Selwyn Te Waihora Nutrient Performance and Financial Analysis Prepared for: Irrigation NZ and ECan Prepared by: The AgriBusiness Group December 2012

Transcription

1 Selwyn Te Waihora Nutrient Performance and Financial Analysis Prepared for: Irrigation NZ and ECan Prepared by: The AgriBusiness Group December 2012

2 Contents Selwyn Te Waihora Nutrient Benchmarking EXECUTIVE SUMMARY 2 1 BACKGROUND SCOPE MODELLING 5 2 RESULTS FOR SAMPLE FARMS RESULTS 8 3 MITIGATION OPTIONS BACKGROUND MITIGATION TECHNIQUES FINANCIAL IMPLICATIONS 1 4 APPENDIX ONE SCOPE 6 5 APPENDIX TWO STATUS QUO BUDGETS. 8 6 APPENDIX THREE MITIGATION OPTIONS FINANCIAL CHANGES 15 Please Read The information in this report is accurate to the best of the knowledge and belief of the consultants acting on behalf of the Irrigation NZ and ECan. While the consultant has exercised all reasonable skill and care in the preparation of information in this report neither the consultant nor the Irrigation NZ and ECan accept any liability in contract, tort or otherwise for any loss, damage, injury or expense, whether direct, indirect or consequential, arising out of the provision of information in this report. 1

3 Executive Summary Background The authors were tasked with carrying out OVERSEER analysis of 18 farms which represented the major land uses in the catchment area of Selwyn - Te Waihora to calculate the amount of N leaching and P runoff analysis. The results were then run through a financial model to calculate the impacts on the farming business from carrying out a range of mitigation strategies. Results for Sample Farms The OVERSEER model has been set up to report the results on a predictive basis in an average year. The results of the OVERSEER analysis vary considerably even within the categories as a result of the soil mix on farm, the intensity of the farming operation and the timing of events on farm. Activities that influence the potential for discharges reporting such as intensity of operation, stocking rate, irrigation rate, nitrogen inputs and timing, supplementary feeding policies etc vary significantly between the farms. Executive Summary Table 1: OVERSEER results for farming types. Farm Type N leaching Kg n / ha/ year Range Of N leaching N conversion efficiency range Irrigated Dairy pasture based light soil type ( 3 farms) Irrigated Dairy pasture based heavy soil type ( 3 farms) Irrigated Dairy High input light soil type ( 1 farm) Irrigated Dairy High Input heavy soil type ( 2 farms) Irrigated Mixed Cropping light soil type ( 1 farm) Irrigated Mixed Cropping heavy soil type ( 2 farms) Irrigated Dairy support light soil type ( 2 farms) Dryland Flatland arable and sheep. ( 2 farms) Dryland Foothills sheep and beef ( 2 farms) P runoff Kg P / ha /year N leaching Results All of the irrigated dairy farming on the light soils have high results for N leaching. For the irrigated dairy farming on heavy soils the results are low. The arable farms on the heavy soils are very low for N leaching. The arable farming on lighter soils is also relatively low compared to all other farms modelled. 2

4 Irrigated dairy support on light land is relatively high in N leaching. Dryland flatland arable and sheep is relatively low in N leaching. Dryland foothills sheep and beef are relatively low in N leaching performance. P run off. As the majority of farms are flatland the P run off results are relatively low. The higher results (> 1) are predominantly on steeper hill country. Mitigation Results The long term mitigation options shown here are each designed to address one of the causes of high nutrient leaching. They address each option with a degree of restraint on the main cause of N leaching from that activity. In many of the cases the mitigation could be adopted with a lesser or greater degree of restraint on the activity according to the requirements of the property. Therefore these should be considered as examples of the degree with which a mitigation activity will address the issue. It should be noted that the intention in this analysis is not to change the farming system. The following table reports the average results of the OVERSEER analysis and the impacts of carrying out the mitigation strategies on farm on the Net Cash Position and on the Total Equity position. Executive Summary Table 2: OVERSEER and Farm Financial Measures N Net Cash Position Total Equity Leaching Reduction Dairy DCD Use Med + Med + Med Reduced Autumn N Med - Low - Low Improved Cow Efficiency Low + High + Med 15% Less Cows High + Med - High Active Water Management High - Low - Low (low cost) On / Off grazing Med - High - Med Winter Housing Low - High - High Top 5% Pastoral High + High + High Irrigated Dairy Support DCD Use Low - Low + Low Active Water management High - Med - Med (low cost) Dryland Sheep and Beef DCD Use Low - High - Low 15% Less Stock Low - Low - Med The mitigation strategies are reported as High, Medium or Low in terms of the amount of reduction that occurs on the N leaching result. The Net Cash Position and Total Equity results are reported as + in terms of their impact having an improving effect on that measure or in terms of them having a deteriorating impact on that measure. As can be seen the two do not work in tandem with some being positive for some and negative for the other. 3

