regulations
Farmers were worried about how they could operate under the proposed regulations and so they sought ways of getting out of the Catchment before the regulations took effect. In the north this was particularly evident by the number of farmers that sold to property developers. What took many farmers in the Catchment by surprise, however, was that Landcorp also chose to exit.
One of the options that the Council was considering was that all farmers in the Catchment would be required to reduce their nitrogen discharge levels by 20%. This, the farmers claimed, would put
them out of business (Nimmo-Bell, 2002) and thus it was natural that farms became difficult to sell –
although many, interviewed farmers claimed, wanted to do so. The sheep and beef farmer quoted below did sell his farm (to a farmer already resident in the Catchment), quite soon after the Council announced its intention to regulate:
I was probably the first to exit the catchment. The reason that I left was because I wasn’t sleeping - my whole livelihood was at stake because I had high debt levels and an income that was insufficient. Dairy had been going to save us. But as soon as there was a whisper of Variation 5, the NZ Dairy Group backed away and wouldn’t allow us to convert.
While farm sale volumes in the whole Catchment fell during this period of uncertainty, land values increased. The consultation period for the regulations coincided with renewed interest in rural subdivision and this was particularly relevant for the northern sector since it was close to Taupo. In the early 2000s, developers, apparently predicting a boom in tourism, purchased properties with Lake views for subdivision, farm parks, and tourist facilities such as hotels. An analysis of consents granted by the Taupo District Council showed 12 large developments were approved for the
northern sector of the Catchment between 2000 and 201380. Silvester & White (2006:70) estimated
that 729 ha of farmland was earmarked to be converted to urban and rural residential in the period 2001 to 2005. Waikato Regional Council consent data shows a total of only 270 ha was actually
converted to subdivision between 2001/05 (benchmarking81) and consent approval (2011/2013).
But this demand from developers, coupled with dairy land price rises in the wider district, were
80 A listing of all consents can be found in Appendix C.
81 Benchmarking is explained in Chapter Five. In summary, farmers were required to choose one year (2001 to
factors that helped to push up the price of rural land, particularly if it had Lake views. As one real estate agent explained:
The world went mad between 2000 and 2008 – everything was going to double in value by the next year – and it did almost. No-one could see an end in sight.
The Global Financial Crisis in 2007/8, however, quickly cooled demand for lifestyle blocks and tourist ventures and an oversupply (and mortgagee sales) followed. A Waikato Regional Councillor, and Health Board member, summed up the situation as follows:
About 3 years ago, the Health Board did a survey looking at the hospital that we were building and [found that] there’s about 20 years’ worth of sections in the Taupo area (up to about 10 acre blocks) already subdivided. Two farm parks have gone belly up, untold subdivisions have all gone belly up, - massive ones, things on ridge lines. It was bizarre - it was crazy rhetoric driven by crazy developers and we tried as a community to say “Where’s the population coming from”?
Figure 13: A rural subdivision subject to mortgagee sale in 2013
As the consultation period wore on, it became apparent to farmers that the regulations would definitely be implemented and that they would have to decide how to operate their farm under a regime of restricted nitrogen discharge. Expectations of a fall in land values under the proposed regulations coupled with worries over the Global Financial Crisis, the age of the remaining ballot farmers, and continued uncertainty about the form that the regulations would take, were all taking
their toll. In the midst of this difficult period, Landcorp decided to exit from the Catchment, a move that further demoralised the farmers (Yerex, 2009) and resulted in significant land-use change in the northern sector.
Many farmers had hoped that Landcorp (a government owned, major landholder in the Catchment) would play a leading role in reducing nitrogen discharges in the Catchment. It was pointed out, for instance, that planting all Landcorp property would have contributed significantly to the required
20% reduction in total nitrogen discharged82. Landcorp itself used a similar argument to justify its
involvement in converting forest to dairying just north of the Catchment. The Ministry for the Environment reported to Parliament in 2004 that the increase in greenhouse gases that will result from this dairy conversion would be offset by planting up land in the Taupo Catchment (Ministry for the Environment, 2004:5):
Some of us are concerned that this [conversion] represents significant land- use change debits as well as increased methane and nitrous oxide emissions and more nitrogen flowing into waterways. The ministry told us, however, that Landcorp owns a substantial amount of land in pastoral farming in the Taupo catchment. The ministry is in discussions with Landcorp, and is working with Environment Waikato and Ngāti Tuwharetoa, to consider the viability of moving some of that land into forestry or into other forms of protection.
