MDC/MLC Trip to the Netherlands to Investigate
Environmental Regulations and the Dairy Sector
26th -28th of April, 2006.

Current Situation

Within the existing Nitrate Vulnerable Zones (NVZs) in England the maximum amount of nitrogen that can be spread on grassland (from slurry or artificial fertiliser) is 250 kg per hectare.  Outside existing NVZs the recommendations are 250 kg or less per hectare. 

It is likely that the Water Framework Directive will lead to future alterations to the system, especially in relation to phosphates, which will affect dairy farms and intensive beef finishers.  The aim of these regulations will be to reduce the environmental impact of livestock production by reducing the amount of nitrogen and phosphate entering watercourses.  This will mean that farmers will need to monitor what their animals are excreting, the amount of manure and slurry they are spreading and the quantity of artificial fertiliser they are using. 

Most farms will have some slurry handling systems, but it is likely knowledge transfer efforts will need to be directed towards the best practices to ensure regulations are met.  Alternative methods to deal with slurry will be needed, such as machinery that injects the slurry directed to the soil, to help farmers achieve the targets. 

The Netherlands vs the UK.

As can be seen from Table 1, the UK and the Dutch Dairy Sectors have subtle differences, for example, the number of dairy farms and cows and the yield per cow are higher in the Netherlands, while the herd size and total milk production is greater in the UK.  

Table 1: Descriptive Statistics for the Dairy Sector in the Netherlands and the UK.

A major point that came across during the visit was the high land and quota prices, which made the possibility of expansion very difficult and the prospect of establishing a new farm impossible. 

In the Netherlands the cost of land varies between 20,000-50,000 Euros per hectare (£13,750-£34,500 per hectare) depending on the quality and location.  In England the average land price is £8,000 per hectare.  The high cost of land has a knock-on effect on the environmental regulations, as farmers cannot afford to buy more land to increase the area they can spread manure. 

The cost of quota in the Netherlands was 2 Euros (£1.38) per kg while in the UK it is £0.04 per kg.  This is generated by the high milk price (0.30 Euros (21p) per kg) compared to 19p per litre in the UK.  The cost of quota means it is difficult to expand but it is attractive to farmers to sell their quota and leave the industry or rear youngstock.
 
In the Netherlands, due to the difficulties in buying land and quota investment has been focused towards buildings and equipment, which means that most units are under-capacity.  This means that once the quota system is removed a rapid increase in the number of cows can occur.  In the UK, most units are at capacity as cheap quota prices have allowed an increase in cow numbers.  This generally means that further expansion requires considerable capital cost, for example additional housing and parlour expansion, which means that the UK sector is less able to grow.  However, as the UK is currently producing under quota it is unlikely that expansion will occur once the quota system has been removed.

Quota vs. Free Trade

It is predicted that the quota system will be removed by 2013 so dairy production will need to compete at world prices.  The removal of the quota system will remove approximately 6p per kg from the costs of Dutch production and allow them to competitive.  Unfortunately, a lot of European countries are building up their industries to allow for expansion once quotas have been removed, which may lead to over-supply and drop in the milk price.  It depends on countries' government on how much they will support their dairy industries through this time. 

It is likely that environmental regulations relating to nitrogen and phosphate levels will act as an informal quota system by controlling the level of production.  For example, if the 250 kg N per ha is exceeded then the farmers have to pay between 6 and 10 Euros (£4.10-6.88) per m3 to remove the excess manure off the farm.  (A 550 kg dairy cow will produce 1.61 m3 per month).  If production increases manure production will increase and the costs of disposal will increase.  This is likely to be the limiting factor for future livestock production.   

Intensive vs. Extensive

Within the UK dairy sector there has been a move towards extensive (low input) systems, which have greater emphasis on reduced costs and improved efficiency, for example, through effective grazing management. 

However, in the Netherlands there has been a move towards intensive (high input) systems, which are justifiable because of the high milk price.  But if the milk price should fall it is likely there will be a movement towards low input systems. 

90% of all Dutch dairy farms will graze the cows at some point but only for a couple of months and they will tend to be brought in at night.  Generally, the system will rely on early silage cut (up to 5 silage cuts per year) and late or no grazing.  The benefits are that utilisation is higher and there is minimal poaching, however the costs associated with conservation versus grazed grass will be higher.  There are also the welfare consequences of housing dairy cows for a high percentage of their lives, such as disease problems and lameness.   

Within the Netherlands as long as 70% of a farm's land is in grassland there is a derogation, which means that N per ha can range between 170 and 250 kg.  Therefore, the percentage of land within a farm that can be drilled in forage crops is low, due to the low farm size.  This means that forage crops can tend to be bought in cheaper than they can be grown due to the economies of scale. 

Opportunities vs. Problems

Two of the farms visited were part of the "Cows and Opportunities" scheme that aimed to combine research from an experimental farm with system research from 15 commercial demonstration dairy farms.  The objective was to demonstrate new practices to farmers through demonstration farms with about 25% of Dutch dairy farmers visiting one of the farms or attending a meeting organised by the project. 

There was a general impression that they viewed challenges as opportunities rather than problems, which is not always the case in the UK sector.  This may be related to the Dutch government's commitment to education of producers, which aims to stimulate a whole system approach.  Within the experimental farms, they are researching issues/problems that may occur in 2020, with the demonstration farms aiming to overcome problems that may occur in 2009.  This forward focus allows problems to be turned into opportunities as a lot of information on how to deal with them has already been gathered.  Focus for research in the UK dairy sector tends to 5 years into the future, but this needs to be changed.

Beef and Sheep Sectors

From Table 2 it can be seen that the beef and sheep sectors are smaller than the UK sectors. 

80% of the beef produced in the Netherlands come from the dairy sector compared to 30% in the UK (based on the breed of the bull).  The Netherlands has a large veal sector with 45% of the production tonnage being veal, while 86% of all calves are destined for veal.  This is not seen in the UK systems, and this difference can be seen in the lower average carcase weight in the Netherlands. 

The Dutch sheep industry produces only 1.6% of the EU-15 sheep meat (total = 1,024,000 tonnes (2005)), which means it has limited impact in the EU.

Table 2: Descriptive statistics of the Beef and Sheep Sectors in the Netherlands and the UK

• The interesting components of the Dutch dairy sector were the high land and quota prices that made expansion difficult, and the reliance on purchased or conserved forage.
• Although the quota system is likely to end, which means the Dutch dairy farmers can increase their herd size to take advantage of their extra capacity, environmental regulations are likely to constrain major expansion due to the cost of manure disposal.
• The beef sector is important as it provides markets for the excess calves and cull cows from the dairy sector, which provides extra revenue for the dairy farmers. 

Liz Genever
Beef and Sheep Scientist
Meat and Livestock Commission