30 September 2020

In the last farming update back in July, I referenced the drought had broken somewhat, resulting in a little rain and the greening of grass. Some areas have indeed received reasonable quantities of precipitation, whilst others feel they are still a long way off full dams. The unexpected balmy pre-spring weather has been advantageous for early lambing percentages, although the schedule outlook is depressed largely because of COVID-19 uncertainties in a lot of our major markets which is expected to continue for some time. Hopefully the predicted La Nina weather pattern will bring some good spring/summer rainfall.

Early 2020 financial accounts for farmers are showing a mixed bag. Generally, 2020 was quite a good year for most, although cash flow was hit hard when the cost of feed supplements was added to maintain stock condition during the drought.

This will mean 2021 provisional tax will need to be closely monitored. The drought provisions of the Income Equalisation Scheme allowing deposits for 2020 and almost immediate withdrawal for 2021, will certainly help flatten tax bills over the next ten months. There may be opportunities to move livestock from the National Standard Cost to Herd Scheme where appropriate, with the decreased herd scheme values applying for the 2020 income year, as part of this.

Another topic receiving attention is the Government’s Essential Freshwater reform programme which has caused some angst in farming circles. On 5 August 2020, new rules to protect and restore New Zealand’s freshwater passed into law.

Under the new law, stock exclusion regulations firstly define what a waterway is and if it requires fencing off. Secondly, key stock exclusion rules will apply from 2023, initially affecting predominately dairy cattle, and beef cattle and deer where these animals are grazed on fodder crops or break fed or grazed on irrigated pasture.

Restrictions on Intensive Winter Grazing (IWG) are also defined and certain standards for grazing livestock on winter forage crops, including sheep, must be met to conform with the standards. Land slope is also important (low slope is less than 10 degrees) for determining stock exclusion rules and hill country farms (land over 10 degrees slope) must meet the six standards under the IWG restrictions for grazing winter forage crops. If farms cannot meet the six permitted activity standards, they will need to apply for a restricted discretionary consent by 1 May 2021.

The government is clearly putting emphasis on cleaning up our waterways, and in doing so has prompted much discussion in farming communities. If you would like to find out more or discuss any of the topics raised, please contact the Findex Accounting & Business Advisory team.

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