Friday, March 29, 2024

New thinking needed

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Canterbury’s proposed regulations limiting nutrient loss will require changes in thinking about farm systems. Balancing nutrient loss with a farming business’ requirement to remain viable and profitable creates some big challenges.
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In late 2014, I contributed to the submission of Federated Farmers on Variation One of Canterbury’s proposed Land and Water Regional Plan.

Because our family farming operation sits within the Selwyn Waihora zone we, like other farmers in the zone, will be required to reduce our nitrate leaching to 30% below nitrate leaching levels determined by the matrix of good management (MGM). Initially we must maintain our leaching losses at our baseline level – the average of the three seasons from 2009.

I have been a dairy farmer in the Selwyn District since 1987.

My wife and I are both third generation dairy farmers and operate two dairy farms, one (515 cows) currently predicted to be leaching at 51kg nitrogen (N) a hectare a year and the other (630 cows) at 32kg N/ha/year in the present year.

Recently we purchased a 110ha support block to secure the future grazing of young stock and to provide feed for the dairy platforms.

This farm has a nitrogen baseline of 14kg N/ha/year. To optimise profitability we should winter part of the herd on the property, but under the proposed restrictions this won’t be allowed.

In my opinion, there are three general options open to farmers to cut nitrogen losses.
1. Intensification.
2. De-intensification.
3. A hybrid model.

Intensification

The best example of intensification can be found in the western United States. Originating in California, open-lot dairies with herds of more than 2000 cows were developed in the 1960s.

In response to high land prices and environmental issues, a number of these operations have moved to less populated, often desert areas.

Last year, Keith Woodford and I visited large dairies (2000 to 25,000 cows) in the Pacific Northwest and Southwest of the US where cows are increasingly housed in sheds.

These cut and carry systems allow per-cow production twice that of New Zealand’s pasture-based systems, and greater control of effluent.

Most farms imported more than half their feed requirements and exported the treated waste. From an economic point of view they are very capital efficient. Most operate their farm dairies 22 hours a day and are concentrated on relatively small areas of land. But despite their advantages, these systems expose the farmers to considerable risk from rising feed prices because of drought, US support programmes for potential feedstuffs or even the effect of feed exports to Asia.

These systems work very well in the context of the US where fuel, machinery, land and building costs are lower than NZ.

Most farms are operated by Hispanics, many of whom are paid the minimum wage of between $9.50 and $11/hour for a 12-hour working day. They receive only one week of holiday a year and are not provided with housing.

De-intensification

De-intensification is the process by which the inputs and possibly the outputs of the farming system are reduced.

As an example, if the stocking rate of the herd is reduced, then it can be assumed that urinary nitrogen leaching will also be reduced.

Likewise, if nitrogenous fertilisers are applied in reduced amounts and-or periods of high leaching are avoided, then leaching should also be reduced.

Although this seems like a simple concept, it is more difficult to manage pastures at lower stocking rates and often mowing is required to ensure pasture regrowth quality, involving more machinery and labour.

Another version of de-intensification is to reduce stocking rate during key periods for nitrogen leaching. The Lincoln University Dairy Farm (LUDF) trialled this system by reducing cow numbers from April. By May there were 250 cows being milked in the pre-winter period, rather than the normal 500-550. This reduced milksolids (MS) production by 24,000kg and resulted in an operating profit reduction of $90,000.

Hybrids

A number of systems incorporating structures have been suggested, with varying results.

AgFirst consultant Phil Journeaux established a model shed system for a 119ha farm in the Tararua district. The farm wintered 332 cows and produced 342kg MS/cow and 953kg MS/ha.

The cows were housed for 20 hours a day from February to May and were totally housed in June and July. Two further options involving intensification were also analysed compared to the base scenario.

Journeaux found that a wintering facility would reduce nitrogen leaching, but establishing it came at a significant cost.

The intensification scenarios helped to rectify the reduced profitability, but effectively increased nitrogen leaching to levels similar to those in existence before building the shed.

Recent research at Telford suggests that housing cows during the shoulders of the season reduced profitability by $200/ha/year primarily because of the inability to control pasture covers by having cows off paddocks.

As a consequence, the trial farmlet struggled to maintain pasture quality throughout the season, which resulted in the increased use and expense of topping and conservation.

Contrary findings are provided by Macdonald, Scrimegeour and Rowarth who modelled options for a 300-cow Waikato dairy farm for controlled duration grazing. Scenarios were as is, woodchip bedding and a slatted floor system.

They identified the advantages of reduced pugging, less overgrazing, better supplementary feed utilisation and less nitrogen leaching through the use of the structures.

They proposed that both hybrid systems returned a positive net present value over a 10-year period.

Recently, Lincoln honours student Matt Benton was able to model the construction of a shed on LUDF that resulted in little reduction in operating profit.

Balancing the environmental and economic effects is challenging, with no perfect answer and questions raised over the effect on farm profitability.

The intensification option allows control of nutrients and higher milksolids production. However, the capital and running costs are an added source of risk if financed by debt.

The system would increase the cost of production compared to traditional pasture-based systems and would mean NZ dairy farmers needed to adapt their skill set to a very different way of farming.

Most importantly, NZ doesn’t have a competitive advantage in producing milksolids under an intensive system.

Accessing the feed required and exporting effluent off-farm could become a problem.

Most NZ dairy farms import 20-30% of their feed and if this was to increase because of an intensive housing system, there would be a need for greater levels of feed movement and potentially more feed imports which come with bio-security risks.

In the large US dairies, effluent is handled by taking advantage of their desert environment for drying compost. The levels of rainfall in NZ would preclude this.

De-intensification appears from early modelling to allow the reduction of nitrogen leaching, but at a cost.

If the LUDF profit reduction was applied to the 1000 farms in Canterbury, total losses would be $90 million. If a multiplier of five is applied, then the loss to the economy is $450m/year.

Hybrid models come with a cost for the added infrastructure which will result in an increase in the cost of production.

It appears that partial housing structures will reduce nitrogen leaching.

However, if farmers add more cows to cover increased costs, then the reduction in nitrogen losses could be negated.

Obviously these issues will filter through to the local and regional communities.

If the costs for system change are financed by debt, farmers place themselves in a more risky position financially.

There could be a move to the use of outside equity to maintain the strength of balance sheets, but this could result in higher levels of corporate or foreign ownership. These entities can hire experts to deal with compliance.

At the moment, there is an influx of ambitious young people to the dairy industry because it’s still a good method for growing capital. However, it is rare to see a corporate entity or equity partnership employ sharemilkers, so this method of succession and industry invigoration could disappear as farms become larger and incorporate outside investors.

This could lead to labour shortages and the need to import more labour. There is already anecdotal evidence of consolidation by farmers who can afford to purchase more land to spread their leaching over larger areas.

Dairy farmers are also concerned about their future ability to graze replacements and winter cows, as nutrient restrictions might drive some graziers away from dairy support.

Farm Environment Plans, the Matrix of Good Management and meeting future targets has created a level of fear and uncertainty in the rural community.

Several farms in our zone have been sold as the farming family does not see a future in a highly regulated environment and-or don’t want to spend the time and money that will be required to meet regulations.

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