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Dairy costs?

One of my “things” over the past decade in New Zealand has been generalised annoyance with poorly conducted cost-benefit studies. And so the Herald got in touch asking me about a new study on the environmental costs of dairying; Jaime Morton did a great job with the story.

But academics have questioned the study’s methodology and findings.

“The report does a good job in identifying some of the environmental harms from dairying, but, at least on a first reading, does not provide a reliable estimate of the value of those harms,” said Dr Eric Crampton, head of research at the New Zealand Institute.

He believed some of the tallied costs used in the calculations — such as harm a farmer might do to his or her own pasture through soil compaction where stocking rates were too high — should have never been considered “external” costs, while other costs appeared “over-estimated”.

“The high-end estimates of the costs of nitrogen leaching, estimated at over $10 billion, seem to assume we would need to remediate all water in New Zealand to a drinking water standard — however, very few sites currently exceed nitrogen standards for drinking water.”

Dr Crampton also took issue with the upper-bound cost of the second largest cost component factored into the report, national dairy greenhouse gas emissions, which was put at over $3 billion.

“But that figure cannot be relevant for policy without considering relative greenhouse-gas intensity of dairy production in different countries and without considering the alternative uses to which dairy land would be put if it were not in dairying — and especially where the paper notes that dairy makes up half of New Zealand’s agricultural emissions,” he said.

“If every dairy cow in New Zealand disappeared, we would see more cows elsewhere and more beef and sheep production here. The net effect on greenhouse gas emissions is not particularly clear.

“Finally, the paper suggests that demand for New Zealand dairy product could be cut in half were New Zealand’s agriculture viewed abroad as being less than clean and green.

“But estimated high-end costs of over $500 million should be accompanied by a clearer picture of how much worse things here would need to be before exports were really at risk.”

Professor Frank Scrimgeour, director of the Institute for Business Research at Waikato University, slammed the research as “sloppy” and argued its bold claims could not be substantiated.

“The authors do not do any original data collection, estimation or modelling,” he said.

“They synthesised existing data without ensuring that measurements are consistent through space or time.

“Foote, Joy and Death are right that there needs to be holistic conversation in New Zealand regarding performance of the dairy industry but papers like this do not enhance the conversation.”

University of Waikato professor of agribusiness Jacqueline Rowarth said it was “naive” to expect water quality in waterways could be restored to drinking water standards, and she noted people reading the study needed “to consider alternatives and relativities”.

“This sort of research doesn’t actually get us anywhere, and that’s disappointing.”

I understand that the NBR is also following up with the study’s authors. I touch on the topic in this week’s Insights newsletter; make sure to sign up if you aren’t already on the mailing list.

About Eric Crampton (88 Articles)
I'm Head of Research with the New Zealand Initiative.

1 Trackback / Pingback

  1. Dairying costs revisited | The Sand Pit

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