Agricultural Policy Monitoring and Evaluation 2022

21. New Zealand

Support to agriculture

Since New Zealand’s reform of agricultural policies in the mid-1980s, its production- and trade-distorting policies almost disappeared and support to agricultural producers has been the lowest among OECD countries. Over the past decade, support consistently accounted for less than 1% of farm receipts, with an average 0.8% during 2019-21. Almost all prices align with world market prices. Exceptions are fresh poultry and table eggs, and some bee products, which cannot be imported into New Zealand due to the absence of Import Health Standards (IHS) for these products – the biosecurity standards that products considered to pose a biosecurity risk must meet to be imported. These restrictions result in some market price support (the only form of support to individual commodities in New Zealand), amounting to 15% and 39% of respective gross farm receipts for these commodities in 2019-21, and account for the majority of New Zealand’s low producer support. Support for on-farm services, mainly related to animal health and for disaster relief, provides additional minor producer support.

Agricultural policies in New Zealand focus on animal disease control, relief payments in response to natural disasters, and the agricultural knowledge and information system. The government also provides support to community-scale off-farm investments in irrigation systems. Over the past decades, the share of agricultural land under irrigation expanded significantly.

Support for general services (GSSE) equalled just over 2% of the value of agricultural production during 2019‑21, well below the OECD average. For most of the past two decades, more than 70% of all support was for general services, with the remainder benefitting producers individually. On average, total support to the sector represented 0.3% of the country’s GDP during 2019-21, roughly half the average share across the OECD.

Recent policy changes

Recent policy changes in New Zealand focused on adverse events, and tools and guidance to enhance farm sustainability.

Major adverse events in New Zealand included the drought affecting many parts of the country from summer 2020 to autumn 2021, and the Canterbury floods in May 2021. The government provided NZD 2.8 million and NZD 500 000 as grants, respectively, in addition to NZD 1.07 million for Rural Support Trusts to help primary producers, their families and employees confronted by these and other challenges. Rural Assistance Payments to cover essential living costs also supported farmers in hardship.

The government is working towards an Integrated Farm Planning Framework to enable farmers and growers to incorporate regulated requirements into their farm planning. The “Good Farm Planning Principles: Towards Integrated Farm Planning” guide released in June 2021 provides advice on managing biosecurity, animal welfare, greenhouse gases (GHGs), fresh water and human aspects of farming. It complements a NZD 37 million investment over 2021-2024 for rural advisors equipped with relevant skills, data and information tools.

Government and industry stakeholders co-developed a publicly available farm planning module on intensive winter grazing to provide practical steps for mitigating the effects on fresh water of grazing livestock during winter months.

As part of the Productive and Sustainable Land Use package, the Ministry for Primary Industries (MPI) financed several projects that aim to increase connections between farmers and other stakeholders, such as sector groups, regional councils and science providers.

In late 2021, the He Waka Eke Noa – Primary Sector Climate Action Partnership released a draft document outlining three agricultural emissions pricing options: a farm-level levy and a processor-level hybrid levy, with the New Zealand Emissions Trading Scheme (NZ ETS) presented as the counterfactual option. After consultation with growers and farmers, the Partnership and the independent Climate Change Commission are asked to provide recommendations on emissions pricing systems to ministers in April 2022.

In April 2021, the government announced a ban on the export of livestock by sea which is expected to take effect from 30 April 2023, as a response to animal welfare concerns about the suffering of livestock on ships.

In October 2021, New Zealand and the United Kingdom announced that they had agreed on the key outcomes and parameters for a future Free Trade Agreement (FTA). Elements include market access for agricultural products and co-operation on indigenous trade.

Assessment and recommendations

• Almost half of GHG emissions in New Zealand originate from the agricultural sector. Reducing agricultural emissions is therefore key to achieving New Zealand’s mitigation targets. With the passage of the 2019 Zero Carbon Amendment Act and proposed pricing of livestock and fertiliser emissions from 2025, New Zealand was one of the first to bind its climate commitments into law and include objectives for agriculture as an integral component, including medium- and long-term targets for the reduction of bionic methane emissions. Fully including agricultural emissions in New Zealand’s Emissions Trading Scheme, or implementing an equivalent way of pricing them, as currently planned, would provide an effective incentive to reduce emissions across the sector.

• Engagement in climate-related research at national and international levels complements planned economic incentives for emission reductions. Given the importance of the beef and dairy sector in national emissions, investments rightly focus on the mitigation of methane emissions.

• New Zealand’s open agricultural sector focuses on foreign markets and trade. Its export orientation, underlined by the country’s low level of producer support, is buoyed by New Zealand’s engagement in a large number of FTAs.

• New Zealand’s IHS are key to the country’s biosecurity vis-à-vis imported products. While required for all imported products considered to pose a biosecurity risk, some livestock products (including eggs, fresh chicken meat and honey) do not have IHS, meaning that these cannot be imported. While representing a small share of New Zealand’s agricultural output, this deprives consumers of lower prices and larger choice. The development of relevant IHS would benefit consumers while ensuring required biosecurity standards.

• Kiwifruit exports to markets other than Australia by entities besides Zespri, the main company, continue to be regulated by requiring authorisation from Kiwifruit New Zealand. New Zealand should aim to change these restrictions as they burden participation in kiwifruit exports by other firms wishing to do so and thus reduce competition and efficiency in kiwifruit trade.

• New Zealand’s policy mix focusses on key general services. In addition to pest and disease control, significant investments target the agricultural knowledge and innovation system. This should improve agricultural productivity growth, which has been comparatively low in recent years. Mandatory funding from private investors often complements public expenditures for general services. This can help to ensure the effective allocation of these investments and that those who benefit from the services contribute to their provision.

• Available data suggests that New Zealand’s agricultural sector faces large and, in the case of nitrogen, increasing nutrient surpluses related to the country’s large livestock sector and increased fertiliser use, representing risks to soil, water and air quality. While the 2020 Resource Management Regulations aim to limit agricultural pollution of freshwater ecosystems and could reduce such pressures, this might require greater attention.

