Only 5% of income!
August 29th, 2011 at 2:00 pm by David FarrarNewstalkZB reports:
The Green Party says it has the numbers to prove farms will remain very profitable, even if they’re charged for irrigation.
It says MAF statistics show its suggested charge for irrigation is 4.8 percent of total farm income for the average Canterbury dairy operation.
Co-leader Russel Norman believes it shows farmers can afford the cost
This sort of claim could only be made by someone who has never owned or managed a business.
An extra charge which amounts to 4.8% of gross income is a huge expense. Hell many businesses have a net profit margin of less than 5%, so an extra 5% would turn them into a loss maker.
I’ve actually said I do support user pays for water – so long as it applies to all water users. But the Greens shouldn’t say that an expense equal to 5% of income is easily affordable.
August 29th, 2011 at 2:11 pm
The Gweens say water is a valuable resource that belongs to everyone. They want to charge farmers to use it.
If it’s so valuable why let 95% of it run off to the sea and become useless?
Vote:August 29th, 2011 at 2:17 pm
I’ve actually said I do support user pays for water
But what Norman is proposing is not user pays for water. Farmers already pay for their water. This scheme is a surcharge on those farmers who pay for their own water that will subsidise the many farmers who don’t use irrigation.
Users pays would mean those who pollute waterways would pay to clean them up. That’s a different thing altogether to irrigation.
Vote:August 29th, 2011 at 2:18 pm
“4.8 percent of total farm income” – “charge which amounts to 4.8% of gross income”
Where did the gross come from? 4.8% of not much, as many dairy farms declare for taxable income, is not much.
Vote:August 29th, 2011 at 2:24 pm
User pays. Simple. A surcharge is a dumb idea.
Vote:August 29th, 2011 at 2:29 pm
Thing is, I’m a tree hugger, and I’m pro GM and pro nuclear and pro 1080 for that very reason. The Green Party isn’t rational.
Vote:August 29th, 2011 at 2:30 pm
The 4.8% only refers to the expected impact of the 1 cent per 100 litres charge on the average dairy farm in Canterbury. I’m not sure what the charge is based on exactly, but charging by usage seems likely to be fair. The important thing would be whether the price would support rational allocation of the resource and pay for the associated infrastructure.
Vote:August 29th, 2011 at 2:30 pm
DPF, you know as well as the next person that most dairy farmers in it primarily for the capital gain rather than the operational profit.
Vote:August 29th, 2011 at 2:31 pm
Bad look from the Greens.
However, it is worth noting that requiring farmers pay for their water will put some of them out of business. Somebody has to be operating at the margin and for those people they will be forced to change to less water intensive operation, or go out of business. Provided the fee for water reflects its value, this is to the good: the water released by these business failures will be put to higher value uses elsewhere. The Greens understand none of this, but this will be the upside of their proposal.
Vote:August 29th, 2011 at 2:31 pm
I wonder if city water users would be happy to pay 5% more for their water to pay for sorting out septic tanks.
Farmers who irrigate already have higher costs than farmers that don’t need to. This scheme would penalise them more.
Are the Greens just dopey? Or are they trying to force farmers who irrigate out of the market?
Vote:August 29th, 2011 at 2:36 pm
Augustus gross farm income is high, and 5 percent of that is a lot.
Vote:Also when am I going to get some of this free water dairy farms are getting, I have to pay thousands for mine and I don’t irrigate. The Farms that do have to pay tens to hundreds of thousands.
August 29th, 2011 at 2:37 pm
this is typical leftish thinking — income is NOT PROFIT— get it into your stupid narrow minded little brains.
If I sold a billion dollars worth of widgets but it cost me a billion dollars to make them, the lefties would be demanding I pay extra taxes because i was earning a billion a year and it’s not fair on them.
Vote:August 29th, 2011 at 2:37 pm
They complained enough when GST raised prices by a mere 2.2% – and that was offset by decreases to other tax rates and increases in benefits.
What worries me is the comment I saw on Frog Blog some time ago that basically stated that business owners are all fat cats who don’t care if the business goes under. In reality most NZ business are farms and other small ventures where, if it goes under the owner loses everything – not just their job as employees do.
Vote:August 29th, 2011 at 2:39 pm
The Greens are saying Canterbury dairy farmers have a net cash income of $2.2 million, so 4.8% of that is $105,000.
However, the MAF Dairy Farm model says the current surplus/deficit for dairy farmers is $95,000. Whilst Canty farmers may be making twice that a water rate would take 50% of the surplus/deficit.. and thats in a really great year.
