MAF Policy News
Issue 7, December 2007
ISSN 1177-701X
In this issue you can read about:
Climate Change Response (Emissions Trading) Amendment Bill introduced to Parliament
The Climate Change Response (Emissions Trading) Amendment Bill has been introduced to Parliament.
The legislation includes default provisions for all sectors. Essential principals of the Emissions Trading Scheme's (ETS) design are that it applies fairly across all sectors and to all greenhouse gases, and that there is legislative certainty to all sectors that they will, in the absence of further legislative action, be covered by the scheme.
The government believes that it is important that the forestry sector - which is entering the scheme in 2008 - has the assurance that they will not be alone in having obligations under the scheme.
The inclusion of the default provisions in no way negates the government's commitment to ongoing engagement with stakeholders.
The government has yet to make final decisions on some important issues. For agriculture, these issues include the point of obligation, minimum thresholds to participate in the scheme, and the method of allocating free emission units to the sector. For forestry, the government is still considering proposals from both Maori and/or the leadership group covering issues such as options for allocation of units and the inclusion of pre-1990 indigenous forest in the ETS.
While some preferred options have been identified, the government has an open mind and is committed to fully engaging with stakeholders on these issues over the next year.
A joint industry/government partnership Peak Group plays a key role in representing stakeholders' views as well as in building a partnership with the sector in order to respond to the challenges of climate change.
A separate technical working group will be established on the agricultural component of New Zealand's ETS. It will report its findings in October 2008.
More information
- Read the ministerial announcement about the legislation
- Read the Climate Change (Emissions Trading and Renewable Preference) Bill
- Read the government's response to feedback from engagement
2006/07 challenging for the pastoral sector
Following a tough year in 2006/07, financial prospects for dairy and deer farmers are good for 2007/08, according to MAF's new annual Pastoral Monitoring Report.
The deer sectors' profitability improved in 2006/07, thanks to higher venison and velvet prices, after a string of difficult seasons that saw many farmers leave the industry. The outlook for 2007/08 is for further improvement in deer sector incomes on the back of improving prices.
In the dairy sector, farm operating surpluses fell in 2006/07, following three years where the profit available for reinvesting in farms was barely adequate. Dairy incomes are expected to recover dramatically in 2007/08 on the basis of Fonterra's forecast payout of $6.40 per kilogram of milksolids - a 44 percent increase in one year.
Low prices for lamb and wool and challenging seasonal conditions saw incomes for the sheep and beef sector deteriorate in 2006/07 from their already low levels in 2005/06. Sheep and beef farmers' confidence was also knocked by the high exchange rate. Unless there is a rise from the forecast lamb and wool prices there is little prospect of incomes improving in 2007/08.
The report contains analysis and commentary on trends and issues of significance to the whole sector, including:
- comparative levels of profitability between the dairy, deer and sheep and beef sectors and the effect on land use change;
- farmers' capacity for adaptation;
- adverse events in recent times and the recently developed framework for government support;
- labour issues in the pastoral sector.
The Pastoral Monitoring Report replaces three reports previously published by MAF: Dairy Monitoring Report, Sheep and Beef Monitoring Report and Deer Monitoring Report.
More information
- Read the Pastoral Monitoring Report
- To request a copy email policy.publications@maf.govt.nz
MAF maps future challenges for primary sectors
MAF's new publication Future Focus: Signposts to Success for New Zealand's Primary Industries identifies six global drivers of change likely to impact on New Zealand's primary sectors over the next 10 to 15 years:
- global warming, climate change, and extreme weather;
- energy cost and supply;
- geopolitical power shifts, and international trade and investment;
- ecosystem degradation, and water quality and availability;
- demographic shifts;
- technological advances.
Among the future threats identified are: increased biosecurity risk due to climate change, the end of cheap oil, and emerging tensions over water supply. Possible opportunities canvassed include sustainability branding, emission mitigation technologies, and innovative foods.
While the drivers of change may be unambiguous, the way they will play out is unpredictable - in part because of the complexity of possible interactions between them.
Future Focus distils the findings of a strategic foresight project carried out by MAF this year, and is intended to be a catalyst for further exploration of ways to respond to the challenges and leverage the opportunities on the strategic horizon. It is not an exhaustive or exact survey, but aims to stimulate discussion, and to inform an appreciation of the emerging context of future strategic choices.
MAF welcomes your comments and suggestions for further development of this work.
More information
- Read Future Focus
- To request a print copy email policy.publications@maf.govt.nz
- Please email your comments about this publication to Micaela Buckley (micaela.buckley@maf.govt.nz)
Review of the Dairy Industry Restructuring (Raw Milk) Regulations
MAF Policy is undertaking a comprehensive review of the Dairy Industry Restructuring (Raw Milk) Regulations. The Regulations require Fonterra to sell a certain quantity of raw milk to other dairy processors, at a regulated price.
The discussion document, Review of the Dairy Industry Restructuring (Raw Milk) Regulations: Clarifying industry concerns and the Regulations' intent, outlines the original intentions of the Raw Milk Regulations and our understanding of concerns about the Regulations.