Figure 21.1. New Zealand: Development of support to agriculture

 

 

 

 

 

Source: OECD (2022), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

 

Source: OECD (2022), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

 

Source: OECD (2022), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Table 21.1. New Zealand: Estimates of support to agriculture

Million USD

	1986-88	2000-02	2019-21	2019	2020	2021p
Total value of production (at farm gate)	4 067	6 371	20 723	19 761	20 299	22 108
of which: share of MPS commodities (%)	72.09	73.07	74.83	74.52	74.88	75.08
Total value of consumption (at farm gate)	1 624	2 626	10 169	10 065	9 789	10 654
Producer Support Estimate (PSE)	424	33	158	134	199	142
Support based on commodity output	54	15	127	114	168	97
Market Price Support1	53	15	127	114	168	97
Positive Market Price Support	53	15	127	114	168	97
Negative Market Price Support	0	0	0	0	0	0
Payments based on output	1	0	0	0	0	0
Payments based on input use	179	17	29	19	29	39
Based on variable input use	2	0	0	0	0	0
with input constraints	0	0	0	0	0	0
Based on fixed capital formation	154	0	0	0	0	0
with input constraints	0	0	0	0	0	0
Based on on-farm services	23	17	29	19	29	39
with input constraints	0	0	0	0	0	0
Payments based on current A/An/R/I, production required	26	1	2	0	1	6
Based on Receipts / Income	26	1	2	0	1	6
Based on Area planted / Animal numbers	0	0	0	0	0	0
with input constraints	0	0	0	0	0	0
Payments based on non-current A/An/R/I, production required	165	0	0	0	0	0
Payments based on non-current A/An/R/I, production not required	0	0	0	0	0	0
With variable payment rates	0	0	0	0	0	0
with commodity exceptions	0	0	0	0	0	0
With fixed payment rates	0	0	0	0	0	0
with commodity exceptions	0	0	0	0	0	0
Payments based on non-commodity criteria	0	0	0	0	0	0
Based on long-term resource retirement	0	0	0	0	0	0
Based on a specific non-commodity output	0	0	0	0	0	0
Based on other non-commodity criteria	0	0	0	0	0	0
Miscellaneous payments	0	0	0	0	0	0
Percentage PSE (%)	10.16	0.52	0.77	0.68	0.98	0.64
Producer NPC (coeff.)	1.01	1.00	1.01	1.01	1.01	1.00
Producer NAC (coeff.)	1.11	1.01	1.01	1.01	1.01	1.01
General Services Support Estimate (GSSE)	119	85	454	483	404	476
Agricultural knowledge and innovation system	60	46	229	244	192	251
Inspection and control	31	28	200	211	187	201
Development and maintenance of infrastructure	27	11	25	27	24	25
Marketing and promotion	0	0	0	0	0	0
Cost of public stockholding	0	0	0	0	0	0
Miscellaneous	0	0	0	0	0	0
Percentage GSSE (% of TSE)	20.97	71.98	72.45	78.33	64.92	74.34
Consumer Support Estimate (CSE)	-53	-13	-107	-107	-143	-72
Transfers to producers from consumers	-51	-13	-121	-107	-163	-94
Other transfers from consumers	-2	0	0	0	0	0
Transfers to consumers from taxpayers	0	0	14	0	19	23
Excess feed cost	0	0	0	0	0	0
Percentage CSE (%)	-3.36	-0.51	-1.07	-1.07	-1.47	-0.67
Consumer NPC (coeff.)	1.03	1.01	1.01	1.01	1.02	1.01
Consumer NAC (coeff.)	1.03	1.01	1.01	1.01	1.01	1.01
Total Support Estimate (TSE)	542	118	626	617	622	640
Transfers from consumers	53	13	121	107	163	94
Transfers from taxpayers	491	105	505	509	459	546
Budget revenues	-2	0	0	0	0	0
Percentage TSE (% of GDP)	1.50	0.21	0.28	0.29	0.30	0.26
Total Budgetary Support Estimate (TBSE)	489	103	500	503	454	543
Percentage TBSE (% of GDP)	1.36	0.18	0.23	0.24	0.22	0.22
GDP deflator (1986-88=100)	100	138	210	205	209	217
Exchange rate (national currency per USD)	1.71	2.25	1.49	1.52	1.54	1.41

Note: p: provisional. NPC: Nominal Protection Coefficient. NAC: Nominal Assistance Coefficient.

A/An/R/I: Area planted/Animal numbers/Receipts/Income.

1. Market Price Support (MPS) is net of producer levies and excess feed cost. MPS commodities for New Zealand are: wheat, maize, oats, barley, milk, beef and veal, sheep meat, wool, pig meat, poultry and eggs.

Source: OECD (2022), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Description of policy developments

Overview of policy trends

Prior to the 1970s, New Zealand exported more than half its agricultural production to the United Kingdom, and support for agricultural producers was largely non-existent, with the exception of some import-competing sectors such as eggs and poultry. At the same time, New Zealand’s Statutory Marketing Boards, operating since the end of World War I, enjoyed significant rights to regulate supply and trade of several key export products. Overall, relative to the more protected manufacturing sectors, agriculture was implicitly taxed (Anderson et al., 2008[1]).

The accession of the United Kingdom to the European Economic Community in 1973 weakened New Zealand’s access to its most important market, and the oil shock of the mid-1970s generated significant foreign exchange shortfalls given the country’s dependence on oil imports. In response, the government introduced policy measures to support agricultural production (MPI, 2017[2]). These included input subsidies, minimum prices supported by import barriers and export incentives, tax concessions, low-interest loans and development grants (MPI, 2017[2]; Harris and Rae, 2004[3]).