5 The choice of options or the mix of options for a farm may be much more complicated than as displayed here. However these results indicate that given time a significant reduction in N leaching results can be achieved at the same time as a positive change in the Net Cash Surplus and Asset Value can be achieved on Irrigated Dairy farms on light soils. However for the other farms reported here the results are far more subdued and do not indicate positive changes in the farm financial measures. 4

6 1 Background 1.1 Scope This is a collaborative project between Irrigation NZ, Canterbury Regional Council and MPI which has been partly funded through the Sustainable Farming Fund (SFF). The project involves carrying out analyses on farms in the Selwyn Waihora catchment to support community discussions in the local catchment limit setting process. The authors were tasked with carrying out analysis of 18 farms which represented the major land uses in the catchment area of Selwyn - Te Waihora. These farms were then put through OVERSEER analysis to calculate the amount of N leaching and P runoff. Once this was carried out the results were then run through a financial model to calculate the impacts on the farming business from carrying out a range of mitigation strategies. 1.2 Modelling There are two stages of modelling reported here. The first is the use of OVERSEER to model and report nutrient discharges and the second is the financial modelling that was carried out OVERSEER OVERSEER 6.0 has been used in this analysis. This is the latest version of the model which has upgrades to how it handles irrigation and fertiliser on a monthly basis, amongst others. The most significant upgrade is the change of the nutrient discharge model to one of modelling the drainage of the soil rather than the input of moisture through rainfall and irrigation to the soil. This change to the way that it calculates the discharge of nutrients has meant that there has been a considerable change to the performance of different classes of soil in terms of total discharges. The results have been subject to a peer review which indicates that they do represent a fair result in terms of use of the model. Protocol There are quite a number of settings available in OVERSEER all of which can greatly affect the amount of nutrients leached that it reports, especially N. Many of these settings have a default which estimates leaching performance. The accuracy of the information can be greatly enhanced if additional figures are supplied. As changes to these functions impact on nutrient loss a protocol must be developed for the use of OVERSEER 1. The OVERSEER model has been set up to report the results on a predictive basis in an average year. As yet there is no official protocol for use the authors have adopted the following: Climate data (rainfall, PET and average temperature) have been taken from the nearest of two climate stations Darfield and Lincoln. 1 This protocol should include guidance on interpretation and use of soil information for use in the model 5

7 The average water holding capacity to 60 cm has been matched with that published in the SMap data sheets for the soil type on the farm. This has taken some juggling of soil description in order to make the soil water holding capacity used in the model fairly reflect that reported in the data sheets. The rest of the data has been taken from the farms; irrigation practice, n fertiliser applications etc. The adoption of this protocol on a predictive basis creates some issues with matching water demand (as driven by evapotranspiration) and water supply (as driven by rainfall and irrigation) on a monthly basis. Rainfall is entered as a total figure for the year and is then distributed on a monthly basis by OVERSEER. How this is distributed is not able to be checked. However irrigation is entered on a monthly basis. In order to follow a logical protocol on the monthly distribution of irrigation water a figure for the net soil moisture deficit was calculated by deducting evapotranspiration from rainfall. This was then converted to a percentage figure by comparison with the total annual deficit. The monthly amount of irrigation for each farm was then allocated on the basis of multiplying the total annual irrigation by the monthly percentage. Data Much of the information that is required for OVERSEER in order to calculate the nutrient leaching of a property must be collected from the farmer. Where the model is used retrospectively to estimate the leaching losses from the previous year, the actual farm management information will be used. For this modelling exercise, the model was used predictively, and for an average season. In our experience it is quite difficult for farmers to estimate what level of activity would occur in an average season. A particular problem was encountered with accurately predicting annual irrigation. Water metering is now in place and it will enable farmers to more accurately determine the efficiency of their systems. In the majority of cases the farmers did not know the amount of water that they used at present and were forced to estimate it on the technical capacity of their system to deliver water. Past experience with this would indicate that the actual performance of irrigation systems in terms of delivery of water is a long way from the theoretical performance. Data collection should be included in any protocol developed. OVERSEER modelling issues The use of OVERSEER 6 has been problematic and continues to cause problems in terms of delivery of results. Ongoing instability of the model causes it to fail when required to carry out particular sorts of modelling operations. The new version of OVERSEER is able to model arable properties. Although this is a significant advancement there are still many technical features that have to be fudged or worked around for it to work in specific instances.. For the wide range of crops and crop rotations to be fully modelled further development within OVERSEER is needed. 6

