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Keith Woodford explains how transforming dairy to be environmentally friendly is possible, but existing debt will be a big constraint

Keith Woodford explains how transforming dairy to be environmentally friendly is possible, but existing debt will be a big constraint
Happy cows in NZ composting barn

By Keith Woodford*

I have always been optimistic about the long-term future of dairy. I think it is likely that dairy will remain one of the pillars that underpins the New Zealand economy. But we sure do have some challenges!

The first challenge is that urban New Zealand does not understand the extent to which our national wealth depends on the two pillars of dairy and tourism.  Yes, there are other important industries such as kiwifruit and wine, and yes, forestry, lamb and beef are also very important. But rightly or wrongly, our population has been growing rapidly, and the export economy also has to keep growing. There is a need for some big pillars. 

Somehow, we have to create the exports to pay for all of the machinery, the computers, the electronics, the planes, the cars, the fuel and the pharmaceuticals on which we all depend.

Our horticultural industries can help, and they will grow further. But most of New Zealand has severe limitations for horticulture. Soils, climate and a South Pacific location do not give us an international advantage when it comes to most horticulture.

 Having said that, I would like to see us putting more effort into perennial crops. These have to be high value, low volume and with an Asia focus. At a big-picture level, the rest of the world outside Asia either does not need us or cannot afford us.

Coming back to dairy, this is where we do have an international competitive advantage. We also have three major technical challenges.

The first technical challenge is how to deal with urinary-N leaching. We have the science to solve that. More of that below.

The second challenge is greenhouse gases. This one is tricky. The starting point is to go back to the system dynamics of short versus long-lived gases. As long as we focus on the greatly flawed notion of CO2 equivalence, then we will not find the path. I have written of that before [] and at some time will do so again.

The third challenge is finance. Our dairy industry has been built on debt. In the new world where the value of dairy land is tanking, where farmers are required to repay principal, and where many farmers simply want to get out, then the old cliché of a rock and a hard place comes to mind.

First, let’s focus on the good news of how we can solve the urinary-N leaching. The starting point is to recognise that the science tells us that it is all about what happens in the second half of autumn and throughout winter.

The cow piddle that occurs at other times of the year is not a problem. There is enough time before winter for the grass to soak up the excess nitrogen before it can leach.

Winter grazing can also be OK in many situations as long as the cows do their grazing and are then off-paddock for the rest of the day and night.

If cows are to be off-paddock for most of the day and night then they have to be on a soft surface. That means some form of soft bedding that stays reasonably dry.

Most forms of off-paddock wintering are either animal unfriendly or too expensive. Concrete stand-off pads or other hard surfaces come into the first category. Free-stall barns typically come into the second category, although all of the free-stall farmers that I meet say they would not be without their barn. I do agree that free-stall barns can be an economic proposition for the good farmers who get things right.

The new technologies that open up great new possibilities are composting barns.

The composting barn technologies have been developed overseas – mainly in the USA but also in Europe. Fortuitously, there seems to be nowhere that they work better than in New Zealand, linked to our climate and farming systems.

The essential feature of a composting barn is an open structure where the cows wander around at leisure, and lie in the deep bedding. The bedding provides a medium with which the effluent combines and turns to warm compost.  All of the liquid evaporates. The cows love it.

Of course, nothing is ever quite as simple as it might sound. There are key design features which combined with daily tilling are essential to make the system work.

If farmers do things right, with both infrastructure and management, then it does work. Do things wrong and it does not work. I know of barns in both categories.

For the last 18 months I have been observing and monitoring the Allcock composting Mootel in South Waikato. Tony, Fran and Lucas Allcock are now into their fifth year with the barn and it certainly does work for them. The Allcock Mootel is the best of the New Zealand barns that I have seen.   

If lots of people build composting barns there will be an issue with a supply of suitable bedding. The Allcocks have found sawdust the best of the options they have tried, but if we end up with thousands of composting barns across New Zealand there will not be enough sawdust.

This last winter we trialled Miscanthus in the Allcock Mootel as an alternative bedding system. Miscanthus is a woody perennial grass that grows to about four metres in height and is harvested once per year.

 We learned a lot. The Miscanthus composted beautifully and the cows loved it. But the tilling system does needs to be different than for sawdust, which the Allcocks still prefer.

