AgFirst 2nd Interim Report Hawkes Bay Regional Council Part 2 of the TANK catchment Economic, Social and Ecological Impact Assessment: Pre

Transcription

1 P a g e 0 AgFirst 2 nd Interim Report For the Hawkes Bay Regional Council on Part 2 of the TANK catchment Economic, Social and Ecological Impact Assessment: Water Management & Land Management Policy Options Prepared Management October Policy Options: 26Part th 2017

2 P a g e 1 Table of Contents 2 nd Interim Report Overview... 2 Overview Objective... 3 Base and Mitigation Model Development... 3 Mitigation Model Scenario One; Key parameters and assumptions MS1 Modelling Results Discussion Overseer Calculated Nutrient losses Appendices Lochie MacGillivray 13 October 2017

3 P a g e 2 2 nd Interim Report Overview AgFirst is pleased to be able to forward a second report to the Hawkes Bay Regional Council (HBRC) for the TANK catchments economic, social and ecological assessment for water management and land management policy options. This report follows on from the first report which covered the methodology used to develop both the environmental and the economic impacts required under Part 2 of the HBRC TANK catchments Economic Social and Ecological Assessment of Water and Land Management Policy Options. This second report details the first mitigation scenario whose aim is to reduce sediment levels in the TANK catchments from grazed (pastoral) land.. This second report covers; 1. The mitigation model development and assumptions made 2. The provisional economic results of the base farm models for the Pastoral country 3. A discussion on the effect on the model farms of this mitigation strategy. The intention of this report is for it be a discussion document within the HBRC and Economic Assessment Working Group (EAWG) from which other mitigation options maybe developed as well as providing Nimmo Bell with the base and first mitigation scenarios so that they can calculate the regional impact for mitigations.. As such the financials derived from this modelling are only to a Farm Gate basis. A copy of this report has been provided to Nimmo Bell.

4 P a g e 3 Overview Objective Productivity and profit outcomes under current land use regimes and to assess the costs and implications of measures to mitigate contaminant losses Base and Mitigation Model Development As described in the first report, AgFirst developed three major geospatial zones and five pastoral models across these zones as detailed below. Summer Moist - Sheep and Beef Summer Dry - Sheep and Beef Part Time - Sheep - and Beef Intensive - Sheep and Beef Summer Moist - Dairying The differing pastoral systems were described in detail in the first report to the HBRC. In terms of mitigation of contaminant losses, the HBRC and the TANK stakeholder group has signalled that sediment contaminant in the TANK waterways is the single main issue, although in some catchments, such as in the Karamu, phosphate poses as the major problem. The first scenario run for consideration by the HBRC and EAWG is focussed on reducing sediment contamination, with a target of a 30% reduction in sediment in the streams and waterways in the TANK catchment. This report assumes that the pastoral sediment reduction target is held to 30% of the water leaving pastoral land. Other critical source areas are outside of the sphere of influence of the TANK pastoral farmers and are therefore not addressed in this report. In terms of mitigation strategies that can be tangibly measured on a catchment scale in the pastoral zone three broad mitigations options were chosen in Pastoral Mitigation Scenario One (MS1). 1. Stream bank erosion control by the provision of riparian strips along water ways. 2. Land use change, retiring high sediment loss micro and sub catchments and erosion vulnerable lands from livestock grazing. 3. More extensive use of pole planting on erosion prone hills that are not retired from grazing above. Other mitigation options such as leaving swales uncultivated, grazing crops from the top down and cropping setbacks from streams are considered best management practice and as a BMP any costs associated with this is already accounted for in the base models.

5 P a g e 4 All the base models have some winter cropping, this is modelled in the base models on land of less than 15 degrees. The mitigation models continue with this policy. It is recognised though that in practise and on a paddock scale some slopes of over 15 0 may be cultivated. Winter cropping in general forms an integral part of many farm systems and to remove it from the practice is likely to have a dramatic effect on the systems currently deployed. Levels of cropping was appended in the first report. There is an increasing volume of New Zealand (NZ) science work that has measured sediment losses from winter grazing of crops. A recent study conducted by Massey University indicated that on some soils and on some cultivatable slopes sediment losses from winter grazing of fodder crops by cattle were up to 150 times that of similar neighbouring pastoral land grazed. Winter cropping also poses increased risks from nitrate leaching. The destocking of cattle from grazing some slopes will most likely have an impact on sediment getting into waterways. However, a science literature review revealed that there is little NZ science that correlates a tangible value of sediment moving into waterways with differing cattle stocking rates. In future mitigation scenarios, assumptions on the relationship between cattle stocking rates and sediment losses could be suggested by the EAWG /HBRC and then modelled to determine the possible financial impacts. Mitigation Model Scenario One; Key parameters and assumptions. Base assumptions Erosion mitigation years of spread 10 Riparian years of planting spread 20 Forestry costs year spread 28 Erosion mitigation amortisation rate % 0.0% Forestry amortisation spread rate % 6.0% Percentage of identified high sediment/ erosion vulnerable land retired 100% percentage reverted/ non- production forestry (rest in forestry) 33% Min size of forestry (ha) Stream bank erosion control. Percentage of Stream Orders fenced 1 0% 2 50% 3 75% 4 100% 5 100% 6 100%

