Chapter Six outlined two significant land-use changes in the northern sector of the Catchment, i.e. the conversion of sheep and beef land to dairy platform and the establishment of dairy support units. Both of these involve a change of stock type and a move from a low nitrogen emitting animal (sheep) to a higher nitrogen emitting one (cattle). Under conventional definitions of intensification (e.g. Watters, Rowan & Williams, 2004) increasing the number of cattle is a form of intensification and generally is associated with increased profitability. However, in a capped situation, intensification and profitability are potentially decoupled. Thus the land-use can be changed from sheep and beef to dairy support but, because of the discharge limit that applies to the farm, intensification i.e. higher numbers of animals and/or higher use of nitrogenous fertilisers (Watters et al., 2004:4) and higher levels of nitrogen discharge, have not occurred. Several farmers suggested, however, that such a
land-use change improved profitability (see Section 6.3). The term ‘intensification’, therefore, aptly
describes the conversion of sheep and beef to dairy platform, facilitated by trading of nitrogen, that occurred in the northern sector, but does not adequately describe the change from sheep and beef to dairy farming, dairy support or similar where extra NDA is not required.
In the western sector, three farms have undergone a change of this type. One changed stock type from sheep and beef to 100% cattle, but the other two are dairy support farms. As one of these farmers explained, dairy support is a more profitable land-use than sheep and beef:
I don't like sheep, they're too much work and there's not enough money in them … The thing is with dairy grazers and that - it gives you a meaty cash flow on a monthly basis. Whereas with beef you're either waiting 12 months or 18 months and with lamb you're waiting once a year for a lamb cheque.
Although this farming couple changed the stock type of the farm, they found that they were not using all of their NDA allocation and so sold the surplus. In a sense this was a windfall allocation because their benchmarked year was one where they happened to have a higher level of stock on the farm than they planned to have over the long term. Although the income that the farm now
produces (on the lowered NDA) was adequate for their needs, this couple agreed that “you’d be hard
pushed” to raise a family on such an income. If they had not sold the NDA, however, the income
from the farm, they suggested, would be sufficient and there would be room to “wind the farm up
with even more stock”. In Chapter Six (section 6.7.2) another case of ‘intensification’ without raising
the NDA level of the farm was outlined. In this case the owners of a station in the south have expanded their dairy farm (intensified their land-use) and reduced the size of their sheep and beef unit. Last, a dairy farmer in the northern sector reported that he had purchased land outside of the
Catchment so that he could “…grow” his operation. Thus he has ‘intensified’ without increasing the
NDA level of his farm within the Catchment.
In the Catchment, therefore, both intensification (by increasing the NDA of the property) and
‘intensification’ (without increasing the NDA of a property, but improving the profitability) are occurring.
7.6
Chapter summary and conclusions
This section describes the landscape transitions that have taken place in the western sector, notes key drivers of the changes and concludes by considering the consequences of the land-use changes that have taken place.
The western sector was, in many ways, a model SES. Since the 1970s when ballot farms were first sold in this area, social, economic and environmental factors had all melded to produce farm systems that functioned well for the farmers concerned. Thus the ballot farm community, the last such community in the Catchment, thrived in this area. Unfortunately these farm systems became less and less economically viable due to exogenous changes such as reductions in international product prices and the removal of farm subsidies. Farmers in this area did not subdivide to the same extent
as happened in the north because the area is remote from townships and the potential for lifestyle subdivision and tourist developments is limited. Consequently farm sizes remained unchanged and on-farm practices and land-uses became the focus for financial progress. Improvements in on-farm productivity (e.g. carcass weight and lambing percentage increases), however, proved not to be a complete solution and many farmers were turning to cattle farming as a means of improving incomes on small/medium sized farms. Several farmers increased their cattle to sheep ratio, one new entrant raised 100% beef, and another established a dairy support unit. A third farmer bred bulls in addition to running sheep and beef. Signalling the introduction of Variation 5 in 2000 caused huge concern amongst these farmers since under Variation 5, continuing to increase cattle numbers was no longer possible, and they believed their financial viability was threatened. As in the north, this proved to be the point at which the landscape changed paths and a new landscape transition began.
Farmers in this sector were active in the farmer lobby group (Taupo Lake Care) that was formed to represent farmer interests. Discussions between this group and the Waikato Regional Council centred on how farming could continue under environmental limits and, in part, led to a burst of scientific studies. Research into mitigations and alternative land-uses, however, did not find any significant land-use or farm-practice alternatives. Further, OVERSEER®, the model that enabled the establishment of nitrogen discharge limits for individual farms, now became the gatekeeper that determined the practices that could be undertaken on-farm. Innovation by individual farmers was almost impossible because of the cost of the scientific proof that would be required to get new uses/mitigations into the model.