Landcorp had drawn up a Memorandum of Understanding to this effect (Rennie, 2008) but,
according to the CEO Chris Kelly, “…dithering” on the part of local government meant that the
process of setting up a mechanism to purchase nitrogen was proceeding too slowly (Rennie, 2008:4).
Landcorp, it seems, had alternative plans for this land –it was aiming to use it to “…reposition” itself,
not offset dairy conversion outside of the catchment, as this Landcorp manager explains:
If you look at Otutira, the return is much less but the value of the property is high … We wanted to cash in that value and buy land elsewhere.
It is also possible that an expected decline in land values was contributing to the decision about whether to exit or not. A valuer who has contributed to four studies on the likely effects of the regulations on land values said, in our interview, that he had concluded that there would be around a 25% reduction in land values as a result of the implementation of the regulations. These conclusions were relayed to farmers in meetings in the Catchment and were also published as part of
investigations into likely effects of the regulations (See Finlayson & Thorrold, 2001).
82 Silvester & White (2006) estimate that planting all land owned by Landcorp would have reduced the nitrogen
load to the Lake by 48 tonnes N/yr. This equates to a 73% reduction in N discharge from the Landcorp properties from their 2006 estimated discharge levels.
This caused much concern amongst farmers. Many interviewees said that sheep and beef farming
was a poorly paying industry (e.g. “…it's only just pays the grocery bills”). Consequently, farmers
counted on capital gain from the land to provide an avenue for wealth generation (“…by taking the
land and moving it to the next regime - carve off the dairy land from a sheep and beef farm”) or for the money to retire (“…like buying a house in town – there is an expectation that it [land] will go up in value and that that value will fund your retirement”). One farmer saw their core business as land
trading, that they were a “…farmer of real estate”, and that “…the animals are just the means to that end”. Studies have supported these points of view. Eves & Painter (2008) for instance, found that farmland in NZ increased in value by 28% each year between 2000 and 2005. For sheep and beef this rise in land value was unrelated to profitability, with return on capital falling below 1% in 2004/05 (Journeaux, 2015). Capital value, then, was an important component of farming, particularly sheep and beef farming as it has always been and continues to be in New Zealand.
In a statement to Parliament in 2005, Chris Kelly claimed that Landcorp was supporting the proposed regulations by moving its operation out of the Catchment (NZ Parliament, 2006):
Landcorp has continued to exit its 10,000 hectares of land at Taupo during 2004/05 … The sale of its properties in the Taupo catchment is also an initiative by the company to support the anti-nitrate leaching programme. As the company buys only when it sells, the recent purchase of the King Country properties [outside of the Catchment] are at least in part a response to the sale of Landcorp’s Taupo holdings.
So it appears that the exit of Landcorp83 from the Catchment was driven, at least in part, by the
forthcoming regulations. But Landcorp was not the only farming operation that was keen to exit the Catchment at this time. One sheep and beef farmer, reflecting on their own decision to stay,
perhaps echoes the factors that led other farmers to decide to leave:
A few years ago I would like to have moved off this property because of the effects that the N regulations were having – the uncertainty, our neighbours gone, the risk to capital value. I would like to be with more people … [And now] the cash income from the farm is not improving sufficiently to make me feel that this is a worthwhile thing to put time and energy into … The LTPT were paying reasonable prices so maybe we should have sold at the same time and then we would have had some certainty.
83Waihora (2305 ha sold in 2009 with 1240 ha inside the Catchment), and Otutira (1358 ha sold in 2007/8).
were located in the northern sector. The latter property was sold to Boat Harbour Trust (Smith, 2009), an entrepreneurial company, and the former (initially) to the Hikuwai Hapu Land Trust (Taylor,2007). Sales in other parts of the Catchment took place around the same time i.e. Mangamawhitiwhiti (647 ha sold in 2005), Motere (1449 ha sold in 2008) and Otaipuhi (1333 ha sold in 2008). The first four properties were sold to the Hikuwai Hapu Land Trust (the land dealing arm of Tuwharetoa) and then on-sold to private owners.
Benchmarking and consent data (supplied by WRC) suggests that 10 farmers in the northern area sold and exited the Catchment from the early 2000s to 2013.