6 P a g e 5 Riparian width Stream order metres Streambank fencing % fenced depending on slope gradient Slope C or less- 15 degrees or less, Rolling - Flat 100% Slope D degrees, Strongly Rolling 50% Slope E degrees, Moderately Steep 0% Slope F & G- over 26 degrees, Steep- Very Steep 0% Under the above parameters 98 km of streams are fenced and this is in MS1 spread over ten years. Sednet was used to calculate the sediment reduction by this mitigation method. It has been assumed that the riparian planting along the streams will take place, spread over 20 years in MS1. At 4,500 plants/ha and at $5.50/ plant costs are at $2.48 for land of slope D or less. Costs would increase by 10% for slopes in the E category and by 15% for any slopes in the G & F category Fencing costs also vary according to slope and this and riparian cost increments are shown below. Stream fencing Riparian planting cost Average fence Percetage Slope category per meter cost double fencing factor / m2 cost Electric C or less $ $ 2.48 $ % D $ $ 2.48 $ % E $ $ 2.72 $ % GF $ $ 2.85 $ % Further water reticulation costs at $5/ metre are budgeted in this model. $200/ha of weed and pest control is included. The riparian planting is spread over twenty years. An adjustment was made for any riparian land removed from livestock production. 2. Vulnerable land retirement. Micro/Sub catchment land identified with an erosion loss rate of over 950 tonnes of sediment per km 2 was retied in MS1. There is a total of 9,550 ha is in this category across the pasture grazed TANK catchment. As with the calculations used in river bank stream riparian planting the effectiveness of retirement in sediment reduction is calculated at 80%. Under this scenario the following land in ha per model farm would be retired S. Moist S. Dry Intensive Part Time Dairy Total wgted av

7 P a g e 6 This would decrease sediment by 206,710 tonnes annually or a 21% reduction in sediment loss. Increasing the area retired to micro/sub catchment land with rates over 900t/ increases the land to be retired to 11,366 ha, and would result in the following land retirements; S. Moist S. Dry Intensive Part Time Dairy Total wgted av This would decrease sediment by 233,976 tonnes annually or a 25% reduction. This retired land was used to establish production forestry, left to revert, or to be planted in non-production trees. There is a minimum area for production forestry at 10 ha/ farm with a minimum of 40% of the retired land left to revert (due to slope/contour and land manager desire to utilise other land use opportunities i.e Manuka for honey). Fencing costs at $9.37/m were calculated for each farm model to retire land. Forestry establishment costs are amortised over twenty-eight years. The retirement of the land is spread over ten years. As with the stream bank riparian planting an adjustment was made for any land removed from livestock production. The breakdown of the erosion increments, corresponding erosion tonnage/yr, estimated effectiveness by land use change and the land areas involved are detailed below. Total Erosion rate range (t/km 2 ) Total Erosion (t) Total Erosion effectiveness (t) Total Area Area/farm Farm Model (ha) (ha) Dairy ,539 1, over Dairy Total 2,359 1, Intensive ,955 5, over ,690 48, Intensive Total 67,644 54,116 1, Part Time ,183 3, over ,568 20, Part Time Total 29,751 23, Summer Dry ,109 11, over ,342 34,674 1, Summer Dry Total 57,452 45,961 2, Summer Moist ,481 9, over ,574 62,060 3, Summer Moist Total 89,056 71,244 4, Grand Total 246, ,009 9,530

8 P a g e 7 3. Further pole planting. Extensive pole planting modelled to happen on sub catchment land with sediment loss rates that ranges from t of sediment loss/km 2. This covers a further 8,347 ha. Poles are planted at 250/ ha and with the HBRC subsidy there is cost of $6.66/ pole planted (including the net protectors). Pole effectiveness drives a 65% reduction in sediment loss on this country. Farm Model Erosion rate range (t/km 2 ) Total Erosion (t) Total Area (t) Area / Farm (ha) Dairy , Dairy Total 5, Intensive , , , , , , Intensive Total 17, Part Time , , , , , , Part Time Total 16, Summer Dry , , , , , , , Summer Dry Total 52,778 3,532 33

9 P a g e 8 Summer Moist , , , , , , , Summer Moist Total 36,929 2, Grand Total 129,290 7,779 Farmax modelling The models were rerun on FARMAX and a dynamic series of excel worksheets were developed from the Farmax outputs. The Farmax model optimises the mix of stock numbers and stock performance to achieve the most likely new stocking rate and production. The excel spreadsheets provide the HBRC with a flexible model for any further analysis. As some of the lower production land was retired from grazing the modelling effected a general decrease in stock numbers but in most cases a slight increase in stock performance. Ie. The Summer Dry model had an increase in sheep productivity of 2.21%. This modelled is supplied to the HBRC and Nimmo Bell.

