This will result in global demand for agricultural products increasing 60 per cent by 2050, compared to 2005-07. Over that timeframe, New Zealand has the potential to capture $1.3 trillion more in agricultural exports. However, it is a conditional opportunity. Constraints on capital, skills, R&D and extension services, land access, supply chain costs and market access will need to be overcome. On top of that will be an intensifying competition from the other primary producer nations.
What is required in dairy is a farm business model where production can increase, the environmental footprint can be reduced, and more profit generated to attract capital.
Much of the commentary on the dairy industry suggests increased production and profit, and less environmental impact are irreconcilable. As a consequence of its Greener Pastures research, ANZ is talking with a number of industry service providers and suppliers who take an alternative view.
These include companies like HerdHomes, who build dairy cow housing, Intelact, who advise farmers on systems including intensive farming, cow nutrition and environmental sustainability, Pioneer, which provides high-yielding maize seed, and Seales Winslow, who provide feed concentrates.
They are challenging the idea that the low-input New Zealand system is the most efficient and profitable in all circumstances. From their innovative work, these companies are suggesting an alternative future for dairy that turns long-held assumptions upside down.
The picture of cows fed in large stock shelters, and paddocks increasingly producing feed crops for harvest, is a stretch for the imagination in New Zealand. But in overseas markets without the luxury of our abundant pasture and rainfall, this system is generating good results.
These are not like archaic factory farms or crowded battery farms, but modern, environmentally friendly, and with humane living conditions.
Fonterra has seen milk production per cow double by taking NZ cows and putting them in housed farming systems in China. Because they are warmer, well-fed and well looked after, it's a stress-free existence where cows have nothing to worry about but producing milk.
Input and output is carefully managed, which has significant advantages in preventing animal waste runoff into waterways, and in realising its value as free fertiliser.
We are currently seeing a move towards elements of these systems on New Zealand dairy farms. Farmers are investing in effluent systems, cow housing and cropping and feeding systems to increase productivity and profit as well as reduce the impact on the environment.
Because of variable feeding levels, per-cow production is low in New Zealand, meaning many more stock are run to achieve production. But when cows are better fed, production increases.
Last year New Zealand farmers spent $400 million on imported feed concentrates to achieve this, which surely isn't the answer in a country with the plant growth advantages New Zealand has.
For example, paddocks sown with high-yielding maize species followed by a winter crop are potentially capable of 30-40 tonnes of feed per hectare per year compared to a limit of around 18 tonnes from ryegrass pasture. They are also more efficient absorbers of nitrates and converters of water to animal feed, which is an important consideration for farmers wanting to maximise the returns on expensive irrigation schemes, or reduce the impact of drought in non-irrigated situations.
None of this is new, but the rate of application is increasing with more farmers housing cows, installing integrated effluent and irrigation systems, growing an increasing percentage of farm areas in higher yielding species and feeding cows better to increase production. We may look back at this time as the start of a transformation.
The evolution of the industry to this point has been influenced by this country's abundance of pastoral land and rainfall.
Everyone agrees that well-managed farming systems are the prerequisite for profitable and environmentally sustainable farming, but the pastoral farming skills with which New Zealand leads the world are likely to be supplemented with skills in animal nutrition and agronomy to continue progress.
At a time when the industry's footprint is being questioned and new technologies are available to boost production, the time is right to draw on our tradition of innovation, forward thinking and ability to fit new solutions into this country's unique circumstances, to ensure the industry remains a leader into the future.
• Graham Turley is Managing Director, Commercial & Agri, for ANZ Bank.
