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Mounting pressure on Southland’s agricultural sector is expected to hit dairy production.
Southland’s economic development agency Great South this month released a post-Covid scenario analysis report.
Economics consultants Infometrics produced the report.
Author Nick Brunsdon said economic activity in most industries would recover by 2025 but increasing stringency in environmental regulations would soon limit, and ultimately reduce, output from activities such as dairy and cattle farming.
This was driven by the Essential Freshwater work programme, including the National Policy Statement for Freshwater Management.
"The work programme includes elements which are contentious among the farming community, and is subject to change.
"However, it represents a broader long-term shift towards more stringent environmental regulation, to reflect changing societal attitudes and greater understanding of the adverse effects of land uses and intensification."
For the dairy sector in Southland, these changes would lead to a lower volume of milk production, which in turn would lead to fewer dairy sector jobs.
"Dairy NZ modelling at a national level, suggests a 30% decline in milk production and a 15-20% fall in dairy sector employment."
This could result in cuts to production and changes to alternative land uses, rather than to continue dairy farming.
"This will offset some of the job losses in the sector, both on-farm and in downstream processing.
"Nonetheless, this process will represent a significant change in Southland, and will involve a degree of disruption."
Alternatives included growing oat crops for oat milk, or legume crops for non-meat proteins.
This could be challenging in terms of money spent on dairy-specific investments, he said.
Transitioning might be extremely challenging when farms had a large investment in dairy-specific capital, such as milking infrastructure.
A skill shift from dairy to crops also might need government support.