MAF welcomes written feedback in response to the discussion document and the questions in it. Submissions close 14 December 2007.
More information
- Find out more about the review and how to make a submission
- Read the discussion document
Community Irrigation Fund applications open
Applications are now open for the first round of funding from the new Community Irrigation Fund.
The Community Irrigation Fund helps promoters of community water storage and irrigation schemes overcome the high costs of raising investor and community support for their schemes. It aims to build resilience in agricultural producers and rural communities, and ensure their long-term economic growth, within sustainable environmental limits, by reducing the risks they face from water shortages caused by climate change.
Applicants can receive financial support for up to 50 percent of the cash costs of raising investor and community support for community schemes, for up to four years.
More information
- Find out more about the fund and how to apply
Funding rural projects for sustainable futures
Applications for the Sustainable Farming Fund (SFF) close on Monday 11 February 2008. Each year the SFF provides up to $9.5 million in grants for projects that contribute to the on-going economic, environmental, and social wellbeing of the country's primary producers.
Applications must be made on the SFF application forms, and submitted by email.
In the 2007 funding round, SFF funded 68 projects across the horticultural, agricultural and forestry sectors, including:
- developing sustainable integrated pest management systems in arable crops;
- using maize to manage dairy shed effluent;
- investigating the non-chemical control of kumara rots;
- developing sustainable controls for varroa bee mite;
- producing an on-line pest and disease database for forestry.
More information
- Find out more about SFF-funded projects
- Download the application forms
Economic impact of 2007 East Coast drought
The 2007 East Coast drought has had a severe impact on the East Coast region. A report MAF commissioned, Economic Impact of the 2007 East Coast Drought on the Sheep and Beef Sector, provides an objective assessment of the likely impact of the drought on the sector, the wider regional economy and the national economy.
The report estimates that the East Coast sheep and beef sector GDP will decline by $161 million over the three years to the end of 2008/09 as a result of the drought. This is a 20 percent decline from the 2005/06 year.
More information
- Read the report (PDF file 275 KB)
Otago and Southland wood availability forecasts for the period 2007-2040
MAF's recently released wood availability forecasts for the Otago and Southland regions show that the availability of radiata pine and Douglas-fir, from the Otago/Southland estate, will remain relatively static over the next decade (2007-2015).
Looking further out, the forecasts show that an increase in wood supply is possible after 2015, with substantial increases in wood availability towards 2020. The actual timing of the harvest from these forests will depend on market conditions and the decisions of a large number of small-scale owners.
MAF will publish an Otago and Southland forest industry report in 2008, along with reports for other regions.
More information
• Read the report
Roundwood removals from New Zealand forests for the year ended 31 March 2007
Our latest Statistical Release shows an estimated 20.0 million cubic metres of roundwood was harvested from New Zealand forests during the year ended March 2007. This is a 6.6 percent rise on the estimated 18.8 million cubic metres of removals during the year ended March 2006, and the first rise in roundwood removals since 2003.
More information
- Read the release
New guide for sustainable indigenous forest management
The Indigenous Forestry Unit has released a new guide to help owners of indigenous forest landholdings understand the sustainable forest management (SFM) provisions of the Forests Act.
It outlines what is involved in preparing:
- a draft SFM Plan;
- an SFM Permit application;
- an Annual Logging Plan.
More information
- Read the guide
- Find out more about more about the Indigenous Forestry Unit
Research and development tax credit: What you need to know from the IRD
Research and development tax credit legislation
The new research and development (R&D) tax credit is included in the Taxation (Annual Rates, Business Taxation, KiwiSaver and Remedial Matters) Bill, which is due to be enacted in December. Until this happens, Inland Revenue is unable to give any detailed information about the new regime.
As soon as the legislation comes into effect, Inland Revenue will release the draft Research & Development Tax Credit Guide for consultation on its website. Stakeholders will be alerted via an email including a website link and instructions for making submissions. The consultation period will end on 8 February 2008 and outcomes will be posted on the R&D web page - see link at the end of this article.
A more substantial description of the R&D tax credit will be included in the next edition of MAF Policy News, in the mean time, here is a high-level overview:
Introducing the R&D tax credit
Businesses doing research and development (R&D) may be able to claim a 15 percent tax credit from the start of the 2008/09 income tax year. The R&D must meet three key eligibility tests relating to the business itself, the activity and the expenditure.
Who is eligible?
The business must operate in New Zealand. R&D activities must be related to business activities. The business must control the R&D, bear the financial risk, and own the results.
What R&D is eligible?
To be eligible, research must be systematic, investigative and experimental (SIE) and follow a process that includes formulating an hypothesis, testing it and observing and evaluating the results. It must also seek to "resolve scientific or technological uncertainty" or have an "appreciable element of novelty".
What expenditure is eligible?
Expenditure must meet a number of criteria and not be specifically excluded.
How to claim
The credit is claimed in the annual income tax return. A supporting R&D tax credit detailed statement must be filed on line, within 30 days of the business's income tax due date.
More information
For more information seek professional advice or go to IRD's website
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