9 Nov 2021
The Freshwater Package and the Future of Your Farm

What you need to know and do to keep operating profitably

New Zealand is blessed with some of the purest freshwater in the world, whether from bores, wells, or streams. For farmers, this freshwater is an essential element in the health of their livestock and business.

In the past year, national policies regarding freshwater use and pollution have been implemented, with a series of regulations at both the regional and national level affecting how farmers use freshwater and conduct their business.

The Essential Freshwater Package directly affects dairying and intensive farming, with the aim of reducing their impact on waterways. TelferYoung Manawatu Rural Valuer Peter Loveridge talks us through how the new regulations are affecting farmers and the property market, and what rural property owners need to do next.

It’s not the only water policy in play

Let’s begin by clarifying one thing: the Freshwater Package is distinct from the Three Waters debate that is currently in the headlines. The Three Waters programme relates to urban areas, while the Freshwater Package is specific to farms.

The intention of the Freshwater Package is to ensure the quality of our freshwater in New Zealand is not compromised and that it remains safe for swimming and for marine life to live in for generations to come.

However, up to now, the level of governance between our regions has differed, leading the central government to put tougher measures in place on a nationwide scale.

“In my own region of Manawatu-Whanganui, our regional authority Horizons is already tackling water issues with their One Plan. On top of this, the Labour Government has also instigated their own set of rules which override and add to these. Farmers now have to comply with two sets of rules in order to continue farming.” - Peter Loveridge, Rural Valuer

What the new regulations mean

The Freshwater Package is designed to limit the amount of run-off, pollution, and natural and chemical elements that make it into our waterways and rivers.

Some of the new regulations include:

  • Stock exclusion from wetlands, lakes and rivers.
  • Specific standards for feedlots and intensive type winter grazing.
  • A cap on synthetic fertiliser to reduce nitrogen use.

The rules at this point refer specifically to dairy cattle, deer, pigs, beef cattle, and other large livestock. Sheep are excluded from several of these policies.

“Broadly speaking, it’s made dairying difficult, and intensive cropping and fattening more challenging. It’s introduced a new layer of rules, which is difficult for farmers to get their heads around. The way they’ve used their land for generations up to now is no longer guaranteed.” - Peter Loveridge, Rural Valuer

There are timelines and deadlines attached to the new regulations, with fencing required for some areas by 2023 and all areas by 2025. If farms choose to not comply by the set dates, they may have their consent revoked and be unable to continue farming legally.

The early impact on farm sales

Farmers are now faced with a decision to either take up legislation and comply, or get out altogether.

“In Manawatu, we’ve seen a dozen dairy farm sales in the past year, with over half of them decommissioned. They’re unlikely to be dairy farmed in the short-term future. It may not be just because of legislation, but the fact is people are making big decisions and pivotal shifts for the future of their rural properties.” - Peter Loveridge, Rural Valuer

Demand for dairy farms has been impacted, with few sales occurring compared to historic levels. Decommissioning a dairy farm is an easy—albeit drastic—way to avoid the regulations, as consent is only needed for dairying and intensive farming.

“This is at a time when payout for dairy has never been higher—prices would normally be expecting to spike, but dairy farms are selling at similar levels to when the payout was less. This may not be directly as a result of recent rule changes, as other issues such as difficulty securing reliable labour, existing consent compliance and concerns regarding climate and future markets also come in for consideration.” - Peter Loveridge, Rural Valuer

What farmers can do now

The best thing for farmers to do, even if they currently disagree with the new legislation, is to attend public meetings, read the book of rules and engage with a farm advisor to ensure their farm complies. By doing this, they can also discover the likely costs required to meet compliance.

For prospective buyers, the process is the same.

To bring the farm up to compliance could involve new fencing, additional bridges across waterways, or a reassignment of pastures. The work and costs involved will vary from farm to farm, and should be assessed earlier rather than later.

How TelferYoung can help

At TelferYoung, our valuers are educating themselves about the Freshwater Package regulations and their effects so we can best inform our clients through the implementation process.

In creating a valuation, we investigate whether a farm complies with the regulations or not, and to what degree this will impact the selling price. We look at comparable sales in the market for the specific type of farm, to create a realistic and accurate picture of its value.

“We can’t ignore this legislation, we have to take it into account in our valuations. Whether you comply or not, it will still be considered in the price of your farm. It’s here to stay.” - Peter Loveridge, Rural Valuer

We understand that this is a stressful time for farmers, on top of several other challenges in the industry, however the intention behind the Freshwater Package is clear: protecting our waterways so that our grandchildren can enjoy fresh water in future years.

Call TelferYoung to talk with a specialist valuer today