In a front page story in the current NZ Farmers Weekly (17 June 2013), prominent farming economist/consultant Phil Journeaux comments on the vastly different productivity and profitability profiles of different farms, focusing on the dairying sector.
Citing Ministry of Primary Industries data from 2011/12, he notes that the top 10% of farms were 65% more profitable than the average farm, and 185% more so than the bottom 10%. [Another article in the same Farmers Weekly makes the same point about sheep & beef farmers.]
Journeaux then argues that pulling the average farm up to the top 10% would generate an extra $3 billion a year for the dairying industry. And notes that such a payoff would easily outstrip the the promised $2 billion income claimed to result from more irrigation investment using $200 million of taxpayer funds. [Actually, the Government has earmarked $400 million to subsidise irrigation.]
Says Journeaux: “Keep an iron control on farm working expenses, particularly labour, feed and fertiliser. Always consider if the marginal revenue from any input will be greater than the marginal cost.”
This is precisely the point local farm economist Barrie Ridler makes about adding irrigation water as an input, at prices envisioned by the Regional Council’s dam scheme, to farming systems in CHB. He’s analysed individual farms, demonstrating that smarter farming practices can indeed profitably increase farm productivity, while adding expensive water eliminates profitability. See BayBuzz post: Dam economics fail at the farm.
Unfortunately, that reality doesn’t suit the HBRC party line as they press ahead trying to sell the dam to skeptical CHB farmers. HBRC would rather hand farmers a subsidised dam than try to upskill them.
Part of the problem is that farmers don’t seem to clamour for help in upskilling. A third article in the same Farmers Weekly describes a project led by DairyNZ to work with farmers to improve their productivity. Small group and one-on-one counseling was offered, with a focus on better staff management, improved mating strategies and lifting pasture skills. Of a potential pool of 600 farmers, only 60 elected to participate.
The ideas implemented by participating farmers generated an extra $500 per hectare per year profit over the trial’s five-year run. However, feedback from the trial revealed that farmers would pay only about $500 for the advice that made the extra profit possible.
Given that experience, and the very significant upside potential if farmers do up-skill, why shouldn’t ratepayers and taxpayers demand to see programmes (and participation rates) that achieve those gains before even considering subsidising $600 million water schemes like proposed by HBRC?
$80 million from ratepayers (and more from Government/taxpayers) as our ‘investment’ in a dam, versus serious money spent on farmers who seriously want to up-skill? Seems like a ‘no-brainer’ to me.
As Journeaux observes, why throw money at under-performing farmers … those he calls “long-tail laggards”?
P.S. These are the kind of issues we’ll be discussing at the Transparent Hawke’s Bay public forum on the dam, next Tuesday the 25th at the Clive Hall, 7pm. Hope you can join us.