Warnings about farm losses to plantation forestry have fallen on deaf ears, say agriculture leaders.
A major player in the $10 billion-plus New Zealand meat export industry is predicting the loss of hundreds of meat processing jobs in plant closures from next year due to shrinking livestock numbers.
The main culprit, land use change, especially to forestry for carbon emission cost-offsetting, combined with red tape, high farm costs and volatile market returns, will pressure a restructure in an industry with too much capacity for tumbling livestock numbers, Affco national livestock manager Tom Young says.
He says the industry forecast of close to one million fewer lambs available for processing next season across both islands “is such a big drop” which obviously means hundreds or thousands of jobs will have to go at some point.
“Plants are going to have to be shut. A million lambs can shut a big factory.”
While he believed Talley’s-owned Affco would fare better in the coming crunch than loss-making rivals with aged plants, Young says latest volume forecasts took even Affco by surprise.
There are around 56 beef and lamb processing plants in New Zealand - 34 in the North Island and 22 in the South Island. The industry directly employs 25,000 people, mainly in regional New Zealand. It is the country’s second-largest goods exporter, generating more than 16% of all export revenue.
Other industry heavyweights, Silver Fern Farms and Alliance Group, did not respond to Herald approaches for comment.
Young says the processing industry was “a wee bit protected” during the Covid years because operations slowed, but more labour has returned while processing livestock numbers have fallen, and it’s already hard to get factories restarted at normal times.
He doesn’t want Affco to be seen as “leading” the wake-up call, but says the company is concerned for the processing industry and its people and believes a restructure is the only answer.
Industry-good organisation Beef+LambNZ says sheep numbers fell 4.3% to 23.3 million with a 2.9% drop in breeding ewe numbers in the year to June. There was a 2.8% decrease in beef cattle numbers to 3.5 million. The lamb crop for spring 2025 is expected to fall by 970,000 or nearly 5%, and spring beef cattle calving by 2.1% due to fewer breeding cows, it said. In the past three years sheep and beef numbers had fallen by 10%.
The primary driver of the falls in recent years is “land use change as a result of the conversion of sheep and beef farms into forestry”, though in the 2024 year the main cause was drought, Beef+Lamb says.
Farm conversions to forestry were the result of the Emissions Trading Scheme and high carbon prices, it says. Between 2019 and 2022 around 180,000 hectares of whole sheep and beef farms were sold into forestry.
“While sheep numbers had been declining slowly afforestation has accelerated this sharply and also driven down cattle numbers.”
The land use change translated into a reduction of around 1.4 million livestock units. While sales had slowed, there were still farms being converted to forestry in the last year, Beef+Lamb said.
Minister for Primary Industries Todd McClay says the Government has “concerns with respect to excessive conversion of food-producing land to forest, however it’s important to get the policy settings right so that farmers also retain choice over what they do with their own land”.
He notes that in the last year exotic (pine) afforestation numbers have come off a high, with estimates suggesting a further decline in the next year.
Figures from the Ministry for Primary Industries (MPI) from surveys of forestry company afforestation intentions showed 68,500ha in 2023, 51,800ha this year, and 17,700ha next year. The intention in 2022 was to plant 64,100ha.
The latest survey report, by the University of Canterbury, shows 73% of exotic afforestation from 2019 to 2023 was in the North Island with 40% of total afforestation on the East Coast, in Hawke’s Bay and south-eastern North Island . The level of afforestation achieved in 2023 (68,500ha) was much less than intentions stated in the 2022 survey (88,000 hectares), the report says.
It notes forestry industry “uncertainty” in 2022 with only 70% (61,200ha) of intended 2023 afforestation confirmed at December 2022. Planting caveats by those surveyed in 2022 included the-then Government’s decision to maintain existing ETS price control settings for 2023-26, adjusted for inflation and the March 2023 Government announcement of a review of the ETS. Cyclone Gabrielle which caused widespread damage in February 2023 also affected planting intentions. The report says the 2023 intentions survey suggests total exotic afforestation was intended to be 51,800ha this year, of which radiata pine would take 86%.
McClay acknowledges “meat processers are finding it hard at the moment” with soft international markets, particularly in China, driving down commodity prices for sheep meat and beef. This is flowing through to lower returns for farmers, impacting stock numbers, he says.