It is clear that we still have more to learn about the Miscanthus system, but I am very optimistic about Miscanthus as a long-term solution.

Another exciting project has been an Honours project at Lincoln University undertaken by Rachel Durie, with Guy Trafford and myself as the supervision team. Rachel’s research was to investigate how a composting barn might work at the Lincoln University Dairy Farm.

A key result is that Overseer modelling indicates that urinary-N losses can be reduced from the current 42 kg per ha to 3 kg per ha under duration-controlled grazing. That leaves the main source of N leaching as being from cultivation for winter crops.  And that is a reminder that cultivation for cropping of any type leads to nitrogen leaching from mineralisation.

Rachel will be presenting her results at the Fertiliser and Lime Conference at Massey in February. I am looking forward to the discussion.

To me, it is self-evident that composting barns provide the pathway to the future. However, although I am confident about all of the science, the farm systems and the economics, I am less confident about where, for highly indebted farmers, the finance to build the barns might come from.  I think there are ways it could be financed but it won’t be straight forward.

So that brings us back to a fundamental issue: we have too much debt right across the dairy industry. It is this debt that will make the necessary transformation of dairy systems so problematic.

*Keith Woodford was Professor of Farm Management and Agribusiness at Lincoln University for 15 years through to 2015. He is now Principal Consultant at AgriFood Systems Ltd. His articles are archived at You can contact him directly here.

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Not sure who wrote the headline, Keith, but I don't think there is an "environmentally friendly" path for much of our intensive dairy farming. Don't you think we need to face this reality, particularly in light of the debt situation? Surely downsizing/restructuring by way of reduced overhead/costs will become a necessity for the over indebted. It has always been that way for other industries.

We could toilet train the cattle then install lifting stations and all new sewer laterals/trunk mains from the farms to the nearest Wastewater Treatment Plants.

One of the pleasures of writing for is that David C does not impose titles. So I take responsibility for this headline.
Downsizing or de-intensifying does not actually deal in a sufficiently major way with the nitrate pollution. Nor does it deal with the debt burden. And something the general population does not appreciate is that nitrogen leaching is also a major issue with cropping systems.There are very good reasons why NZ agriculture is pastoral-based
Keith W

I agree with you, Keith on the de-intensification issue in some geographic areas. In those places, dairy farming as an activity simply should be prohibited altogether.

Great article, as always, KW. The debt issue is surely the main impediment to uptake of the composting-barn system (indeed, of any other capital-intensive measure), and those urinary-N reductions are quite startling. I applaud your drum-beating to offset the negative externality-narratives espoused by our Urban Chatterati. Every little helps.

Yes, just build bridges over the slime and get on with life, eh?

From your article link; director of environmental quality Gary Bedford said algae was essential for aquatic ecosystems to grow and thrive Maybe us humans need to get over our demand that waterways have to exist to serve how we would like it rather than how it is best for nature. Shallow, low flow water, in times of warm weather develop algae. If you understand climate change then you will understand warmer weather will equal more algae in shallow, low flow waterways. If 400 people were to be walking through that waterway there should have been a bridge over it - algae or not.

Yes, he did say that - it was laughable. A bit like saying that obesity in humans is a natural thing as well, given food is essential for human flourishing.

3kg/ha is a fantastically low figure Keith, but two of the other "elephants in the room" are 1) the level of the "brains trust" on each farm, which unfortunately is getting lower and lower which makes it difficult to get super positive about this type of system, specially when they involve staff that arent family, and 2) the very high average age of farmers and the lack of a viable system for young blood to get into their own land (unless of course land values "tank" back to 1980 levels).

Unfortunately the dairy industry has lost sight of all of this and the chickens are now coming home to roost. Its going to take either a massive lift (that is consistent) in dairy payouts or a complete turn around in industry behaviour where we focus on the long term rather than the short term fix that results from carrying very high debt levels, this would require massive Government Support.

All industry participants will need to buy into the new game which I suspect will be smaller "quarantined" family operated farms with either composting or freestall sheds and cows producing 5-600kgms through either 100% Autumn Calving or Split Calving (for higher value milk). This system will require a substantial Capital Injection as well as a large IQ adjustment, however at present payout levels and the payout trend over the last 10 years it is difficult when putting the "investor hat" on to break a smile on the weathered face of some of us grumpy old farmers.

