Sam McIvor's PGGRC Conference 2017 Speech | Beef + Lamb New Zealand

Sam McIvor's PGGRC Conference 2017 Speech

Read a transcript of the speech by B+LNZ's CEO Sam McIvor from the Pastoral Greenhouse Gas Research Consortium (PGgRc) conference 28 March 2017.
Tuesday, 11 April 2017

Good morning everyone

Thanks for the opportunity to talk to you today.

I want to briefly transverse four key points that encapsulate the GHG journey that the sheep and beef industry is on.

  • Firstly where is the industry at and what’s been the journey to date
  • Secondly what is the industry doing to future proof itself 
  • Thirdly what are some of the considerations for the NZ primary industry as we seek to address ongoing climate change
  • Fourthly how do we best support farmers through this change?

So where are we at today?

We know climate change is seen as a big issue globally, we know we have an unusual profile in NZ, we know the unusual profile is dominated by industries that are the backbone of our economy; the sheep and beef sector is one such sector.

We have given some undertakings as a country that means as a sector we’ve been given a bunch of targets to work to: NZ’s intended nationally determined contribution (whoever came up with that measure) or INDC is targeted at 30% below 2005 which is equivalent to 11% below 1990 by 2030. There is also the wider target of 50 by 50 that is 50% below 1990 by 2050.

What’s the sheep and beef sector achieved?  

Let me give you a brief and remarkable story and one from a sector perspective I’m very proud of.

Well 1990 is a pretty convenient starting date now though it wasn’t that convenient a starting date at the time. From a sheep industry perspective it was the peak of sheep but it’s useful to reflect that what drove the industry there was a set of government enabled perverse incentives that had little resemblance to what the market truly wanted. The result was that by the 1980’s New Zealand found itself with around 70 million sheep and an extremely depressed market internationally almost solely focused on the UK.

Many of you will remember that in 1984 the newly-elected Labour Government devalued the New Zealand dollar. The immediate impact was positive for exporters because it led to increased returns in New Zealand dollars.

However, the next six years were traumatic for farmers. The Government phased out most support for agriculture, including fertiliser subsidies, tax concessions, concessionary interest rates and help controlling rabbits and noxious weeds. Crown agencies started charging for services like meat inspection, animal health inspections, quarantine and farm advisory services. Ironically they still left on import protection, which raised the cost of inputs and we’ve all heard the 28% interest rate stories. By 1990 the farming sector was the most deregulated in NZ.

For me, here’s where the remarkable story begins.

Farmers became focused on what they were producing with dramatic improvements in productivity. This is best illustrated by increased lambing percentages where we’ve gone from 100% to a 125% average. Additionally we are achieving higher lamb weights sold per ewe wintered, increasing by 93% - remarkable.  

Sheep and beef farmers are using far less resources - in rough terms we’ve maintained the amount of meat produced and exported (over 90% of the sheepmeat produced is exported) from half the number of sheep. And it’s been achieved on 23% less land as conversions to dairy have occurred and hill country has been retired into the native bush reserves that Jan Wright mentioned or planted in forestry trees. Over 600% of new QE11 covenants are occurring on sheep and beef farms. Not only has the land-use footprint reduced but so have the greenhouse gas emissions.

It’s been calculated that since 1990, driven by genetic and productivity gains, greenhouse gas emissions have fallen by 19% on sheep and beef farms. What’s more – in a time when all over the world the meat industry is being challenged on its environmental/sustainability footprint, NZ has a strong argument to mount around its production methods. Over 70% of the land farmed by sheep and beef is hill country. It’s land producing food that would otherwise be wasted.

While the UK remains an important market for us, a carcase these days is dissected in 42 different cuts and those cuts are exported to 100 countries around the world. In the 1960’s over 90 % was sold as frozen carcases while today 18 % is chilled cuts and boneless product and frozen carcases make up only 5% of our trade. This has been a great effort by our processors and exporters, meeting the demands of consumers in many different countries around the world.

