A cash cow of a season for farmers masks an uncertain future

Exporting lamb, meat and milk in 2022 looks positive despite the pandemic. Rising numbers of cows and a stable sheep population suggest New Zealand’s agricultural export machine is showing no signs of slowing down. The government wants to steer this machine in a different direction. In this article we examine cattle and sheep numbers in New Zealand, influences on demand, and what this means for New Zealand’s emission targets.

The provisional agricultural production statistics for 2021 give us insight into the productivity of New Zealand’s farms and their responses to international export demand. These provisional figures measure up to June, so do not reflect impacts of the Delta lockdowns.

Total sheep and cow numbers, in broad terms, tell the story of the changing face of Aotearoa’s primary industries over almost 20 years.

The first decade (2002-12) shows the nosedive of our famous 40 million sheep population as dairy takes centre stage as New Zealand’s flagship export. Total beef cattle numbers steadily decline over this dairy boom. Meat is back on the menu in the following decade as beef cattle numbers rise back up to 2002 levels over four years, dairy cow numbers peak then plateau, and the decline of sheep numbers slows as New Zealand lamb maintains its popularity on the world’s dinner plates. Looking at last year’s livestock numbers, it is hard to imagine the world is in the throes of a pandemic. 2021 shows:

• Total beef cattle increasing 4 percent from 2020 to 4 million
• Total dairy cattle increasing 1 percent to 6.3 million (the first increase since 2016)
• Total sheep population unchanged at 26 million.

Beef and Lamb New Zealand’s New Season Outlook 2021-22 forecasts that total farm revenue will be up 4.3 percent per farm and average farm profit before tax will increase by 9 percent to 143,500 NZD.

• This increase is driven mostly by a 7.5 percent increase in sheep farm revenue • Cattle revenue will decrease 2.5 percent per farm
• Wool revenue will increase by 15 percent, however this will barely cover increasing shearing costs
• Total expenditure will increase by 3 percent per farm as most input costs have increased, in particular fertiliser.

Beef and Lamb NZ explain that New Zealand’s meat supply has held strong while the global meat supply has diminished due to the pandemic and African Swine Fever limits protein production in China. Australia’s dairy and meat industry has been hit harder than New Zealand’s, which leaves Chinese and United States markets open for Kiwi product. Demand for high quality meat cuts is forecasted to increase in the USA and Europe which will maintain meat demand against their slower growing populations. In lower-income countries, demand for New Zealand meat and dairy is forecast to increase as population and average incomes increase.

Fonterra has posted their highest farmgate milk price on record - an $8.7 midpoint paid to farmers per kg of milk solids. Dairy New Zealand statistics show increasing cow productivity. The average milk production per cow increased 3.1 percent (397 kg per cow) in the 2020-21 period.

These conditions have offset the rising costs of international freight congestion, and a strengthening New Zealand dollar, on animal product export profits. Taken altogether, things don’t look too bad for farming animals in New Zealand - even, relatively, for wool producers. So why is there a feeling of unease from animal farmers?

The Ministry for Primary Industries’ (MPI) Fit for a Better World Roadmap outlines their target for an additional $10 billion in export earnings, and a reduction in methane to 10 percent below 2017 levels by 2030. By 2050 they aim for an additional $44 billion in export earnings and a methane reduction of 24-47 percent below 2017 levels. The following graphs examine emissions of primary stock animals:

This dataset ends at 2018 so any impacts of recent innovation and dairy population fluctuations aren’t captured. We focus on carbon-equivalent emissions from enteric fermentation (methane burps) and manure which can be directly accountable to the number of animals. The indication is clear; dairy cattle stock produce the most greenhouse gases and also produce more gases per animal than beef or sheep. We can see emissions per dairy cow also increase over time.

So celebrations of a lucrative export year are made bittersweet for farmers as the writing on the wall indicates heavy regulation is coming if MPI wants to meet their targets. As long as export prices stay high, the incentive will remain for farmers to keep more hooves on the ground. Total emissions from the agricultural sector haven’t been measured comprehensively since 2018. We don’t know if a sector-wide rollout of new technology that reduces methane output (such as feed additives and vaccines) will create enough impact on total emissions if stock animal populations increase. What we can say for certain is that less stock will produce less methane.

Beef and Lamb NZ indicate that morale is low among farmers despite the positive export outlook. Expenses are rising. Te Mana o Te Wai policy remains vague, but indicates a lot of work is on the horizon for farmers and their regional councils to make water management plans function. MPI wants more exports but less methane, which might mean priority support for other industries such as horticulture and forestry. After significant environmental work already undertaken, livestock farms still might be faced with the decision to switch to a different product which is by no means a simple or cheap exercise.

2030 is eight years away. A lot can happen in this time. For now, farmers should enjoy their export successes and maintain hope that a balance between livestock profits and methane levels can be achieved.