Applied nitrogen not always profitable

OVER THE past decade, what impact on profit would banning nitrogen fertiliser on dairy farms have had?

Judging by the findings of a paper to be presented at the New Zealand Grassland Association conference in Tauranga in November, very little, in more years than not.

But before regional councils and environmentalists leap to the conclusion that there’s no need for applied nitrogen, there’s a need to look at the bigger picture, the paper’s authors say.

“The current implications of reduced nitrogen inputs on milk production, at a farm and regional level, are quite large,” says paper lead author and Dairy NZ [Farm Systems Specialist] Chris Glassey.

Though in six of nine seasons from 2002/3 to 2010/11, profit from a dairy farmlet managed with no nitrogen fertiliser at DairyNZ’s Scott Farm, Hamilton, was on par with one where an average of 181kg/ha/year of N was applied, in the other three years the farmlet using urea fertiliser was significantly more profitable, he explains.

Also, though profit on the farmlet not using nitrogen was on par with the with-nitrogen farmlet for two-thirds of the time, if farms region-wide adopted such a strategy there would be a marked drop in milk production and overall lower level of economic activity, he points out.

“This is an interesting point that hasn’t always been made clear in this whole discussion about limiting nitrogen. If you take the nitrogen out, to get the same income for New Zealand Inc. we will need to have more dairy farms, so there is a trade-off here that people have to remember…

“Regional councils have to balance all these things. They aren’t just there to protect water quality at the expense of the region’s economy.”

For farmers, the data from the work highlights the importance of paying attention to the ratio between nitrogen price, response and milk price, adds Glassey.

“We’ve probably put nitrogen fertiliser into the ‘auto-input’ category in many farm systems and just assumed it’s making a profitable contribution. What this data set shows is that in some years – those when the milk price is low and the nitrogen price is high – it isn’t.

“That said, at the moment the ratio is favourable and applying nitrogen will add to the profitability of milk production.”

The costs used in the profitability calculation (see table) are based on physical records of each farmlet, with 2011/12 prices of inputs used to calculate costs. 

Hence for nitrogen – applied as urea at $910/t including spreading in 2011/12 – the cost to the farmlet was $1.98/kg of N applied. Today, with urea at $640-650/t ex store, it would be more like $1.50/kg N applied.

For other costs, such as repairs and maintenance, vehicle running costs and depreciation, which couldn’t be allocated per farmlet, industry averages are used.

“The same costs were applied across years so the variation in farmlet profitability largely resulted from variation in milksolids/ha and changes in milk price,” the paper states.

For the profitability calculation, data for each farmlet was scaled up to 100ha so that realistic estimates of labour could be made, and the difference in area of the farmlets – the no-nitrogen farmlet was 9ha with replacements grazed-on whereas the with-nitrogen fertiliser farmlet was 7ha – did not affect the profitability result.

The 181kg N/ha/year used on the with-nitrogen farmlet grew on average 2.9tDM/ha/year more pasture, an apparent response of 16kgDM per kg of nitrogen applied. Stocking rates were adjusted so that annual feed allowance on each farmlet was 6.2tDM/cow/year.

Pasture management was similar on both farmlets, grazing to 1500kgDM residuals and harvesting any pre-graze covers over 3000kgDM/ha as silage.

“Each farmlet remained self contained for feed using this approach,” notes the paper’s discussion section.

The no-nitrogen approach reduced options for filling feed deficits, and cow body condition score in winter averaged 0.2 less than on the with-nitrogen farmlet, yet higher summer production saw the no-nitrogen farmlet cows produce 21kgMS/season more.

Based on the research, the authors say Waikato dairy farmers considering changing, for whatever reason, to a no-nitrogen approach instead of using circa 200kgN/ha/year, should consider the following possible consequences:

• Circa 16% less pasture grown

• Double the clover but also more weeds

• About 17% less milksolids/ha

• Increased profit if milkprice is <$5.10/kgMS

• Reduced profit if milkprice is >$5.10/kgMS.

“Profitable production systems can be achieved without N fertiliser applications on well established Waikato dairy pasture,” the paper concludes.

“The relative profitability compared with N fertiliser systems depends on milk price and the costs of applying N. Despite MS production being reduced by 1.07kgMS/kg N not applied, profitability was very similar for these farmlets in six out of nine years.”