Lincoln University economics lecturer Dr Wei Yang has found consumers overseas will pay 26 per cent more, increasing farmer profit by up to 15 per cent.
Dr Yang is a co-author of the paper ‘Impact of delivering ‘green’ dairy products on farm in New Zealand’, produced as part of the Credence Attributes On-Farm research project, funded by Our Land and Water National Science Challenge and AgResearch.
A key element of this research was to find out whether consumers of New Zealand exports would pay more for carbon-neutral dairy products – and if so, would the price premium be enough to cover farmers’ costs.
Dr Yang conducted a meta-analysis that combined the results of 32 existing studies to learn how much more consumers would be willing to pay for dairy products with “feel-good” qualities related to the environment and animal welfare.
She predicted overseas consumers are willing to pay extra more for environmentally-friendly dairy products – and this is increasing over time. “Environmentally-friendly” was used as a proxy for carbon-neutral products.
Although other businesses along the value chain would all take their share, Dr Yang used historical US data to calculate that 30% of this premium could be returned to the farmer.
After including carbon-neutral certification fees and the cost of offsetting emissions that were impractical or impossible to eliminate on-farm, such as biogenic methane, the results showed producing carbon-neutral dairy products can increase farmer profit by up to 15%.
The paper modelled several scenarios to reduce greenhouse gas emissions on an average Waikato dairy farm without seriously affecting milk production.
Carbon-neutrality was achieved by paying to offset the remaining emissions.
The best-case scenario delivering carbon-neutral dairy also had the potential to reduce nitrogen leaching by 42 per cent, while also reducing greenhouse gas emissions by 20 per cent.
• ‘Impact of delivering ‘green’ dairy products on farm in New Zealand’ by Wei Yang, Grant Rennie, Stewart Ledgard, Geoff Mercer and Gina Lucci in Agricultural Systems, February 2020 (published online 15 October 2019) https://www.sciencedirect.com/science/article/pii/S0308521X19304093