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		Ministry of Agriculture and Forestry Te Manatu Ahuwhenua, Ngaherehere

Issue 5 October 2000

From the Editor I must apologise for the delay in getting this issue of MAF RM Update out to you all. Unfortunately the “Climate Change” issue I had planned for July has been held over until next year, mainly as a result of several Government policy matters waiting to be resolved in this area before a meeting of the parties to the Kyoto Protocol at The Hague in the Netherlands, in November 2000. I am sure you will find this month’s issue on water management both interesting and informative, highlighting the importance of this resource to our land-based sectors. I have also included a summary of a paper presented by Alan Walker from MAF Policy at the New Zealand Institute of Agricultural Science Convention 2000, titled Climate Variability and Risk Management in New Zealand Farming. Last month you would have received a copy of a flier on The Sustainable Farming Fund, a new Government initiative announced on 6 September 2000. For those of you who didn’t see this notice I have included a background summary on the Fund which is administered by MAF. I hope you enjoy this issue. John Vaney Editor

 

In this Issue:

Readers' Views Water Allocation - A National Picture Sustainable Water Allocation Water Resources and Land Use Opportunities MAF Involvement in Resource Management Act Plans to Change Climate Variability and Risk Management in New Zealand Farming : A Policy Perspective The Sustainable Farming Fund PDF Version of this document

Sustainable Water Development

During the 1998/99 drought water sources for several areas of the east coast of both islands were under heavy pressure. Many people in both rural and urban areas started to ask questions about the extent to which lack of water might limit the future opportunities for their communities. Grant McFadden reports on developments in this area.

One farmer put it neatly at a public meeting when he asked, with respect to water, what was the long-term carrying capacity of his district. He was not talking about just livestock carrying capacity, but about the district's capacity to provide for future families at hopefully a better standard of living, while maintaining infrastructure, environmental and recreational standards.

He was asking about the components of sustainable water management. His query emphasises that we need to understand and manage the bundle of issues reflected in the mix of economic, environmental, social and cultural values related to water.

Several of these issues are starting to crop up regularly. They include the following:

• How effective are our planning processes in allocating water in ways which meet communities' balance of objectives in the short and longer term? Is a "first come first served" approach to water consent procedures appropriate?

• Do our water allocation processes and our subsequent individual management of abstracted water provide for an efficient use of this resource? What does efficient mean?

Over the last four years MAF Policy has commissioned work to establish an understanding of the factors involved in the physical efficiency of irrigation uses. Wide promotion of the work is now needed. In many cases it offers win/win situations for both economic and environmental values.

MAF Policy and MfE have a strong water policy programme under way. It will involve many people in assessing possible improvements for our planning, allocation and management processes for water in New Zealand. Questions such as those above will be addressed, along with efforts to define and promote efficiency of water use at all levels.

Christina Robb's article in this issue draws attention to the considerable dominance of irrigation as the principle use (77 percent) of the water allocated in New Zealand. This level is not unusual — Australia and much of the USA have very similar percentage figures.

The high volume usages of agriculture and horticulture, even with 90 percent plus efficient systems, reflect the high evapo-transpiration replacement requirements of actively growing crops in a temperate zone.

For New Zealand a recent MAF Policy calculation shows that the annual additional net return from irrigated land is $800m (1999 farm gate prices) above what land was producing as dry land. Most of this increase comes from the land use change that has become available with irrigation, rather than from the extra volume of production. What this emphasises is that irrigation is no longer just about dealing with drought insurance. Today, irrigation is about farming systems which have more control of production factors and have the capability to produce crop and animal products to consumer quality specifications under contract for delivery on a specific date.

Centre pivot irrigation system
photo: Neal Borrie, Lincoln Environmental

Irrigation is not the only water use with economic significance. The dollars associated with volumetrically smaller urban needs may be much greater. A recent Australian conference paper indicated their cities are paying in the order of $900/mega litre for receiving adequate pure and filtered water. This is almost 10 times as much as their farmers and horticulturists in rural areas are prepared to pay for access to water for production purposes. This huge differential in ability to pay says something about where water will end up if it becomes genuinely short.

While nobody questions the total dependence we all have on continued adequate supplies of quality water, surprisingly there is not a lot of hard data around on the social and infrastructural components of sustainable water management. It is an area we need to understand better because communities making decisions about investment in water programmes must be confident they are going to end up with the services, the structure and the interactions of people which really work. It is interesting to note that one of the Canterbury groups looking at water enhancement opportunities for their area are placing a lot of emphasis on this. They have started consulting widely with both rural and urban people about the detail of their expectations with water in their community. The group has no preconceived engineering concepts in mind but will use the feedback on the full range of expectations and values that people hold for their area as the basis to determine the brief for any water re-distribution programme. It's already evident their final brief will cover the whole range of economic, social and environment issues.

