$86 million ETS bill risks Government ‘being out of touch’ with farmers

Federated Farmers Media Release 6 April 2010

From 1 July 2010, Federated Farmers has estimated the Emissions Trading Scheme (ETS) will directly cost pastoral agriculture almost $86 million in its first 12 months of operation.  Indirect costs could see the cost impact upon pastoral agriculture almost double.
“Given the impact the ETS will have on fuel and electricity from 1 July, we’ve used data from the Ministry of Agriculture (MAF) and some additional research, to estimate the ETS will strip around $39 million out of New Zealand’s sheep, beef, dairy and arable farms,” says Federated Farmers President, Don Nicolson.
“That’s being conservative, because processors too will face increased costs from 1 July that will see their costs grow by a further $48 million.  This will be passed through to farmers so the ETS’s direct impact on just fuel and electricity alone will be around $86 million.
“Scarily, it doesn’t reflect costs associated with fibre or any costs that horticulture and aquaculture will face.  Nor does the $86 million figure take into account the inevitable cascade effect that the ETS will have on virtually all farm inputs.
“In 2009, it was estimated New Zealand agricultural sector faced input costs of around $12.5 billion, not including wages, tax or interest.  Even if the ETS ‘only’ directly or indirectly increased these costs by one percent for example, that strips out a further $125 million. 
“The direct and cascade effect on farm inputs needs to be independently modelled, but it puts to bed the lie that agriculture is getting a free ride. 
“It saddened me yesterday to read that the Minister of Agriculture had claimed dairy farmers will ‘only’ be $35 million worse off from 2015.  That being 2.5 cents per kilogram of milksolids.  But we’re not talking in five years time, we’re talking in just seven weeks.
“Using MAF’s data we’ve estimated that the ETS from 1 July, will strip around $17 million out of dairy farm incomes just for direct fuel and electricity costs.  Hard pressed sheep and beef farmers will lose a further $16 million while arable farmers will be face added costs near to $5 million.
“The ETS represents a massive erosion to farm-gate profitability. It’s no wonder farmers are riled and this is why our current Government risks being out of touch with farmers.
“So why are we jumping into the ETS when the European ETS doesn’t apply to methane, nitrous oxide or even fluorocarbons.  Sectorally, Europe’s ETS excludes all emissions arising from transport (21 percent), households and small business (17 percent), agriculture (10 percent) and construction and waste (9 percent). 
“Europe, where scaremongers predict a ‘consumer backlash’ would supposedly come, omits 57 percent of its own emissions.  Yet Europe isn’t where our future as a globally efficient food exporter lies.  That future lies in Asia, where they value food quality and safety over gestures. 
“But given significant backsliding internationally, the Government has signalled it may suspend agriculture’s enrolment.  Talk is cheap unless Federated Farmers sees legislation that puts the rhetoric in to law,” Mr Nicolson concluded.
Main source of data - MAF Pastoral Monitoring Reports
For further information contact:
Don Nicolson, Federated Farmers President, 027 226 6331