- Advocates for continual growth of agriculture in New Zealand. - E.g. Andy West; double current milk solids(MS) production and $3 Billion more lamb production. - THEO SPEIRINGS 30 th of OCTOBER 2014 - “ He believes NZ dairying can continue to expand over the next decade ,with 60 %of expansion based on conversions and more animals and 40% on more productivity .He said the country had NOT reached the point of having too many cows. He disagreed with the Environment Commissioner‘s comments that more dairying means a drop in water quality . NZ dairying could easily grow for the next 10 years by 2-3% per year ”he said. - However, this will require approximately 22 billion kilograms of extra dry matter fed + create extra effluent and nutrient problems - Will not provide additional revenue to cover the additional costs (MR<MC). Biological systems have natural limits: - These limits include: energy, capacity and resource availability.
Transcript
- Advocates for continual growth of agriculture in New Zealand.
- E.g. Andy West; double current milk solids(MS) production and $3 Billion more lamb production.
- THEO SPEIRINGS 30th of OCTOBER 2014 - “ He believes NZ dairying can continue to expand over the next decade ,with 60 %of expansion based on conversions and more animals and 40% on more productivity .He said the country had NOT reached the point of having too many cows. He disagreed with the Environment Commissioner‘s comments that more dairying means a drop in water quality .
NZ dairying could easily grow for the next 10 years by 2-3% per year ”he said.
- However, this will require approximately 22 billion kilograms of extra dry matter fed + create extra effluent and nutrient problems
- Will not provide additional revenue to cover the additional costs (MR<MC).
Biological systems have natural limits:
- These limits include: energy, capacity and resource availability.
Biological systems have natural limits:
- How do we define limits?
- Physical limits can be distorted short term by such innovations as cow barns, robotic milking, sophisticated feeding systems and improved biological efficiencies.
- Economic limits, however, are more difficult to distort. (Currently this distortion is achieved through the use of averaging, selective data use and inadequate comparative analysis.)
- The use of production economics establishes these economic limits.
Economic Limits – Resource use.
0
100
200
300
400
500
600
700
0 20 40 60 80 100 120
Nitrogen (kg/ha)
Dry
Matt
er (k
g/ha
)
Average response “line”
Diminishing Returns Curve
- Average response: same additional output for every additional input.- Diminishing returns: defines the point where the next additional
input results in a decreasing output.
- This is termed “Marginal Analysis” and identifies the point where the marginal cost is greater than the marginal return ($MC>$MR).
- Most computer models rely on averaged figures and ratios.- These models cannot accurately identify where to cease inputs.
- Without this ability, feed input costs ($MC) invariably exceed the value of additional product from the feed ($MR).
- With the overuse of feeds comes higher nutrient loads and increased environmental damage.
750 cows. 350 kg MS /cow 262,935 kg MS
Buy and Feed 648,500 kg DM; 865 kg DM /cow
Profit $740,235
N leach 18 kg N/ha/year.
Base Farm (Run 1)
BASE FARM
750 cows Buy & feed 648,500kg DM(865kgDM/cow)
262,935kg MS(350kg/cow)
NN leach 18 kg/ha/year
740,235
MARGINAL ANALYSIS
618 cows
Buy & feed 23,000kgDM (37kg/cow)
216,775 kg MS
N15kg/ha/
year
784,840+
132 cows Buy & feed 625,500kgDM (4740kg/cow)
-44,607
N3kg/ha/
year47,160 kg MS
(750 cows; 262,935 kgMS; $740,235; N leach 18)
From LP optimisation & production per cow at 380 MS/cow
557 cows Buy & feed ???
213,970 kg MS(380kg/cow)
NN leach 13 kg/ha/year
28% reduction vs base farm
877,36518.5% increase vs base farm
“Roadtesting” the GSL Resource Allocation LP Model. Example: Lincoln University Dairy Farm.
In “Top 5%” for NZ dairy farms.http://www.siddc.org.nz/assets/LUDF-Focus-Days/11th-July-2013.pdf
LUDF 2010667 cows246,460kgMS369 kgMS/cow
LUDF 2011/12632 cows297,720kgMS471 kgMS/cow
LUDF 2012/13630 cows300,484kgMS477 kgMS/cow
GSL used to set up LUDF Reduce herd number Young stock weights
Model performance standards established
Monitor performance Target reduced N use.Decreased N leach
Management implementation plan set.
Ensure 2 herds and required intakes
Pasture quality and increased grazing intake.
SMART NEW FARMS IN THE SWEET ZONE
WILL NEED MEANINGFUL, STRATEGIC BUSINESS PLANS
• Optimised for PROFIT WHILE MEETING LIMITS • Consistent measure for profit between land uses.