In response to macroeconomic problems, including the substantial fiscal burden of these support measures, a new government implemented significant economic reforms during the second half of the 1980s. By the end of that decade, production and trade distorting policies supporting the farm sector practically disappeared (Table 21.2). In the context of these reforms, New Zealand’s Statutory Marketing Boards lost most of their authority or were dissolved (Nayga and Rae, 1993[4]).

Table 21.2. New Zealand: Agricultural policy trends

Period	Broader framework	Changes in agricultural policies
Prior to 1975	Export-oriented agriculture with little policy intervention. Implicit taxation notably of exporting agriculture relative to the manufacturing sector	Statutory Marketing Boards with significant authority to regulate production and trade of key export products Agricultural and manufacturing import tariffs Limited farm support, including some input subsidies
1975-1984	Incentivising agricultural production	Introduction of significant farm support measures: price support, input subsidies, tax concessions, low-interest loans, development grants
Late 1980s	Reforms to market and trade liberalisation	Dismantling of price support and most other forms of direct farm support, along with economy-wide reforms liberalising the manufacturing industry as well Restricted function or dismantling of the Statutory Marketing Boards. Exit packages and debt restructuring programmes for farmers who had to stop operating
1990-present	Continuing trade liberalisation	Focus on general services and disaster aid

Since the policy reforms in the late 1980s, New Zealand’s level of support to agricultural producers has been the lowest among OECD countries (Figure 21.4). Consequently, for the last three decades, total support to the sector was driven mainly by policies related to general services to agriculture, such as agricultural research and biosecurity controls for pests and diseases.

 

Notes: A/An/R/I:Area planted/Animal numbers/Receipts/Income.

Payments not requiring production include Payments based on non-current A/An/R/I (production not required) and Payment based on non-commodity criteria. Other payments include Payments based on non-current A/An/R/I (production required) and Miscellaneous payments.

Source: OECD (2022), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Main policy instruments

Agricultural support in New Zealand is limited largely to expenditures on general services, such as agricultural research, and biosecurity controls for pests and diseases. A significant share of the costs of regulatory and operational functions, including for border control, is charged to beneficiaries (e.g. farmers) or those who create risks (e.g. importers).

Practically all of New Zealand’s agricultural production and trade is free from economic regulation. Since the phasing out of restrictions on dairy exports directed to specific markets protected by TRQs by the end of 2010, such export rights have been allocated to dairy companies based on the proportion of milk-solids collected. Export regulations continue to exist for kiwifruit: the New Zealand company Zespri has the default right, although not an exclusive right, to export kiwifruit to all markets other than Australia. Other traders can export kiwifruit to non-Australian markets in collaboration with Zespri, subject to approval by the relevant regulatory body, Kiwifruit New Zealand. Kiwifruit exporters to Australia are required to hold an export licence under the New Zealand Horticulture Export Authority Act 1987, which provides for multiple exporters to that market.

The 2017 amendments to the Kiwifruit Export Regulations 1999 allow Zespri shareholders to set rules around maximum shareholding and eligibility for dividend payments; clarify the activities Zespri can undertake as a matter of core business; and enhance the independence and transparency of the industry regulator, Kiwifruit New Zealand.

The Food Act 2014 came into force on 1 March 2016. Since March 2019, all agro-food business operates under this new law. The Food Act 2014 applies a risk-based approach focused on the outcome of safe and suitable food, rather than using prescriptive regulation. It aligns the domestic food system with the risk-based approach of other New Zealand food statutes that have more of an export focus, and with international trends in food regulation.

Import Health Standards (IHS) are documents issued under the Biosecurity Act 1993. They state the requirements to meet before importing risk goods into New Zealand. Risk goods can be imported only with an IHS in place for the product, and with the product meeting all relevant IHS measures. For some products (table eggs, uncooked chicken meat, honey), no IHS is in place. These products therefore cannot be imported, leading to some market price support as their domestic prices are above the world market level.

“Industry good” activities1 (such as research and development, forming and developing marketing strategies, and providing technical advice) previously undertaken by statutory marketing boards are now managed through producer levy-funded industry organisations under the Commodity Levies Act 1990. Under this legislation, levies can only be imposed when supported by producers, and producers themselves decide how to spend the levies. With a limited number of exceptions, levy funds may not be spent on commercial or trading activities. As a provision for accountability to levy payers, the Act requires that levying organisations seek a new mandate to collect levies every six years through a referendum of levy payers held prior to the expiry of their levy orders.

The New Zealand Government engages with industry and stakeholders to build biosecurity readiness and response capability. The Government Industry Agreement for Biosecurity Readiness and Response (GIA) established an integrated approach to preparing for and responding to biosecurity risks through voluntary partnerships between the government and primary industry sector groups. Signatories share decision-making, costs and responsibility in preparing for and responding to biosecurity incursions. In 2021, New Zealand Plant Producers Inc. signed the deed. In total, the number of industry groups having joined with the Ministry for Primary Industries under GIA now stands at 22.2

Overseer is a tool used for setting and managing nutrients within environmental limits. Overseer estimates nutrient losses from farm systems, helping farmers and growers improve their productivity, reduce nutrients leaching into waterways, and reduce GHG emissions. The intellectual property is jointly owned by the Ministry for Primary Industries, AgResearch Limited, and the Fertiliser Association of New Zealand. Regional councils increasingly use Overseer to implement the National Policy Statement on Freshwater Management.

Sustainable Food and Fibre Futures (SFF Futures) finances projects that create value and improve sustainability in the food and fibre industries. SFF Futures has a budget of NZD 40 million (USD 28 million) per year and provides a single gateway for farmers, growers, harvesters and industry to apply for investment in a range of projects that deliver economic, environmental and social benefits. Projects range from small, one-off initiatives to long-running multi-million dollar partnerships. Community projects require co-investment from the partner organisation of at least 20% of costs. Commercially-driven projects require a co-investment of at least 60% of costs.