10 P a g e 9 Results of the MS1 modelling Base Scenario Summer Moist Summer Dry Intensive Part Time Diarying Total TANK Weighted Average Number of Farms farms ha/farm Total Farm area Ineffective Base Grazed Ha $ per Farm Total $ Gross Farm Income 419, , , ,362 2,332,096 $ 163,154, ,152 Farm Working Expenses 300, , ,549 91,726 1,482,829 $ 124,301, ,861 includes wages of management & depreciation EBIT 118,277 63, ,214 25, ,267 $ 38,852, ,291 /ha $ per ha Gross Farm Income ,226 Farm Working Expenses EBIT $ per production unit Sheep & Beef/ Su Dairy - $/kg MS weighted per su (S & B only) Gross Farm Income $ 98.2 Farm Working Expenses $ 76.8 EBIT $ 21.4 Mitigation Scenario Sediment reduction Summer Moist Summer Dry Intensive Part Time Diarying Total TANK Per farm Weighted Average Current losses from grazing land Number of Farms farms Total river bank sediment loss 104,822 tonnes/ yr Total Sednet derived grasslands erosion 924,424 " " Area of stream fencing ha 1 1,029,246 " " Area retired to revert/ non production woodlot ,140 ha 11 Area retired to production forestry ,171 ha 14 Total removed from grazing ,674 ha 26 New grazed area/ farm new ineffective Eventual Sediment Reduction/ yr Total $ Gross Farm Income 399, , , ,194 2,304,894 $ 159,171, ,359 Stream bank protection reduction of sediment 16,999 tonnes/ yr Catchment Mitigation (p.a) % reduction of sediment from stream bank protection 16% Stream & erosion mitigation fencing 1,570 1,725 7, ,408 $ 907,577 Pole planting sediment reduction 84,038 tonnes/ yr New water reticulation , $ 258,867 % Sediment reduction by pole planting 14% Riparian and non production establishment 1,264 1,175 6, $ 698,709 Reduction in erosion by land use change 206,710 tonnes/ yr Pole planting 4,432 5,496 2,085 1,072 3,487 $ 1,305,943 % Sediment reduction by land use change 21% Production Forestry establishment 2,935 1,559 1, $ 533,781 Catchment Mitigation sub total 10,437 10,371 19,280 3,005 6,155 $ 3,693,071 $ 10,008 Revised Farm Working Expenses 298, , ,570 91,767 1,466,257 $ 124,726, ,013 Cumulative overall annual sediment reduction 307,748 tonnes/ yr EBIT 100,502 52, ,598 21, ,637 $ 34,444,618 93,346 Cumulative overall annual sediment % reduction 30% Farm profit before Tax 35,129-12,821-15,112 13,000 N/A Decrease in EBIT from Base $ 17,775 $ 10,607 $ 15,616 $ 4,209 $ 10,630 $ 4,407,880 $ 11,945 Percentage decrease from Base 15% 17% 13% 16% 1% 15%

11 P a g e 10 MS1 Modelling Results Discussion The mitigation modelling achieved the target goal of a thirty percent reduction in sediment leaving pastoral land. In achieving this the models had on average a 15% reduction in EBIT, with a new average EBIT of $93,346/ farm, down 11,945/ farm from the base. Spreading the time taken to achieve the 30% target to 25 years, reduces the difference between the average base farm EBIT and the results from the spread scenario to $7,566/ farm. A series of budgets for each model in MS1 going out twenty-five years was developed. These are attached in the appendices. Based on the assumptions used in MS1 the Summer Dry model shows a deficit after interest and any lease costs. This is clearly unsustainable, therefore under MS1 the land managers/ farmers will either have the belief that there will be an increase in the fundamental viability with positive shifts in market prices and in the meantime continue to mine equity (by borrowing, reducing repairs and maintenance and or reducing fertiliser applications) until the market does improve or they exit farming, or undergo a dramatic farm business policy change (i.e. plant a considerable area into forestry). This latter option may require off farm equity investment as the cashflow from on farm may preclude this. This change may also be outside of the skill set and knowledge of some farmers. The returns from forestry are outside of the scope of this report, although preliminary work done by AgFirst indicates NPVs more than that generated from sheep and beef in some classes of TANK catchment land. Funding this land use option does place a significant cashflow burden for all farms with some form of production forestry (in MS1 this is Summer Moist, Dry and Intensive). The Part Time farm has similar financial issues to that of the Summer Dry and although it has half the wages of management costs it is fundamentally unviable under MS1 becoming a large lifestyle block heavily dependent on off farm income. The intensive farm has a strong EBIT of $107,598 but dependant on the its servicing costs some properties may run at a loss. This farm has the highest proportion of riparian work to prevent stream bank erosion at $7,560 pa. Included in the reduction in EBIT is the spread of $95,065 of stream bank riparian planting (3.8 ha). This riparian planting would in probability be starched out further by the farmer in this model. The other models remain viable in MS1, although the intensive farm This land use change mitigation option provided the most significant decrease in sediment entering the waterways. There is a differing percentage decrease effect between the model farms within the various mitigation strategies and it is dependent on the inherent property size, soil types, slopes and the size (stream order) and number of streams. The intensive model has a highest percentage of riparian land to be fenced mostly due to the number of streams in this zone and a higher percentage of land 15 degrees or less in slope.

12 P a g e 11 The relative cost of sediment reduction is expressed in the table below ($/t reduction/yr) Relative Cost of sediment reduction $/t Summer Moist Summer Dry Intensive Part Time Diarying Total TANK ( per farm) ( per farm) ( per farm) ( per farm) ( per farm) ( av/farm) Stream bank / riparian planting $ $ $ $ $ $ Land use change/ retirement $ 5.68 $ 5.52 $ 4.43 $ 0.68 $ 0.78 $ 5.45 Pole planting $ $ $ 9.10 $ $ $ This suggests that retiring land from pasture use is the most cost effective method of sediment reduction, with stream bank fencing being the least efficient in terms of benefit gained to dollars spent. The fundamental failing of the model farm scenario is that some individual farms are affected far greater than others. Please note maps in the appendices which highlight this. Total Costs of sediment reduction per farm model under MS1 S. Moist S. Dry Intensive Part Time Dairy Stream bank protection 15,698 17,248 75,602 9,682 14,081 Water reticulation 2,355 4,160 25,299 2,194 4,243 Pole planting 44,325 54,964 20,854 14,890 34,872 Riparian/ Forestry planting 64,634 44, ,109 14,890 16,707 Total costs $127,012 $120,766 $256,864 $37,491 $69,903 Overseer Calculated Nutrient losses Nitrogen losses to water kgsn/ha/ ha S. Moist S. Dry Intensive Part Time Dairy Base MS Phosphate losses kgsp/ha/yr S. Moist S. Dry Intensive Part Time Dairy Base MS The MS1 scenarios across the models all indicted a reduction of N and P losses. However as indicated in the 1 st interim report the base scenarios showed the greatest losses on a per ha due to cropping activities, these policies continued under MS1.

