Beef Production Under a Nitrogen Cap

October 2012

Mike and Sharon Barton are running their beef operation under a nitrogen cap by Lake Taupo

What are the implications of a Nitrogen cap on a farm business in the Taupo catchment? The process of coming to terms with the N cap has consumed Mike Barton and his wife Sharon for close to 10 years.

Mike Barton lives on the north western side of Lake Taupo where he and his wife own a 142 ha beef finishing property.

Mike has a background in tertiary education. His most recent qualification is a Masters of Business Administration degree with a research project on ‘The Implications of a Nitrogen Cap on Farm Businesses in the Taupo Catchment’.

Mike was Chairman of the Taupo Lake Care Group (TLC) from 2006 to 2009. TLC represented farmers in the process of developing the lake water quality legislation (RPV5) with Waikato Regional Council, Taupo District Council, the Ministry for the Environment, Tuwharetoa, and all affected stake holders.

Mike says research in 2000 predicted the lake’s future water quality problems. Although only 20% of the catchment was used for agriculture, 93% of the manageable nitrogen entering the lake was from agriculture (urban use accounted for 7%).

The science says native forest and tussock leaches 3kg per ha per annum in pumice soils around Taupo. (Mike says this level is likely to also apply to free draining soils like Canterbury Plains).

Sheep and beef farms leach around 17kg per ha per annum. Dairy farms leach around 55kg per ha plus.

The Waikato Regional Council proposed a variation to protect water quality in Lake Taupo by managing land use and nutrient discharges – this was called Variation 5.

The Environment Court confirmed the provisions of this variation on Friday, 17 June 2011. The variation became operative on Thursday, 7 July 2011. The goal is a 20% nitrogen reduction by 2018.

In response to the proposed changes farmers formed a corporation and went to court to challenge the changes with Environment Waikato. Mike says that was hugely expensive and not a good way to go. TLC has also participated in modelling studies to get more information to show exactly where nitrogen leaks were occurring in the system. Mike says it took many years of discussion between Environment Waikato and the affected farmers to get to the stage they are today.

He says the N cap is not a process of fixing a problem – but stopping a problem from starting. He says generally Lake Taupo is in good condition.

What’s in place now is regulatory program in which Lake Taupo-area landowners follow a nitrogen discharge allowance based on current land use. All farmers in the catchment are required to have an N cap on their properties and need a resource consent to continue farming. They submit nitrogen management plans annually.

Landcare Research has established a permanent deep drainage lysimeter facility on the farm. The lysimeter is used to measure the movement of nitrates through the soil.

The Barton’s farm has also been the site of a four year trial by AgResearch into methods of mitigating nitrogen leaching from beef farming systems. The trial looked a range of scenarios including reducing regrassing (a big source of N), running smaller stock to lessen the volume of urine and diuretics (salt) to dilute the urine

The results of that study have yet to be written up but the lysimeter studies on the Barton’s farm, where scientists simulated the diuretic effect of salt (more dilute urine applied, compared to Control), showed there was a marked reduction in N leaching.

Similarly, where DCD (a nitrogen inhibitor) was put on the lysimeters with urine, there was again a reduction in N leaching. These findings are in line with other New Zealand research. Also, there has been one recent AgResearch report showing a 40% reduction in N leaching and 43% reduction in nitrous oxide emissions where cows were given DCD in the water trough.

The trials using younger stock compared to older animals showed good results but the scientists say that is not likely to be through the urine per se, but due to a higher stocking density of small, compared to large animals, at the same stocking rate (stock units/ha). More animals = more urine patches. If there are more urine patches/ha (i.e. small cattle) then there is a greater opportunity for plants to use this N before it is leached, compared to large concentrations of N from larger cattle.

Regrassing trials showed that considerable amounts of N are likely to be leached every time a paddock is resown or cropped. So, in N-sensitive catchments such as Taupo, this might count against the farmer’s N cap. Using long-lived perennial species, with the correct management, might be one important strategy that could be used to reduce this leaching loss.

Mike says his ‘take’ from the research is that there are no silver bullets.

For the environment court, Mike carried out economic modelling of six farms in the Taupo catchments to forecast results in five to nine years with the N caps in place. The results showed they would all be technically insolvent.

Mike asks if New Zealand is capped in a world of uncapped competitors, how would it succeed? Taupo farmers need to survive until the rest of New Zealand becomes capped to form a critical mass that would solve the problem.

Mike points out that Taupo had had a clean streams accord since 1983. He says the riparian strips do not protect the waterways from N leaching – although they work as a buffer/ filter for other forms of pollution.