The Ministry for Primary Industries’ Productive and Sustainable Land Use package promotes farm land use practices aimed at improving value creation and environmental outcomes. One part of the programme, Extension Services, supports and enables producers to improve environmental, social and wellbeing outcomes in their communities by driving their own solutions. Extension Services emphasises partnering with farmers, regional stakeholders and agricultural professionals to ensure services are relevant to the needs and priorities of local communities. The programme’s NZD 35 million (USD 25 million) budget over four years from July 2019 supports up to 2 200 producers across targeted catchments and regions.

The Māori Agribusiness: Pathway to Increased Productivity (MAPIP) framework supports Māori primary sector asset owners who seek to sustainably increase the productivity of their primary sector assets, including land, agriculture, horticulture, forestry, and seafood. Introduced in 2015, the MAPIP programme offers a one-on-one approach to achieving primary sector aspirations. The Māori Agribusiness Extension Programme (MABx) additionally enables the Crown to partner with Māori (in a one-to-many approach) to achieve economic, environmental, social and cultural aspirations through sustainable development of primary sector assets. The government committed NZD 12 million (USD 8.5 million) to facilitate MAPIP and MABx projects. Such projects may also be eligible for funding under the SFF futures fund and the Maori Agribusiness workforce skills and training programme (see below).

Although no longer accepting new applications for financial support, Crown Irrigation Investments Limited (CIIL) continues to manage three investments under existing contracts: completion of Central Plains Water Stage 2 (Canterbury plains); construction of the Kurow-Duntroon scheme (Kurow, South Canterbury); and construction of the Waimea Community dam (Nelson/Tasman).

The Essential Freshwater package, introduced in 2020, contains rules and regulations to stop further degradation of New Zealand’s freshwater resources, improve water quality within five years, and restore freshwater ecosystems to a healthy state within a generation. The Resource Management (National Environmental Standards for Freshwater) Regulations 2020 implement part of the package – and sets requirements for activities posing risks to freshwater and freshwater ecosystems. The standards set minimum requirements for feedlots and other stockholding areas; define requirements for managing intensive winter grazing of forage crops; restrict further agricultural intensification until the end of 2024; set a cap on the application of synthetic nitrogen fertiliser at 190 kilogrammes per hectare; and require reporting of fertiliser use.

The One Billion Trees programme aims to double the previous planting rate (including re-planting following harvest and new planting) to plant one billion trees over the decade from 2018-28. The programme is supported both by direct government investment (such as the One Billion Trees Fund and joint ventures between Crown Forestry and private landowners), and adjustments to regulatory settings (such as the Emissions Trading Scheme) to encourage and support tree planting.

The One Billion Trees Fund was launched in November 2018 as part of the One Billion Trees programme. The Fund has provided NZD 94 million (USD 66 million) for tree planting grants to landowners including farmers, in order to generate environmental, landscape and productivity benefits. The Fund has also provided NZD 108 million (USD 76 million) for partnership initiatives that underpin successful tree planting. The Fund expired in June 2021 and was not renewed. The government instead decided to establish the New Zealand Forestry Service (see below).

The Sustainable Land Management Hill Country Erosion Programme (HCEP) aims to protect New Zealand’s estimated 1.4 million hectares of pastoral hill country classified as erosion prone. It funds councils to develop four-year erosion control projects. The government approved a total of NZD 35.3 million (USD 25 million) for the period 2019-23.3 Selected projects include: the development of whole-farm plans to manage erosion on farms with highly erodible land; the development of agroforestry plans; wide-spaced planting of poplars and willows; land retirement from production to revert to native vegetation; and soil conservation and sustainable land management programmes. Although the main purpose of the HCEP is to reduce erosion, it also aims to reduce sediment loss to waterways, increases on-farm biodiversity, and contributes to the sequestration of carbon in small-scale forests and through planting of poplars and willows.

The National Science Challenges were established in 2014 to tackle New Zealand’s biggest science-based issues and opportunities. A core part of the government’s investment in science, at just over NZD 680 million (USD 481 million) over ten years, is dedicated to the Challenges. Current projects related to agriculture include the Deep South Challenge: Changing with our Climate to enable New Zealanders to adapt, manage risk and thrive in a changing climate; and Primary Sector Preparedness for Climate Change to assess the impact of rapid and slow-onset climate changes to the primary sector and evaluate the role and cost of adaptation for resilience.

The Food and Fibre Centre of Vocational Excellence Consortium (Consortium) was appointed in 2020 to establish the prototype Food and Fibre Centre of Vocational Excellence (Food and Fibre CoVE) to support better training for New Zealand’s primary sector workers. The Consortium is a collaboration of around 54 organisations across the entire food and fibre sector including industry associations, tertiary providers, Māori, employers and employees. The Food and Fibre CoVE is to define vocational excellence and identify and fund specialised projects aimed at building excellence across regions and sectors. It is one of up to three prototype sector-based Centres of Vocational Excellence to be established, with funding of NZD 18 million (USD 12.7 million) committed over up to four years.

The Overseas Investment Amendment Act 2018, in force since October 2018, brought residential and lifestyle land under the definition of “sensitive” land. The key change replaced the large farm directive with a broader, rural land directive that applies to all rural land larger than five hectares, other than forestry. As a result, most New Zealand land is now “sensitive”, meaning that transactions of such land involving “overseas persons” as defined under the Act require the consent of the Overseas Investment Office. The Amendment Act also places conditions on overseas investors – they must now demonstrate how their investment will benefit the country.

As a trade-dependent economy geographically distant from export markets, New Zealand currently has ten Free Trade Agreements (FTAs) in force, which account for approximately two-thirds both of the value of New Zealand’s total exports and of its agro-food exports. Three additional agreements are concluded but not yet in force: the Regional Comprehensive Economic Partnership (RCEP);4 the New Zealand-Gulf Co-operation Council FTA (involving Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates); and the Anti-Counterfeiting Trade Agreement (ACTA).5 Negotiations between New Zealand and the countries of the Pacific Alliance6 and negotiations for a New Zealand-European Union FTA and a New Zealand-United Kingdom FTA are ongoing.

