Some of New Zealand’s farms may become unprofitable unless they adapt to the changing climate and the associated increase in the number of extreme weather events that it will bring. Rising temperatures could even mean that growing common varieties of kiwifruit will become impossible in regions including the Bay of Plenty.

That’s the warning from a landmark report commissioned by Westpac and carried out by the Agribusiness and Economics Research Unit at Lincoln University. It calls for the agricultural sector to act now to reduce its own carbon emissions and gear up for the inevitable shifts in temperatures, rainfall patterns and storms.

“There are certainly challenges and risks for agriculture,” says Tim Henshaw, Westpac’s head of agribusiness, “but opportunities will arise for those farmers and growers agile enough to take advantage of both a changing climate and a changing regulatory and consumer market.”

Pictured: Tim Henshaw, Westpac

Looming threats

The report highlights dangers threatening incomes:

• Even a moderate drought could reduce dairy profits by nearly 30%
• Two consecutive years of drought would reduce sheep and beef profits by nearly half – and up to two-thirds for intensive South Island operations
• Transitioning to other irrigated land uses, such as pip fruit or viticulture, would decrease per hectare gross margins for kiwifruit producers by 58%.

“The clear message is that it’s now critical to consider effective adaptations of farm management to ensure systems are as resilient as possible. Only a few require an initial investment of capital,” says Henshaw. “This should be a key area for industry focus, both in terms of research into effective practices and training of rural professionals.

“Understanding how to mitigate the risks and develop robust, locally specific plans will be essential.”

Grasping new opportunities

For growers and livestock owners who do so, there will be sizeable opportunities:

1. Reduced production costs through efficient, low-emission energy sources and farming equipment

2. Enhanced productivity with climate-smart farming techniques

3. Potential for profit boosts from diversification and converting land to more cost-effective uses, including agroforestry

4. Latching onto shifting consumer preferences to gain competitive advantages

5. Creating intellectual property through expertise from the transition to low-carbon techniques

6. An extended growth season, faster maturation and more optimal environments for some crops, allowing new species to become viable.

“The journey to methods of production using less carbon will create challenges, particularly for those lacking strong pasture and stock management skills,” says Henshaw, “but there will be openings for those able to successfully de-intensify and improve productivity at the same time, particularly as the carbon price increases.

“It’s clear from this report that farmers are going to need continued support and advice to evolve their businesses so they can continue to thrive in the years ahead. We want to help our farmers and growers, as well as the sector in general, and we hope sharing the insights from this report advances the collective thinking and supports action.”

Find out more

For details on how Westpac can work with accountants to help their agricultural clients, visit westpac.co.nz