New Zealand is in an unusual position in the developed world when it comes to greenhouse gas emissions. About half of all emissions come from Agricultureand almost a quarter can be attributed to biological emissions (nitrous oxide and methane) from the dairy sector.
The last synthesis report released by the Intergovernmental Panel on Climate Change (IPCC) highlights climate change challenges in March New Zealand gifts. And it clearly illustrates the benefits of reducing emissions sooner rather than later.
How did we get here?
Dairy farming in New Zealand has historically been characterized as a grassland based, low input system.
In recent times, however, dairy farmers have intensified production, largely through use more fertilizer and supplementary feed (palm kernel expeller, silage and concentrates) to improve farm performance. Dairy farming has also expanded into regions that are naturally less suitable, requiring more resources.
This increase in supplemental feed use has occurred not only to feed a growing dairy cow population, which has nearly doubled to 6.4 million since 1990, but also to accommodate more intensive farming systems.
Dairy farming is by far the largest consumer of supplementary feed. In 2022, New Zealand used about 5.8 million tonnes of grain and feed. Imports have been far surpassed domestic production (respectively 3.7 million tons against 2.1 million tons).
Dairy cows consumed about 75% of the total grain and feed. In comparison: the poultry sector and the general public consumed 12% and 9% of the total, respectively.
New Zealand’s ability to import feed from other countries promotes the intensification of dairy farming and directly contributes to climate change.
Sandra Mu/Getty Images
Profit versus planet
It may seem that supplementary feed is used to increase production and profitability within the industry and that we are dealing with a classic trade-off between financial performance and the environment (emissions to air and water) and other factors such as animal health and welfare.
Us research on New Zealand’s experience with feed intensification suggests that dairy farmers who use more supplementary feed are technically more efficient than those who use less. This means they can produce more output for every unit of input. This contributes to higher production of milk solids (by 6.3% to 14.2%) and turnover (by 6.3% and 15.6%).
Read more: A new agriculture proposal to cut carbon emissions brings a lot of confidence – and a lot of uncertainty
There are other benefits of supplemental food that can encourage its use. Supplementary feed, for example, helps to fill feed shortages (periods in which there is insufficient grass growth) so that dairy cows maintenance of energy intake and production. Complementary feed can also be used to improve the health of dairy cows and milk quality.
But our further investigation shows that while feed intensification increases production, costs also rise significantly (from 10.9% to 24.3%). This ultimately leads to a reduction margin of profit (by 7.4% to 17.4%).
Major changes ahead
The profitability of dairy farming is jointly determined by the price and output of dairy ingredients and the cost and quantity of production inputs such as feed. As price takers, dairy farmers have no direct influence on variations in input prices (such as feed prices) and they also have no influence on the milk price.
To increase profitability, farmers need to increase production of dairy ingredients while managing inputs more efficiently. However, other operating costs increase as systems become more dependent on additional feed. These increases are generally greater than the increases in milk solids production, resulting in an average decrease in profit.
Sandra Mu/Getty Images
Not all supplementary feeds are equal. Palm kernel expeller (PKE) is widely used as a feed supplement by dairy farmers and has been shown to embody high emissions (0.51 kg CO₂ equivalent per kg dry matter) compared to other feeds.
New Zealand is the largest importer of PKE in the world. In 2022, imports were more than 2 million tonnes higher than in the three previous years.
About 54% of the PKE used on dairy farms was imported from Indonesia and Malaysia. It is widely alleged that PKE was exported to New Zealand contributed to deforestation in the supplying countries, increasing emissions and risks due to climate change. Other concerns have also been raised, for example about the impact of PKE on animal health.
Read more: Palm kernel product imported for use on dairy farms can actually harm cows
The dairy industry is well aware of these challenges and a lot of effort has been put into encouraging farmers to adopt practices that can save them money while reducing overall emissions. These are often aimed at maximizing the yield from pasture and use less carbon intensive power supplies such as homegrown feed or by-products from food and beverage production.
The reason more progress has not been made may be in part because farmers are “trapped” in current systems by what economists call path dependency. Investments have been made in both human and physical capital and many farms have to pay off debts. It is therefore not the case that simply lowering the additional feed level leads to lower emissions and retention of profitability.
Reversing the trends will require significant changes in both management practices and physical infrastructure. High fertilizer prices, stricter regulations and the pricing of emissions can drive this transition, but it may also be time to rethink the role of supplementary feed in our dairy systems.