13 P a g e 12 Appendices Area (ha)- Summer Moist 446 New Area to plant in poles 27 Retired erosion land % 21% erosion reduction New Riparian area 0.32 Retired to reversion area Retired to forestry area New land area Removed SU 299 sheep 193 cattle 106 Erosion mitigation years of spread 10 years Foesrty establishment amortised over 28 years Forecast Profit and Loss for TANK Summer Moist Base Base Mitigation difference $ Total $/ha $ Total $/ha $ Total Revenue Sheep Sales - Purchases 238, Wool 50, Capital Value Change Total 289, ,847 Beef Sales - Purchases 96, Contract Grazing 32, Total 129, ,322 Crop & Feed Capital Value Change 0 0 Total 0 0 Total Revenue 419, ,169 Expenses Wages Wages 23, ,260 Management Wage 68, Stock Animal Health 19, ,377 Shearing 25, ,863 Feed/Crop/Grazing Pasture Conserved 1, Forage Crops 11, Regrassing 4, Fertiliser Fertiliser (Excl. N & Lime) 40, ,647 Nitrogen 3, Lime 3, Other Farm Working Weed & Pest Control 4, Vehicle Expenses 10, Fuel 7, Repairs & Maintenance 26, ,549 Freight & Cartage 4, Electricity 2, Catchment mitigation work Stream & sediment mitigation fencing ,570 Water reticulation 236 Riparian and non production forest planting ,264 Additional pole panting 0 $4,432 Production Forestry establishment 0 $2,935 Standing Charges Administration Expenses 11, Standing Charges Insurance 5, Standing Charges ACC Levies 2, Standing Charges Rates 9, Total Farm Working Expense 286, ,427 Depreciation 14, Total Farm Expenses 300, ,394 Economic Farm Surplus (EFS) 118, ,775 Other Expenses Rent/Leases 12, Other Expenses Interest 52, Farm Profit before Tax 52, ,775 % split Stream & erosion mitigation Fencing total $ 15,698 18% New Water reticulation $ 2,355 3% Pole planting $ 44,325 Riparian and non production forest planting $ 25,289 29% $ 87,666 Erosion mitigation fencing Amortisation yearly rate $1,570 Water reticulation $236 Riparian & non forest planting Amortisation yearly rate $1,264 Pole planting Amortisation yearly rate $4,432 Forestry planting Amortisation yearly rate $2,935 Erosion mitigation fencing & poles spread ( years) 10 Riparian & non forest planting spread ( years) 20 Forestry planting spread ( years) 28 Non production forest estab costs 17,488 Forestry establishment costs $ 39,346 Riparian amortisation rate Interest rate 0.0% Forestry amortisation rate 6.0% Annual cost $6,005

14 P a g e 13 Area (ha)- Summer Dry 449 New Area to plant in poles 33 Retired erosion prone land 25 6% 16% erosion reduction New Riparian area 0.57 Retired to reversion area Retired to forestry area New Grazed land area Removed SU 143 sheep 92 cattle 50 Erosion mitigation years of spread 10 years Foesrty establishment amortised over 28 years Forecast Profit and Loss for TANK Summer Dry Base Mitigation difference $ Total $/ha $ Total $/ha $ Total Revenue Sheep Sales - Purchases 186, ,019 Wool 41, ,115 Capital Value Change Total 227, ,094 Beef Sales - Purchases 121, ,378 Capital Value Change Total 121, ,693 Total Revenue 348, ,787 Expenses Wages Wages 20, Management Wage 68, Stock Animal Health 16, Shearing 20, ,138 Feed/Crop/Grazing Forage Crops 20, Regrassing 7, Fertiliser Fertiliser (Excl. N & Lime) 31, ,797 Nitrogen 2, Lime 2, Other Farm Working Weed & Pest Control 4, Vehicle Expenses 10, Fuel 6, Repairs & Maintenance 26, ,491 Freight & Cartage 3, Electricity 2, Catchment mitigation work Stream & sediment mitigation fencing ,725 Water reticulation 416 Riparian planting ,175 Additional pole panting 5496 Forestry establishment 1559 Standing Charges Administration Expenses 11, Standing Charges Insurance 5, Standing Charges ACC Levies 2, Standing Charges Rates 9, Total Farm Working Expense 272, ,820 Depreciation 12, Total Farm Expenses 285, ,820 Economic Farm Surplus (EFS) 63, ,607 Other Expenses Rent/Leases 12, Other Expenses Interest 52, Farm Profit before Tax -2, ,607 % split Stream & erosion mitigation Fencing total $ 17,248 17% New Water reticulation $ 4,160 4% Pole planting $ 54,964 Riparian and non production forest planting $ 23,493 24% $ 99,865 Erosion mitigation fencing Amortisation yearly rate $1,725 Water reticulation $416 Riparian & non forest planting Amortisation yearly rate $1,175 Pole planting Amortisation yearly rate $5,496 Forestry planting Amortisation yearly rate $1,559 Erosion mitigation fencing spread ( years) 10 Riparian & non forest planting spread ( years) 20 Forestry planting spread ( years) 28 Non production forest estab costs 9,290 Forestry establishment costs $ 20,901 Riparian amortisation rate Interest rate 0.0% Forestry amortisation rate 6.0% Annual cost $4,875