8 An improvement from previous models is the ability of OVERSEER 6 to more accurately model irrigation activities by the type of irrigation used (reflecting irrigation efficiency), the volume of water applied and the monthly variability of the application. There is still no ability to affect the efficiency of application of water. All systems have a set amount of efficiency applied to each irrigation method set into the model which cannot be changed. Testing of this feature found that there were very little apparent differences in N leaching between centre pivot and a big gun irrigator. Further development of OVERSEER is required to incorporate a means of fairly reflecting a range of efficiencies of application of water into the model across an irrigation method Financial Models The financial models used are based on the MAF Farm Monitoring model of 2011 /12. The models used were Canterbury Dairy, Canterbury Sheep and Beef Finishing and the Dairy Support model has been created from the previous two. These report an average farm operation and therefore variation from farm to farm should be expected and individuals will differ considerably from the average both in their likely response in terms of mitigation response and the likely financial impacts. Revenue has been adjusted to allow for a long term average expectation of product prices. This is taken from the MAF report Situation and Outlook for New Zealand Agriculture and Forestry (2012) and averages the actual product prices for the previous four years and MAF s estimate of the likely prices for the next four years. The figures used are as displayed in Table 1. Table 1 : Price Series Item Price Milksolids Price ($/ kg milksolids) 6.38 Lamb Price ($/kg) 5.91 Wool Price ($/kg) 5.10 Beef Price ($/kg) 4.12 Dairy Support ( $ / kg DM) 0.23 The farm expenditure is taken from the farm monitoring model and adjusted according to the changes in activities required for each mitigation option. The asset values used in the analysis are taken from the asset values used in the MAF Farm Monitoring reports. The value per hectare used in those reports is multiplied by the area of each farm to give the total asset value. Similarly the debt structures adopted are the same as those used in the Farm Monitoring reports. If the productivity of the farm is altered by any of the mitigations used then the asset value of the farm is changed accordingly. If there is the necessity to enter into more debt as a result of the adoption of a mitigation then the debt is altered accordingly. 7

9 2 Results for Sample Farms The authors were tasked with carrying out analysis of 18 farms which represented the major land uses in the catchment area of Selwyn - Te Waihora. The basic data was collected from the farms. OVERSEER analysis was used to calculate the amount of N leaching, N conversion efficiency and P runoff. The selection of the farms may have meant that they were better than the average in terms of management practices for each farm type. However the range of activities and results indicate that they are a good mix which represents the district within the confines of a sample of this size. N leaching and P runoff results are given as kg / ha /yr and N conversion efficiency is given as a percentage. The definition of N conversion efficiency is the percentage of N in products of output (crops, milk, wool and meat) compared to the amount of N in inputs in fertilisers, supplements introduced and atmospheric inputs. 2.1 Results In reviewing the results of the OVERSEER analysis on the 18 farms shown in Table 2 there are a number of important points to note. Apart from the two heavy soil type arable farms and one of the dryland light soil type arable and sheep farms all farms had some connection with dairying in the form of dairy support operations. The amount and type of dairy support activity varied considerably from grazing small numbers of replacement stock to the wintering of large numbers of dairy cows. This integration of the dairy industry into other farming operations is quite significant. It also means that the results reported here are not for the type as described but incorporates a mix of farming types. Where there are a number of different farms reported for each type of farming operation there is still a considerable difference in the makeup of the farming operation. Activities that influence the potential for discharges reporting such as intensity of operation, stocking rate, irrigation rate, nitrogen inputs and timing, supplementary feeding policies etc vary significantly between the farms. Therefore different suites of mitigations will be appropriate for different farms. 8

10 Table 2: OVERSEER results for farming types. Farm Type N leaching Kg n / ha/ year Irrigated Dairy pasture based light soil type ( 3 farms) Irrigated Dairy pasture based heavy soil type ( 3 farms) Irrigated Dairy High input light soil type ( 1 farm) Irrigated Dairy High Input heavy soil type ( 2 farms) Irrigated Mixed Cropping light soil type ( 1 farm) Irrigated Mixed Cropping heavy soil type ( 2 farms) Irrigated Dairy support light soil type ( 2 farms) Dryland Flatland arable and sheep. ( 2 farms) Dryland Foothills sheep and beef ( 2 farms) Range Of N leaching N conversion efficiency range P runoff Kg P / ha /year Some interpretation of the results shown in Table 2 can be made based on the comments below. N leaching All of the irrigated dairy farming on the light soils have high results for N leaching. For the irrigated dairy farming on heavy soils the results are very low apart from one farm which is at a particularly high level of output and another which has a very high stocking rate and brings in a large amount of supplementary feed to support this high stocking rate. The arable farms on the heavy soils are very low for N leaching apart from one farm which has a significant amount of winter grazing on it. The arable farming on lighter soils is also relatively low considering that it has a high proportion of dairy support operations built into its rotation. Irrigated dairy support on light land is relatively high in N leaching. Dryland flatland arable and sheep is relatively low in N leaching apart from one farm which has a high proportion of winter grazing of cows. Dryland foothills sheep and beef are relatively low in N leaching. 9

11 N Conversion efficiency. N conversion efficiency i.e. the % of N in products (milk and meat) relative to N inputs in fertiliser, brought in feeds and atmospheric N inputs. The latter includes an estimate of N in rainfall (typically 2 kg N/ha/yr) and legume N2 fixation. Legume N2 fixation is a calculated parameter while all other parameters are farm inputs or simple calculations from farm inputs (e.g. using average NZ concentrations of N in feed or products). Therefore the results are very dependent on the range of activities carried out on farm. P run off. This is the sum of P runoff and P output from farm dairy effluent (FDE) ponds to waterways (for farms where FDE pond systems are used). P runoff is calculated in OVERSEER as a product of site, soil and management factors (McDowell et al. 2005), while P loss from ponds is a product of the level of P estimated to enter ponds as excreta. The results as shown are highly dependent on the mix of activities carried out but it appears that the higher levels are associated with the hill country farms. 10

