- 1.1 Purpose of the Study
- 1.2 Scope of the Study
- 1.3 Taupo District Overview
- 1.4 Economic Comparisons
- 1.5 Regional Economic Impact
- 1.6 Demographic Comparison
- 1.7 Environmental Comparisons
- 1.8 Iwi Considerations
- 1.9 Managing Effects
- 1.10 Environmental Impact Assessment (EIA)
- 1.11 Further Recommendations
1.0 EXECUTIVE SUMMARY
1.1 Purpose of the Study
This study investigates the economic, social and environmental impacts of large-scale dairy conversions in the Taupo District.
1.2 Scope of the Study
The study was based around detailed surveying and monitoring of 30 farmers within the Taupo District. Half of the farmers surveyed were existing sheep and beef farmers with the balance being dairy farmers. The survey focused on collection of data on economic performance, land use, farm management practices and social servicing issues related to the farmers.
Concurrent with the farmer surveys consultation occurred with local Iwi, Environment Waikato, Taupo District Council, New Zealand Dairy Group, NIWA, Local Health Authorities, Electrical Supply Authorities, stock firms and others involved in servicing the rural sector.
Detailed model budgets were developed for sheep and beef, and dairy farm situations. In addition to this, input-output analysis was used to determine regional economic impacts of dairy farm conversions.
Environmental aspects were considered and a methodology has been developed for determining environmental impacts at a later stage.
The intention of this study was to provide an overview of issues. It was not intended to be a detailed environmental, social or economic impact assessment.
1.3 Taupo District Overview
The Taupo District covers an area of 6,970 square kilometres or 697,000 hectares. The dominant feature of the landscape is Lake Taupo which occupies 616 square kilometres.
Of the land used in primary industries, 207,302 hectares (48%) is made up of plantation forestry and 140,169 hectares (33%) is grassland.
The geology of the district is inextricably tied to the history of volcanic activity in the area. The pumice soils of the area lack some nutrients and essential trace elements. Regular applications of fertilisers and careful farm management practices are necessary to maintain pasture growth, limit erosion and prevent herbicide and nutrient run-off.
The number of farms in Taupo has decreased from 578 in 1991 to 532 in 1994. The number of dairy farms is estimated to have grown from 67 in 1991 to 102 in 1996. Total milking cows have grown in number from 15,766 in 1991 to over 32,000 in 1996-97. This represents less than 1% of the total New Zealand dairy industry.
Beef cattle numbers grew from 76,591 in 1991 to 100,049 in 1995.
The casualty has been the sheep industry which has seen total sheep numbers drop from 780,854 in 1991 to 727,324 in 1995.
This has largely been driven by declining returns for sheep and stronger returns from the dairy sector.
Dairy farming was, in 1991, almost exclusively located in the north of Taupo District around Mangakino to Whakamaru. Most conversions from 1991 onwards have occurred in the Whakamaru - Tihoi, Western Bays area with some conversions occurring around Oruanui (SH1 north of Taupo), and Rangitikei (Napier - Taupo Road).
The peak of conversions was in 1996, with 15 conversions occurring then. The number has dropped to three this season (1997). The drop has been attributed primarily to the New Zealand Dairy Group requirement for new suppliers to purchase supplier shares equivalent to $2/kg milksolids. This equates to approximately $260,000 for a typical conversion in the district.
With conversion costs amounting to approximately $670,000 for a 213 hectare conversion, the extra capital share costs significantly increase conversion costs.
Outside of pastoral farming, other significant contributors to the economy of the district are tourism, forestry and electricity generation.
Lake Taupo and the mountains of the central volcanic plateau are a significant attraction for tourism and recreational activities. Preservation of the water quality of Lake Taupo is seen as the most significant resource management issue for the district.
The majority of Taupo’s roads (500 km) are sealed and are considered to be adequate for current traffic levels, but may be inadequate for continued use by heavy milk tankers.
Electricity is supplied by three electricity supply companies, however 3 phase power supply is not currently present in all districts. The main commercial centres servicing the area are Taupo, Rotorua and Tokoroa. Most purchases can be accessed in these centres.
Servicing industries and infrastructure are considered adequate for current requirements.
Surface water quality is regularly monitored by Environment Waikato. Groundwater quality is generally unknown with little data available.
1.4 Economic Comparisons
Key comparisons are summarised in table 1.4.1(a).
Table 1.4.1 (a): Key comparisons between sheep and beef and dairying
Sheep & Beef |
Dairying |
|
| Area (ha) | 285 | 213 |
| Stocking rate (su/ha) | 11.6 | 18.8 |
| Gross Farm Revenue ($) | 148,747 | 474,852 |
| Cash Farm Expenditure ($) | 97,417 | 275,513 |
| Drawings ($) | 21,480 | 48,496 |
| Debt Servicing ($) | 19,864 | 130,164 |
| Disposable Profit ($) | 2,717 | 20,388 |
| Off-Farm Income ($) | 21,548 | 8,022 |
| Net - Cash Surplus ($) | 16,564 | 15,030 |
Gross farm revenue is 219% higher on the surveyed dairy farms. Cash farm expenditure is 183% higher, with the key contributors to this being higher wages, animal health, feed, fertiliser, vehicles and repairs and maintenance costs.