15 P a g e 14 Area (ha)- Intensive 452 New Area to plant in poles 13 Retired erosion land 17 4% 35% erosion reduction New Riparian area 4 Retired to reversion area 7 Retired to forestry area 10 New land area 431 Removed SU 122 sheep 79 cattle 43 Riparian & fencing costs amortised over 10 years Foesrty establishment amortised over 28 years Forecast Profit and Loss for TANK Intensive Mitigation difference $ Total $/ha $ Total $/ha $ Total Revenue Sheep Sales - Purchases 326, ,487 Wool 45, ,319 Capital Value Change Total 371, Beef Sales - Purchases 318, ,396 Total 318, ,012 Crop & Feed Cash Crops 140, ,112 Capital Value Change Total 40, Total Revenue 730,763 1, ,595 Expenses Wages Wages 48, Management Wage 68, Stock Animal Health 30, Shearing 27, Feed/Crop/Grazing Pasture Conserved 7, Cash Crops 88, Forage Crops 48, Regrassing 15, Fertiliser Fertiliser (Excl. N & Lime) 45, ,758 Nitrogen 28, Lime 5, Other Farm Working Irrigation Charges 6, Weed & Pest Control 9, Vehicle Expenses 13, Fuel 15, Repairs & Maintenance 45, ,096 Freight & Cartage 12, Electricity 6, Catchment mitigation work Stream & sediment mitigation fencing Water reticulation 2530 Riparian planting Additional pole panting Forestry establishment Standing Charges Administration Expenses 20, Standing Charges Insurance 10, Standing Charges ACC Levies 6, Standing Charges Rates 19, Total Farm Working Expense 577,354 1, ,021 Depreciation 30, Total Farm Expenses 607,549 1, ,021 Economic Farm Surplus (EFS) 222, ,168 Other Expenses Rent/Leases 27, Other Expenses Interest 94, $ 94, Farm Profit before Tax 100, $ 15,112 % split Stream & erosion mitigation Fencing total $ 75,602 31% Stream fencing annual New Water reticulation $ 25,299 10% Pole planting $ 20,854 Riparian and non production forest planting $ 120,896 50% Riparian annual $ 242,651 Erosion mitigation fencing Amortisation yearly rate $7,560 Water reticulation $2,530 Riparian & non forest planting Amortisation yearly rate $6,045 Pole planting Amortisation yearly rate $2,085 Forestry planting Amortisation yearly rate $1,060 Erosion mitigation fencing spread ( years) 10 Riparian & non forest planting spread ( years) 20 Forestry planting spread ( years) 28 Non production forest estab costs 25,831 Forestry establishment costs $ 14,213 Riparian amortisation rate Interest rate 0.0% Forestry amortisation rate 6.0% Annual cost $17,195

16 P a g e 15 Area (ha) - Part Time 97 New Area to plant in poles 6 Retired erosion land 7 7% 24% erosion reduction New Riparian area 0 Retired to reversion area 7 Retired to forestry area 0 New land area 89 Removed SU 45 sheep 29 cattle 16 Riparian & fencing costs amortised over 10 years Foesrty establishment amortised over 28 years Forecast Profit and Loss for TANK Part Time Mitigation difference $ Total $/ha $ Total $/ha $ Total Revenue Sheep Sales - Purchases 46, ,030 Wool 10, ,784 Capital Value Change Total 56, $ 54,664 2,150 Beef Sales - Purchases 60, ,548 Total 60, $ 58,530 2,018 Total Revenue 117,362 1,210 $ 113, ,168 Expenses Wages Wages 1, $ 1, Management Wage 15, $ 15, Stock Animal Health 4, $ 4, Shearing 5, $ 5, Feed/Crop/Grazing Forage Crops 7, $ 7, Regrassing 2, $ 2, Fertiliser Fertiliser (Excl. N & Lime) 8, $ 7, Nitrogen 2, $ 2, Lime $ Other Farm Working Weed & Pest Control 1, $ 1, Vehicle Expenses 6, $ 5, Fuel 6, $ 5, Repairs & Maintenance 6, $ 5, Freight & Cartage 1, $ 1, Electricity 2, $ 2, Catchment mitigation work Stream fencing $ Water reticulation $ Riparian planting $ Additional pole panting $1,072 Forestry establishment $0 Standing Charges Administration Expenses 7, $ 7, Standing Charges Insurance 3, $ 3, Standing Charges ACC Levies $ Standing Charges Rates 3, $ 3, Total Farm Working Expense 85, $ 85, Depreciation 6, $ 6, Total Farm Expenses 91, $ 91, Economic Farm Surplus (EFS) 25, $ 21, ,209 Other Expenses Interest 8, $ 8, Farm Profit before Tax 17, $ 13, ,209 Prt time % split Stream & erosion mitigation Fencing total $ 9,682 26% Stream fencing annual New Water reticulation $ 2,194 6% Pole planting $ 10,725 Riparian and non production forest planting $ 14,890 40% Riparian annual $ 37,491 Erosion mitigation fencing Amortisation yearly rate $968 Water reticulation $219 Riparian & non forest planting Amortisation yearly rate $744 Pole planting Amortisation yearly rate $1,072 Forestry planting Amortisation yearly rate $0 Erosion mitigation fencing spread ( years) 10 Riparian & non forest planting spread ( years) 20 Forestry planting spread ( years) 28 Non production forest estab costs 6,660 Forestry establishment costs $ - Riparian amortisation rate Interest rate 0.0% Forestry amortisation rate 6% Annual cost $1,932

