Report unearths NZ pasture riches

Sheep, beef and dairy farm-gate returns have the potential to increase by 6-27% if farmers adopted higher pasture renewal policies. That’s one of the findings from a report looking at the value of pasture to the New Zealand economy.

In 2007, pasture-based products were worth an estimated $10.2 billion in farm-gate value and directly contributed $5.2b to NZ gross domestic product (GDP). Total GDP (direct and indirect) from pasture-based products was $20.5b or 12%.

Pasture renewal would lift farmgate returns by 16% to $11.8b, direct GDP to $6.0b and total GDP to $23.7b.

The report was prepared by Wellington-based company Business and Economic Research (BERL). It was commissioned by the Pasture Renewal Charitable Trust.

One of the report authors, Kel Sanderson, said that in 2006-07 the rate of pasture renewal was 2% on beef and sheep farms and 6.1% on dairy. For sheep and beef an 8% target of pasture renewal was used with the level of response varying from 10-30%. The target for dairy was 12% and a response of 7-27%. (See Table 2 below).

If a sheep and beef farmer renewed 8% of the farm and got a 10% response, farm-gate values would lift 0.8-1.5%. At 30% they would lift 2.4-4.6%.

Dairy pasture renewal was 6.1% in 2006-07. If it rose to 12%, farmgate values would rise by 0.4-1.6%. The midpoint of the various scenarios modelled in the study was taken so the average increase for sheep and beef farm-gate values was 18%, dairy 15%.

Report outlined two main objectives

Sanderson and co-author Michael Webster had two main objectives:
1. Measure the value of the pasture to the economy;

2. Model the impact of pasture renewal.

A range of regions and farm types in both islands was used in the study. Meat & Wool NZ’s nine classifications for sheep and beef farms was used, such as hard hill country, hill country, finishing breeding, mixed finishing and intensive finishing. The five dairy regions were Northland-Waikato- Bay of Plenty, East Coast, Taranaki- Manawatu, Marlborough-Canterbury, and Otago-Southland.

The project provided an estimate of the value of the pasture-based products from beef, sheep (meat and wool), dairy and deer. However, deer products were excluded from the pasture renewal estimates because of a lack of information. The export value of pasture-based products was $16.3b in 2007 with dairy contributing $10.7b, sheep $3.4b and beef $1.9b.

Domestic consumption totalled $1.7b of which 60% was dairy. Gross output of the farm-gate values after processing was estimated. That is the total value of sales before subtracting the cost of goods used in the production of the products.

A multiplier of 3.16 was applied to give the total effect (direct, indirect and induced) of gross output on the economy.

In 2007 gross output of pasture based products after processing was $24.3b and total gross output was $72.3b.

Significant job creation 

Pasture-based production was directly responsible for 35,000 jobs or full-time equivalents (FTE) on farms. This was questioned by some industry people at the launch as being too low. A lift in renewal rates would push farm FTE to 41,100 and the downstream affect in the industry would be another 44,300 jobs to the existing 277,300 FTE.

Agriculture Minister David Carter told industry representatives at the report launch in Wellington the figures were “massive”.

“It clearly identified the significant gain to NZ farmers and therefore the economy by undertaking pasture renewal.”

He said NZ had to focus on growing the GDP pie and grab any opportunity such as this to boost productivity. Carter promised to do what he could do to help but stopped short of offering any financial aid. He did point to the taxpayer-funded Primary Growth Partnership fund as an example of government aid to agriculture.

Potential gains are massive 

The response to pasture renewal and the extra money it generates in the economy would be permanent if all pasture was renewed over the regular cycle. Table 6 below shows total farm-gate value could potentially increase by a larger amount than that modelled in one year.

The model used in the study assumes that after several years all pasture will be renewed and the maximum level of added production from renewal is reached (Figures 1 and 2).

The Pasture Renewal Charitable Trust was formed in 2006 with a key objective of educating farmers and others in the agriculture sector on the benefits of frequent pasture renewal.

Trust chairman Murray Willocks said the purpose of the report was to attract the attention of policymakers especially when investing taxpayer funds into different industry sectors.

“There is a good argument to increase investment in technology transfer and drive adoption.”

Willocks said the technology and knowledge for pasture renewal and management was all there but was not being used as well as it could be: “We are leaving a lot of value on the table by not renewing pastures.” The report was strong on the macro as it was aimed at policymakers.

Surprisingly little work had been done on the micro side to convince farmers they should invest in pasture renewal. Limited information had been available through the likes of seed companies, Monitor Farm programmes and Country-Wide on the cost and benefits of pasture renewal.

Willocks said renewal rates were low because many farmers made decisions based on the type of crop rather than looking at the gains in productivity.

The launch of the trust’s pasture calculator website would help decision-making. Climatic conditions such as drought affected renewal rates as did low product prices, but he said they were secondary to the potential productivity gains to be made.

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Published courtesy of Country-Wide December 2009