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Incentives for Change

Less Nitrogen, Smaller Carbon Footprint, More Profit

When a dairy farm goes organic, new research suggests the farm's nitrogen leaching and carbon footprint will decrease by around 20% – while profits could increase as much as 67%.

Organic, 100% pasture-fed and carbon-neutral are examples of ‘credence attributes’: a feature of a product that cannot be perceived, but may have environmental, animal welfare, social welfare or cultural benefits. Some consumers are willing to pay more for products with these additional qualities.

The Credence Attributes On-Farm research project, funded by Our Land and Water, has connected information about this potential price premium with the cost of the practical changes required to deliver these credence attributes on New Zealand farms, to estimate changes to farm profitability.

“We modelled three product attributes – pasture-fed, carbon-neutral and organic – to see what changes the average farm would need to make to produce these products, what the environmental impact would be, what it would cost, and what the price premium might be – and how much of that could be returned to the farmer,” explains lead researcher Dr Gina Lucci, senior scientist at AgResearch.

Researchers were anticipating some increase in profitability, says Dr Lucci, but some results were very surprising – particularly the profitability of organic dairy products, which increased as much as 67%.

Using data for ‘average’ DairyNZ System 3 farms in the Waikato and Southland, and for a Class 4 North Island sheep and beef farm, Credence Attributes On-Farm researchers modelled the farm system changes required to deliver pasture-fed, carbon-neutral and organic products. These models also enabled nitrogen and greenhouse gas reductions to be estimated.

Researchers also conducted a meta-analysis (combining the results of 94 other studies) to learn how much more consumers are willing to pay for attributes such as organic dairy (36% more, for this example).

Bringing all this data together allowed Credence Attributes researchers to estimate changes to profitability (Economic Farm Surplus) for conventional farms that made systems changes to deliver pasture-fed, carbon-neutral and organic products. The costs of accreditation fees and offsetting for the carbon-neutral products were included, and the share of the consumer price premium returned to the farmer was estimated based on what was ‘leftover’ after other businesses along the value chain took their share.

Researchers were anticipating some increase in profitability, says Dr Lucci, but some results were very surprising – particularly the profitability of organic dairy products, which increased as much as 67%.

The estimated profitability increase for the farmer was greatest for organic (increase of 42% to 67%) and pasture-fed (increase of 36% to 49%) dairy products. Carbon-neutral products were also more profitable (increase of 11% to 25%).

There were also reductions in carbon footprint and nitrogen leaching, compared to the conventional base systems. Carbon-neutral dairy had the greatest potential to reduce N leaching (-41% N reduction) and carbon footprint (-11 to -17%), due to imported maize being used for 30% of the feed. Configuring to organic dairy also reduced N leaching (-17% to -24%) and carbon footprint (-11% to -20%).

Dr Lucci says the research shows that organic dairy has great potential to deliver both greater returns to the farmer and the greatest environmental benefits, while sounding a note of caution. “The modelling was done using Farmax and Oveerseer, which is a long-term average and doesn’t take into account the kind of variations you’d get from year to year with droughts or too much rain. This is for an average year where everything goes right!”

“Organic farming is a high-risk, high-reward system that requires learning and experimentation, and it is not going to be the answer for everyone.”

For more information, see:

You may also be interested in Organic farming: When less is better (Newsroom, July 2019), an informative read about Pāmu's move to large-scale organic dairy farming.

Photo: Alex Wallace Photography / Jersey Girl Organics

Author

Annabel McAleer

Senior Communications Advisor, Our Land and Water

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