Higher environmental thresholds set by regional councils were expected to reduce to a trickle the conversion of land to dairy with farmers expected to be offered inducements and contracts from processors looking to secure or grow their milk supply.
Waikato University economics professor Frank Scrimgeour said given the smaller milk pool, the dairy industry needed to be careful not to replicate the excess capacity issues facing the red meat sector.
Some planned projects might need a rethink.
“The key is that people invest in added-value and do something different rather than adding capacity that does the same things.”
ANZ Bank rural economist Con Williams believed future milk supply growth could halve to between 2% and 3% a year, depending on weather and milk price, primarily driven by greater farm efficiency and innovation rather than adding more cows.
Milk growth has averaged 5.5% to 6% in recent years.
Williams said land conversion to dairying could continue in some areas such as the East Coast of the North Island and, depending on Environment Southland’s final regulations, possibly Southland but the rate of conversion would be much slower.
“It certainly won’t be at the pace of the last 10-15 years but there will be some in some regions,” he said.
Equally, there could be some retraction in regions where farmers struggled to meet new environmental standards.
Open Country Dairy chairman Laurie Margrain said logically the growth of milk supply would slow as less land was converted though securing supply was not an issue for his company.
He was uncertain if it would lead to competition between processors but those investing in new processing capacity might want to look carefully at what they were building and the products they were producing.
As regional councils ramped up environmental protection thresholds the level of disclosure required on stocking rates and fertiliser application had increased.
Local Government NZ’s regional sector head and Bay of Plenty Regional Council chairman Doug Leeder warned it would only increase.
“What is going to happen is there is going to be a higher requirement on farmers to satisfy regional councils or regulatory bodies that they are complying,” he said.
Owners of intensively farmed properties would require greater accountability for their inputs than less intensive operators and the Overseer monitoring system would remain the leading tool in determining the environmental impact of farm management.
Leeder said unlike Europe where monitoring of farms was input-based, most NZ councils were adopting output based models.
They required information about when and how much nutrient was applied, stocking rates and bought-in feed which was then crunched by Overseer to assess if it complied with discharge rules.
Leeder said the next focus for councils after nutrient leaching and runoff would be reducing E. coli levels or what Leeder called “bugs in water”.
Tough environmental standards had been imposed to protect the Rotorua lakes, which effectively required farmers to get consent or a licence to farm.
Mid Canterbury dairy farmer Willy Leferink said dairying was still one of the most profitable land uses and he believed land would continue to be converted to milking platforms though at a much slower rate than previously.
“Will dairy continue to happen? Yes. Will it happen under these new conditions? Yes, although it has temporarily been placed on hold as people find their feet again.”
Leferink said innovation would also pick up some of the fall-off in production.
“Farmers are quicker than regulations.”
