Given environmental and market pressures, the future of the cow looks to be in real doubt. The coming disruption could be as big a threat to our economy as the rise of nylon, which led to the wool price crash of 1968.
We need to invest in researching alternative land uses, and fast.
A Quick History Lesson
We all know about the economic malaise that Muldoon handed over to the incoming Labour Government in 1984. Many trace this disaster back to the United Kingdom joining the European Union. But some economic historians like Brian Easton instead tie the problem to our dependence on wool.
Wool was once New Zealand’s biggest export. However, after the Korean War, things started to go sour. The rise of nylon eventually displaced wool in products like clothing and carpets, and the price plummeted. Our Government tried desperately to prop farmers up for years, which eventually led to the currency crisis of 1984. Nowadays, most farmers view shearing wool as a necessary evil that (at best) covers its costs.
Could something similar face the cow in the next decade?
Disrupting the Cow
Some scientists are predicting that cow herds in the United States will fall by 50% by 2030. They claim that all the products that we currently get from the cow – particularly burgers and milk – will be surpassed by cheaper and more sustainable alternatives. You’ve probably heard of the Impossible Burger, but an even bigger threat is the use of fermentation processes to create proteins found in milk.
This sort of disruption seems inevitable, all that is open to question is the speed and breadth of the change. Will this new technology follow other digital technologies along an exponentially falling cost curve? How much will the global demand for protein grow at the same time? Will consumers retain a taste for the “real thing” as a premium product?
The worst case scenario for New Zealand’s dairy industry is what happened to wool, which eventually led to the reduction of our sheep flock – after we gave up on some very poor government attempts to prop up farmers.
The best case scenario seems to be that we retain some sort of hold on the premium market for meat and milk. That would at the very least require our farmers to show that they are upholding the highest environmental and animal welfare standards.
On its own, this technological disruption may not convince everyone of the need for change. But if we add in the double whammy of higher environmental standards, some parts of the country will need to seriously consider change.
Water Quality Standards
As I noted in a recent blog, the Government’s climate change proposals were well thought through, but will have little impact on farming due to the 95% exemption. Of greater concern to farmers is the Government’s fresh water package, for which the implementation details are relatively scant.
On Thursday, Dairy NZ released economic modelling it had commissioned on the freshwater reforms. Not surprisingly, it predicts doom and gloom – an economic loss of around $6b and drops in milk volume of around one quarter.
Last week I critiqued their claims. Farmers in most regions should be able to meet the new standards simply by farming better, using fewer inputs and without necessarily losing any profit. However, in some parts of the country – like Canterbury and Southland – reducing the numbers of cows on the land seems unavoidable if we are to reach our freshwater quality goals.
Of course, Dairy NZ’s argument is that the Government’s proposals should be watered down to reduce the economic impact. While Kiwis might be prepared to wait longer for the goals to be reached, I don’t think they will swallow this argument whole. For most Kiwis, the real question is what else can we do with the land that will earn money and not pollute our rivers?
New Land Uses Needed
Industry could explain away alternative proteins and environmental concerns when looked at individually. But taken together, they provide a compelling argument to invest in experimenting with alternative land uses. And Canterbury and Southland should be leading the way.
Dairy NZ's own modelling shows why this work needs to be done. Their model only allows for switching between dairy, sheep/ beef and forestry. It doesn't allow for different types of dairy farming, or for other land uses.
Some of the solutions could allow dairy farming to continue as usual, such as herd homes or new types of grasses and cows. Others might require doing farming differently, such as organic and regenerative agriculture. Still others might involve farming new products and developing new markets. Whatever the solutions might be, farmers need to know what the options are, what they cost, and what the possible returns are.
In my next blog, I will look at what is holding us back from this urgent research.