12 3 Mitigation Options 3.1 Background N leaching occurs at times when there is an excess of N built up in the soil and when the soil water holding capacity of the soil is exceeded causing it to be washed through. In terms of a build up of excess N in the soil we know that this occurs when animal urine is deposited with its high concentration of N, excess N fertiliser is applied and not taken up by the plant, when pasture is cultivated and when it is left fallow over the winter months. In terms of N leaching we know that excess amounts of N are leached through the soil profile at times when the soil water holding capacity is exceeded. This occurs at times of high rainfall events and / or times when irrigation applications exceed the holding capacity of the soil. Therefore the majority of N leaching occurs as a result of N built up in the soil profile in the autumn months which is leached out during the high rainfall winter period. The mitigation options explored here are those that are designed to address the nature and timing of N leaching. The results to date indicate that the majority of the incidences of high N leaching in the subject farms are caused by: Operating on the lighter soils with low soil water holding capacities with irrigation. Not adopting DCD technologies. Applying more irrigation water than is required. Applying extra N to requirements through the autumn period. Having high concentrations of cows being fed additional feeds imported from off farm. Wintering cows on intensive feeding systems (crops). The first point to note is that there are very low levels of N leaching on the heavier soils for both Dairy and Arable. This is due to the relatively deep nature of the soils resulting in the high water holding capacity of these soils therefore there is less opportunity for them to leach. The second is the very low, levels of N leaching from arable farm systems. This is due to the heavy soils that they are predominantly carried out on, the continuous nature of the cropping rotation, the adoption of minimum tillage techniques, the application of N and irrigation during the growing season (spring) of the crop, the application of N and irrigation at rates that meet the growing demands of the crop, the use of cover crops during the winter and the relative lack of animals on the property. 3.2 Mitigation Techniques Mitigation techniques were modelled for each of the farm systems as detailed in Table 3. They are modelled to represent the range of options open to farmers to address each of the problem areas. 11

13 3.2.1 Good Management Practices for reducing nutrient losses A suite of good management practices have been assumed in the Selwyn Te Waihora catchment modelling for limit setting. These were: Compliant effluent systems Fertiliser applied according to the industry Code of Practice. Stock exclusion from water ways. Irrigation efficiency 80 % Fertiliser recommendations generated from a budgeting tool. Compliant effluent systems The upgrading of effluent management storage and application systems is well underway to the point that the N leaching calculated from the N disposal area is less than that from the remainder of the block in all of the farms modelled. This will continue to contribute to reducing N leaching through the recent adoption of storage pond facilities to allow the effluent to be held and applied to pasture at times of low soil moisture. Fertiliser applied according to the industry Code of Practice. This practice is widely adopted with all of the fertiliser spreaders being fully code compliant. Stock exclusion from water ways. In the dairy industry there has been almost complete uptake of stream fencing and putting in bridges over water ways to exclude animals from water ways as part of complying with the clean streams accord. In the sheep and beef and arable sector the adoption of this Good Management Practice is variable. Irrigation efficiency 80 % It is difficult to comment on irrigation efficiency at present because of lack of hard data on water use in most of the systems although the 80% measure is seen to be relatively easy to achieve in most systems. Fertiliser recommendations generated from a budgeting tool. Knowledge of the amount of market penetration of fertiliser representatives who carry out the exercise would suggest that compliance is relatively high Advanced Mitigation Techniques Arable Cropping Techniques The arable sector has been very good at adopting advanced management practices over the last ten or so years. Activities like minimum tillage, deep N testing and a sound knowledge of the N requirements of crops has led to them only putting on what the crop is going to utilise are now almost universally used within the arable industry. This has been assisted by the availability and use of N calculators for many of their crops. In this exercise the arable farmers chosen were at the top end of production and were utilising all of the advanced techniques like minimum tillage, deep N testing of soils and the utilisation of irrigation at strategic times. 12

