Working with forestry - Speech

Speech by Don Nicolson, President of Federated Farmers, to the 2010 New Zealand Farm Forestry Association in Invercargill

Good morning everyone.

I am absolutely delighted to be here, in my home town, to discuss how and where Federated Farmers and the New Zealand Farm Forestry Association can work collaboratively. Indeed in June, we’ll be back at this very venue for Federated Farmers own national conference that I would encourage you to be at. Given Southland has that certain ‘log of wood’, it’s definitely the place to be.

I’d like to begin by acknowledging you as colleagues. I’d like to thank Patrick Milne for this opportunity to speak, as I would like to carve out what I see as very much, a shared future. Let me start by declaring that I, too, am a member of the Association and have been since the early 1980s. I understand the work you do is to forestry, what Federated Farmers is to pastoral agriculture. This begs one question, why are we not more integrated? In some ways our membership is common.

The New Zealand Farm Forestry Association was formed in 1957 and we were formed in 1899. You have 29 branches throughout New Zealand while we cover 24 provinces. You have five special interest groups while we, similarly, have seven specific industry groups. Your members manage or own six percent of New Zealand’s plantation forestry while our members directly contribute to half of New Zealand’s merchandise exports.

We are both un-levied membership based bodies, which means we need to prove to our members and prospective members real value for money. While Federated Farmers has more business members than the Association, the simple fact is that consolidation is seeing the number of farm businesses decline. It’s well known that the shareholding base of Fonterra, for instance, is one-third less than what it was at formation in October 2001.

Federated Farmers is increasingly replacing its farm business members with associate members – the farm workers and related agri-businesses. This poses a structural and constitutional challenge we will have to face up to. But since we’ve been around for 110 years, resilience and adaptability means we will evolve.

One of our latest initiatives, back to the future really, is the reinstatement of local Field Officers. They are an interface with our membership, our policy teams and we farmer politicians. This is a major investment for us but is one to get closer to our grassroots. We are also one free call away to 0800 FARMING.

Yet in many ways we face very similar structural issues going forward. There is a concept I would like to float here for you to contemplate. That is a potential combining of our activities.

As I survey the industry bodies, levied and un-levied alike, I am reminded of what Jackie Fisher did to the Royal Navy before the Great War. He sent a large proportion of the British fleet to the breaker’s yard on the basis that a great many ships were either, "too weak to fight and too slow to run away." He was proved right.

The plethora of agricultural oganisations we have in New Zealand means double-up on office space, IT, accounting, membership services and the like. Not to mention our respective policy activities, member services and media offerings. We have much more in common in terms of the issues we face than we don’t. Your members need legal advice from the RMA to employment issues, they need access to specialist policy and advocacy right across the country.

Our combined membership will benefit from the broadband Federated Farmers is leading upon, having got the Government to lift its spend from $48 million to the current $300 million. Our going toe-to-toe against the banks last year meant the banks had to come clean on farm interest rates. That benefited all farmers and puts the cost of our membership, frozen for the last two years, into perspective.

But I am also increasingly struck that we are not doing among the lobby groups, what we demand from Government. That is more efficient use of shared services. By sharing services we make the most of what we have and it means more money can be put into the sharp end of what our groups do.

It is just a thought at this stage but it is one tangible way for Federated Farmers and the New Zealand Farm Forestry Association to align positively because in the MMP environment, it’s too easy to be divided and conquered.

In many ways the integration of forests in the farming system, especially hill country, is essential to achieve integrated catchments. While the focus has been way too skewed towards the Emissions Trading Scheme, the fact is methane and nitrous oxide falls outside the CO2 stored in trees.

Water, both our access to it and its cleanliness, is an equal issue we’re grappling with.

While dairying bears the brunt in Horizons Regional Council’s proposed One Plan, the first regulatory attempt to introduce what we call ‘a license to farm’ – this is based on nutrient outflow, principally nitrogen, from the farm system.

While the proposed One Plan has run into heavy water at its hearing, this reflects a need to recognise that trees and plantings form part of any integrated catchment. They keep erosion prone high country together, represent a commercial asset in their own right and in the case of everything to shelter belts and riparian plantings, are integral to the modern farming system.

Federated Farmers would welcome the Association’s input with the ‘Bees for Trees’ programme to encourage bee friendly tree plantings. More so as the scourge of Varroa marches down the South Island. Varroa is a strong indication why we need much more robust biosecurity and not less.

Federated Farmers is concerned about the loss of eyes at our sea and air borders – it’s another area of common shared interest.

Frankly, we are one Foot and Mouth or Pine Pitch Canker outbreak away from Armageddon. We must work together on the Government to ensure the importers pay the cost of fighting any biosecurity incursion. The current plan is to share costs with us exporters all in the hope of keeping down the price of an LCD television at The Warehouse.

Yet you can’t export from New Zealand a biosecurity incursion into New Zealand. Let’s put the ambulance at the top of the cliff and not the bottom. Prevention is much better than the cure.

