This is to update you on two developing issues that could have major impacts on food production in New Zealand: the Government’s independent methane science review and the need for an inquiry into rural banking.
Methane review
We covered the problems with existing methane policy in a recent email, so we won’t canvass those details again (see here if you missed it), but it’s important to understand just how high the stakes are for how the Government views agricultural methane emissions.
To recap, the simple version is that agricultural methane is a cycle, running through the animal, the atmosphere, and the feed the animal eats. With livestock numbers coming down in New Zealand over time, there can’t be more methane in the air than there was, meaning there is likely to be a net-cooling effect as far as agriculture goes.
Government policies, though, still treat agricultural emissions according to the old models.
Enter the Government’s independent methane science review, which could recommend updating those models to the those like the newer, credible, and widely respected GWP* and could even investigate the recent Happer & Wijngaarden paper that argues that the IPCC calculations could be off altogether.
As more and more scientists are coming around to these ideas, there is hope that the independent review fundamentally changes how agricultural emissions are approached, possibly putting to bed for good the not quite dead attempts to bring in a Farming Tax (aka He Waka Eke Noa).
For that to be the case, though, the review panel needs to actually be independent. If it’s just the same old people defending the same old status quo, the review will inevitably find that the existing policies are fine, thank you very much.
That’s why Groundswell has been going to every minister involved with this process to tell them they must ensure the panel is independent and includes scientists who aren’t already involved in the existing emissions establishment and motivated to keep the status quo.
The opportunities for farming from this methane science review are huge and we’re ensuring we make the most of it.
The problems with rural banking
Groundswell NZ is backing calls for a parliamentary inquiry into rural banking.
Federated Farmers' Banking Survey found that nearly a quarter of farmers are dissatisfied with their bank - a record high. Those reporting that they've come under undue pressure have also reached a record high of one-in-four.
With the economic pressures on farms (in addition to the cost-of-living hitting everyone), fair lending practices are essential to a functioning economy and for family farms to get through these tough times to bounce back on the other side.
Rural Lending Rates and Credit Availability
Farmers are struggling with higher lending rates and restricted access to credit. Despite possessing high equity and a strong repayment capability, many farmers face insurmountable barriers when seeking loans.
The average premium on rural lending is approximately 2% higher than other forms of lending, while there is no clear difference in terms of increased risks or costs to justify it. But that’s just when the credit is available - Groundswell hears all the time about farmers unable to get credit extended to get through a bad patch, even when their equity in the farm would more than cover any risk of default.
This financial strain is leading to dire consequences, including farmers selling up and a severe impact on the already dire mental health in rural communities.
When asked why the interest premium and credit availability is this bad, the commercial banks point at the Reserve Bank rules making them hold aside more money on rural lending than the other kinds. The Reserve Bank, in turn, blames the market for not being competitive and the 2019 regulations on the Reserve Bank under the last Government could be requiring them to be so risk averse that the rates get pushed up. Federated Farmers estimate those regulations alone could be adding 0.5%-1.2% to rural interest rates.
This is all part one for why we need an inquiry to get to the bottom of what is causing these structural failings in rural banking.
Emissions Compliance and Banking
More worrying still is the recent trend towards banks serving as compliance enforcers for emissions management. Banks are just not equipped to handle the complex and developing science of agricultural emissions, making their emissions data and models incomplete and outdated. They shouldn’t be involved, but if they are, they should at least be considering offsets like on-farm sequestration.
Recent regulations like the Mandatory Climate Related Disclosures and international groups like the Net-Zero Banking Alliance are pushing banks to use metrics developed for general emissions policy that do not accurately reflect the true warming effect of agriculture. Sound familiar?
An inquiry to flush out the facts on these policies could nip this in the bud before banks as regulators becomes the norm.
The solution
Rural lending should be treated no differently than other types of lending, considering only the market risks and costs. The unique nature of agricultural emissions must be recognised, banks should not be acting as pseudo-regulators, and financial regulations should not impose additional restraints on food production.
To get to the bottom of where the root causes lie, the Primary Production Committee in Parliament must hold a formal inquiry into rural banking and demand real answers from the players involved. Those findings can then provide the credible evidence to get changes made. Otherwise, farmers will be left to remain on the losing end of a dysfunctional system as producing food gets harder and harder to do in New Zealand.
Fieldays
The Groundswell team will be at Fieldays (12-15 June), based at the new Rural Advocacy Hub, Site D70, Gallagher Building.
Make sure you come along to meet us and the rest of the groups standing up for food production and rural communities.
We hope to see you there.
Thank you again for your support.
Kind regards,
Bryce, Laurie, Mel and the Team at Groundswell NZ
