Finding alternatives to dairy

[This post was first published in the Fairfax NZ Sunday Star Times on 11 May 2014]

New Zealand dairy production has increased by 80% since Year 2000. This has come almost equally from both more dairy hectares and more production per hectare. However, the limits to pastoral dairying in New Zealand have largely been reached. Where do we go from here?

First, there is a need to recognise the two reasons why pastoral dairying has largely reached its limits.

The most important reason is that society is no longer willing to accept the effects of cow urine leaching from pastures into waterways and aquifers. Huge progress has been made in fencing off livestock from waterways, and in tree planting alongside the streams, but that does not solve the problem of the urine patch. This 2013/14 year is therefore the last year of large-scale conversion of sheep and beef farms to pastoral dairying. New environmental regulations have effectively closed that door.

A second important reason is that pastoral production systems have reached biological productivity constraints. Ryegrass-based pastures only produce about 15 tonnes of utilisable dry matter per hectare each year and this has changed very little in the last thirty years. The cows have improved greatly but the pastures have not.

There are two alternative strategies to deal with the dairy problem. The first is to move away from the pastoral model to a system where cows are housed for part or all of the year. A combination of housed cows and high yielding forages has the potential to double the milk produced from a hectare of land and also satisfy environmental requirements. This is the model our international competitors are following. Conventional wisdom says New Zealand has no competitive advantage if it adopts those systems, but there are times when conventional wisdom does need to be challenged.

The second strategy is to focus more of our agriculture towards non-dairy activities. It is this second alternative I will explore here.

Expansion of sheep, beef and deer cannot be the overall answer. The economics of wide-scale expansion of these industries back onto the flat and rolling country does not stack up. In any case, these animals will create their own urine patches, albeit with somewhat lower nitrogen concentrations than with large dairy cows. This means that any large scale agricultural intensification away from dairying has to be by expansion of arable and horticultural crops.

Unfortunately, our broad-acre arable industry has never been competitive on world markets. In terms of wheat yields, we can outperform everyone, but in terms of cost of production we are not in the money. We do have a vibrant seed industry, with a competitive space deriving from our Southern Hemisphere temperate environment, but these opportunities are already largely exploited.

In horticulture – broadly defined – we have three major crops. They are wine grapes, kiwifruit and apples. In all cases, the locational requirements are important and this constrains expansion. None are a solution for zones such as Southland or Taranaki.
In the case of wine, current economics strongly favour Marlborough and Sauvignon blanc. Hawkes Bay has struggled in recent years, in part because the local Chardonnay has been selling at lower prices than Sauvignon blanc, and the North Island red wines have yet to fully develop their market niche. On a global basis, wine consumption is not increasing. There are opportunities, but the New Zealand wine industry is largely overseas-owned, and the big companies will make investment decisions from their own international perspectives.

The kiwifruit industry is now in rapid recovery phase from the PSA disaster. We are fortunate that there are big advantages associated with counter seasonal production. Questions have to be asked as to whether this industry has been fully delivering to its potential. The immediate future is as a $1 billion industry but could this be a $3 billion industry?

After many difficult years the apple industry is now getting better returns from the market. This is quite some achievement given the high exchange rates. Apples can be successfully grown across large parts of Europe, America and Asia, so our long term position has to be with out-of-season production of premium varieties. Currently apples are less than a $0.5 billion industry; could they grow to be a $1 billion industry?

There are many other smaller horticultural export industries, but the overall story is at best one of stagnation. We have to ask again as to where the constraints lie and what can we do about it. Also, as an educator, I cannot help but notice that degree-level education in horticultural production and marketing is sadly lacking in New Zealand. I know that the Plant and Food CRI is doing good work in relation to research and development, but we do need to look again at what else needs to be done, particularly for production and marketing of branded premium products.

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About Keith Woodford

Keith Woodford is an independent consultant, based in New Zealand, who works internationally on agri-food systems and rural development projects. He holds honorary positions as Professor of Agri-Food Systems at Lincoln University, New Zealand, and as Senior Research Fellow at the Contemporary China Research Centre at Victoria University, Wellington.
This entry was posted in Agribusiness, Dairy, The Fairfax SST Articles. Bookmark the permalink.

4 Responses to Finding alternatives to dairy

  1. Pingback: Rural round-up | Homepaddock

  2. farmerbraun says:

    It would be surprising indeed, if, as you suggest , there were no more than ” two alternative strategies to deal with the dairy problem.

    The problem is essentially one of price(s); in the first place , paying too much for dairy land , in anticipation of no pollution restrictions;
    and secondly , receiving too low a price for milk as a result of the “decision” to concentrate on the production of low-value commodities.

    At a half- decent price for milk solids converted to added-value products, there is absolutely no need to turn dairy farms ( aka milking platforms) into leaky feed pads.
    Of course these leaky feed pads require resource consents and will have their polluting outputs reduced by law. That is only fair if the commons are to be protected.

    We should have anticipated that outcome ; in fact some dairy farmers did do just that.

    Arguably , at no more than two cows /Ha, no nitrogen fertiliser, no “dairy support” (read nitrogen imports), a dairy farm will have acceptable (to the public) nutrient losses.
    But then the price received will have to be consistently higher than $1/litre or, less relevantly in this scenario, $12/Kg M.S.

  3. Phyllis Tichinin says:

    Professor Woodford , may I offer as an alternative to this view, my own perspective on the problems with and future of NZ’s dairy industry. http://nutritiontrumps.wordpress.com/2014/05/28/the-urea-cascade-in-dairying/ I don’t see the need for restriction in dairying acreage that you do. Instead, as a soils consultant and animal health specialists, I see the opportunities inherent in getting full nutrition into our soils and hence into our cows and milk products. Dairying is not inherently polluting – it is the manner in which we’re applying urea and our simplistic view of animals’ nutritional requirements that is the core problem. Barns are another expensive, and ultimately counterproductive, band aid We need to move away from a powdered protein focus towards a liquid butterfat focus in dairying. I realise this is a big call for the industry given the current direction of large capital investment in milk drying facilities. I also suggest that there is a range of specialised crops we could grow that the rest of world would like to eat, even if they’re foreign to us, such as: lentils, buckwheat. Given the trend in antibiotic resistance and no new antibiotics in the pipeline, we will have to rediscover the traditional essential oils of oregano, lavender and thyme. They possess potent plant biochemicals that are effective against resistant microbes where antibiotics fail. Developing a reputation for quality, natural plant biochemical production, including native plants, could be a lucrative niche….look where manuka is headed.

  4. Pingback: Rural round-up | Homepaddock

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