But I can probably divine the area of divergence we have as organisations and they are three letters – ETS.

As a forestry owner I first read of carbon trading back in 1989, I believe in the Association’s own magazine and thought it was whacky. I would bet there is no one in this room, hand on heart, who, in 2000, would have made investment decisions based only on the prospect of carbon trading.

My personal observation as a fellow forester, is that our industry has been bedevilled by schemes and subsidies. It seems we lurch from one bright hope to next forgetting about the intrinsic value tied up in what we are growing. That is why I laud your focus on looking beyond Radiata as we need to focus on the farming of cellulose.

You may then ask why, as a potential beneficiary of carbon trading under the ETS, I am so cynical about it.

It is because for you to win financially, I, as a sheep farmer, have to lose financially in the farm inputs I need to farm. Come 1 July the cost of farming will increase.

That is the conundrum facing many a dual use farmer today. In recent days a low level drought has been declared for Auckland and the Waikato and we are thankful for the Government acting so decisively.

Yet come 1 July our costs will jump sharply upwards with fuel and energy entering the ETS – every farm and service input will cost more. One wag even dropped me an email suggesting it would be more useful that instead of drought relief, the Government would do better by suspending the ETS.

The ETS is based on science that can most generously be described as immature. It also increasingly seems that what were acts of God before 1990, has become evidence of climate variation post 1990.

The problem for me is that science is littered with untold cul-de-sacs. The theory of Continental drift in which continents were like jigsaw pieces, was science orthodoxy for almost 600 years. The theory didn’t come under serious challenge until the very late 1950s and it was in 1962 that a seminal paper on subduction, the basis for explaining plate tectonics, was authored. It went little-noted and was even ridiculed by science orthodoxy of the day but rapid geological and scientific advances supported plate tectonics. In the space of just ten years, a theory first advanced in 1596 went from science fact to science fiction.

From my farm gate the ETS has the appearance of a political juggernaut, which is real in the minds of our MPs, bureaucrats and sections of the media, except for the ACT Party and some brave commentators. Reporting requirements are set to kick in for farm emissions over the next year or so, but we’re still working out what this means in practice if the point of obligation stays at the meat and dairy processor or the fertiliser company. The provision of farm information is costly enough in time lost that would otherwise be better spent on-farm, without the penalties that lie in the ETS legislation for non-compliance.

$8,000 for not notifying MAF that pre-1990 trees have been cleared, another $8,000 for not filing an emissions return and then being forced to surrender emissions units equal to what was lost in the forest plus an additional $30 per emission unit surrendered. That adds up to a fair amount of punishment for something as relatively simple as accounting for changes in the carbon stored in a forest.

The science around the rates at which carbon is stored in trees is fairly well understood. Tools have been developed to help us tree owners work out what we’re up for, or in the case of some, in for. Yet the cost of compliance has many farmers with forests deciding if the cost of compliance is worth what they’d get for the carbon. That and rules which discount many plantings and types of plantings do little to warm farmers towards it.

I also don’t know that the same science certainty can be said for methane and nitrous oxide emissions either.

We know from the amendment passed late last year that the Government is sticking the processors with the point of obligation for farm emissions. If we have to have an ETS and the ETS has to include agriculture, then the only worthwhile place to put the point of obligation for farm emissions, is the farm. Sure this means the Government has to process and audit emissions returns from a far greater number of participants than under processor point of obligation. Sure, there is sizable variation in the efficiency of production on farms across New Zealand. Sure, there is a lot to account for at the farm-level to come up with a robust emissions return. Sure this requires a leap of faith on the part of both Government and farmers.

The end result though will be an approach that can take account of the efficiency of production. Of the changes in land-use undertaken to reduce exposure to a price on carbon and of the use of land-based technologies that are in development.

That is the big risk of pinning hopes on carbon farming as the latest ‘white knight’ for forestry – you are one innovation away from seeing all of our investment implode in value. It’s reminiscent of a cartoon I once saw of a dishevelled trader begging for food holding up a sign that read, ‘I cornered the slide-rule market in 1979.’ Oh, I now see you are all reaching for your calculators!

As a sheep farmer I can attest to the fact that ‘white knights’ are seldom that as I’ve seen them come and go. Wool I feel is now starting to find its feet based on the values associated with wool. My message is that it’s far better to farm for production, productivity, progress and profit, our four 'Ps', based on the intrinsic value of what we grow.

That’s why I still farm trees for the cellulose and not the carbon.

Yet if it’s there, take the money for carbon but I’m yet to meet anyone receiving a regular cheque for carbon sequestration. Carbon is a bonus but not the reason to farm trees.

So in summation we collectively face many of the same issues but it is my sincere hope that our respective organisations, 53 and 110 years old respectively, can grow together.

We have to because we are both part of New Zealand’s largest and most important industry, agriculture.

Thank you.