(ROC)• Ethical(fair) resource use that is efficient. (e.g: LUC + kg
protein/megalitre water or profit/ML water)
• Resilient to volatility (price, weather, resource clawbacks) 10
True profit + true environmental costs?
Investment Average return on capital (ROC%)
Top 10% N loss
Term Deposit 4.5 (no work)
Dairy ($6.10 payout) 4.6 7-8 30-80
Sheep + Beef 4-5 7-8 10-20
Manuka 4.3 (no work) 9 (beekeeping) 3-4
11
HOW DO WE GET THERE…..
Legitimate + Meaningful Business Plans showing limits will be achieved over time.Smart Resource Allocation to Best Users + Innovators (Water goes to most efficient use and expansion is only on soils with greatest attenuation capability)
Not voluntary nor self regulation (FEPs with no time bound targets).
True Economic Assessment of Externalities + Clean Up (Public will not keep paying $400,000 per tonne of N leaving root zone (20 years – Lake Taupo)
12
Tomorrows Farms Today25 farms Upper Waikato – 3 years.
Naked Business Discussion Group – “Bare All”What Farms were most resilient? (consistently good ROC)
Central Plateau Average: 4.5% ROC + 39kg/N Leached
DOUBLE THE PROFIT WITH HALF THE POLLUTION
AND DOUBLE THE PRODUCTION WITH HALF THE POLLUTION
Kg Milksolids per kg N lost……
18
-
10
20
30
40
50
60
70
80
90
J V B K C P U I G D W Q M T A R N L F O H X S E
KgM
S/ha
Per
KgN
Lea
ched
/ha
Tomrrows farms Today Group
TFT Group 2013 - Production N Loss Efficiency
McKnight + Robinsons
THE STORY OF LAKE FARMA TALE OF “TWO HERDS”
• 530 cows – baseline 2009. Marginal profit and high risk.
• Drop to 430 and ROC improves and (economic)risk drops
• N loss reduced by 30%• Review system after 4 years (2014)• Drop further 100 cows to 350 cows,
Risk drops, ROC improves and environmental footprint is 50% below
baseline.• What is this telling us? A TALE OF TWO HERDS
(40% drop in SR improves business resilience, and halves the footprint)
19
A Smooth Journey to our end point If we want more – from less
• Encourage business literacy + resilience + development with fewer externalities
• Facilitate the most resource efficient use• NOT BY REWARDING POLLUTERS + POOR RESOURCE USE • COUNT THE COST OF EXTERNALITIES & PUBLIC BURDEN
OF CLEANUP• Educate businesses to think……
PROFIT, PLANET & PEOPLE NOT - Productionist + Resource Hungry
DUMB & DIRTY GROWTH20
21
0
20
40
60
80
100
120
140
160
180
200
L-XL L-XL L-M L-XL L-XL H H H
kg
MS
pe
r k
g N
le
ach
ed
Soil Type (XL = Light, H =Heavy)
Increasing Rates of Resource Use Efficiency
Least Efficient Soils
INTENSIFYING THE Upper Selwyn Catchment where L & XL soils have high rates of nutrient loss relative to productivity (M-H soils most resource efficient)
22
The Treadmill of Marginal ReturnsMore Growth – Less Productive
MORE IS NOT ALWAYS BETTER
MARGINAL GROWTH and PRODUCTION = ↑RISK
HIGH SOCIAL COST WITH LOW SOCIAL BENEFIT
23
The Sweet ZoneBusiness Indicators
24
Risk
Sweet Zone
Profit (ROC)
Cow Liveweight per Hectare
Production
The Sweet ZonePhysical Indicators
25
Sweet Zone
Profit (ROC)
Cost to Fix Effects
Environmental Effects
Production
Marginal Cost of reducing Nitrogen leaching.
The System 3 dairy farm produces at an N leach of 18 and profit of about $600,000.
Becoming more efficient in terms of economic resource allocation will also improve profit for such System 3 farmers and reduce their N leach to that of a more optimal farmer at about 14.But from there on, the diminishing returns curve dips down at an increasing rate, meaning that any reduction in N leach for the efficient farmers will immediately reduce profits. “Grand parenting” therefore results in the most efficient farmers (e.g. LUDF) immediately losing profit whereas the least efficient farmers may reduce N leach by up to 50% and be no worse off. This policy unfairly targets efficient farmers but inadvertently benefits inefficient farmers.(“Inefficient” refers here to integrated economics and N leach. The higher input farms may however claim to be more biologically efficient if the high inputs result in higher production per cow.)