The environmental component of sustainable water management has been receiving a great deal of attention and certainly the majority of water research and science effort in the last few years. The interactions of people pressures with water systems are complex but our knowledge of the interactions and how to manage them is growing very rapidly. Often sophisticated modelling tools are involved and, to date, our technical skills in this area are internationally competitive, but ongoing investment is required.

An example of what happens when investment in research and development drops off can be seen in the irrigation area. Following restructuring of various Government agencies, virtually no field research in irrigation occurred in New Zealand from the late 1980s to the mid-1990s.

At a recent large international irrigation conference in Melbourne it was evident that New Zealand thinking, development and application of irrigation management and technology is still in line with other leading agricultural nations _ but only just. We have been in serious danger of slipping behind our competitors when arguably we could have had more people at the leading edge of effective and efficient irrigation management.

 

Border dyke irrigation system
photo: Colin Reid

Finally, to come back to the farmer's concerns raised at the beginning of this article about the "carrying capacity of families" for his district and his implication that water may be a seriously limiting factor. If one were to cut through the morass of data and myth about water and were to offer a subjective but considered opinion on his concerns, it could include the following points:

• Apparent shortages of allocatable water in many areas at present may be viewed as a shorter-term problem that is often related to allocation methodology and the reliability with which the allocatable resource can be defined.
• Water quality issues are related to people pressures and intensification of resource use and tend to be concentrated towards the lower end of catchments. They can be managed but require continued attention to existing and developing good practices.
• For most of New Zealand, real water shortages are in the category of longer-term problems. There are very few genuinely water short areas in New Zealand when calculated on an annual basis. What happens is that water is often not where it is needed at the right time. The re-distribution of water to get a better temporal match for supply and demand is generally not limited by engineering constraints, rather it is limited primarily by economic issues but also by social and cultural concerns. These are areas people can address and so have some real influence on what constitutes sustainable water management for their district.

Readers' Views

Issue 4 April 2000 - Balancing Financial Sustainability with Environmental and Social Sustainability

I found Nicola Shadbolt's article fascinating - but lacking in its climax. So what did the research determine? Is there somewhere we can go to find out?

Garth Cumberland
Garth Cumberland Forestry IMS Ltd
Grassington Farm, Rural Post, Manurewa, 30 April 2000

Nicola Shadbolt replies:

Thank you for your letter, it is always pleasing to hear from another mind who can be fascinated by this issue. I am sorry if the article I wrote did not have a strong enough climax or an obvious conclusion. The research on the application of the method is ongoing so, perhaps, I was loath to be too definitive about the results. Over time, as we work with more and more farming businesses, we will develop a stronger and stronger sense of what are the key drivers of sustainable business growth. To date the results indicate that there are two drivers that dominate, the first being operating profit (or EFS) and the second being the Extracted Cost of Equity. That is to say the profit the business can generate and the requirement of the farming family for cash both have a strong and opposite effect on sustainable business growth.

The operating profit, both in its fairly basic commonlyused form and once it has been adjusted for physical resource depletion or development, is a very important determinant of business health. The extracted cost of equity is a reflection of both lifecycle and lifestyle expectations of the family and, in our research so far, plays a more important role in sustainable business growth than the cost of debt.

I am often asked what the target should be for sustainable business growth. Unlike operating profit there is not an amount per hectare that springs to mind. Waters are well muddied by the time financier and family expectations come into the equation. Instead I usually say it should at least be above zero for those with a relatively short time frame left in the business but should be a greater amount if the family has a requirement for business growth to finance succession and retirement plans or reckons to be in business for some time yet. A useful approach is to set the sustainable business growth target as a percentage of Gross Farm Income each year.

An important requirement of this measure is that it should always be calculated over a number of years. It is the trends in both operating profit and extracted cost of capital that need to be analysed to determine how well the business is managing sustainable business growth.

The Sustainable Business Growth approach is now being tested in a number of countries overseas. The results will enable us to know how easily it can be used under quite varying farming environments. We are always keen to do further work with more New Zealand farm businesses too. There is a need to refine the sustainable cost adjustment techniques by working with individual farms. Some of the databases we have worked with so far did not have sufficient detail for us to adequately determine the physical resource changes.

If you, or a group of like-minded farmers, are keen to be involved further or would like more information on the approach used please feel free to contact me at Massey University at the above address or email me at: N.M.Shadbolt@massey.ac.nz

Nicola M Shadbolt
College of Sciences, Massey University
Private Bag 11222, Palmerston North,
25 September 2000

 

Contact for Enquiries

Amber Duncalfe
Editor - RM Update
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND

Tel: +64 4 894 0710
Fax: +64 4 894 0745
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