JC
Vote:August 29th, 2011 at 2:42 pm
http://www.greens.org.nz/press-releases/maf-statistics-show-green-s-irrigation-charge-affordable
Given the charge is supposed to be between $84k-$105k, really what Norman is referring to is an erosion of some 15% of their pre-tax profits. Quite some difference between that and 4.5% (which sounds so reasonable.)
What is more, this extremely clever approach creates an $84k-$105k taxable deduction for each farm, which will serve to reduce government revenues. Still Russell has the answer for that too doesn’t he? – just up the taxes a bit more
And what, in the real world, happens to the price of goods when costs increase?
Vote:August 29th, 2011 at 2:43 pm
This is just the latest example of the Gweens pushing out a policy announcement before they have thought through the detail.
The principle of user pays is the correct one, but the devil here is in the detail. An arbitrary 5% impost on the cost of irrigation water will push some farmers out of business.
The Gweens are in desperate need for some business acumen to be brought to their ranks – there is little evidence of it so far…
Vote:August 29th, 2011 at 2:45 pm
Yet if Key said that KiwiSaver was now mandatory at 4.8% of gross earnings there’s be an uproar about how unaffordable and unfair it is…
kowtow:
Useless? So by extension you think the oceans are useless? Despite the oceans being the major source of water evaporation that forms into clouds and rains back down as fresh water for you to drink? Despite the fact that the ocean is the source of around half the world’s oxygen production?
Vote:August 29th, 2011 at 2:49 pm
It’s not a 5% charge, it’s a rate at 1 cent per hundred litres.
What I’m not clear about is what that rate would fund, or is it essentially a consumption tax to encourage more efficient use of the resource. Are there other measures in place or proposed to regulate the allocation of water to irrigation? Would the rate change in future to reduce demand?
Vote:August 29th, 2011 at 2:58 pm
I see the actual announcement is here:
http://www.greens.org.nz/press-releases/maf-statistics-show-green-s-irrigation-charge-affordable
It is very unclear what is being said…. what is “a net cash income”….. certainly not after-tax profit as according to this relase farms in Canterbury are making ‘$500,000 in farm profit before tax” ….
Vote:I don’t know what either of those numbers really are but I suspect one is the income and the other is the earnings before farm expenses….. you know, little things like paying the mortgage and the workers …. and the cost of belonging to organistations that need to spend some time teaching economics 101 to daft Greens.
August 29th, 2011 at 2:58 pm
The Gweens are in desperate need for some business acumen to be brought to their ranks
Yes they are in need of it but I fear they wouldn’t listen to it even if exposed to it. To them, they’d all be thinking to themselves about how awful and selfish it all was and they’d just be crying on the inside all the time whenever our business experts were talking.
It’s a shame but there we are. The caucus must be exposed to it all the time, and yet none of their naive ignorant positions on business ever change, ever. This really does say a hell of a lot either about how profoundly stupid they are or alternatively, how evil they are. For if they truly understand the advice they must get given all the time from various officials, they must realise how impractical their ideas are in the real world and thus are doing it deliberately knowing that this is economic sabotage but they do it cause their electorate expect it. Not because they think it’s the right thing to do. So they’re deliberately fucking the country for themselves, so they’re evil. OTOH if they really don’t understand the business advice they must get from all sorts of officials, they’re almost childishly naive in their understanding of how life and the world really works. So they’re dumb. It’s one or the other, and I plump for dumb, myself.
I do like Kennedy Graham tho, he’s the only one who gives good value. That doesn’t apply to him.
Vote:August 29th, 2011 at 3:00 pm
@ JC
That surplus is usually after paying all costs including themselves a reasonable salary.
@ toad
Any evidence for that? Capital gain only comes if you sell the business. How many farms as a % sell each year? If most were in it for capital gain you would expect to see existing farmers selling out in large numbers in good times. Most of the capital gain seems to be sheep/beef converting to dairy. I suspect most are in it for lifestyle and income (dairy that is – lifestyle for sheep/beef as there is precious little income it seems there)
Vote:August 29th, 2011 at 3:02 pm
mikenmild, I may have it wrong but the impression I got was the Greens want to surcharge farmers who irrigate to pay to clean up the mess in waterways caused by farmers who pollute.
But they may also want to reduce the amount of water used for irrigation.