Mike says essentially the N problem comes from stock urine, and the N cap is really a cap on production because it effectively limits the number and class of stock he can farm.

Nowadays Taupo farmers are the first farmers in NZ to have to seek consent to farm. They must provide a detailed N management plan to gain resource consent limited to 15 years. They are audited.

Taupo farmers need to manage their business from the perspective of $ profit per kilogram of N leached. All farming decisions must factor this in. As a result the Bartons have discontinued breeding cows because of their impact relative to profit.

Overall the cap has also affected land values. Farms are now valued in terms of their productive capacity – not what you might be able to convert or develop into. Essentially the farm has been capped in perpetuity on a stocking rate.

Mike believes that in the future all farms in New Zealand will be capped – so science and marketers need to get together with farmers to find a solution.

He says in the past farmers have taken up science driven production increases because of static returns. Better grasses, more intensive farming systems, more stock units, etc etc…… Mike says the era is at an end.

Mike says in the future consumers need to pay for the environmental costs farmers incur. He suggests that in future all research outputs and farm system changes should be defined in terms of a gross margin/kg of N leached. He thinks this is an issue for all of NZ not just Taupo.

Mike applies conventional fertiliser and extends the season by stockpiling forage in large round bales. He says he really needs on-going research on pastures that will survive longer than seven years before they need to be replanted, and more efficient cattle breeds.

The Barton’s business plan is to finish 300 cattle to slaughter every year. Mike says he can’t grow more meat per ha so he has to get more dollars per kg of meat.

“I need to convince people that my animal is worth buying for its environmental aspects. We will certify that our meat has been raised in a manner that will not harm the lake.”

He says the farm system is based on $ profit per kg of N leached. He says they can farm in a way that protects the water quality but asks do consumers actively seek out food that has minimal impact on water quality? He says the real test for the wider public is how much they value water quality and how much of a premium they are prepared to pay for it.

He says that if there’s wide public approval for N capping as a way of improving water quality, the farmers either accept a cap on income or start investing in a way of redefining NZ food production business models.

His Taupo beef are grown and finished quickly. They’re a Charolais/Angus cross. They’re RF tracked – so they can guarantee the fillet you eat has come from one of three participating farms. They’re aged for at least 4 weeks after slaughter and then sold at a premium to Taupo restaurants and butcheries.

He says they’re getting a significant premium and really good feedback from chefs and diners. He says the NZ meat industry doesn’t want to deal with this ….yet….

Mike says the farmers in the Taupo catchment found out early on that the devil was in the detail – and that the only way they could understand those details was to become involved in the process.

Mike’s had a lot of interest from around NZ and offshore in his constrained farming circumstances. Below is a summary of his papers and speaking engagements :

Recent Conference Papers:

2007 Grassland Association Conference: “The Realities of a Nitrogen Cap on Farmers in the Taupo Catchment

2008 The New Zealand Institute of Primary Industry Managers: “Valuing a Farm Business under a Nitrogen Cap”

2009 Combined AgResearch NZ and The Scottish Agricultural College strategy planning workshop. Invited farmer representative.

2010 VZX-Agribusness Conference: Lessons from a Nitrogen Cap on Taupo Farmers and the Implications for other Catchments”

2010 Presented a Seminar Series for the four AgResearch NZ Campuses entitled: ‘A Nitrogen Cap – A Dead End or a Driver for Future Research’

2011 Iowa State University and The University of California: “Farming Under a Nitrogen Cap – a New Zealand Farmers Perspective”.

2011 Practical Farmers of Iowa Conference: Keynote Address-“Farming without Subsidies- A New Zealand Perspective.”

2011 Resource Management Law Association Conference (October). – “The Rear End of the Rural Industry- Dealing with Nitrogen Leaching”. Joint presentation with Dr Stewart Ledgard- AgRsearch, Shane Hartley –Planner, Justine Young – Waikato

Regional Council, Simon Berry, Counsel for WRC.

2012 Landcare Trust Conference.(March) “Beefing up in Taupo” A paper discussing the tension between the conventional farming business model and the implications of farm emissions capping.

2012 Markets and Water Quality Symposium. A joint symposium by Motu Economic and Public Policy Research and NIWA. “ Lake Taupo Nutrient Trading –a Farmer Perspective”

2012 Tools to Farm Within Limits. A joint conference hosted by NZ Assoc. of Resource Mangers and Fert. Research. “Farming under an N Cap and the Resulting Taupo Beef”