14 DCD Use DCDs use entails the spraying of pasture with a chemical which inhibits the release of the N. The technology has been established and is still undergoing research. In Canterbury trial results show that the N in the pasture which is inhibited from being leached is able to be used by the plants and can accelerate growth by up to 12% based on a wide range of research. Despite this only one of the farms used in this exercise used DCDs. The cost of two applications is a barrier for widespread use across all enterprises. More accurate use of N One area that the pastoral sector is lacking is a means of predicting when N is low in the soil and should therefore be applied. Most dairy farms tend to have a more blanket application of N with regular applications occurring whether it is needed or not. Part of this is a reliance on N for feed production rather than clover which has a more variable output of N in terms of timing. More accurate use of the N through the autumn period is an area that requires further research. Accurate use of water. Scheduling irrigation applications to more accurately match plant requirement and evapotranspiration losses minimises runoff and drainage and therefore nutrient loss. At present much of the irrigation capability is determined by the allocation regime set by the technology that is in use. Aspects such as return period, application rate and depth set the capability of irrigation systems at present. The adoption of modern technology enables irrigation management which is more precise to the plant needs. The recent adoption of soil moisture monitoring and the recent requirement for water use monitoring will make the adoption of this technology much more relevant than it has been up until now. Reducing access to pasture. Reducing livestock s access to pasture either as a long term reduction in stocking rate or during times when they contribute to N leaching are possible through a range of techniques including housing and spreading the effluent over a larger area at a lower rate. Improving efficiency. There are also a large number of improvements in the efficiency of the operation that farmers could adopt that would each result in an improvement in the nutrient leaching of the property. Individually they would not alter the leaching figures by much but collectively they could make a significant difference to the leaching of the property Efficacy of mitigation options for sectors. The mitigation options shown here are each designed to address one of the causes of high nutrient leaching. They address each option with a degree of restraint on the main cause of N leaching from that activity. In many of the cases the mitigation could be adopted with a lesser or greater degree of restraint on the activity according to the requirements of the property. Therefore these should be considered as examples of the degree with which a mitigation activity will address the issue. It should be noted that the intention in this analysis is not to change the farming system. 13

15 Brief Description of Mitigation Techniques Used. Status Quo which is the current operation of the farm. DCD use which is the application of DCD in May and August. Reduced Autumn N reduce N application to half the normal rates from January with complete reduction of the April application. Improved cow efficiency doing the same production having all cows producing at their genetic capability which reduces the number of cows. 15% Fewer Stock reducing stock by 15% with a resultant decrease in the amount of feed purchased and N used. Active Water Management applying irrigation water to meet the plant demand. This includes a medium and high cost item of achieving this through changes to the irrigation system. On / off Autumn Grazing which restricts the herds access to pasture during the Autumn period with urine being collected and spread through the farms effluent system. Housing houses the herd for the winter dry grazing period on farm utilising the farms effluent disposal system when they would normally be grazed off the farm. Top 5% of Pastoral Only Farms adopting a best practice system of no supplementation of the farm operating at performance levels (grass and milksolids production) in the top 5% of farms using the latest technology in irrigation application but using relatively high rates of N application. The actual practices involved in each mitigation are shown in the appendix. In Table 3 the various mitigation options chosen by farm type are displayed. 14

16 Table 3: Mitigation options chosen by farm type. Base DCD use Reduced Autumn N Improved Cow Efficiency 15% less stock AWM On/Off Grazing Winter housing Irrigated Dairy Pasture Irrigated Dairy High Input Irrigated Mixed Cropping Light soil Irrigated Mixed Cropping Heavy Irrigated Dairy Support Dryland Flatland arable and sheep Dryland Foothills sheep and beef Top 5% Production

17 It should be noted that the range of options to reduce N leaching are very limited on non irrigated properties other than the use of DCD s and reducing stocking rate. 3.3 Financial Implications The financial implications of each option are shown in the following tables. The financial results are reported as two different measures. The first is the impact on the Cash Operating Position of the farm the second is the impact on the Asset Value of the farm. The impact on the Cash Operating Position is reported as Revenue minus Expenditure which gives the Cash Operating Surplus which indicates the operation of the farm. From this we then subtract Interest, Taxation, Drawings, Capital Purchases, Development and Principal Repayments in order to establish the Net Cash Position. The impact on the Asset Value of the farm reports Total Farm Assets which includes Land and Buildings, Livestock, Plant and Machinery and any farm related share holdings. From this we deduct Total Liabilities to report the net Asset Value of the property. Examples of the status quo budgets are shown in Appendix 1. Details of the financial adjustments made to the models for each of the mitigation options are found in Appendix 2. 1

18 Results are all reported against the status quo position. Although some activities can be carried out concurrently the end result will not necessarily be the sum of the two activities as some things have proportional impacts that diminish as the impact reduces. Table 4: Financial Impacts and OVERSEER results for Dairy Farming on Pastoral Systems Status Quo DCD Use Reduced Autumn N Improved Cow Efficiency 15% Less Cows Active Water Management On Off grazing in Autumn Winter Housed at Home Top 5% Pastoral Revenue ($m) Expenditure($m) Operating Surplus Net Cash Position ($) - 1,443 44,459-25, ,404 23,115-21,342-34, , , ,961 Total Farm Assets $m Total Liabilities $m Total Equity $m Results for Light Soils N leaching kg / ha Change from Status Quo (%) Results for Heavy Soils N leaching kg / ha Change from Status Quo (%) 21% 24% 7% 28% 28% 24% +3% +7%

19 Table 5: Financial Impacts and OVERSEER results for Dairy Farming in High Input Systems Status Quo DCD Use Reduced Autumn N 15% Less Cows Improved Cow Efficiency Active Water Manage ment On Off grazing in Autumn Winter Housed at Home Revenue ($m) Expenditure($m) Operating Surplus Net Cash Position ($) Total Farm Assets $m Total Liabilities $m Total Equity $m Results for Light Soils N leaching kg / ha Change from Status Quo (%) 16% 41% 9% 29% 32% 17% +4% Results for Heavy Soils N leaching kg / ha Change from Status Quo (%) 22% 27% 10% 29% 27% 22% +2%