Vote:August 29th, 2011 at 3:03 pm
“MAF’s typical dairy farm in Canterbury has a net cash income of $2.2 million, so even using Irrigation New Zealand’s own hefty numbers for water use, we find that our irrigation charge is only 4.8 percent of income,” Dr Norman said.”
Rounding from Wussell’s 4.8% to 5% seems reasonable for this to be described as a 5% impost.
But if you are ideologically myopic, then I guess this could be anything you want it to be….
Vote:August 29th, 2011 at 3:06 pm
Have I missed something or are the Greens under the impression that only dairy farmers use water for irrigation? I wonder what a 4.8% increase will do the price of fruit from Central Otago, or the wine industry?
Vote:August 29th, 2011 at 3:09 pm
I heard him trot this out on radio live last week and promptly expressed my disgust in the GD.
They are unbelivable.
Vote:August 29th, 2011 at 3:13 pm
And other than capital gains being a function of operational profit, there is no link between the two things at all.
Vote:August 29th, 2011 at 3:15 pm
“DPF, you know as well as the next person that most dairy farmers in it primarily for the capital gain rather than the operational profit.”
You’re an educated guy, do you honestly believe that statement?
How about some inspired policy, a policy that doesnt include a new tax or fee increase?
Vote:August 29th, 2011 at 3:17 pm
INteresting looking further at the model how much debt Canty dairy farmers have – 390k in interest a year – much higher than the national average. The model actually shows them in a net deficit position after reinvestment costs and paying off some loan principal. What if this extra 5% in costs is funded by interest payments to evil aussie banks? Would that be a bit of a dilemma for the Greens?
Vote:August 29th, 2011 at 3:17 pm
Nookin
Pete George above gives the information that it is supposed to be targeted to cleaning up dirty waterways. The fruit and wine industries are unlikely to be as polluting as dairy farming with the effluent run-off.
I wonder if charging for water is a smart way to promote clean waterways. Wouldn’t it be better to control effluent disposal and water quality more directly by resource managment controls or pollution charges?
And again, it doesn’t appear to be a 5% charge. The figure was given as the likely impact of a 1 cent per 100 litre charge on the average Canterbury dairy farm.
Vote:August 29th, 2011 at 3:28 pm
That is estimated to add up to 5% of total farm income on average. For some less, for others more. Average use vs average income? Actual impact could be vastly different in practice if thats the case.
Vote:August 29th, 2011 at 3:43 pm
Some one once described the Greens as rent-seekers, and this illustrates that perfectly.
Vote:August 29th, 2011 at 3:55 pm
Most of Green policy bears a striking resemblance to the green stuff that comes out of my cow’s arseholes. But hay it’s only 5% of your income, add to it the ETS the commie pricks want us to cough up with and in a few years this alone would be at least taking 35% of our income. Add to this all the rates, levies, income taxes we now pay, guess what we have the communist state of the long white cloud for dairy farmers. Fuck I tier of the parasite classes that make up the Green movement. Yes there are problems but things are vastly different then what they were 30 to 40 years ago as far as farming and environmental awareness goes. But issues like this are simply attempts by the Green party to rally the useful idiots, in a vain attempt to to show they are the true environmental warriors they claim to be. Most of their clientele are urban residents, the voting base, farmers and farming make that handy enemy, they are the evil polluters and must be brought to heel. What a great pity they don’t concentrate one some of the crap that comes out of the cites. Lets see these Green arseholes promote a pollution tax on the the urban dwellers, oh that’s right, can’t do that, no one will vote for the idiots.
Toad claims that most farmers are simply in farming for capital gain, what tosh. Farm sells around here are very rare, I know of only 2 in the last 50 years.
Vote:August 29th, 2011 at 5:25 pm
Even if that analysis by the co muppet did make sense which it clearly doesn’t, what when Interest rates climb and product prices fall.
Vote:His impost will still be there to drag the business to destruction, but that was the idea wasn’t it.
Then what, well that wont matter will it.
He has a Phd but sure didn’t end with even a basic understanding of economics or the fundamentals of how business works.
SSBob at least lives there!
August 29th, 2011 at 5:37 pm
So DPF you support user pays for water but think that people who propose unaffordable levies should admit they are unaffordable.
Should I take it to mean that you think user pays would be affordable?
Or is your admission that it would be unaffordable to be found elsewhere?
Vote:August 29th, 2011 at 6:18 pm
Daigotsu: irrigation schemes pay their own way. They are already user pays.
The argument here is whether they should pay more for the water they take from freshwater sources.