Climate change mitigation policies in agriculture

Primary agriculture is responsible for 48% of New Zealand’s gross GHG emissions. This share is large relative to other OECD countries, partly due to the prevalence of agriculture, livestock in particular, in the New Zealand economy, and partly a result of renewable sources’ large share of the electricity mix. Most agricultural emissions are methane emissions from dairy, sheep and beef cattle.

In its 2021 Nationally Determined Contribution (NDC) to the Paris Agreement, New Zealand commits to reducing national net GHG emissions by 50% below gross 2005 levels by 2030, an economy-wide target covering, among others, agriculture and other land use sectors. This corresponds to a 41% reduction on a multi-year emissions budget for the 2021-30 period.

The Zero Carbon Amendment Act 2019 (Zero Carbon Act) sets separate long-term emission reduction targets for long-lived and short-lived GHG emissions, including a target for biogenic methane. In particular, the emissions reduction targets set out in the Zero Carbon Act aim to reduce all GHG emissions, except biogenic methane, to net zero by 2050; and reduce gross biogenic methane emissions 10% below 2017 levels by 2030 and 24-47% by 2050. These targets are considered to be consistent with the Paris Agreement’s objective to limit global-warming temperature rise to 1.5°C above pre-industrial levels.

The Zero Carbon Act requires an independent Climate Change Commission to advise on setting carbon budgets, and policies to meet them. On 31 May 2021, the Climate Change Commission provided the government with its final advice on the first three emissions budgets (2022-2025, 2026-2030, 2031-2035) and on the proposed policy direction for New Zealand’s first Emissions Reduction Plan (ERP). The government is now working to respond to this advice, set the first three emissions budgets, and publish the first ERP by May 2022.

The New Zealand Emissions Trading Scheme (NZ ETS) is the main policy tool to reduce GHG emissions. It requires companies in the agricultural supply chain (e.g. meat processors, dairy processors, nitrogen fertiliser manufacturers and importers) to report their agricultural emissions. However, these companies are not required to pay for their emissions. The NZ ETS also imposes a cost on emissions from transport fuels, electricity production, synthetic GHGs, waste and industrial processes, including in primary sectors.

Reforms legislated in 2020 aimed to increase the ability of the ETS to drive climate change mitigation. The reforms, in combination with a carbon price increase to about NZD 68 (USD 48) per tonne by the end of 2021, which includes forestry emissions, are already increasing the incentive to store carbon in forests and reduce deforestation. The reforms make it easier to participate in the scheme, including for sheep and beef producers whose pastureland could be converted to forest land. This includes introducing into the NZ ETS averaging accounting (which provides more certainty about returns from rotation forestry) and a new category for permanent forestry (replacing the Permanent Forest Sink Initiative). Regulations are in development, expected to come into force on 1 January 2023.

As a tool to reduce GHG emissions, the He Waka Eke Noa – Primary Sector Climate Action Partnership between the New Zealand Government, the food and fibre sector and Māori encourages farmers to reduce emissions through available practices. This includes extension and advisory services to give farmers and growers the knowledge and resources to measure, manage and reduce their emissions. Furthermore, investments focus on research and development of mitigation technologies, such as methane inhibitors and a methane vaccine. The partnership aims to implement a framework by 2025 to reduce agricultural greenhouse gas emissions and build the sector’s resilience to climate change. This is to be achieved through: (1) measuring, managing and reducing on-farm emissions; (2) recognising, maintaining or increasing integrated carbon sequestration on farms; and (3) adapting to a changing climate. In November 2021, the Partnership released a draft document that outlines three agricultural emissions pricing options, including a farm-level levy, a processor-level hybrid levy, and the NZ ETS presented as the counterfactual option. These pricing options were consulted on nationwide with growers and farmers in February 2022, with feedback informing the He Waka Eke Noa Partnership’s policy recommendations to Ministers in April 2022. The independent Climate Change Commission is also asked to provide its own advice to Ministers on the farm-level pricing systems in April 2022.

The New Zealand Government researches and develops mitigation technologies to reduce agricultural GHG emissions. It does so primarily through the New Zealand Agricultural Greenhouse Gas Research Centre (NZAGRC), the Pastoral Greenhouse Gas Research Consortium (PGgRc), and in co-ordination with the member countries of the Global Research Alliance on Agricultural Greenhouse Gases (GRA).

The NZAGRC, funded by the Ministry for Primary Industries, brings together nine organisations that conduct research to reduce New Zealand’s agricultural GHG emissions.7 Research focuses on practical ways to reduce on-farm methane and nitrous oxide emissions while improving productivity and sequestering soil carbon. The PGgRc is a partnership funded equally by government and industry, which provides livestock farmers with information and means to mitigate their GHG emissions. The PGgRc focuses on research to reduce methane emissions in ruminant animals. Public funding for the PGgRc ended in August 2021. The PGgRc is expected to focus in the future on commercialising the intellectual property it developed for reducing livestock farmers’ GHG emissions.

The GRA was established in 2009. New Zealand hosts the Secretariat and GRA Special Representative, and co-chairs its Livestock Research Group. Through its network of 65 member countries and 25 partner organisations, the GRA contributes to the global discussion, research and science capability for agricultural GHG mitigation by facilitating collaborative and evidence-based dialogue and knowledge sharing. GRA members collaborate on research, development and extension of technologies and practices to deliver more climate-resilient food systems without growing GHG emissions. New Zealand supports GRA scholarship programmes to build science capability in developing countries. These joint initiatives utilise relationships built through the GRA. Other funders of the GRA include the Climate Change, Agriculture and Food Security programme of the Consultative Group on International Agricultural Research (CGIAR-CCAFS) and the Government of the Netherlands. 