Sorry about waxing lyrical there for a few minutes – now what was the point I was getting to...ah yes...Sheep and Beef emissions are 19% below what they were in 1990. In emissions intensity – kg of CO2 equivalent per kg of product, sheep have improved 23.1% and beef 19.7%; about 1% per year. If the current rate of emissions reduction continues, sheep and beef will just make the 30% below 2005 mark, and will also hit the 50 by 50 mark. Time for sheep and beef farmers to put their feet up.

So with sheep – what’s got us there – a hard out drive for productivity. With beef the picture is a little bit different - beef cows numbered about 1.4 million in 1990 – they now number less than a million. What has changed is that bull beef procured through dairy cows has now become a mainstay of many sheep and beef farms. They have essentially replaced those exiting beef cows and they are an efficient beast turning pasture directly into beef rather than turning pasture into a reproductive cycle that produces one calf a year. So in short, the dairy cow has become the beef industry reproducer without a GHG cost to the beef industry, that is in turn generating a return from a potentially surplus product – from an NZ Inc perspective it’s very efficient.

So what is the sheep and beef industry doing to future proof itself? We’re not actually putting our feet up. In 2003 along with other industry partners and govt, we invested in the Pastoral Greenhouse Gases Research Centre (PGGRC). I won’t labour you with the detail here but essentially it’s been focused on the soil, plant and animal relationship...the very basis of our industry. It’s been focused on understanding the individual parts and how they interact and intersect and the influence on GHG production. The aim to build practical reduction tools that can be applied by farmers – after all it is the farmers who have to date and will in the future make the improvements. Beef + Lamb NZ has invested $6 million since that time and remains committed to ongoing investment to identify intervention tools.

Secondly we’ve been focused on an industry on constantly improving productivity aside from GHG aspects by focusing on the productivity formula, that is production = genetic potential + feeding plus animal health and welfare. Obviously what they eat is just as critical as how much so we have additional focus on pastures and their environmental impact – Pastoral Genomics is another partnership across primary industry focused on this. This additional research and extension strategy has invested a further $120 million since 2003. We’ve also worked with government to start assessing the implications of climate change on farm and delivering that information to farmers – given the extremes of weather we seem to be enduring on either coast there is strong interest from farmers in considering how they may adjust their farming systems to cope long term with changing climate. My observation in coming back into the sheep and beef industry after an absence of about 10 years as that farmers are now firmly focused on these things.

So sheep and beef farmers have made spectacular progress and they are not letting up, they continue to invest and learn.

A third aspect I want to cover is the bigger picture consideration of the NZ economy and our approach to primary sector emissions and the primary sectors exclusion from the ETS. I think it is a pragmatic and sensible policy to leave the sector out. It is a pragmatic avoidance of cutting off one’s nose to spite ones face. I recently heard John Gummer speak about Climate change in a NZ context. For those of you who don’t know him, also known as Lord Deben, he is Chairman of the UK's independent Committee on Climate Change. His points really struck a chord with me.

His points were these: We have some easy things we can do and some hard things. The easy things are related to our unique renewable energy status and the obvious opportunity to further develop that sector; lets hook into those electric cars. He berated the recent purchase on a diesel train engine when an electric one could have been used, he talked about our ability to grow trees and the lateral thought about how we might be able to use timber in our commercial buildings and the credit advantages that would come from that - it’s about thinking outside the square. When he came to the primary sector he recognised both the importance of this sector to the economy and the difficulty of dealing with it. His point was this – by all means look for solutions but frankly that we’d be mugs to kill the goose that currently lays the golden economic egg for us.

Further it’s worth thinking about our place in world food production. Global Food security is an issue and NZ is a global food producer. We are one of the most emissions-efficient producers of beef and lamb. Globally it makes sense for the more emissions efficient to produce food and the likelihood is that if NZ stops producing food, someone else will fill the space, possibly with less emissions efficiency.  

Again it comes back to taking a pragmatic approach that makes sense but at the same time our sector recognising we have to play our part for the privilege – I think we do recognise this.

So how should we approach this issue?  