Vote:August 29th, 2011 at 6:32 pm
User pays is fine but the daft greens are just proposing some extra vague sort of tax. Myself and 70 others run our own scheme and we pay the costs (mostly captial and maintainance) between us. It’s the business of nobody else. Not the government or other wallys. We don’t ‘buy’ the water from anybody. We do pay to shift it from a to b and keep it clean etc.
Vote:Hopefully when DPF says he supports user pays he means people like us who pay our own running costs.
Hopefully he does not mean that charging is a way of rationing where water is short or there are competing demands (Ours incidently is not in that situation)
Water even when it is scarce it is not “valuable” or should be paid for. The Greens are wrong on that one. The economic model of rationing does not work in theory or practice for water. Best it be divided up by a defined legal process that takes into account more factors than the economic.
August 29th, 2011 at 6:33 pm
Farmers who irrigate already have higher costs than farmers that don’t need to. This scheme would penalise them more.
Gee, imagine if farmers actually had to farm in such a way as to be sustainable with the land and climate they are farming in.
I find this “poor dairy farmer” crap almost unbelievable, there is no $uch thing.
Vote:August 29th, 2011 at 6:45 pm
i have 1000 cows in canterbury this small charge will add 200000 dollars to my costs
Vote:i am sick of people like toad who doesnt risk his assets telling me i farm for capital gain only. Bullshit to that i aim to make money each year and have no problem with paying tax because if i am not paying tax i am loseing money. Now for the last time for people like toad the figures nash used for the amount of tax farmers pay were in a year of major drought and world ression.that year i lost 700000 if the greens had there way it would have been 900000.
Dpf is right the wacking on the envy tax the greens would destroy what is great about the dairy industry is that it is possible to start at 17 with zero skills and money and work your way up so that by the time you are 40 you own a 1000 cow farm(though hard work and the ITO system). they would condem it to releying on inherating a farm from daddie and having low debt in order to pay your huge tax bill there would be no further wealth creation and the one industry which is growing would stagnate are they for real?
August 29th, 2011 at 6:59 pm
As a EX sheep farmer there was a trade off between money and lifestyle. There is the same trade off in the dairy industry I will use myself as a example in the last 12 months i had a total of 14 days off work. A week away with the family in summer and some timeaway in june. Now the money is good but it needs to be .I also have no intention to sell my farm and farm to make a profit
Vote:August 29th, 2011 at 7:05 pm
Well Graham, there are also those of us that don’t have a particular problem with farming, but don’t want to see a red hot dairy industry fill the rivers with sh!t or suck them dry altogether.
I have met and heard of some bloody shocking dairy farmers, they really don’t give a rats arse how what they are doing could be affecting the environment around them.
This is what I find appalling, and pleading “back bone of the nation” is just a cop out, if it is not sustainable it won’t be the back bone for very long.
I personally believe NZ could and should lead the world in sustainable agriculture, unfortunately those with dollar signs stuck in their eyes are chomping at the bit in a different direction.
Vote:August 29th, 2011 at 8:50 pm
Okay:
Cow water consumption = 3900 litres per year or 10.5 litres per day.
Water cost (based on total consumption plus availability charge) = $0.0006 per litre.
Total water cost = 0.1% of total income or 0.2% of profit.
Woah – rich prick alert. I can afford more. Much, much more.
Of course in my case the water scheme is – like KH’s above – a district water scheme designed by the council and built by we farmers 30 years ago, most of whom are the same ones using it today. Budgets and other matters are handled by a small group of elected members. Moreover we’re in pluvial country so this is simple thirst with no irrigation.
As you can see my current rate is six times that of the proposed Canterbury rate.
There’s something screwy about this. It specifically refers only to the proposed charge, which they say is 1 cent per 100 litres ($0.0001 per litre), and that that translates into the additional costs quoted. But that means the farm is using 1 billion litres of water? Are my calculations that wrong? What decimal did I misplace? Surely this means other charges in those figures, above and beyond 1 cent per 100 litres.
Similarly I also can’t figure Graham’s numbers: at $0.0001 per litre his $200,000 additional cost translates to 2 billion litres of water per year? Perhaps he meant $20,000 additional cost or was calculating at 1 cent per litre vs. the proposed rate of 1 cent per 100 litres? The former rate would translate to him using 20 million litres per year or 20,000 litres per cow. That’s roughly five times my consumption rate which may be correct for Canterbury, but still does not add up to $200,000 per annum costs.