20 Table 6: Financial Impacts and OVERSEER results for Irrigated Mixed Cropping ($) Status Quo DCD Use 15% Less Stock Revenue 776, , ,881 Expenditure 516, , ,040 Operating Surplus 260, , ,841 Net Cash Position 15,782-1,818 17,822 Total Farm Assets 6,650,000 6,650,000 6,650,000 Total Liabilities 1,662,500 1,662,500 1,662,500 Total Equity 4,987,500 4,987,500 4,987,500 N leaching kg / ha Change from Status Quo (%) - 3% Table 7: Financial Impacts and OVERSEER results for Irrigated Dairy Support ($) Status Quo DCD Use Active Water Management Revenue 690, , ,000 Expenditure 333, , ,944 Operating Surplus 356, , ,056 Net Cash Position 90,560 86,160 74,645 61,645 Total Farm Assets 3,511,800 3,511, ,511,800 Total Liabilities 1,700,000 1,700, ,300,000 Total Equity 1,811,800 1,811, ,211,800 N leaching kg / ha Change from Status Quo (%)

21 Table 8: Financial Impacts and OVERSEER results for Dryland Flatland Arable and Sheep ($) Status Quo DCD Use 15% less Stock Revenue 1,432,072 1,432,072 1,344,681 Expenditure 880, , ,611 Operating Surplus 551, , ,071 Net Cash Position 231, , ,457 Total Farm Assets 12,480,000 12,480,000 10,608,000 Total Liabilities 2,000,000 2,000,000 2,000,000 Total Equity 10,480,000 10,480,000 8,608,000 N leaching kg / ha Change from Status Quo (%) 6% 6% Table 9: Financial Impacts and OVERSEER results for Dryland Foothills Sheep and Beef ($) Status Quo DCD Use 15% less Stock Revenue 1,432,072 1,432,072 1,344,681 Expenditure 880, , ,611 Operating Surplus 551, , ,071 Net Cash Position 231, , ,457 Total Farm Assets 12,480,000 12,480,000 10,608,000 Total Liabilities 2,000,000 2,000,000 2,000,000 Total Equity 10,480,000 10,480,000 8,608,000 N leaching kg / ha Change from Status Quo (%) 6% 6% 5

22 4 Appendix One Scope The tasks were set out as: 1. To work with ECan and SFF project team to select an appropriate range of representative farms for analysis. The farms should represent a range of management practice and should as far as is practicable fit into the following farm types: Irrigated (spray) Dairy pasture based, system 3 (light soil type) (x2) Irrigated (spray) Dairy pasture based, system 3 (heavy soil type) (x2) Irrigated (spray) Dairy high input, system 5 (light soil type) (x2) Irrigated (spray) Dairy high input, system 5 (heavy soil type) (x2) Irrigated Mixed Cropping winter cows (light soil type) (x2) Irrigated Mixed Cropping winter sheep (heavy soil type) Intensive Cropping (heavy soil type) Dryland Flatland arable and sheep (x2) Dryland Foothills sheep/beef, and winter cows Dryland Banks Peninsula sheep & beef Irrigated Dairy support (x2) 2. Visit 18 farms to collect data to run OVERSEER and a financial model. Include a discussion with the farmers on how the information will be used in the limit setting process. 3. Calculate for each farm (including likely range and certainty) for current practice, good practice and maximum possible mitigation: N loss OVERSEER N conversion efficiency OVERSEER P loss and risk OVERSEER Farm production and financials (Farmax or appropriate model) 4. For two limit setting scenarios, Environment Canterbury will provide Nitrogen discharge allowances for the farms. Run OVERSEER and farm financial models to understand how those limits could be met and the financial implications of those limits. 5. Support Environment Canterbury staff to undertake a sensitivity analysis of nutrient losses to different land use combinations, specifically providing advice on the range of land use combinations. 6. Revisit each farm or convene a farm meeting to report back findings and get comments. 7. Support Environment Canterbury staff to populate a matrix on reduction of nutrient losses from good practice to maximum possible mitigation for the farm types. 8. Draft report that documents: The methodology including farm selection, modelling etc Key findings from current, good practice and maximum possible mitigations for each farm type including: The likely costs for the catchment to achieve good practice 6

23 The likely costs for the catchment to achieve maximum possible mitigation The overall impacts of meeting farm nutrient discharge allowances for 2 scenarios including the likely farm management practices and costs to meet scenario nutrient discharge allowances. 9. Discuss draft report with Environment Canterbury and Irrigation NZ SFF project team and finalise contents. As the project continued through its process some of the tasks were abbreviated or changed slightly from what was originally envisaged. A lot of the changes resulted around the delay in getting results from OVERSEER which meant that there was not time to allow for an analysis of the final decision making of the group. This has meant that the core results are around the reduction of nutrient losses from good practice to maximum possible mitigation. 7