Thanks for your continued positive advocacy for the dairy sector, we need more like you at the moment!

I travel around canterbury farms and as yet I haven't seen any that could be called sustainable and that is without calculating the debt in the system or the old farmers.

They have reaped what they sowed migrant labour to keep wages low and massive debt bidding up land prices on some expectation that china will always want our milk.

The Canterbury Plains is one of those areas that dairying should have been a prohibited activity from the get-go.

There has always been some dairying on the Canterbury Plains Kate. On the positive side there is more topsoil being retained under dairy and fewer dust storms. ;-)

The very first settler, the Deans family in 1843, ran a dairy farm. Their shed is still on the grounds of Christchurch Boys High School. It drains directly into the River Avon....

Blanket statements like 'dairying should have been a prohibited activity from the get-go' ignore the huge variation in soils, altitude, rainfall, ground slope and other physical characteristics of the 'plains'. Sweeping generalisations are no basis for land-use policy.

Which plains were, themselves, the result of early human modification: the lowland forest cover which was 100% (Tangata Whenua has a map referencing precisely this) was burnt to a crisp by the moa hunters in the early 13th century.... in fact most of the East Coast of the South Island was similarly burnt.

When humans arrived c. 750 years ago, they instigated a period of deliberate burning that led to the loss of nearly 50% of New Zealand´s forests. Astonishingly, it appears this was caused by very few people - probably only a few hundred individuals in small transient groups - yet they were able to initiate widespread and permanent forest transitions to open vegetation.

So land and thus climate modification is, we can cheerfully say, an ancient and revered activity.

Sweeping generalisations are no basis for land-use policy.

Yes, I agree, which is precisely why the sweeping generalisation of 'rural' zoning has served us and our environment so poorly under the RMA.

Hi Keith

Did you read the article in 'Australian' 5 days ago about 'China may turn sour for infant producers A2 and Bellamy's.

be keen to hear your views on how the market is being manipulated.

best regards

Nic Johnson

I don't think that particular article in the Australian was quality.
One of the remarkable things about the Chinese infant formula regulations in the last ten years is that the Chinese have not done anything they did not flag well in advance.
All businesses have risks but A2 seems in a good space as it satisfies the criteria which the Chinese regard as important.
I have always been cautious about Bellamys and I still am cautious.But I do watch them with interest.
The worrying issues for both companies relate to the extent that NZ and Australia get caught in political crossfire. NZ has had a special relationship with China for many years and that relationship has been very much to our advantage.

Thanks for responding Keith. Great to have a knowledgeable guest taking the time to engage in the comments section.

Best regards

NZ has a special relationship with China.
10 social credit points to Keith.
You really think that will matter two hoots if if we don't let Huawei back in... or we start questioning their $$ influence via the back door?
Special relationship as long as we stay onside. That's it.

It is not as simple as whether or not we let Huawei back in.

Since Fonterra have abandoned the Rochedale principles and ceased being a co-operative, maybe there's opportunity for an actual dairy co-operative with a focus on sustainable / low-impact farming to emerge.

There is indeed an argument that the diversity of interests of NZ dairy farmers is too great to be managed within a single co-operative. Tatua is a good example of how small co-operatives with very modest scale but with strong common interests of members can prosper. It is interesting that new dairy co-operatives have not emerged - all of the new dairy processing and marketing entities have been investor-orientated.

Very true Stuart. Non supply capital is king in Fonterra now, with the milk price manual proffering a mechanism to minimise value/price of on farm milk, and any 'profit' increasingly going to non-farm investors.

Keith, what is the additional benefits to having an off-paddock wintering solution?

I am thinking less damage to paddocks and races. Also, more controlled BCS spread across the herd?

How does it affect animal health?

Trapped Millennial,
The animal health effects will depend on the specific situation.
As a very general statement, the health issues with off-paddock wintering are different but not necessarily better or worse.
The key issue with any off-paddock system is that the cow must have soft dry bedding and be able to exhibit normal animal behaviours.
If those conditions are met then animal health outcomes should be very good.
If those conditions are not met then the outcomes can be bad.
Keith W

...our national wealth depends on the two pillars of dairy and tourism.