In any case, the real question is how the likes of Graham get the water and what the actual cost of extracting, storing, pumping and treating it may be – and whether his usage is cutting into the water tables of others or whether there is any real way of estimating that usage and putting a “true” price on it.
Furthermore, how do we know it’s being “wasted” anyway? Surely the only true test is whether one could grow something off that land of equal or greater value? Otherwise the water just sits in the ground unused – or is that really the ultimate objective here, in line with other Green thoughts that disparage “wasteful” capitalism despoiling nature just to make a buck?
Which causes me to raise the same question others have, that if this is about pollution of waterways then that should be targeted instead.
So what’s this really all about?
Vote:August 29th, 2011 at 10:49 pm
Can I have 4.8% of Wussel’s salary? It’s not much to ask, apparently.
Vote:August 29th, 2011 at 10:52 pm
Wow
I’ve tracked down the Radio NZ report on Curtis’s statement (CEO of Irrigation New Zealand) here:
So the 210 hectare farm that Russell uses as an example could actually be spraying on it’s pastures the 1 billion litres of water per year I’d calculated earlier. That’s amazing, a water usage rate 450 times that of my dairy farm.
But Curtis also focused on smaller farms than the Green press release mentions:
Interesting that Russell instead went with an example of a larger farm, claiming that such is “typical” of Canterbury, which is at odds with Curtis’s claim that the 100 hectare units are the average. Russel must be referring to this MAF Excel S/S, which shows the $2.2 million income figure in the press release.
However, that same s/s shows an irrigation cost of $
Vote:August 29th, 2011 at 11:19 pm
Grrr – hit the damn “submit” button before I was ready.
I’ve tracked down the Radio NZ report on Curtis’s statement (CEO of Irrigation New Zealand) here:
So the 210 hectare farm that Russell uses as an example could actually be spraying on it’s pastures the 1 billion litres of water per year I’d calculated earlier. That’s amazing, a water usage rate 450 times that of my dairy farm.
But Curtis also focused on smaller farms than the Green press release mentions:
Interesting that Russell instead went with an example of a larger farm, claiming that such is “typical” of Canterbury, which is at odds with Curtis’s claim that the 100 hectare units are the average. Russel must be referring to this MAF Excel S/S, which shows the $2.2 million income figure mentioned in the press release.
However, that same s/s shows an irrigation cost of $13,485 for the 2011/12 FY, so that would jump to $118,485.
The real kicker is to look at the projected pre-tax profit of $512,640. These charges would hit that down to $407,640 – that’s a 20%+ hit on what you get out of the place, dropping the ROA from 4.25% to 3.4%.
Finally, I don’t get their tax calculations, which have taxes of $243,655, translating to an effective rate of 48%. However, if we stick with their figures the additional irrigation cost would result in about $50,000 less in tax. I wonder if the Greens have multiplied that across all these farms in totaling up their estimate that introducing a charge on irrigation water that would raise $370 million to $570 million per year?
Vote:August 30th, 2011 at 12:03 am
Is not water, under the Treaty, a freely accessible treasure for both parties? What idiot’s allowed charges in Auckland to start with?
Vote:August 30th, 2011 at 9:26 am
to shunda
Vote:if you fill the rivers with shit ecan will prosacute you and the fines if you are bad have been big(over 100k)
seceond we have minium flows on our rivers which in my case i stop the irrigatior untill the flows increase.I also have water storage where i collect flood waters and store them
It is a green party line that we suck the rivers dry and fill them with shit. In canterbury only 5% of the river water is used for irrigation.
The greens think 5% is a small number would they rather 0%
August 30th, 2011 at 9:32 am
i use during the irrigation season at peak 300000 cubic meters a plus 100,000ls a day from august to may
Vote:August 30th, 2011 at 3:22 pm
that is a month 300000cubic meters a month
Vote:August 30th, 2011 at 7:17 pm
Tom this is the figures i use
Vote:280 ha property
we use 126l/s(.45l/ha)
60s in min
60min in hour
24 hour in day
so 60*60*24
=86400seconds /day*126ls=10886400ls aday=$1088/day
my irrigation season is from oct to march 6months
now we dont irrigate every day
we have soil tapes so only turn on when nessary
in a average year there will be at least 120 days of irrigation=130560
bad year 150 days=163200
now my cows drink at least 75ls a day*1000*305 days=0nly 3k
this will add 32cents a kilogram to my FWE
we are talking an 9% increase in fWE not 5%
August 30th, 2011 at 8:54 pm
graham
Thanks. Very interesting.
Vote: