More extensive dairy farms score better on sustainability, but face economic pressure

The research, based on the themes of ZuivelNL’s Sustainable Dairy Chain programme, analysed around ten studies on the relationship between farm intensity, economic performance and sustainability outcomes. The picture that emerges is nuanced.

Dairy farms that are more extensive produce less milk per hectare. However, they achieve more favourable results for nitrogen and ammonia emissions per hectare and are more often able to allow cows to graze outdoors. They also produce more protein from their own land, reducing dependence on imported concentrates such as soy. In this way, extensive farms contribute to the Sustainable Dairy Chain’s objectives for biodiversity, land-based farming and maintaining grazing.

The economic balance, however, often tips the other way. The research shows that extensive farms generally achieve a lower income per labour unit compared to intensive farms. 

A comparison between extensive farms (on average 1.25 livestock units per hectare) and the 10 percent most intensive farms (on average 3.75 livestock units per hectare) illustrates this. The extensive farms had more land (64 hectares compared to 51) but fewer cows (61 compared to 160). Their economic result was on average €22,000 per year lower than that of the intensive group. This is mainly because extensive farms tend to be smaller in scale.

Yet there are caveats. When dairy farms are ranked by overall sustainability performance – that is, how well they perform across climate, biodiversity and land-based farming combined – the best-performing farms turn out to be on average somewhat more extensive and more economically successful than the rest. Their stronger results are linked to lower attributable costs (including less purchased feed) and a higher milk price, often because they supply to quality labels such as On the way to PlanetProof or organic. 

Alongside retrospective research into existing differences, WUR also carried out simulations of farms converting to more extensive or nature-inclusive systems. These show that environmental performance almost always improves for the chosen indicators. Nitrogen surpluses and ammonia emissions per hectare decline, the proportion of permanent grassland increases, and there is more room for grazing. The picture for greenhouse gas emissions per kilo of milk is mixed: sometimes they fall, sometimes they rise, depending on the starting point and the way extensification is implemented.

Economically, the challenge remains. Extensification usually results in lower income, unless alternative revenue models are in place, such as organic production combined with on-farm cheese making, or when land is devalued. This is because extensification in practice means either buying more land – which is expensive – or keeping fewer cows, which reduces output.

Savings on feed and manure disposal costs generally do not offset that loss. The abolition of derogation – which had allowed farmers to apply more livestock manure – makes extensification slightly more favourable. The high manure disposal costs that have arisen as a result weigh heavily on intensive farms, meaning extensive farms come out relatively better. 

The research underlines that there is no simple solution to making the business model of extensive dairy farming viable. Still, there are several options:

• Lower land costs, for example through lease arrangements that include sustainability requirements.
• Payments for ecosystem services, such as nature management or water quality, to financially compensate farmers for societal services.
• Premiums for sustainable milk streams, such as On the way to PlanetProof or organic milk, which ensure a higher milk price.

In addition, the variation between farms shows that entrepreneurship and management are crucial: some dairy farmers do succeed in remaining profitable with more extensive systems by using their land and resources more efficiently. 

The researchers stress that this literature review only looks at the performance of individual farms. For the sector as a whole, key questions remain unanswered: how much land would be needed if the Netherlands were to farm more extensively on a national scale? How does this relate to land demand for arable crops, housing or nature development? And what would be the effect on the total emissions of the dairy sector as a whole?

What is clear is that extensification can be an important means of meeting sustainability requirements, but it is not an end in itself. The report therefore calls on policymakers, supply chain partners and farmers to be explicit about the goals – climate, biodiversity, animal welfare – and then to assess how far extensification can contribute to them, and what this would mean both economically and in terms of sustainability at national level.