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”?

Tom Belford

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.

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3 Comments

  1. Totally agree with this argument, Tom, and so would anyone else with a background in scientific agriculture.

    I know Phil Journeaux well, from my years in MAF as a senior policy analyst, and he is straight as a die. Tells it like it is, with no bullshit, unlike the so-called rural representatives on the HBRC, who mostly live in town these days. The last one on the HBRC who had my respect as a livestock farmer was Rex McIntyre, from Wairoa, and it wasn’t lack of rural knowhow that removed him. He’d had enough of the politics.

    Sam Robinson is a more complex case. Not on the council of course: he got out back when I did. But clever and knowledgeable. So why is he backing the dam project so strongly? I haven’t asked him, but my guess is because he believes it will result in a rapid generational change. It’s the young farmers who make the big improvements in productivity – and who also implement better environmental management – and what spurs them on is debt: the big debt they take on when they buy their farm, as a going concern, from the previous generation.

    So Sam is probably thinking: get these farms loaded up with debt, then the tired older farmers will stand aside early, and let the next generation take over. And that will indeed result in big gains, but only some of those will be from irrigation; most will be from better farm mamagement and introducing new technology.

    I doubt if you’ll change the HBRC thinking, Tom. It’s set in concrete, and only wholesale changes in the election would change it. All I see around me is me-too thinking from the usual suspects and apathy from the rest. Apart from your good self!

    Keep it up though, miracles do happen, very occasionally.

  2. Why not just farm smarter? The answer’s easy. Farmers, like every other group on the planet come in a range of abilities. Inevitably, some are just better than others. You might just as well ask the question, ‘why don’t all senior rugby players play like All Blacks?’ It’s because they just aren’t that good, but they try just as hard.
    Putting the issue of the dam aside, I can’t figure out your aversion to irrigation Tom. It’s the very life-blood of the land use on the Heretaunga Plains; without it Hawke’s Bay would be decidedly poorer. Why don’t you campaign against that?
    You say, “Part of the problem is that farmers don’t seem to clamour for help in upskilling.” You don’t know what you are talking about.
    And Dr Bill, I think you are taking one hell of a liberty in assuming the thoughts of Sam Robinson, especially given that they are somewhat less than worthy, when you say, “So Sam is probably thinking: get these farms loaded up with debt, then the tired older farmers will stand aside early, and let the next generation take over”.

  3. Ewan,
    wishing that people would “put the dam issue aside” is silly, this discussion is about the dam issue.
    We would all prefer to be in a position to have an informed discussion, but the release of necessary information is very slow, with HBRIC pushing on through the stages toward implementation as fast as possible. At the moment, the project looks very much like an attempt get irrigation in place with a minimum of cost to the end users, with ratepayers and taxpayers being asked to stump up cash to assist. We are entitled to ask if the benefit to the wider community is enough to justify the investment. At the moment it appears that the answer is “no”.

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