Some farmers were so discouraged by the situation they found themselves in that they chose to exit the Catchment. Out of 22 properties in the western sector, only one original (commercial) farmer remained by 2013. Although several of the farmers that left were ballot farmers close to retirement, others, including Landcorp, also exited this sector in the mid-2000s. The sale of the two large
Landcorp farms located in this sector, however, offered an opportunity for a new entrant to establish a large deer/sheep/beef farm (selling nitrogen and undertaking carbon trading in the process). Another new entrant purchased Landcorp farms in the northern sector and established a dairy farm
(using nitrogen trading to augment the farm’s NDA) and both new entrants amalgamated their ex- Landcorp farms with neighbouring ballot farms to achieve economies of scale. The drivers for these purchasers included attractive land prices, large land parcels and, for the dairy farmer, certainty around the environmental rules and therefore improved business certainty (unlike elsewhere in New Zealand). Nitrogen trading facilitated the land-use and tenure changes that occurred. Other
amalgamations that occurred were on a smaller scale and involved uniting three or four ballot farms into a single enterprise. Thus amalgamation was one farm system change that occurred which had potential for ensuring a viable agricultural sector and the change was facilitated by trading.
Another farm system change that occurred, de-intensification, was the direct result of nitrogen sales and thus a response to the regulations. The de-intensification is of two main types. In the first, one land-use is replaced by another (potentially) income-earning land-use. The change from sheep and beef farmland to plantation forestry is a common example of this in the western sector (and in the Catchment) and the income potential is enhanced if there are carbon contracts attached. In this case one type of community may, in time be replaced by another type as income sources move from pastoral farming to forestry. This scenario, however, is dependent on the cost of logging of forests since some of the plantings in the Catchment have been quite small, ranging from 23 ha to 1150 ha. Research elsewhere in New Zealand (Park, Manley, Visser & Morgenroth, 2012) suggests that small blocks of forest may be uneconomic to harvest.
The second de-intensification type, however, is a subtler change but also with far reaching effects. It involves those farms that have reduced stocking rates but do not appear to have invested in
alternative ways of making up for the reduced income that follows from the reduction in stock numbers. It appears that these farms have traded nitrogen but have not changed land-use. Thus the answer to the anomaly pointed out in the previous chapter about farms that have not changed land- use, but have traded nitrogen, appears to be that these farms, particularly in the south, have sold some of the productive capacity of the land by reducing stocking rates in perpetuity. In other words, they have withdrawn capital from the farm but have not reinvested on-farm. It is difficult to see what the future for these farms might be, given the remote and climatically challenging nature of the western (and southern) sector, the gatekeeping nature of the OVERSEER® model and the poor outcomes of research studies into alternative land-uses to date. The experience of one sheep and beef farmer, who received a very low NDA because of an accidental mistake in the benchmarking
process, suggests that farming at this level of NDA is “…existence living” and that there is little ability
to compensate for increased farm costs. This view was supported by an award-winning farm manager on one of the southern stations who suggested that a sheep and beef farm, even a large one with economies of scale, needs an NDA of at least 18 in order for a farm to absorb farm costs increases and market changes over the next 10 to 15 years. The median NDA in the study area is currently 14 and the median NDA of farms that have de-intensified is 11. Thus, if the farmer manager is correct, the farms that have sold NDA and not reinvested in other productive land-uses may already be in financial difficulty. De-intensification, therefore, while contributing to the environmental goal of Variation 5, could potentially have a negative effect on achieving a viable agricultural sector. The drivers of this de-intensification were found to be primarily nitrogen and carbon trading, but there may be other drivers that are not apparent at this scale of analysis.
Intensification, on the other hand, could potentially contribute to the sector’s viability under
established a large dairy platform, using nitrogen trading to increase the NDA of the farm, and of other farmers that have converted sheep and beef properties to dairy support. In the western sector
a small number of farms have ‘intensified’ by increasing cattle numbers (and potentially their
profitability) without increasing their NDA level, in the south a station has similarly ‘intensified’ by
expanding its dairy farm and reducing its sheep and beef unit, and in the north a farmer has
purchased land outside of the Catchment in order to ‘intensify’ their operation. Moves to ‘intensify’
in this way, may contribute positively to a viable agricultural sector if profitability improvements eventuate as expected.
Both amalgamation and de-intensification have led to a reduction in the number of families resident in the Catchment and, reportedly, an increase in the number of itinerant, single, farm workers. The new entrant who developed the amalgamated farm in the western sector spoke, for example, of how the money that the farm earned was largely spent outside of the Catchment, and in other parts of their business enterprise, rather than within the Catchment. Such changes are in addition to the labour force changes that conversions to forest or woodlot will engender. While it is possible that this change in demography was already underway because of the difficult economics of sheep and beef farming, it appears that the Variation 5 regulations have amplified the trend.
The drivers of change in the western sector appear to revolve around the economics of sheep and beef, the small/medium farm sizes, lack of viable land-use alternatives and the uncertainty that farmers experienced during the regulatory development process. With such bleak prospects it could be expected that farmers would have retained the productive capacity of their land (rather than sell NDA) and would look for ways to increase their incomes, perhaps by amalgamating farms, by
‘intensification’ that may or may not involve increasing the NDA of their property or, as in Chapter Six by changing land-use. In order to understand the reasoning behind the farm system and land-use choices that have been made, this following chapter turns to the local (farm) level and to exploring farmer motivations.