It’s our number one export and the backbone of our economy. But has the dramatic growth of the dairy industry come at too high a cost for our streams and rivers? Andrew Laxon gets both sides of the story

Mike Joy - Marine ecologist, Massey University

What makes you sure dairy farming is the prime cause of increased pollution in our waterways?

You look at how much nutrient is in the river. You account for some of it from pipe-consented areas, you have an estimate of what's coming out naturally, so you know the rest of it is from dairy farming. The other thing is a model called Overseer. You know what's going on the farm, what's coming out in the milk and what's not accounted for must be leaching into the groundwater or rivers. At both ends the sums come out the same, so we know we're pretty close.

Why is dairy such a big contributor?

They use a huge amount of nutrient. If you go back 30 years, cow numbers were less than half per hectare on average what they are now because we bring in a whole lot of feed. We're the biggest importer of palm kernel. We've had an 800 per cent increase in the past 20 years in nitrogen use. The cows make milk out of that but that extra number of cows pee out a huge amount of nitrogen. Because they pee in such a small area and in such a large volume, only 20 per cent of it is taken up by the grass; the rest of it goes down into groundwater or streams. The nutrients themselves are not toxic until they get to high levels, but at low levels they grow heaps of algae [which] takes oxygen out of the water.


How polluted are our lakes and rivers?

Forty-four per cent of our lakes are eutrophic or worse. They've flipped from their natural state, because they can't handle the amount of nutrient coming in. Eighty-four per cent of those lakes are in lowland pastoral catchment and most of the nutrients coming out of lowland pastoral areas are from dairy. Most of our lowland rivers are still below the Yangtze river in China and the Mississippi in the US, famous for its nutrient pollution. We're about a third of those on average but creeping up all the time. And there's a lag time. Movement in the nitrogen through the soils can take between a year or 100 years, so a lot of what we're seeing is only the front end of what we've been doing.

You've been critical of how we measure this water pollution. Why?

The Macroinvertebrate Community Index (MCI) is not there. That's the measure of the health of the invertebrate insect communities. If you take a snapshot of our water quality, in the middle of the day it will be fine even in an incredibly degraded system because of the daily fluctuation as the plants respire and photosynthesise. The animals have to be in there their whole lives, so they're a much better indicator of the health of a river than a snapshot sample. With nitrate, 6.9mg/litre will kill 20 per cent of the life in the stream and the powers that be have decided this is the limit. But the absolutely gross flaw is that is it doesn't happen like that. The temperature increases, oxygen levels fluctuate, all these things happen at much lower levels than the toxic level. So all the fish and invertebrates are dead long before it becomes toxic. You can see why they wanted to do that because when you look at the level of nitrates in our rivers already and at the dairy herds around the country, they're all exceeding 0.8mg, the safe level. Otherwise you'd have to do what I'm saying we should be doing - stop dairy expansion right now because we've already breached the limits.

Dairy farmers say they've been working very hard to clean up their act. Have they done enough?

Many have but there's a limit to what they can do with the pressures they're under. And if you have expansion, as in Waikato and Canterbury - 25,000-30,000 extra hectares of dairy coming on - all the money they've spent will be totally wasted because it will be swamped by the new farming. Planting the river (banks) up does have advantages in not letting faeces get into the stream. To a certain extent it stops the phosphate. But you don't in any way address that nitrogen issue.

What do farmers need to do?

We have to move away from this model where we just maximise production. Even if you forget the environment impacts, it's a big cost to the farmer to bring in all these nutrients and have them disappear down the stream. The goal should be maximising kilograms of milk per unit of nitrogen lost out of the system. Then you change the whole model and it's actually more profitable for farmers to have fewer cows, buy in less food, produce more from the fewer cows they have and make more money that way.


Why would farmers increase production if it wasn't profitable?

The more milk you can produce off a farm per hectare, the more valuable that farm is. So bizarrely, people don't look at profits, they look at production. It's been the situation for years in New Zealand. The money's not made year to year - the money's made when you walk away from the farm. I'm not an economist but it would seem to me you've got to do something about that. If the biggest profit of farming is selling the land and you're not paying tax on that, that's a huge loophole, surely.

Are you saying we may have to accept a lower standard of living to solve this problem?

