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The financial costs of environmental compliance through reducing nitrate leaching for a range of Waikato dairy farm system intensities

The New Zealand dairy industry has grown significantly over the past decade through increasing both area farmed and the number of cows milked. Dairy farm systems have intensified as a result of the use of supplementary feeding, increased stocking rate and land use changes. Environmental regulations have been implemented as a means to limit and mitigate the negative environmental impacts of dairy under the National Policy Statement for Fresh Water. In the Waikato, regulation to date has predominatly been focused on effluent storage and application. As such, regulation has not yet shaped how Waikato farm systems are implemented. It is likely that future regulation for the Waikato will include nitrogen loss limits. Management of nutrient cycles will therefore become a high priority for effective farm management as well as being used to inform the adoption of changes to farming systems. Four nitrogen (N) loss mitigation strategies were modelled for Waikato dairy farm systems of low, medium and high input to show the changes in N leaching and economic farm surplus per hectare. Reductions in N leaching for farm environmental compliance were able to be achieved through farm management practices as well as through additional farm infrastructure. Large reductions of 20 percent and 17 percent were achieved through destocking and cow housing scenarios respectively. A corresponding lift in farm surplus per hectare of 1 percent and 11 percent was recorded. Similarly, moderate reductions in N leaching were achieved through winter grazing off farm (9 percent) and increased effluent management facilities (8 percent). However a 4 percent reduction in farm surplus was noted for the winter grazing scenario while increasing the effluent area had no material impact on farm working expenses or revenue. This research identified cow housing as farm infrastructure which for low, medium and high input farm systems was able to return a reduction in N leaching greater than 15 percent and increase farm surplus by greater than 9 percent. The implementation of cow housing was modelled for a large scale farm system in the Taharua catchment where N limits are currently being enforced. Results of the modelling show a cow housing facility for large scale dairy farming has a positive internal rate of return of 13 percent. Waikato dairy farmers were surveyed to gather data on the initial capital cost of compliance and the farm system implications of increased regulation to date. The survey illustrated that effluent compliance has been the focus of investment and highlights the significant cost to the dairy industry of internalising environmental impacts. Aggregated survey results indicate that the capital cost of environmental spending to date for the average Waikato farm system has totaled $1.02 per kgMS, $1487 per hectare or $404 per cow. This equates to an average investment of $110,000 per farm. A clear understanding of the impact of environmental regulation and the relative cost of compliance for different farm systems is needed to produce accurate measures of environmental performance and to improve the cost efficiency of dairy production systems. Importantly there is a need to understand how different farming systems can work together at a catchment, regional and national level to achieve both value creation and environmental sustainability as set out in the national policy frameworks.
Type of thesis
Macdonald, T. O. (2014). The financial costs of environmental compliance through reducing nitrate leaching for a range of Waikato dairy farm system intensities (Thesis, Master of Management Studies (MMS)). University of Waikato, Hamilton, New Zealand. Retrieved from https://hdl.handle.net/10289/9212
University of Waikato
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