24 5 Appendix Two Status Quo Budgets. Irrigated Dairy Farm Pasture Based System 8

25 Irrigated Dairy High Input System Revenue Milksolids $/ Kg ,300, Cattle $/ Kg , Other $/ Kg ,201 Total Farm Revenue 2,441,105 Expenditure Labour $ / cow ,675 Animal Health 97 91,665 Breeding 48 45,360 Dairy Shed Expenses 21 19,845 Electricity 98 92,610 Feed (hay and Silages) ,000 Feed (Grain etc) 0 147,000 Feed (Grazing) ,650 Feed (other) ,450 Fertiliser and Lime ,210 Freight 16 15,120 Regrassing Costs $ / ha 61 12,873 Weed and Pest 34 7,148 Fuel ,880 Vehicle Costs ,310 Repairs and Maintenance ,380 Communication 20 4,103 Accountancy 31 6,449 Legal and Consultancy 32 6,741 Administration 56 11,726 Rates 74 15,538 Insurance 98 20,521 Other 59 12,312 Farm Working Expenses 1,727,567 Cash Operating Surplus 713,538 Interest 6.5% 354,640 Taxation 20% 71,780 Drawings 82,000 Capital Purchases 60,000 Development 100,000 Principal Repayment 25,000 Net Cash Position 20,118 Total Farm Assets 14,783, Total Liabilties 37% 5,456,000 Total Equity 9,327,196 9

26 Irrigated Mixed Cropping STATUS QUO Total REVENUE Grain 277,500 Ewe Breeding Beef Finishing 0 - Dairy Grazing 498,830 GROSS FARM REVENUE 776,330 - FARM WORKING EXPENSES SU/Ha per SU Livestock Purchases - - Wages ,688 Animal Health Breeding - - Shed Expenses - Electricity ,334 Feed ,566 Fertiliser ,070 Freight ,950 Seeds ,792 Shearing - Weed and Pest ,322 Fuel ,452 Vehicle ,738 Repairs & Maint ,718 Rates ,640 Communication ,724 Insurance ,512 Acct, Legal,Cons ,256 Administration ,448 Other ,280 Irrigation Off Farm - On Farm ,550 CASH FARM EXPENDITURE 516,040 - CASH FARM SURPLUS 260, ,290 Interest 6.5% 108,063 Taxation 20% 30,446 Drawings 60,000 Capital Purchases 21,000 Development 5,000 Principal Repayment 20,000 Net Cash Position 15, Total Farm Assets ,650, Total Liabilties % 1,662,500 Total Equity ,987,500 10

27 Irrigated Dairy Support Irrigated Dairy Support REVENUE Price ,450 TOTAL REVENUE 3, ,000 FARM WORKING EXPENSES Livestock Purchases Wages 50 Animal Health 45 Breeding - Shed Expenses - Electricity 42 Feed 400 Fertiliser 450 Freight 13 Seeds 150 Shearing - Weed and Pest 84 Fuel 45 Vehicle 38 Repairs & Maint 100 Rates 20 Communication 8 Insurance 25 Acct, Legal,Cons 13 Administration 7 Other 4 Irrigation Off Farm 0.00 On Farm CASH FARM EXPENDITURE 1, ,800 CASH FARM SURPLUS 1, ,200 Interest 6.5% 110,500 Taxation 20% 49,140 Drawings 60,000 Capital Purchases 21,000 Development 5,000 Principal Repayment 20,000 Net Cash Position 90,560 Total Farm Assets ,511,800 Total Liabilties % 1,700,000 Total Equity 1,811,800 11

28 Irrigated Arable STATUS QUO SHEEP FINISHING Total REVENUE Grain 805,250 Ewe Breeding Beef Finishing 0 - Sheep Grazing 60,000 GROSS FARM REVENUE 865,250 - FARM WORKING EXPENSES 0.00 SU/Ha per SU Livestock Purchases - - Wages ,000 Animal Health Breeding - - Shed Expenses - Electricity ,750 Feed ,750 Fertiliser ,750 Freight ,750 Seeds ,000 Shearing - Weed and Pest ,250 Fuel ,500 Vehicle ,250 Repairs & Maint ,750 Rates ,000 Communication ,500 Insurance ,000 Acct, Legal,Cons ,000 Administration ,000 Other ,000 Irrigation Off Farm - On Farm ,750 CASH FARM EXPENDITURE 485,933 - CASH FARM SURPLUS 379, ,318 Interest 6.5% 101,563 Taxation 20% 55,551 Drawings 60,000 Capital Purchases 38,000 Development 50,000 Principal Repayment 20,000 Net Cash Position 54, Total Farm Assets ,500, Total Liabilties % 1,562,500 Total Equity ,937,500 12

