Nitrogen inhibitors - which hold nitrogen in soil and help to prevent leaching - were introduced into New Zealand in 2003-04.
Federated Farmers president Charlie Pedersen said inhibitors point to a "very significant breakthrough, economically and environmentally" on managing nutrient run-off.
New Zealand is the only place in the worldwhere they are being applied directly to pasture in a bid to prevent run-off to water, said Peter Mourits, business development manager at Ballance Agri-Nutrients.
They cost about $65 to $68 a hectare, and need to be applied twice a year.
Mourits said a small part of the dairy sector was using the inhibitors. He estimated the national market at present was no more than 20,000ha a year. The dairying area in 2004-05 was just over 1.4 million hectare.
Those using them tended to be the more environmentally conscious farmers, or those farming in areas where nitrogen run-off was a big issue.
Besides helping waterways, holding nitrogen in the soil had economic benefits, supporting pasture growth.
Demand could increase as new regimes to manage nutrient run-off are introduced.
The head of the Dairy Environment Review Group, John Penno of Synlait, said farmers were still assessing inhibitors because they were new.
"So people are sort of standing off and looking at it.
"As with all new products in the market, they take a while to get legs," he said.
The inhibitors were just one example of the type of technology that could allow farmers to reduce nutrient run-off.
