Paying the dairy sector's share of the Mycoplasma bovis response costs.
In February, we consulted with farmers about the Biosecurity Response Levy which will fund the dairy share of the Mycoplasma bovis response.
Farmers told us they wanted the levy to be managed by DairyNZ, and supported the cap (maximum rate) being set at 3.9 cents per kilogram of milksolids per year.
We’ve listened to the feedback (more than 1700 farmers responded) and have considered many options when setting the rate for the coming year. The following has been confirmed:
- The Biosecurity Response Levy will be effective from 1 September 2019.
- The rate will be 2.9 cents per kilogram of milksolids for the first year (until 31 May 2020).
The rate will be set each year and be communicated with farmers in writing at least 30 days prior to the effective date.
The levy will be administered by milk supply companies. On a milk docket, it will show as ‘Biosecurity Response Levy’.
With DairyNZ managing the Biosecurity Response Levy on your behalf gives dairy farmers a voice, and DairyNZ a seat, at the decision-making table for biosecurity responses.
Biosecurity Response Levy consultation information
Biosecurity Response Levy presentation
Hear DairyNZ Chair Jim van der Poel and Chief Executive Tim Mackle explain the Biosecurity Response Levy, plus give an update on the M. bovis response.
Question and answer videos
We filmed the Q&A session at last week's meeting in the Waikato. Watch the videos below.
DairyNZ industry biosecurity responsibilities
How is the Biosecurity Response Levy paid by lower order sharemilkers who get a portion of the milk cheque?
A lower order sharemilker will pay the portion of the Biosecurity Response Levy, depending on their contract. For example, if the sharemilking agreement is set at 22%, that sharemilker will be paying 2.9c on 22% of the farms production (2.9c is the rate set for 1 September 2019 – 31 May 2020). Whereas a 50/50 sharemilker will pay 2.9c on 50% of the farms production.
If farmers do not support DairyNZ to manage the levy, could they be charged more the 3.9 cents from MPI?
Yes, it could be more or less. MPI would implement a levy under the Biosecurity Act, rather than the GIA, and the levy amount and payback period would be at their discretion without input from DairyNZ.
How did industry get to the point of agreeing that we would fund 32% of the Biosecurity contribution?
The 32% was negotiated by industry and the Government when the decision was made to eradicate M bovis in May 2018.
What is the current biosecurity levy?
We have consulted on but not yet got a Biosecurity levy in place under GIA. We are now re-consulting on the rate (proposed maximum cap of 3.9 cents per kilogram of milk solids per year) and from there we propose to ask MPI for get a levy formally in place.
How long will be the levy be in place?
The levy will be in place permanently, however will be set at a specific rate each year. For example, it is likely that the biosecurity levy to cover M. bovis costs may be set at or near the maximum cap (3.9 cents per kilogram of milksolids) for two-three years and then reduce as most of the response costs significantly reduce.
Is the biosecurity response levy separate to the DairyNZ Commodity levy?
Yes this is a separate levy, managed by DairyNZ and paid to MPI.
Who is accountable for biosecurity in the dairy industry?
DairyNZ is accountable for ensuring the dairy farming industry is fully prepared and able to immediately respond should a biosecurity risk be identified.
How can we be confident DairyNZ won’t just increase its budget and levy charges into the future?
The Biosecurity Response Levy will be set annually (where necessary) and communicated to you, the levy payer, and set at a level appropriate to meet GIA funding commitments. It will be subject to the maximum rate and any changes will be notified by:
- email or post to all dairy processors known to DairyNZ,
- in a major rural publication,
- in DairyNZ's official magazine Inside Dairy, and
- on DairyNZ's website
It will be collected and paid in the same manner as levies under the Commodity Levies (Milksolids) Order 2014*, i.e. a dairy processor will pay the levy and recover it from dairy farmers.
Where did the 3.9c kg/milksolids come from? How did you reach that figure?
We modelled various scenarios and believe 3.9 cents is the most appropriate considering the payback period for the M bovis response and the risk of any new response in the immediate future.
What happens if we don’t pay?
MPI can recover response costs directly from farmers under the Biosecurity Act 1993 without having to consult you like we are doing now. How much over and what time would be set by MPI. Farmers would not have the same say in decision-making through DairyNZ under the GIA on what are our priorities and how your levy is spent during the response.
There are currently 21 GIA signatories, and all the significant horticulture and animal sectors have joined. MPI has been developing the policy and regulatory framework needed so that non-GIA signatory beneficiaries will be paying their share, but they won't have any decision-making rights. The bottom line is industry will need to contribute to biosecurity responses, either by an imposed levy or through negotiation of funding proportion through a GIA operational agreement. Industry stand to get a better deal through the GIA route.
Why did DairyNZ sign us up to GIA in the first place?
There is always the risk of unwanted pests and diseases making their way to New Zealand and affecting dairy farming. The GIA commits industry and government to work together in partnership to improve readiness for future biosecurity events, and jointly respond to future outbreaks. By working together, we can be better prepared at stopping or immediately finding new arrivals, and as such reduce the damage from incursions, and have more certainty that we can eradicate.