To support the GRA, New Zealand funds international collaborative efforts to accelerate global research in mitigating GHG emissions from agriculture, pastoral livestock farming in particular. The focus is on topics identified by the GRA and relevant to New Zealand’s agricultural production systems. Research challenges include manipulating rumen function, reducing nitrous oxide emissions from soils, manipulating rates of soil carbon change, and improving tools and practices for minimising farm-system-level GHG emissions intensity. New Zealand also works on capacity building activities with countries in both South-East Asia and southern and eastern Africa for measuring, reporting, verifying and mitigating agricultural emissions in those countries. New Zealand also co-funds and participates in several international research calls designed to decrease agricultural emissions.

Domestic policy developments in 2021-22

In the year ending June 2021, the government provided NZD 1.07 million (USD 0.76 million) of funding and partnered with a nationwide network of 14 Rural Support Trusts (RSTs) to support primary producers, and their families and employees who experienced challenges. The RSTs used government funding to support people and businesses during and after droughts, floods, hail events and Mycoplasma bovis targeting pastoral care, community events and one-on-one support.

One of the main adverse events the government helped people through was the drought that affected many parts of the country from December 2019 to April 2021. Stock feed and water shortages were a particular challenge for the food and fibre sector and rural communities. The effects were worsened by disruptions to supply lines and processing due to the COVID-19 pandemic. Government has spent NZD 2.8 million (USD 2 million) of grants for recovery advice to around 810 farming businesses.

Another major adverse event was the Canterbury floods in May 2021. The government worked closely with Federated Farmers to ensure farmers in the region were supported through this event. Funding of NZD 500 000 (USD 354 000) was made available immediately. This was given to farmers as grants of NZD 3 500 each. A further NZD 4 million (USD 2.8 million) of funding support was announced by the Prime Minister on 24 June 2021.

Other services provided to the rural community in 2021 to assist them in coping with adverse events include: the Farm Business Advice Support Fund, in partnership with the RSTs and the New Zealand Banking Association, which funds farmers to receive financial or business advice from an independent consultant; the Farm Debt Mediation Scheme, which enabled 38 trained and authorised mediators to facilitate 50 mediation sessions for famers and their creditors; and the national stock-feed co-ordination service, which helps farmers forecast and plan their feed and supplementary feed requirements and access supplies of commercial and donated feed.

The Enhanced Task Force Green programme was activated as part of the government response to the Canterbury floods. It covers clean up support following adverse events for agriculture farms, forestry, marae and public spaces.

Rural Assistance Payments (RAPs) were made available to be utilised as a result of the 2021 drought. RAPs are only available on case-by-case basis to farmers in significant hardship and cover essential living costs for those farmers’ whose income is severely impacted by a medium-scale (or greater) adverse event and who have no other means of supporting their family. For the year ended 30 June 2021 an estimated NZD 177 000 (USD 125 000) was spent on RAPs.

The ten-year programme to eradicate the bacterial infection Mycoplasma bovis is ongoing with compensation payments to farmers for slaughtered cattle for the year ending June 2021 estimated at NZD 19 million, compared with NZD 54 million the previous year (USD 13.4 million and USD 38.2 million, respectively), reflecting lower levels but continued infection. The focus for the next 12 months remains on ensuring all infected herds have been found, before the Programme moves to the long-term surveillance phase to prove the absence of the disease. This will involve ongoing optimised bulk tank milk surveillance and on-farm herd testing. In 2017, the Ministry for Primary Industries had declared a biosecurity response after the disease had been found for the first time in New Zealand.

The Mycoplasma bovis Recovery Advice Service helps farmers pay for business and technical advice on recovering from the effects of Mycoplasma bovis. The Ministry for Primary Industries makes payments to eligible farmers of up to NZD 5 000 (USD 3 536) per property.

To help farmers and growers balance an increasing number of social, business, economic and regulatory challenges, the government has established an Integrated Farm Planning Framework that aims to enable them to incorporate regulated requirements into their farm planning processes. As part of this framework, in June 2021 the government released the guide “Good Farm Planning Principles: Towards Integrated Farm Planning”. This guide, co-developed by MPI, industry and councils, defines integrated farm planning and provides advice on managing key areas: biosecurity, animal welfare, greenhouse gases, fresh water and the human elements of farming. The ambition is to facilitate farmers’ compliance with the rules and to provide a structured approach for farmers and growers wanting to increase their profits in an environmentally sustainable way.

The guidance complements the NZD 37 million (USD 26 million) investment to be spent over the four years 2021-24 towards MPI delivering 100 additional rural advisers with the right skills, improved data and information tools to drive better on-farm decision making and a fund to help farmers transitioning to an integrated farm planning approach. Overall, the ambition is to ensure New Zealand’s farmers and growers are equipped to add value to their farming operations while making the food and fibre sector more sustainable.

To implement the Resource Management (National Environmental Standards for Freshwater) Regulations 2020, a publicly available intensive winter grazing farm planning module was co-developed with relevant government and industry stakeholders as a non-regulatory tool to help farmers manage intensive winter grazing during the 2021 and 2022 grazing seasons, highlighting practical steps farmers can take to mitigate the effects on fresh water of grazing livestock on forage crops during the winter months.

As part of the MPI’s Productive and Sustainable Land Use package, 16 projects were funded in the year ending June 2021 totalling NZD 21 million (USD 14.9 million) involving over 4 000 farmers and growers across New Zealand. The funding allows the employment of co-ordinators and to increase the connection and collaboration with sector groups, regional councils, science providers and others to facilitate exchange of experiences and to provide mutual support.

In 2020 the New Zealand Government published its first National Climate Change Risk Assessment. This Risk Assessment sets out the priority and significant risks New Zealand faces from the impacts of climate change. The government is now developing a National Adaptation Plan to set out the actions to be taken to address these risks. The Plan is due to be published in August 2022, with public consultation expected in early 2022. Unlike the ERP, the National Adaptation Plan does not have a chapter dedicated to either the agriculture or forestry sector. Rather, agricultural and forestry adaptation measures, policies and strategies are subsumed within the five domains (Natural Environment, Economy, Infrastructure, Communities and Homes, Buildings and Places) of the Plan.