Well in my view it’s the four legged stool of balancing economic, social, environmental and cultural factors. There is no point winning on one of these legs if it tips the stool over. It’s this old adage of “it’s hard to be green when you’re in the red”. So as we consider the changes that we need to make, we need to consider the social and economic and cultural implications of environmental impositions. This is not only on rural communities but it is on urban communities as well – it is well known now the knock-on impact that significant downturns in the dairy or sheep and beef sector have on businesses in urban centres. Those of you close to the rural sector know that many of our more remote rural communities are fragile and it is an integral fabric of our NZ society and indeed what makes us attractive to the rest of the world; the 3.4 million tourists that visited our shores last year were increasingly seeking out our rural communities as a preferred destination. We need to retain this fabric with measured change.

Another big picture consideration is the integration of climate change initiatives with the wider suite of regulatory aspects affecting farmers in the environmental space. How much consideration is being given to the practices and tools being promoted for better management of water quality or of biodiversity and how this might complement farmers’ efforts to improve their GHG status. Let me draw a very specific example which we have been considering at B+LNZ and was raised by Feds Chairman William Rolleston yesterday. That is, that farmers are increasingly planting to protect water ways or slopes susceptible to runoff, however to receive carbon credits they need a hectare of planting at least 30 metres wide. If we were to have policy settings that added the extra incentive of credits to plantings of smaller areas where they are needed, then I believe this would rapidly increase the rate at which farmers would address these issues.

I’ve given one example of how we might support farmers through change but I want to dwell on this for a few more minutes before drawing to a close.

The first thing is to ensure we understand farmers. The fact that farmers are stewards of the land is an overused term at present and in fact it is being seen as an increasingly defensive statement as challenges come about farmers’ environmental practices. However it is in fact true. It was no better exemplified in a series of in-depth one on one interviews we carried out with 45 farmers as a basis for writing the NZ red meat story. A couple of statements that truly typify farmers’ attitude to the land:

Theme: Land Stewardship
In farmers own words: 
“If you take the land away, what does it leave you with? Nothing. You are the land and the land is you.”
Farmer insight: I feel that I have been given responsibility to look after this land. I know that if I look after the land, it will look after me. I want to leave it in better condition than I found it. The land is a living thing.

It is precious, it is part of them and it is intergenerational. They are not just farming for today they are farming for the future.

Secondly farmers do respond to change – no better typified by the sheep and beef industry productivity changes until now. What are the key ingredients of successful change? It is about clear market signals and it is about confidence that they can make change and the change they make will bring about the desired result. It is about the ability to test and try on a smaller scale to grow this confidence in scaling up. It is knowing that they will have the support alongside to help them through this change. It is also about being able to measure the impact of change and this is where I see we have a major challenge with GHG management changes.

Another aspect is to remember a farmer isn’t an individual, they are often a husband and wife team, often a family and they live in a community and they have a number of confidants who they look to for advice, guidance and reassurance. It is about understanding the wider rural network that influences change.It is important to remember too that no one farmer is the same, but there are a spread of demographics and business life cycle stages around each issue that farmers face. Let’s take for example farmers’ approach to the climate change issue. There will be farmers that are ahead of the market and the research fraternity having already dealt with these issues. There will be farmers who are starting to make their plans and just need reassurance they are on the right track. There will be a group that know they have to do something but frankly don’t know where to start. There will be others who are disinterested or who hope the whole thing will go away or figure they will retire and sell the farm before having to do anything. It’s important that we spend the time to understand the farmer perspective and take this into consideration as we seek to support change.

Fourthly and lastly do not load change with cost especially administrative cost. We’ve recently done some analysis on farmer profitability. Over a 10 year period, 2007-2017 lamb and beef prices have continued to trend upwards in real terms but farmer profitability has stayed flat. The key aspect has been farm working expenses that have risen 29% through that time; compliance related costs are a significant part of that as are standing charges such as rates. However what is not captured is farmers’ time and there is an increasing volume of derision that their time is being spent in the office at the cost of time in the field. And increasingly that time is compliance related rather than value added. So you want to encourage farmer change, avoid the administration and maximise the time the farmer can spend implementing.

So to conclude, 4 points:

  1. The sheep and beef sector is ahead of the game GHG wise
  2. However we are continuing to invest to ensure future progress
  3. The reasons are compelling for sheep and beef farmers to remain outside the ETS
  4. Farmers are already motivated to change, protect and enhance their environment for future generations. By taking the time to understand them we can support more rapid and successful change and meet our GHG targets. 

Thank you