“That is why we are working at pace to implement policy that seeks a balance of land uses to achieve improved outcomes for agriculture, forestry, and the climate while considering the impact across the rural economy,” he says.
“Both forestry and farming will play integral roles in boosting our economy, meeting our climate change targets, and achieving our ambitious goal of doubling exports by value in 10 years.”
Food and fibre exports, responsible for 80% of New Zealand’s total goods exports, earned $54.6b in the year to June 2024. MPI’s latest Situation and Outlook report expects this revenue to lift to $66.6b in 2028. (This report noted Beef+Lamb projections that sheep and beef farm profit before tax was forecast to fall 54% to $62,600 per farm in the 2023-24 year, following a 29% decline in 2022-23, due to lower revenue and higher input costs.) Looking to 2024-25, MPI expected meat and wool sector export revenue to begin to recover with 3% growth to $11.8b “due to improving demand and lower global beef exports bolstering prices”.
McClay says the Government is now considering proposals to meet the Coalition agreement to place limits on newly planted forests on converted farmland from entering the ETS, “and the recently consulted-on second Emissions Reduction Plan signals a shift in this direction”.
The Cabinet is expected to consider these proposals early next year, he says.
Asked to respond to the suggestion a processing industry restructure seems inevitable, the Meat Industry Association, which represents processing and export company members, says decisions about capacity are up to individual companies.
But chief executive Sirma Karapeeva says the sector “remains concerned about the lack of limits on fossil fuel emitters offsetting their emissions by planting trees on productive land”.
“This risks pushing more land into carbon farming, which will have long-term consequences for the viability of meat-processing plants , rural communities and the New Zealand economy.
“Meat-processing plants are often the largest employers in the regions they operate,” she says.
Also “really concerned” about the effect, and rate of, of farm-to-forestry conversions is Federated Farmers.
Meat and wool chairman Toby Williams, an East Coast farmer, says the downstream effects are “devastating”.
“We hear more and more frustrations from communities that it’s so hard to get workers and about schools closing.”
“We were talking four or five years ago about the rate of it (land use change) and it fell on deaf ears.
“It’s not just forestry to be fair. We’ve got dairy farms up north going into avocado orchards and other places where all those good soils are going to housing pressure. Flat land that you would have finished lambs on previously is under pressure. The big kick already though is the loss of breeding stock.”
Williams says livestock numbers have been declining for many years “but it comes in waves”.
“In the last three years we’ve seen the effects with a massive decline in breeding ... then you throw in poor wool returns and (sheep) meat returns being below the cost of production.”
He was sending lambs to a processor for $120 at the beginning of this year that cost $150 to produce.
“The beef market’s strong, although numbers are falling. I was talking with a meat company director the other day and we were saying there needs to be consolidation within the processing sector.”
Williams says farmers fully accept they have to do their bit towards carbon-emissions reduction.
“But our biggest criticism is not the planting of pine trees but the fact we’re converting whole farms to pine trees. We need to see a mosaic of land use where we integrate vegetation, pine trees or natives or whatever, into existing farms to diversify the incomes of those farms.
“When you convert a whole farm, everything goes and we are seeing the consequences of this.”
He says it’s often forgotten by advocates of exotic afforestation that “pine trees soak up a huge amount of water”.
“In 10 to 15 years, we’re going to start seeing the downstream effects of that in our aquifiers and waterways.”
He doesn’t blame farmers for being lured by attractive forestry company offers.
“Farming is difficult. Animals are hard work. The climate is changing. Bugs and worms and fly strike have become more prevalent and labour more intensive. The average age of farmers is rising. There’s constant badgering from the media about methane emissions and that we make up a significant chunk of the emissions profile for our country and that we need to do something about it.
“It gets farmers down and we are seeing the results of it. They’re saying ‘I’m going to sell up to forestry. I really don’t want to but they’re paying the best money’.
“You can’t criticise someone for selling - they’ve got to do the best for themselves and their children.”
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the $26 billion dairy industry, agribusiness, exporting and the logistics sector and supply chains.
Zespri must sell 190 million trays of kiwifruit from record crop.