17 P a g e 16 Area (ha)- Dairy 400 New Area to plant in poles 21 Retired erosion land 10 3% New Riparian area 0 Retired to reversion area 6 Retired to forestry area 0 New land area 394 Reduction is MS Riparian & fencing costs amortised over 10 years Foesrty establishment amortised over 28 years Forecast Profit and Loss for TANK Dairy Mitigation difference $ Total $/ha $/kg MS $ Total $/ha $ Total Revenue Stock Net Milk Sales - this season 2,135,567 5, ,905 Net Milk Sales - last season Net Milk Sales - dividend Net Livestock Sales 196, ,195 Contract Grazing Change in Livestock Value Total 2,331,994 5, ,100 Crop & Feed Capital Value Change Total Total Revenue 2,332,096 5, ,202 Expenses Wages Wages 226, ,815 Management Wage 100, ,613 Stock Animal Health 70, ,134 Breeding 46, Farm Dairy 24, Electricity 42, Feed/Crop Pasture Conserved 36, Feed Crop 62, ,000 Bought Feed 37, Calf Feed 6, Grazing Grazing 309, ,924 Other Farm Working Fertiliser (Excl. N) 80, ,290 Nitrogen 71, ,024 Irrigation 14, Regrassing 40, Weed & Pest Control 14, Vehicle Expenses 38, Fuel 24, R&M Land/Buildings 62, ,013 R&M Plant/Equipment 24, Freight & Cartage 17, Catchment mitigation work Stream & sediment mitigation fencing ,408 Water reticulation Riparian planting Additional pole panting $3,487 Forestry establishment $0 Overheads Administration Expenses 32, Insurance 20, ACC Levies 10, Rates 42, Total Farm Working Expenses 1,452,828 3, ,571 Depreciation 30, Total Farm Expenses 1,482,829 3, ,572 Economic Farm Surplus (EFS) 849,267 2, ,630 % split Stream & erosion mitigation Fencing total $ 14,081 20% Stream fencing annual New Water reticulation $ 4,243 6% Pole planting $ 34,872 Riparian and non production forest planting $ 16,707 24% Riparian annual $ 69,903 Erosion mitigation fencing Amortisation yearly rate $1,408 Water reticulation $424 Riparian & non forest plantingamortisation yearly rate $835 Pole planting Amortisation yearly rate $3,487 Forestry planting Amortisation yearly rate $0 Erosion mitigation fencing spread ( years) 10 Riparian & non forest plantingspread ( years) 20 Forestry planting spread ( years) 28 Non production forest estab costs 5,535 Forestry establishment costs $ - Riparian amortisation rate Interest rate 0.0% Forestry amortisation rate 6.0% Annual cost $2,668

18 P a g e 17 Forecast Profit and Loss for TANK Summer Moist Base Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 Years of Mitigation spread 10 $ Total Revenue Sheep Sales - Purchases 238,835 Wool 50,890 Capital Value Change -79 Total 289, Beef Sales - Purchases 96,753 Contract Grazing 32,865 Total 129, Crop & Feed Capital Value Change 0 Total 0 Total Revenue 419, , , , , , , , , , , , , , , , , , , , , , , , , ,096 Expenses Wages Wages 23,698 23,572 23,446 23,320 23,194 23, Management Wage 68,499 68,499 68,499 68,499 68,499 68, Stock Animal Health 19,191 19,053 18,916 18,778 18,640 18, Shearing 25,971 25,785 25,598 25,412 25,226 25, Feed/Crop/Grazing Pasture Conserved 1,520 1,520 1,520 1,520 1,520 1, Forage Crops 11,200 11,120 11,039 10,959 10,879 10, Regrassing 4,800 4,800 4,800 4,800 4,800 4, Fertiliser Fertiliser (Excl. N & Lime) 40,928 40,563 40,199 39,834 39,469 39, Nitrogen 3,424 3,424 3,424 3,424 3,424 3, Lime 3,393 3,393 3,393 3,393 3,393 3, Other Farm Working Weed & Pest Control 4,400 4,406 4,413 4,419 4,425 4, Vehicle Expenses 10,000 9,928 9,857 9,785 9,713 9, Fuel 7,422 7,383 7,343 7,304 7,264 7, Repairs & Maintenance 26,000 25,745 25,490 25,235 24,980 24, Freight & Cartage 4,400 4,368 4,337 4,305 4,274 4, Electricity 2,800 2,800 2,800 2,800 2,800 2, Catchment mitigation work Stream & sediment mitigation fencing 1,570 1,570 1,570 1,570 1,570 1,570 1,570 1,570 1,570 1, Water reticulation Riparian and non production forest planting 1,264 1,264 1,264 1,264 1,264 1,264 1,264 1,264 1,264 1, Additional pole panting 4,432 4,432 4,432 4,432 4,432 4,432 4,432 4,432 4,432 4, Production Forestry establishment 2,935 2,935 2,935 2,935 5,593 7,104 7,104 10,203 10,203 10,203 10,203 10,203 10,203 10,203 10,203 10,203 10,203 10,203 10,203 10,203 10,203 10,203 10,203 10,203 10,203 Standing Charges Administration Expenses 11,116 11,116 11,116 11,116 11,116 11, Insurance 5,526 5,526 5,526 5,526 5,526 5, ACC Levies 2,810 2,810 2,810 2,810 2,810 2, Rates 9,205 9,205 9,205 9,205 9,205 9, Total Farm Working Expense 286, , , , , , , , , , , , , , , , , , , , , , , , , ,641 Depreciation 14,685 14,688 14,692 14,695 14,698 14,702 14,705 14,708 14,711 14,715 14,718 14,721 14,725 14,728 14,731 14,735 14,738 14,741 14,744 14,748 14,751 14,754 14,758 14,761 14,764 14,768 Total Farm Expenses 300, , , , , , , , , , , , , , , , , , , , , , , , , ,409 Economic Farm Surplus (EFS) 118, , , , , ,513 99,268 98,534 94,702 93,968 93, , , , , , , , , , , , , , , ,687 Other Expenses Rent/Leases 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 12,930 Other Expenses Interest 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 52,443 Farm Profit before Tax 52,904 41,733 40,999 40,265 39,532 36,140 33,895 33,161 29,329 28,595 27,861 35,360 35,357 35,353 35,350 35,347 35,343 35,340 35,337 35,334 35,330 35,327 35,324 35,320 35,317 35,314