Drawings and debt servicing are significantly higher on dairy farms. Higher debt servicing reflects the investment in conversion costs.
Substantial changes occur to farm valuations as summarised in table 1.4.1 (b).
Table 1.4.1(b): Valuation Comparisons
| Sheep & Beef ($/ha) | Dairy ($/ha) |
Variance ($/ha) |
|
| Land | 3,844 | 8,931 | 5,087 |
| Buildings | 1,080 | 2,541 | 1,461 |
| Total | 4,924 | 11,472 | 6,548 |
Property rates subsequently increase from approximately $3000 on sheep and beef farms to $7500 to $8000 on dairy farms on similar sized farms.
By far the majority of farms are in European title and run by partnerships.
Dairy farms surveyed employed more labour, with wages of $13,821 on sheep farms and $37,621 on dairy units. Interestingly the increased labour use is not reflected in population statistics, probably because only 35 conversions have occurred across the district in the last five years.
1.5 Regional Economic Impact
The conversion of 6,400 hectares in land to dairying has created $14.5m in extra total output, $5.25m in extra value added, $2.3m in extra household income and 112 extra jobs. Approximately 50% of the extra revenue and jobs are on the land and 50% in other sectors of the economy. None of this gain is due to processing agricultural production, since this takes place outside the Taupo economy.
The development of two scenarios of future growth in dairying are also developed in section 9.1.
1.6 Demographic Comparison
Population has declined slightly in two of the three census areas covering the area of dairy conversions. The third area has seen a 21% population increase.
Data obtained from the farmer surveys indicates a significant increase in population associated with dairy farming. This is not reflected in census data and requires more research to clarify exact reasons behind this.
Dairy farmers generally perceived a good community spirit (more than sheep and beef farmers did). Dairy farm conversion had good support even among sheep and beef farmers.
1.7 Environmental Comparisons
There is a large difference in the fertiliser practices of sheep and beef farmers and dairy farmers. Average annual application of nitrogen fertilisers on dairy farms was more than ten times that applied to drystock farms. Average annual phosphorus application was three times greater on dairy farms.
This does however include capital phosphorus applications required to raise base levels. This reflects the need for attaining high target levels on pumice soils to achieve similar responses in pasture growth to volcanic loams.
The vast majority of dairy farmers surveyed disposed of dairy shed effluent via spray irrigation back onto pasture. Given the high rate of nutrient input via fertilisers and effluent, the major potential impact of dairying is in nutrient leaching to ground water and nutrient run-off to surface waters.
Dairy farms’ water use on average is 83,000 litres/day compared to dry stock use of 14,000 litres/day.
Only 14% of dairy farmers allow access to waterways compared to two thirds of dry stock farmers. Riparian management is however greater among drystock farmers who reported a 73% level of riparian planting compared to 40% of dairy farmers.
Erosion problems exist on 40% of all farms.
1.8 Iwi Considerations
Maori groups are significant landholders within the Taupo District with approximately 18,230 ha in grass and even more in forestry. Potential dairy cow numbers based on existing plans, amount to a rise from approximately 2000 cows now to 9,500 to 10,000 cows by the year 2000 on Maori owned land.
Maori groups have concerns about possible negative environmental impacts of dairy conversions, particularly on water quality.
1.9 Managing Effects
Adverse effects are possible in any situation where significant change is occurring.
The key to successfully managing effects revolves around four key points.
- anticipation and planning
- monitoring to accurately assess effects
- education of land and resource users
- community participation in resource management
The first part of the planning process is already underway with studies such as this and the Rural Sector Review completed last year for Taupo District Council.
The need exists to combine the findings of these reports with the proposed environmental impact assessment to come up with actions to incorporate in annual plans of both Taupo District Council and Environment Waikato.
Given that dairy farming in the Taupo District represents less than 1% of national production, and that Lake Taupo is of national and international importance, serious consideration must be given to increased monitoring and modelling of impacts, and a pro-active stance of landowner education/advice to mitigate or avoid adverse impacts.
Additional areas that the community may be able to manage to maximise benefits include:
- employment training
- retailer and service provider inputs
- Council services
1.10 Environmental Impact Assessment (EIA)
Two previous studies (EIA’s) have been conducted on dairy farming in New Zealand in Otago and Southland.
Aspects included in these were contaminant budgets, reviews of effluent treatment systems and water quality assessments.
Assessments should be made of land resources available in the district which are suited to dairy farm conversion.
Collection of base data to develop a clear profile of dairy conversions over time should be done. Information on number, location, size and timing of conversion needs to be done.
Social impacts need closer monitoring, probably through the development of key informant interviews, in a number of sectors (eg education, health, business, and government services).
1.11 Further Recommendations
Key recommendations for further work is:
- clear monitoring for water quality and quantity issues
- regular collection of accurate statistical data on land use in the district
- completion of a cost-benefit analysis on dairy conversions
- on-site research on nutrient and dairy shed effluent leaching
Contact for Enquiries
Rural Affairs Coordinator
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0675
Fax: +64 4 4 894 0745
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