Domestic policy responses to the COVID-19 pandemic

MPI’s Primary Sector Workforce programme, launched in July 2020, aims to bring 10 000 New Zealanders into work in the food and fibre sector over four years. It focuses on attracting a larger, more diverse talent pool. It seeks to equip New Zealanders with the basic skills and knowledge needed to enter food and fibre sector jobs, helping employers to retain a skilled and productive workforce, supporting skills and labour for Māori through the He Ara Mahi Hou funding programme and developing a detailed skills database and supply-and-demand model.

In the year ending June 2021, 6 306 people moved into food and fibre sector employment and 764 people graduated from “familiarisation” basic skills courses. The programme is working across the sector with multiple training providers and industry bodies. Examples of the range of training and events that were delivered in the year ending June 2021 include:

• Familiarisation courses held through the Taratahi Agricultural Training Centre, Telford – Southern Institute of Technology, New Zealand Kiwifruit Growers Inc, Agri Training, Wine Marlborough and New Zealand Apples and Pears Inc.

• Hanzon Jobs, a mentoring programme and mobile app funded by MPI and the Ministry of Social Development supporting new employees entering into agricultural contracting.

• Primary Industries Good Employer Awards held by MPI in partnership with the Agricultural and Marketing Research and Development Trust, to highlight good employers and good employment practices across the food and fibre sector, to provide an incentive to employers to strive for good practice, and to change perceptions about employers in the sector.

• He Ara Mahi Hou, MPI’s Māori Agribusiness Workforce, Skills and Training Programme. Through the programme MPI supported Māori Agribusinesses and land trusts to develop worker redeployment opportunities and to access greater skills training to create sustainable employment for increasing the productivity of their food and fibre sector assets. Projects funded span key sectors, including kiwifruit (Bay of Plenty), forestry (Te Tairāwhiti), dairy (South Taranaki), general food and fibre sector education and training (Taupō), and education, apiculture and remote digital training (Rēkohu/Wharekauri).

Following the initial NZD 30 million (USD 21.2 million) provided to support the delivery of food and welfare assistance by local authorities and Civil Defence Emergency Management Groups during New Zealand’s COVID-19 Alert Levels 3 and 4 in 2020, additional support of up to NZD 32 million (USD 22.6 million) was announced in 2021 following the re-emergence of COVID-19 in the community. The funding was used to bolster the organisation of food parcels and provide upfront funding or reimbursement to food banks, community food organisations and other welfare providers.

Trade policy developments in 2021-22

In April 2021, the government announced a ban on the export of livestock by sea following a transitional period of up to two years. The export ban is a response to animal welfare concerns around the suffering of livestock on ships.

Negotiations with Costa Rica, Norway, Fiji and Switzerland for an Agreement on Climate Change, Trade and Sustainability (ACCTS) are ongoing. The agreement aims to bring together some of the interrelated elements of the climate change, trade and sustainable development agendas and demonstrate how they can be mutually reinforcing.

In October 2021, New Zealand and the United Kingdom announced that they had agreed on the key outcomes and parameters for a Free Trade Agreement that remains to be concluded. Elements covered include improvements in market access for agricultural products and an indigenous trade chapter providing a platform for co-operation. Agro-food exports to the United Kingdom, and imports from the United Kingdom, have represented about 3% and 2% of New Zealand’s total agro-food exports and imports, respectively.

On 10 December 2021, following talks with interested APEC members, New Zealand announced the development of an Indigenous Peoples Economic and Trade Co-operation Arrangement (IPETCA). The IPETCA is a voluntary arrangement that commits economies to deepen indigenous peoples economic and trade cooperation. A joint decision-making body, the “Partnership Council”, is to enable both economy and indigenous people’s representatives to oversee and implement the arrangement. IPETCA is to come into force once at least four economies have declared their intention to join. New Zealand, Canada, Australia and Chinese Taipei expect to become the foundational members of IPETCA. Membership of IPETCA should be open to any APEC economy or WTO member.

Trade policy responses to the COVID-19 pandemic

In order to maintain some international air connectivity during the pandemic, the government has been providing short term market-led funding for air freight and passenger capacity on a small number of key routes. In March 2021, the existing International Air Freight Capacity scheme was restructured to put greater emphasis on maintaining future tourism linkages and was renamed maintaining international air connectivity (MIAC) to reflect this change in emphasis. All payments for freight services continue to be market led with importers and exporters paying airlines for freight services. Only flights that do not get enough passengers and freight to break even are eligible for support. Between 1 April and 30 October 2021 around NZD 170 million was allocated to support the scheme. The MIAC scheme will continue until the end of March 2022 with up to NZD 195 million available.

Contextual information

New Zealand is a relatively small and sparsely populated country with a per capita GDP that is slightly above the OECD average, but well above the average of all countries covered by the report. It has a high degree of market openness that is related to its high dependency on international trade. Agriculture has a comparatively high, albeit slowly shrinking, importance to the economy, accounting for around 6% of both GDP and employment. Moreover, agro-food products account for more than two-thirds of New Zealand’s total exports.

With little arable land, grass-fed livestock products represent the backbone of the agricultural sector. New Zealand is the world’s largest exporter of sheep meat, and among the largest exporters of dairy products. Beef, fruit and horticultural products also contribute significantly to the country’s agro-food exports.

Table 21.3. New Zealand: Contextual indicators

	New Zealand		International comparison
	2000*	2020*	2000*	2020*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	83	225	0.2%	0.2%
Population (million)	4	5	0.1%	0.1%
Land area (thousand km2)	263	263	0.3%	0.3%
Agricultural area (AA) (thousand ha)	15 413	10 345	0.5%	0.4%
			All countries1
Population density (inhabitants/km2)	15	19	53	63
GDP per capita (USD in PPPs)	21 472	44 011	9 281	20 929
Trade as % of GDP	25	18	12.3	14.0
Agriculture in the economy			All countries1
Agriculture in GDP (%)	8.3	6.2	2.9	4.9
Agriculture share in employment (%)	8.5	6.0	-	-
Agro-food exports (% of total exports)	50.7	69.2	6.2	8.5
Agro-food imports (% of total imports)	7.9	13.4	5.5	7.7
Characteristics of the agricultural sector			All countries1
Crop in total agricultural production (%)	17.7	22.5	-	-
Livestock in total agricultural production (%)	82	78	-	-
Share of arable land in AA (%)	10	5	32	34

Note: *or closest available year.

