we say some appropriate land should be repurposed for growing more plant foods, then it might pay us to look at the revenue we currently receive from our primary sector.

To use some land for horticulture would reduce the value of our exports so we have to make it up. Some of these exports hopefully will be in food production.

A 2019 Ministry of Primary Energy report (see link below) shows we export very little in the way of horticultural products ($2 billion plus a bit from seed exports) compared with animal products  ($43 billion), so our potential partners in aiming to reduce methane and nitrous oxide emissions from our livestock will include the kiwifruit industry, avocado, onions, wine, apples, pears industries etc etc.

Of course the national revenue from exports depends on two big factors – the value of the NZ dollar and the commodity prices at the time. These have been in our favour lately.

Dairy exports, dairy debt

The outstanding feature of this report is the rise and rise of dairy exports, especially to Asia. We earned $19.6 billion from dairy exports in the year to June 2019. With it has come a huge rise in dairy conversions and dairy debt. Dairy revenue is still expected to rise 3.4% to June 2020, but not so much as in the last few years.

Dairy debt is very worrying. It stands at $41.4 billion, up from about $11 billion in 2003. That is it is about four times what it was in 2003. Dairy debt has risen much more than other agricultural debt. Nearly a quarter of farms have a ratio of debt/assets of over 70% and non-performing loans are up – much higher than sheep and beef farms.

Dairy farms now cover 1.744 million hectares of land. There has been a 25% rise in the total dairy herd and a 58% rise in milk solids production since 2003. We now have nearly 7 million dairy cattle in New Zealand, more than one per person.

What is worrying is that there is a falling demand for dairy farmland and the report says there are “signs that rural asset values may be falling.”

Meat and Wool

We earned $10.4 billion for the year from meat and wool and the revenue is still rising, though the outlook is for only modest rises.

We had 27 million sheep in New Zealand in 2016, about half what we had a few decades ago.

And going back to the Beef and Lamb NZ site, they say, “Since 1990, the total hectares in sheep and beef have decreased 28% from an estimated 12.5 to 9 million hectares in 2012. Having said that, one third of New Zealand’s landmass still remains covered by sheep and beef farms.” (They then mention that nearly half of the QEII National Trust covenants are on sheep and beef farms, so these are the farms that are more likely to have trees on them. Great news)

That means sheep and beef farms cover about five times as much land as dairy. And horticulture will be very much less because it requires elite land, some of which is being gobbled up for housing.

Almost all this information is from the MPI website and is a report called Situation and Outlook for Primary Industries 2019, dated 19/12/2019. Note the amazingly well-produced report with clear, coloured graphics showing trends.