No I think that's a false economy. If you think of the environment like a credit card, the farmers are paying the country's bills with the credit card and everyone's turning a blind eye. Because we're going to have to pay. You can see the huge sums of money that are going out - $300 million on the Rotorua lakes, which won't even begin to fix the problem there. If you start multiplying out into the future what it's going to cost us to clean up the mess, then the emperor's got no clothes on. That's the problem I have with people saying that the dairy industry's worth so many millions of dollars a year, without taking the costs off. Any business would look great if you didn't look at the other side of the ledger.

Tim Mackle - Chief executive, Dairy NZ

Do you agree dairy farming is damaging water quality in New Zealand?

We understand that we've got a footprint to manage at national level. That said, you really need to look at this catchment by catchment. There'll be some no-go areas, some go-slow areas and in other areas, there's a lot of headroom left.


How do you respond to the Parliamentary Commissioner for the Environment, Jan Wright, who called this "a classic economy versus environment dilemma" and warned the conversion of farmland to dairy has to stop if we are to stop the pollution of our rivers?

We're not denying conversion in some areas needs better control. We're in the middle of this land and water planning process (with regional councils) and I think in her report she completely overlooked the work going on. I don't think it's just environment versus economics, quite the contrary. Our philosophy is we must have our cake and eat it. Being competitive helps us farm in a sustainable way because we can invest in ways to farm better. From 1990 to 2011 there's been a 7 per cent increase in total nitrogen loads from all farm animals. We believe dairy is less than half the total nitrogen load to land from animals right now.

Your critics say recent moves to keep cattle out of waterways won't stop the nitrogen problem. What else will you do?

I think Mike Joy and other science people are grossly underestimating the effect of keeping cattle out of waterways. Algae requires nitrate, phosphorus and sunlight to grow. If you can control phosphate, you will control water clarity. We've fenced 95 per cent of Fonterra's farms, 22,000km, and we're looking for all stock to be excluded at some point. There's significant potential through farm management - timing of fertiliser application and standing animals off (the grass) at the right time - to reduce nitrogen.

What's your view on regional councils imposing nitrogen limits?

It's inevitable, that's the process we're working through with the national policy statement on fresh water. We endorse the community based approach where communities work out what they want to fix.


Will dairy farmers ever have to keep their cows inside over winter to solve the problem?

There's a range of options - from a stand-off pad to a covered stand-off pad to a herd home to a fully enclosed barn - all with different issues and different costs. The biggest downside is cost. Some of them can be up to $2500 a cow to put in. We've contracted an ex-MAF guy who found in the short term farmers saw a reduction in (nutrient loss) but to pay for the thing they had to put more cows on and put more feed into it. I think we've got to ask the question of what does NZ Inc want to be known for in the long term. Do we want our dairy products to be known for free-range, pasture-grazing cows out in the sunshine or is that not important? Once you're locked into capital intensive projects it makes it more difficult to breathe in and breathe out with the volatility in milk prices. Traditionally our pasture-based system allows us to do this.

Is there too much emphasis on increasing production instead of profit?

Farmers have got more efficient but maybe not to the level we'd like. If every farmer could increase pasture utilisation, we could easily get $100kg of milk solids per hectare for no extra cost, just from cows grazing more of what's been grown. Multiply that out, you're looking at a 10 per cent increase in output. We've improved our impact per waste produced, which we measure with an index called Product from Productivity. In the past 10 years we've got about $50 a hectare gain on average. By 2020 we want to achieve $65 a hectare per year.

Should dairy farmers be paying for their contribution to water pollution, as Mike Joy suggests?

I don't really see what that would solve. We hear about dairy all the time from him but what we don't hear is that there's a lot of other contributors as well. We're already as an industry investing a lot of money - $100 million to $200 million doing the fencing, for effluent systems we're talking in the tens of millions of dollars. I think that's what we should be focused on, not on some kind of tax. It's quite annoying when you hear Mike Joy level at the dairy farmers, as if he's got a mortgage on this stuff. Dairy farmers inherently feel quite passionate about the environment. They love animals, otherwise they wouldn't be working with them. And they do care about the land; the majority want to leave the properties they own and the waterways in a better state than when they started.


How can you double exports by 2025 (a goal set by the Government) without causing more water pollution?

It's not all about volume. Admittedly we have benefited a great deal in the last few years from increases in output but we've got to switch very firmly towards the value-driven game. The fall in dairy prices this year and the (Fonterra botulism scare) last year highlight New Zealand has a lot at stake in dairy. It's good to have the debate but we've got to be very careful about how we go forward, so we can fix issues but at the same time maintain competitiveness in our industry and have a long-term future.

• Transcripts edited from phone interviews.