New Zealand's dairy dilemma
New Zealand earned more than $17 billion in export income from the dairy industry for the 12 months ended August 2014. This was one third of our total export income. Quite simply, without dairy, our economy would go into free fall.
Yet many New Zealanders are inherently negative about our largest industry. The problem is that dairy is perceived as polluting the rivers of New Zealand.
Somewhat grudgingly, the industry now accepts that something has to be done. Actually, there is an implied error embedded in that statement. The industry has already been working hard for many years in first managing shed effluent, and then more recently in fencing waterways and planting riparian strips.
I look back to the 1960s, when I first milked cows, and on those farms the effluent went straight into the drains. It was a case of out of sight and out of mind. We have indeed already come a very long way.
The big remaining problem is nitrogen leaching into the soil and thence making its way into streams and rivers. There is also a problem in some catchments with surface run-off of phosphorus fertiliser. Whereas nitrogen leaches downwards, phosphorus travels with runoff on the surface. A muddy looking stream is sure to contain phosphorus attached to the soil particles.
In some fragile catchments, such as the land surrounding Lake Taupo, the realisation that something further had to be done came more than 15 years ago. But with most of our dairy catchments, it is only now that new regulations are really biting hard. The reality is that the future for dairy is going to be very different than the past.
The fundamental problem is that cows discharge urine. This urine lands in a concentrated puddle. Once winter comes, the excess nitrogen gets flushed out through the soil.
Until recently, scientists thought they had at least a partial answer by spraying a chemical called DCD onto the pasture to turn the nitrogen into an insoluble form. Then, in 2012, DCD started turning up in milk and so the chemical was banned.
If dairy were not so important to our economy, then the solution would be obvious. We could simply replace dairy with something else. In the real world that is no solution.
Although sheep produce smaller urine patches than cows, they also only earn a fraction of the dairy income per hectare. The ratio varies from year to year, but in broad terms a kilogram of pasture will earn about four times as much export income if converted into dairy products rather than meat.
In New Zealand, our traditional competitive advantage with dairying has been the low cost of production. The cows harvest the grass themselves, and they live outside all winter. Also, we have learned how to graze pastures so as to maximise both the quality and the utilisation.
Nobody does this better than New Zealand farmers, although in priding ourselves we do sometimes ignore the advantages that nature has kindly bestowed upon us. In most parts of the world, these grass-based pasture systems do not work anywhere near as well as in New Zealand.
Now we need to change those systems to manage the environmental problem that lay hidden for so long. The challenge is how should we do this?
There are multiple ways to tackle the problem, all with advantages and disadvantages. Within the industry, the debates can get heated, with limited respect for alternative views.
The simplest way would be to de-intensify. But reducing cow numbers is only a partial solution as the remaining cows will still produce high nitrogen urine. With less intensive farming, we could also expect to see more "once-a day milking", which some farmers are already doing profitably. Other farmers have tried once-a-day milking but have gone back to twice-a-day.
De-intensification may work at the farm level. But at the national level, farming less intensively will impact heavily on export income, upon which we all depend.
All of the other systems involve some form of off-paddock wintering. These systems can range from stand-off pads designed primarily for heavy rain events, through to fully housed systems. In between, there are the hybrid systems, where cows are housed during the night but let out to graze each day.
Our major overseas competitor is now the United States. The main system they are using is to fully house the cows. This is capital expensive but it can provide a very high level of effluent control. Importantly, the Americans are showing that they can be internationally cost competitive with these systems.
Fully-housed cows produce a lot more milk than either grazing cows or partially housed cows. They also convert feed to milk with considerably increased efficiency. The key advantage the Americans have is that they are much more cost efficient at cut-and-carry feed systems than we are in New Zealand. In New Zealand, we still have lots to learn.
Keith Woodford is Professor of Farm Management and Agribusiness at Lincoln University. His archived writings can be found at keithwoodford.wordpress.com.
Sunday Star Times