1. Average of all countries covered in this report.

Sources: OECD statistical databases; UN Comtrade; World Bank, WDI and national data.

New Zealand has a stable economy having featured robust growth and a relatively low inflation rate for most of the past decade. However, the COVID-19 pandemic and related restrictions caused New Zealand’s GDP to fall by 1% in 2020. In 2021, New Zealand’s economy rebounded with a growth rate close to 5%, while inflation rose to 3.8%, the highest level in a decade.

New Zealand is a consistent and growing net exporter of agro-food products, which after some drops in 2015 and 2016 due to, among others, lower dairy prices, have picked up again since 2017. Most of New Zealand’s agro-food trade, particularly its exports, is processed food for final consumption. On the import side, however, intermediary products represent two-fifths of the trade basket.

 

Sources: OECD statistical databases; World Bank, WDI; and ILO estimates and projections.

 

 

Note: Numbers may not add up to 100 due to rounding.

Source: UN Comtrade Database.

New Zealand’s growth in agricultural output over the 2010-19 decade has been below the global average, driven by relatively low productivity growth: at 0.8%, the estimated average growth in total factor productivity (TFP) is well below the global average. It is also well below the TFP growth measured for the 1990s.

Given the large share of renewables in electricity generation and the dominant role of dairy and ruminant meat, agriculture is responsible for nearly half of New Zealand’s GHG emissions. Almost three-quarters of agricultural emissions are in the form of enteric methane from ruminant livestock. Nutrient surpluses are also well above the respective OECD averages. The sector is also the country’s prime consumer of freshwater as irrigated land has expanded, partly in response to climate related uncertainties. Nonetheless, its overall level of water stress, while higher than in the 1990s, is relatively low.

 

Note: Primary factors comprise labour, land, livestock and machinery. Intermediate input comprises materials (feed and fertiliser).

Source: USDA Economic Research Service Agricultural Productivity database.

Table 21.4. New Zealand: Productivity and environmental indicators

	New Zealand		International comparison
	1991-2000	2010-2019	1991-2000	2010-2019
			World
TFP annual growth rate (%)	3.3%	0.8%	1.7%	1.4%
			OECD average
Environmental indicators	2000*	2020*	2000*	2020*
Nitrogen balance, kg/ha	36.7	66.0	32.1	30.0
Phosphorus balance, kg/ha	13.2	9.6	3.4	2.9
Agriculture share of total energy use (%)	3.5	4.3	1.7	2.0
Agriculture share of GHG emissions (%)	50.0	48.1	8.6	9.7
Share of irrigated land in AA (%)¹	3.7	7.3	-	-
Share of agriculture in water abstractions (%)	..	61.7	46.3	43.7
Water stress indicator	0.7	2.2	9.7	8.6

Note: * or closest available year.

1. Data are not comparable between time periods due to change in methodology.

Sources: USDA Economic Research Service, Agricultural Productivity database; OECD statistical databases; FAO database and national data.

References

[1] Anderson, K. et al. (2008), “Distortions to Agricultural Incentives in Australia and New Zealand”, Agricultural Distortions Working Paper, No. 09, World Bank, Washington, DC, https://openknowledge.worldbank.org/handle/10986/28184.

[3] Harris, D. and A. Rae (2004), “Agricultural Policy Reform and Industry Adjustment in Australia and New Zealand”, Conference paper for International Agricultural Trade Research Consortium, Philadelphia, 6-7 June 2004, https://doi.org/10.22004/ag.econ.15762.

[2] MPI (2017), New Zealand Agriculture. A policy perspective, Ministry for Primary Industries, New Zealand, https://www.mpi.govt.nz/dmsdocument/27282/direct.

[4] Nayga, R. and A. Rae (1993), “New Zealand’s statutory marketing boards: Their history and some recent developments”, Journal of Food Distribution Research, Vol. 24, pp. 94-100, https://core.ac.uk/download/pdf/6988122.pdf.

[5] NZIER (2007), Productivity, profitability and industry good activities. Report to Dairy Insight, New Zealand Institute of Economic Research, https://nzier.org.nz/static/media/filer_public/11/cb/11cb415e-a97b-4ac9-b86c-a0b238de9b61/productivity_profitability_and_industry_good_activities_feb_2007.pdf.

Notes

← 1.  Activities “beneficial to the industry, but whose benefits cannot be captured by those who fund or provide the activity”, or “long-term investments in the industry made with the expectation of accelerating delivery of better technology and products for the industry” (NZIER, 2007[5]).

← 2.  Three more industry groups, which have not signed the deed, are represented by other signatories.

← 3.  The HCEP existed before the One Billion Trees programme but has received significant funding from it.

← 4.  RCEP comprises the ten countries that make up the Association of South East Asian Nations (ASEAN), Australia, the People’s Republic of China (hereafter “China”), India, Japan, Korea and New Zealand.

← 5.  Other ACTA signatories include Australia, Canada, the European Union and 22 of its Member States, Korea, Japan, Mexico, Morocco, Singapore, and the United States.

← 6.  Pacific Alliance countries are Chile, Colombia, Mexico and Peru.

← 7.  The seven member Crown research institutes and universities are: AgResearch, Landcare Research, Lincoln University, Massey University, National Institute of Water and Atmospheric Research, Plant Food Research and Scion. The two other organisations involved are DairyNZ and the Pastoral Greenhouse Gas Research Consortium.