19 P a g e 18 Forecast Profit and Loss for TANK Summer Dry Base Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 Years of Mitigation spread 10 $ Total Revenue Sheep Sales - Purchases 186,019 Wool 41,115 Capital Value Change Total 227, Beef Sales - Purchases 121,378 Capital Value Change Total 121, Total Revenue 348, Expenses Wages Wages 20,599 20,524 20,450 20,375 20,300 20, Management Wage 68,499 68,499 68,499 68,499 68,499 68, Stock Animal Health 16,682 16,622 16,561 16,501 16,440 16, Shearing 20,327 20,113 19,899 19,686 19,472 19, Feed/Crop/Grazing Forage Crops 20,400 20,326 20,252 20,178 20,104 20, Regrassing 7,200 7,159 7,117 7,076 7,035 6, Fertiliser Fertiliser (Excl. N & Lime) 31,336 31,156 30,977 30,797 30,617 30, Nitrogen 2,996 2,996 2,996 2,996 2,996 2, Lime 2,949 2,949 2,949 2,949 2,949 2, Other Farm Working Weed & Pest Control 4,400 4,411 4,423 4,434 4,446 4, Vehicle Expenses 10,000 9,964 9,927 9,891 9,855 9, Fuel 6,451 6,428 6,404 6,381 6,357 6, Repairs & Maintenance 26,000 25,851 25,702 25,553 25,404 25, Freight & Cartage 3,825 3,811 3,797 3,783 3,770 3, Electricity 2,800 2,800 2,800 2,800 2,800 2, Catchment mitigation work Stream & sediment mitigation fencing 1,725 1,725 1,725 1,725 1,725 1,725 1,725 1,725 1,725 1, Water reticulation Riparian planting 1,175 1,175 1,175 1,175 1,175 1,175 1,175 1,175 1,175 1, Additional pole panting 5,496 5,496 5,496 5,496 5,496 5,496 5,496 5,496 5,496 5, Forestry establishment 1,559 1,559 1,559 1,559 2,971 3,774 3,774 5,420 5,420 5,420 5,420 5,420 5,420 5,420 5,420 5,420 5,420 5,420 5,420 5,420 5,420 5,420 5,420 5,420 5,420 Standing Charges Administration Expenses 11,116 11,116 11,116 11,116 11,116 11, Standing Charges Insurance 5,526 5,526 5,526 5,526 5,526 5, Standing Charges ACC Levies 2,442 2,442 2,442 2,442 2,442 2, Standing Charges Rates 9,267 9,267 9,267 9,267 9,267 9, Total Farm Working Expense 272, Depreciation 12, Total Farm Expenses 285, Economic Farm Surplus (EFS) 62, Other Expenses Rent/Leases 12, Other Expenses Interest 52, Farm Profit before Tax -2,

20 P a g e 19 Forecast Profit and Loss for TANK Intensive Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 $ Total Revenue Sheep Sales - Purchases 326,487 Wool 45,319 Capital Value Change 0 Total 371, Beef Sales - Purchases 318,396 Total 318, Crop & Feed Cash Crops 140,112 Capital Value Change 2 Total 40, Total Revenue 730, Expenses Wages Wages 48, Management Wage 68, Stock Animal Health 30, Shearing 27, Feed/Crop/Grazing Pasture Conserved 7, Cash Crops 88, Forage Crops 48, Regrassing 15, Fertiliser Fertiliser (Excl. N & Lime) 45, Nitrogen 28, Lime 5, Other Farm Working Irrigation Charges 6, Weed & Pest Control 9, Vehicle Expenses 13, Fuel 15, Repairs & Maintenance 45, Freight & Cartage 12, Electricity 6, Catchment mitigation work Stream & sediment mitigation fencing 7,560 7,560 7,560 7,560 7,560 7,560 7,560 7,560 7,560 7, Water reticulation 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2,530 2, Riparian planting 6,045 6,045 6,045 6,045 6,045 6,045 6,045 6,045 6,045 6, Additional pole panting 2,085 2,085 2,085 2,085 2,085 2,085 2,085 2,085 2,085 2, Forestry establishment 1,060 1,060 1,060 1,060 2,020 2,566 2,566 3,685 3,685 3,685 3,685 3,685 3,685 3,685 3,685 3,685 3,685 3,685 3,685 3,685 3,685 3,685 3,685 3,685 3,685 Standing Charges Administration Expenses 20, Standing Charges Insurance 10, Standing Charges ACC Levies 6, Standing Charges Rates 19, Total Farm Working Expense 577, Depreciation 30, Total Farm Expenses 607, Economic Farm Surplus (EFS) 222, Other Expenses Rent/Leases 27, Other Expenses Interest 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 $ 94,920 Farm Profit before Tax 100,056 -$ 18,410 -$ 18,410 -$ 18,410 -$ 18,410 -$ 19,370 -$ 19,549 -$ 19,549 -$ 20,669 -$ 20,669 -$ 20,669 -$ 3,181 -$ 3,181 -$ 3,181 -$ 3,181 -$ 3,181 -$ 3,181 -$ 3,181 -$ 3,181 -$ 3,181 -$ 3,181 -$ 3,181 -$ 3,181 -$ 3,181 -$ 3,181 -$ 3,181