The NZ 'wealth effect' of dairy is yet another myth so often proffered about the industry;

Got a more recent update Kate than a 7yr old article? Any business that has an income drop of around 68% but costs the same or more, wouldn't be paying much tax.

Bernard rebuts that "this is just a one-off after a bad year" claim in the comments. I laughed to see you and me there all those years ago too... plus ça change, plus c'est la même chose.

When interpreting dairy industry statistics re taxation, it is important to recognise that the operating entity will typically be a company, and this has an industry association. However, in the final wash-up of transfers between entities, most of the profits are actually earned and the tax paid by other entities - typically trusts and individuals - which typically do not show as being dairy industry related.

Indeed, Keith: as companies there will be Directors (with expenses and fees), shareholders (with dividends and capital contributions and returns, expenses related to accounting and audit, and some of those companies will be incorporated offshore. Further, as with hotels in Oz, there may be a company to hold the land, a company to hold the above-ground assets, a company to employ the workers, and a company to operate the farm itself. Nice insulation against the vagaries of employment law and employee discontent - no strlkes in Aussie hotels.....

As you so rightly (and gently) note, it pays to have a far more intimate knowledge of farm accounting, land-holding, company structures etc than most commentators appear to possess, before holding forth on such details....

I'm not taking the time to look myself but it would be interesting to see a complete assessment of water on farms and the water outputs as well as inputs.

If we accept matter isn't created or destroyed but transformed or transitioned then what is the water transformations and transition for dairying? The water doesn't disappear at the cow...

what are the water inputs and where does it end up... some exhaled, some back into groundwater, some evaporates back into water vapour, soil moisture, some into plant matter, some directly consumed by animals, some out as urine and back into plants or water system (not talking nutrients here just water), some ends up as milk or meat and any excess we don't retain after eating the products heads out as water vapour or in urine again back into a water system...

Someone smarter than me could present a complete picture with some pretty graphs.

(That moment when someone says "that's been done already")

Correct Ahuhyeah. I'm not able to give you the answers but in Southland 57l/cow/day for stock drinking water is what is used by regional council for dairy water permits and 70l/cow/day for all dairy shed water - cleaning plant which has to meet food hygiene standards and washing down cowshed yards etc. This may vary slightly especially the 70l/day between regional councils. The 70l/day is almost all captured and piped to effluent ponds which is then irrigated on to pasture - the 'effluent' you see being irrigated is actually mainly water from the shed washing down processes.
The important thing to note is that just because a Regional council has issued consents for x cubes of water doesn't mean that the farmers are actually using x cubes of water, it may be quite a bit less on a regional cumulative scale.

Kate - And then there is this: "Wellington's estimated non-commercial water consumption is typically about 350 litres per person per day. This figure is based on total water supplied, less the metered commercial use, divided by resident population. Because this figure can be affected by changes in resident and Council activities, it is used when measuring water usage trends as part of managing water demand."

Fraser and Dewes in your link used 80l/pp/day as their basis.

Anecdotally of course, we only have rain water and ive checked our consumption at about 70 litres pp/day
Our 50 sq metre fruit and veg garden uses about the same.
Its hot...

Recycled newsprint and cardboard are worth virtually nothing at the moment,I wonder if they can be mulched for bedding material. I would think the feed requirements for a cow on warm covered bedding would be lower than been outside on a frosty night. I have seen YouTube videos of closed loop systems where the air from the cow barn is fed to a glasshouse, where the plants benefit from the higher co2 and methane . Of course even more capital costs, but then again, glasshouses are been built anyway.

It is interesting that the cow water use and the person water use is similar.
We could add the 5 million cows to the 5 million people to calculate a combined environment loading.
And then there is Hort of course.

Cows don't have showers , baths or use flush toilets . A cow could drink 40 litres-60 litres on a hot day , a human probably lucky to drink 2 litres.

I appears the cows have 140 litres a day, some of which ends up as irrigation and produces food for them.
We beings seem to use 70, mostly for sanitary but we should for comparison add the water used to produce our food.
For this household on our diet my guess is 70 litres pp/day, only a guess, we are not big meat eaters.
Possibly the point is that’s cows and people put similar demands on the environment and that includes the destruction to the river systems.

Well said pws.

It appears shelter could be helpful in Sumer as well.

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