Wednesday, 27 August 2008

The Fonterra Effect

A scheme to tackle the environmental damage caused by dairy farming in New Zealand


Dairy farming can be very damaging to the environment, and is on the increase in n.z. Tracts of land are being converted from forest and other forms of primary production to dairying. Growing cattle for both beef or dairying is a very inefficient method of converting available natural resources into food and has been identified as a large contributor to GHG emissions.

Historically there has been a surplus of dairy produce in the world but even so the price of dairy commodities has recently been rising, and so the problem will get worse, particularly in n.z. The processing and transport of millions of tonnes of milk each year also adds to the effect.

The dairy industry is of great economic importance to n.z., as well as being somewhat of a 'sacred cow', if the pun can be excused. It has become an iconic way of life for primary producers and the general population alike, so any effort to curb it's development and expansion would be very unpopular. I believe however that if n.z. Is to meet it's obligations, a major change in the industry is essential.

To meet Kyoto targets n.z. Must come up with novel ways to get on top of the problem. Research has been, and is being done to attempt to reduce for example, the emission of methane by cattle, and to control the pollution of ground water by dairy effluent. Little progress has been made in these efforts, and even though scientists are hopeful that some gains can be made, these are likely to have little overall effect on the total output of GHG, nor will they effect the other damage being done.

Another reason we should change is the growth in environmental circles in Europe of the food miles issue. I believe that the element in this which concentrates on long distance transport of commodities like dairy produce, is somewhat misguided, but also that it will grow as an issue and our dairy industry will take some flak from it. The general issue of food miles will grow in importance and very little is being done to confront it.

The overall approach

I believe that any attempt to tackle the stated problem must contain several elements which at first glance seem very difficult to achieve. They are as follows:

It must be a 'market' solution, therefore show a neutral or positive economic effect.
It must not involve any large scale shift of the farming population from the land
It must involve a strong stewardship element to help sell it politically.
It must achieve a large reduction in overall emissions of GHG.
It must achieve a considerable reduction in dairy herd numbers.
It must effect not only the primary production but the processing and transport part of the industry.
It must enable the leaders of the industry to gain financially and politically from the considerable long term effort involved, and the primary producers to see a viable and profitable future in the business of farming.
It must contain a large benefit to the general community to enable it to be sold politically.


The Scheme

These elements seem to be completely fantastic and unachievable at first reading, but I believe they can be achieved. What could be done to set this in motion ?

I think the key is Fonterra. They are the largest single dairy company in the world, and have a very important economic presence here in n.z. As well as being recognised in dairy circles across the world as innovators and leaders in the field, they have an enormous influence on what happens in the n.z. dairy industry.

Essentially the idea involves changing Fonterra from a dairy company into an energy company which also produces dairy products.

If each of their plants were to convert from being mass consumers of polluting electrical power and fossil fuels ( oil and diesel ), to being net contributors, then a large part of the problem would be solved. If at the same time primary producers no longer were an agricultural monoculture ( milk ), but produced other much less polluting products, as well as or instead of milk, the other part would be tackled too.

The attached flow chart sets out graphically what the ideal would be. Fonterra using Biomass Power Generating Technology to produce all its power plus contributing surplus to the grid, and also producing Biofuel to power its fleet of vehicles ( or those of it's contractors, including the farmers ), and selling biofuel on the market.

Farmers would produce biomass, in the form of wattle and root crops for example, which would feed the power plants. Many farmers would also produce milk, at least during a transition period. Some farmers would be mixed producers, some produce only milk and some only biomass, depending on their land type, location, and inclination. Waste products would flow back to the farm in the form of fertilizer and also be sold in the market.

This scheme would achieve positive effects in all areas of GHG reduction ( substitution, mitigation, reduction, evolution ) as well as meeting all the above mentioned aims.

It is a market solution. It would have the effect of stimulating investment and innovation, reduce costs and increase profits in the medium and long term. It would give Fonterra opportunities to develop new companies and increase share value. It would maintain or increase overall payments to farmers. It would convert Fonterra from a single market company to a more diverse one. Because a larger proportion of the nations energy needs would be produced internally with a reduced need to import oil, many millions could be cut from our import bill. A lower volume of dairy exports would offset this however.

It would not involve a large scale shift of the farming population away from the land. Each would become a different kind of farmer and would be guided by the market as to what they should produce.

The stewardship of the land would become a positive element and not a negative one. Growing biomass would be far more environmentally friendly than dairying.

The GHG equation would be substantially changed for the better. An overall reduction in cattle numbers, and thus methane emissions, would naturally occur as the change became embedded, and in addition the growing of crops would would bring about a reduction in GHG emissions in itself.

The demand for biomass would cause farmers to switch from dairying to crop production and reduce cattle numbers and production of dairy commodities.

Because the transport and farming machinery fleet would be converted to using biofuel, a massive reduction in GHG emissions would be achieved in this element alone. A surplus would be sold on the market thus adding to the effect. Also electricity generated at the plant would be sold to farmers and surplus to the grid, as well as powering all processing plant.

Industry leaders would profit financially and politically and farmers would be ensured a good future on the land.

The wider community would benefit in many ways, not only by being able to consume green electricity and biofuel. I believe the economy would achieve an overall gain and be more secure by being less dependent on scarce and expensive oil, and on the export of dairy produce. We would also gain by reducing our overall GHG emissions and be therefore less likely to incur costs associated with the Kyoto Agreements. Such a major change in one of our iconic industries would have a drag effect on the rest of industry encouraging them to change practices and methods to also help achieve that aim.

Whilst I acknowledge, to say the least, that this may be seen as an extremely radical idea, and that powerful groups would be ranged against it, I also believe that it contains the elements of an achievable and very valuable idea for n.z., and the dairy industry world wide. I would welcome ideas and suggestions to refine and modify it.

G F Cox

20th April 2007
(updated June 2008 )

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