DairyNZ has leveraged significant government funding in this partnership, with government funding 68% of the M bovis response. Government are not obligated to pay for biosecurity responses and using GIA we can get agreed contributions from Govenrment tax payer money to fund both the M bovis and future biosecurity responses.
By signing up to GIA we have a seat at the decision-making table in setting biosecurity priorities. Non-GIA signatory beneficiaries are going to still be required to pay, but they won’t have any decision-making rights.
If you are a signatory to GIA and don’t agree with the direction of a response, do you still have to pay cost shares?
Yes, once a response starts you will have to pay if you benefit from the response, either through an agreement with other GIA partners that sign up to the response, or if you don’t sign up to an operational agreement MPI will still impose biosecurity levies to cover your share of the costs.
Could non-signatories to GIA walk away from a response and not have to pay anything?
There are currently 21 GIA signatories, and all the significant animal and horticulture sectors have joined. MPI has been developing the policy and regulatory framework needed so that non-GIA signatory beneficiaries will be paying their share, but they won’t have any decision-making rights. The bottom line is industry will need to contribute to biosecurity responses, either by an imposed levy or through negotiation of funding proportion through a GIA operational agreement. Industry stand to get a better deal through the GIA route.
Is the DairyNZ Board entering into commitments where there could be liability issues because we can’t pay? If we can’t pay does GIA fall over?
The DairyNZ Board has and will be prudent in only entering into commitments that can be funded. DairyNZ on your behalf decides what it will sign up for and whether we are beneficiaries of any response. We then negotiate with Government and other sector beneficiaries on fair and equitable cost shares specific to a response. The DairyNZ Board will make sure that liability is limited before we sign up to any commitment.
Why doesn’t the Government pay more? Isn’t this their responsibility, especially if they say it’s a priority?
The government has put in place the policy and legislation framework that supports GIA, and it believes it is making a fair contribution to the costs of biosecurity, and that industry needs to be contributing also to the GIA partnership or through MPI imposed Biosecuirty levies.
How is the beef industry paying for their portion of the response?
Beef + Lamb NZ are going to consult with their farmers, it is likely they will fund their portion through a cull fee per head. All dairy farmers will be exempt from the beef cull fee and will only be charged the levy on milksolids.
What assurance can you provide that the biosecurity levy will be put towards the genuine recovery and not used up in ‘admin’ expenses?
The money can only be spent on response and recovery of an incursion. We are paying back the response costs after they are accrued. The levy will drop down with the response costs. By DairyNZ managing the Biosecurity Response Levy, farmers get more assurance that it will be spent on response activity and we have a seat at the decision making table. We will let farmers know each year what the levy will be.
DairyNZ Commodity levy reserves
What are DairyNZ reserves for? Why can’t DairyNZ build up enough reserves from the Commodity levy and use them to fund incursions?
DairyNZ reserves are used to fund outcomes under the sector’s Dairy Tomorrow strategy, including meeting our GIA minimum commitments and biosecurity readiness activities. Our GIA biosecurity response commitments therefore, need to be funded by a new biosecurity response levy.
Instead of asking for an increase in the ceiling of the levy, surely DairyNZ can get a loan and pay it back later?
DairyNZ is not able to use the Commodity levy for biosecurity response activities and therefore has no means to pay back any loan, which would be the Biosecurity levy.
The consultation process
What is the process for providing feedback, and what happens next? What is the timeline for this entire process?
DairyNZ signalled in mid- December after the Industry Cost Share split was finalised that it would be coming out to dairy farmers in the new year with a proposal for funding our part of the M bovis response. Farmers were emailed an introductory letter and background leaflet about the proposal on 2 February. This information was in advance of the presentations to farmers at February roadshows around all our dairy farming regions, where DairyNZ went into more detail, answered questions, and collated feedback. The deadline for feedback is 29 February.
Based on all the feedback we receive, the DairyNZ Board will then decide before the end of March whether to approach the Minister for Biosecurity seeking an increase in the ceiling of the levy as proposed. No vote is required for this (unlike a commodity levy), but the Minister needs to be satisfied that we have adequately consulted and taken into consideration all feedback.
How will DairyNZ measure the level of support from farmers for the proposed levy change?
DairyNZ will produce a summary record of all the meetings and feedback we have received related to the levy proposal, which we will put on our website. During the roadshows we encourage feedback at, and after the meetings (by phone or email), which will be recorded. At levy meetings DairyNZ is asking whether farmers support the proposal, and their reasoning.
Is the levy going to stop being charged once it is all paid off or will it go on forever?
Once the industry has paid off the M bovis response cost the levy will drop unless another large response affects dairy farming and we have to commit to that.
Why is it being charged per kg MS? It is unfair for bigger farms and higher producing farms as they are paying a bigger proportion.
We are using the same levy collection process as used for the Dairy Commodity levy, so we don’t need to duplicate administrative collection systems. Bigger farms that are higher producers of milk solids have a bigger risk to their business so are expected to pay a bigger proportion.
How come it can’t be charged per head like the beef guys?
We are using the same collection system as we use for the Dairy Commodity levy to minimize administration costs. If we used the “per head” model like the beef guys that would still mean that bigger farms pay more than smaller farms with less animals.