21 P a g e 20 Forecast Profit and Loss for TANK Part Time Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 $ Total Revenue Sheep Sales - Purchases 46,030 Wool 10,784 Capital Value Change 0 Total 56, Beef Sales - Purchases 60,548 Total 60, Total Revenue 117, , , , , , , , , , , , , , , , , , , , , , , , , ,344 Expenses Wages Wages 1, Management Wage 15, Stock Animal Health 4, Shearing 5, Feed/Crop/Grazing Forage Crops 7, Regrassing 2, Fertiliser Fertiliser (Excl. N & Lime) 8, Nitrogen 2, Lime Other Farm Working Weed & Pest Control 1, Vehicle Expenses 6, Fuel 6, Repairs & Maintenance 6, Freight & Cartage 1, Electricity 2, Catchment mitigation work Stream fencing Water reticulation Riparian planting Additional pole panting 1,072 1,072 1,072 1,072 1,072 1,072 1,072 1,072 1,072 1, Forestry establishment Standing Charges Administration Expenses 7, Standing Charges Insurance 3, Standing Charges ACC Levies Standing Charges Rates 3, Total Farm Working Expense 85,707 $ 88,415 $ 88,415 $ 88,415 $ 88,415 $ 85,451 $ 88,119 $ 88,119 $ 88,119 $ 88,119 $ 85,155 $ 82,743 $ 82,743 $ 82,743 $ 82,743 $ 82,743 $ 82,743 $ 82,743 $ 82,743 $ 82,743 $ 82,743 $ 82,743 $ 82,743 $ 82,743 $ 82,743 $ 82,743 Depreciation 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 $ 6,019 Total Farm Expenses 91,726 $ 94,434 $ 94,434 $ 94,434 $ 94,434 $ 91,470 $ 94,138 $ 94,138 $ 94,138 $ 94,138 $ 91,174 $ 88,762 $ 88,762 $ 88,762 $ 88,762 $ 88,762 $ 88,762 $ 88,762 $ 88,762 $ 88,762 $ 88,762 $ 88,762 $ 88,762 $ 88,762 $ 88,762 $ 88,762 Economic Farm Surplus (EFS) 25,636 $ 22,511 $ 22,511 $ 22,511 $ 22,511 $ 23,457 $ 22,821 $ 22,821 $ 22,821 $ 22,821 $ 23,766 $ 26,582 $ 26,582 $ 26,582 $ 26,582 $ 26,582 $ 26,582 $ 26,582 $ 26,582 $ 26,582 $ 26,582 $ 26,582 $ 26,582 $ 26,582 $ 26,582 $ 26,582 Other Expenses Interest 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 $ 8,427 Farm Profit before Tax 17,209 $ 14,084 $ 14,084 $ 14,084 $ 14,084 $ 15,030 $ 14,394 $ 14,394 $ 14,394 $ 14,394 $ 15,339 $ 18,155 $ 18,155 $ 18,155 $ 18,155 $ 18,155 $ 18,155 $ 18,155 $ 18,155 $ 18,155 $ 18,155 $ 18,155 $ 18,155 $ 18,155 $ 18,155 $ 18,155

22 P a g e 21 Forecast Profit and Loss for TANK Dairy Base Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 $ Total Revenue Stock Net Milk Sales - this season 2,135, Net Milk Sales - last season 0 Net Milk Sales - dividend 0 Net Livestock Sales 196, Contract Grazing 0 Change in Livestock Value 0 Total 2,331, Crop & Feed Capital Value Change 102 Total 102 Total Revenue 2,332,096 2,329,284 2,329,284 2,329,284 2,329,284 2,329,284 2,329,284 2,329,284 2,329,284 2,329,284 2,329,284 2,304,894 2,304,894 2,304,894 2,304,894 2,304,894 2,304,894 2,304,894 2,304,894 2,304,894 2,304,894 2,304,894 2,304,894 2,304,894 2,304,894 2,304,894 Expenses Wages Wages 226, Management Wage 100, Stock Animal Health 70, Breeding 46, Farm Dairy 24, Electricity 42, Feed/Crop Pasture Conserved 36, Feed Crop 62, Bought Feed 37, Calf Feed 6, Grazing Grazing 309, Other Farm WorkinFertiliser (Excl. N) 80, Nitrogen 71, Irrigation 14, Regrassing 40, Weed & Pest Control 14, Vehicle Expenses 38, Fuel 24, R&M Land/Buildings 62, R&M Plant/Equipment 24, Freight & Cartage 17, Catchment mitigatstream & sediment mitigation fencing 1,408 1,408 1,408 1,408 1,408 1,408 1,408 1,408 1,408 1, Water reticulation Riparian planting Additional pole panting 3,487 3,487 3,487 3,487 3,487 3,487 3,487 3,487 3,487 3, Forestry establishment Overheads Administration Expenses 32, Insurance 20, ACC Levies 10, Rates 42, Total Farm Working Expenses 1,452,828 1,456,709 1,456,709 1,456,709 1,456,709 1,456,709 1,456,709 1,456,709 1,456,709 1,456,709 1,456,709 1,430,102 1,430,102 1,430,102 1,430,102 1,430,102 1,430,102 1,430,102 1,430,102 1,430,102 1,430,102 1,430,102 1,430,102 1,430,102 1,430,102 1,430,102 Depreciation 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 Total Farm Expenses 1,482,829 1,486,709 1,486,709 1,486,709 1,486,709 1,486,709 1,486,709 1,486,709 1,486,709 1,486,709 1,486,709 1,460,102 1,460,102 1,460,102 1,460,102 1,460,102 1,460,102 1,460,102 1,460,102 1,460,102 1,460,102 1,460,102 1,460,102 1,460,102 1,460,102 1,460,102 Economic Farm Surplus (EFS) 849, , , , , , , , , , , , , , , , , , , , , , , , , ,792

23 P a g e 22

24 P a g e 23