29 Dry Flatland Arable and Sheep STATUS QUO SHEEP FINISHING Total REVENUE Grain 849,470 Ewe Breeding ,602 Beef Finishing 0 - Dairy Grazing GROSS FARM REVENUE 1,432,072 - FARM WORKING EXPENSES 6.36 SU/Ha per SU Livestock Purchases - - Wages ,000 Animal Health ,501 Breeding - - Shed Expenses - Electricity ,234 Feed ,360 Fertiliser ,346 Freight ,862 Seeds ,310 Shearing ,440 Weed and Pest ,978 Fuel ,608 Vehicle ,755 Repairs & Maint ,920 Rates ,600 Communication ,240 Insurance ,500 Acct, Legal,Cons ,140 Administration ,460 Other ,120 Irrigation Off Farm - On Farm CASH FARM EXPENDITURE 880,374 - CASH FARM SURPLUS 551, ,698 Interest 6.5% 130,000 Taxation 20% 84,340 Drawings 60,000 Capital Purchases 21,000 Development 5,000 Principal Repayment 20,000 Net Cash Position 231, Total Farm Assets ,480, Total Liabilties % 2,000,000 Total Equity ,480,000 13

30 Dryland Foothills Sheep and Beef SHEEP FINISHING $ / Ha Total REVENUE Lamb Finishing Ewe Breeding ,088 Beef Finishing GROSS FARM REVENUE 1, ,557 FARM WORKING EXPENSES SU/Ha per SU Livestock Purchases - - Wages Animal Health Breeding - - Shed Expenses - Electricity Feed Fertiliser Freight Seeds Shearing Weed and Pest Fuel Vehicle Repairs & Maint Rates Communication Insurance Acct, Legal,Cons Administration Other Irrigation Off Farm - On Farm CASH FARM EXPENDITURE ,739 CASH FARM SURPLUS ,818 Interest 6.5% 102,375 Taxation 20% 21,089 Drawings 60,000 Capital Purchases 21,000 Development 5,000 Principal Repayment 20,000 Net Cash Position - 21,646 14

31 6 Appendix Three Mitigation Options Financial Changes 6.1 Dairy Farm DCD Use DCD applied twice in May and in August. Cost / ha / annum = $200 Increased production by 5% Reduced Autumn N No April N input and the rate from January to March was halved from 70 to 35 kg. N use reduced by 175 kg /ha total cost saving $36,750. Decreased production based on an average response rate of 1:10 and 15 kg DM / kg milksolids = 9,800 kg milksolids. Improve cow efficiency Same total production from cows operating at 95% of body weight. Less cows = 119. Inputs stay the same. 15% Less cows Less cows = % less production. Less silage = 300 T Less barley = 147 T Less N = 70 kg / ha Active Water management This is achieved by setting the irrigation settings to this option in OVERSEER. This then calculates the amount of water applied if the irrigation system is responsive to what the plant needs (or soil moisture deficit). In this mode it reduced annual water applied from 575 mm to 380 mm a saving of 195 mm. This then assumes that the irrigator has a system that can apply the water in this way. Cost of water probes = $20,000 Cost of new system is taken at two costs $1,750 and $3,000 / ha. Effectively the costs will vary from nil for existing Centre Pivot irrigators up to a full system upgrade. Saving in pumping costs of 33% of electricity costs. On / Off Autumn Grazing 100% of the herd is housed on a stand off pad for the months of March, April and May.They are fed on pasture for 6 hrs grazing during the day from which they harvest 2/3 of their diet. The remainder is fed as silage and fed on the pad which requires an additional tonnes of silage to be made on the property. The cost of the stand off pad is taken as $1,670 / cow. 15

32 Winter Housed at Home This option is in response to reducing the impact of dairy winter grazing on dairy support properties by housing all of the cows at home in a housed facility. The effluent from the facility is collected in a storage dam and is applied later in the season. Current performance is maintained and all the feed for the wintering is brought in. Additional feed purchased = 15 kg / hd / day as kg dm; Straw 79.8 T Grass silage T Maize silage T Barley T Cost of feed = $271,000 Saved winter grazing cost = $153,800 Capital cost of barn = $2,595 / cow = $1,995,555 Ongoing Repairs and Maintenance = $84,590 Top 5 % of Pastoral only farms. Cows stocked at 4.2 cows / ha. DCD costs at $200 / ha. No importing of supplementary feeds. 6.2 Irrigated Dairy Support DCD Use DCD applied twice in May and in August. Cost / ha = $200 Increased production by 5% Active Water management This is achieved by setting the irrigation settings to this option in OVERSEER. This then calculates the amount of water applied if the irrigation system is responsive to what the soil needs. In this mode it reduced annual water applied from 575 mm to 380 mm a saving of 195 mm. This then assumes that the irrigator has a system that can apply the water in this way. The only system that can apply the water in this manner is a centre pivot system which is operated off the results from soil probes. Cost of water probes = $20,000 Cost of new system is taken at two costs $1,750 and $3,000 / ha. Effectively the costs will vary from nil for existing Centre Pivot irrigators up to a full system upgrade. Saving in pumping costs of 33% of electricity costs. 6.3 Sheep and Beef DCD Use DCD applied twice in May and in August. Cost / ha = $200 16

33 Increased production by 5%. 15% less stock. Reduced stock by 15 % along with output and expenses related to livestock. 17