Financial impact of the Waikato Regional Plan nitrogen cap on Taupo farmers

TR 2019/24
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Report: TR 2019/24

Author: Phil Journeaux, Darren McNae, James Allen (AgFirst Waikato (2016) Ltd) 

About this report

Water quality within the lake was/is of a very high standard and monitoring of the lake water quality, which began in 1994 (in Edgar, 1999) started to show a deterioration in water quality, which was largely linked to the pastoral farming development within the catchment. As a result, in 2000 Waikato Regional Council (then Environment Waikato) initiated a process that cumulated in 2005 with the notification of Variation 5. For landowners, the implication was that while they could continue farming in their present mode, if they wished to intensify the operation and/or change land use which resulted in a higher nitrogen discharge, then they could only do this by buying in nitrogen. The concern raised by the farmers is that as the cost/price squeeze continues, in the absence of the opportunity to intensify, their farms will eventually become uneconomic. The main thesis behind this study is to explore that concern.

The objective of this study was to undertake an analysis as to the impacts of the nitrogen cap on farmers within the Taupo catchment, and modelling of future long-term impacts. The purpose of the study is to highlight the financial impact on the farming community. 

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Financial impact of the Waikato Regional Plan nitrogen cap on Taupo farmers [PDF, 1.8 MB]

Contents
1.0 Executive summary
1.1 Financial impact
1.2 Ability to trade nitrogen
1.3 Have some farms been impacted more?
1.4 Ongoing viability
1.4.1 Land values
1.5 Extrapolation across the rest of the Waikato
1.6 Further research and policy analysis
2.0 Objectives
3.0 Methodology
4.0 Background
5.0 Impact on farm working expenses
5.1 On-farm cost inflation and productivity growth
5.2 Compliance costs
6.0 Land values
6.1 Land value analysis
6.2 Land value impact at the catchment level
6.2.1 Rating system
7.0 Opportunity cost
7.1 Conversion to dairying
7.2 Conversion of forestry to pasture
7.3 Intensification of existing farming operations
7.3.1 Opportunity cost of not intensifying, methodology #1
7.3.2 Opportunity cost of not intensifying, methodology #2
7.4 Alternative farm systems
7.4.1 Alternative farming systems within the catchment
7.5 Development of undeveloped Maori land
7.6 Land use change to horticulutre
8.0 Other costs
8.1 Removal of the 20% of managable nitrogen
9.0 Farmer workshops
9.1 Constraints on farming
9.2 Land values
9.3 Big versus small farms
10.0 Nitrogen trading
11.0 Discussion
11.1 Financial impact on farmers
11.2 Ability to trade nitrogen
11.3 Have some farms been impacted more?
11.4 Ongoing viability
11.4.1 Land values
11.5 Extrapolation across the rest of the Waikato
11.6 Further research and policy analysis
12.0 References