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Fewer cows or more land? The potential effects of a grassland requirement
A quick scan by Wageningen Social & Economic Research (WSER) shows that the possible introduction of a grassland requirement in the dairy sector would require some farms to make adjustments, such as reducing their herd size or leasing additional land. This policy instrument calls for a careful assessment of costs and consequences for each farm.
A grassland requirement is a measure of livestock density on a farm, determining the minimum number of hectares of grassland a dairy farm must have per dairy cow. The economic effects of the potential introduction of such a grassland standard at different levels have been studied by WSER at the request of the Ministry of Agriculture, Fisheries, Food Security, and Nature (LVVN).
Income effects depend on the required ratio
The grassland requirement is expressed in hectares per livestock unit (LU), where one LU represents one dairy cow. According to estimates in the quick scan, only 10% of dairy farmers would need to adjust their operations if a requirement of 0.25 hectares per LU were introduced. However, with a stricter requirement of 0.4 hectares per LU, this percentage would rise to more than 50%. To comply with the rule, various measures have been analysed, such as converting arable land into grassland, leasing additional land, or reducing herd size.
The quick scan compares two scenarios: one with derogation (resulting in lower manure disposal and land lease costs) and one without derogation (where costs are higher). In the scenario without derogation, the income effects of a strict 0.4-hectare grassland requirement per LU amount to approximately €1 per 100 kilograms of milk. With derogation, these losses could rise to €3 per 100 kilograms of milk. Expanding land area through leasing generally results in lower income losses than reducing herd size, particularly in scenarios with derogation.
Caveats regarding the results
While this quick scan provides useful insights, there are some limitations. Sectoral and regional effects, such as land scarcity or competition with other crops, have not been included. Additionally, the study assumes that dairy farmers choose between reducing their herd size or expanding their land area, whereas in practice, a combination of measures is often used. Other economic factors, such as changes in labour costs, also remain outside the scope of this analysis.
Grassland requirement as an instrument for improving water quality
Grassland requirement as an instrument for improving water quality
The government aims to make dairy farming fully land-based within ten years. A grassland requirement has been mentioned as a possible measure to achieve this goal. More grassland on farms reduces nutrient leaching and decreases the use of crop protection products compared to other crops, leading to improved water quality. It also contributes to rapid carbon sequestration, closed nutrient cycles, biodiversity, animal welfare (pasture grazing), and the preservation of the cultural-historical landscape.
The quick scan has so far only examined the economic impact of the grassland standard. This study shows that the economic impact varies by farm and depends on the practical implementation of this instrument (e.g., the level of the standard) and other policy developments (e.g., the presence or absence of derogation). Further research on ecological aspects is expected.
Source of the data
The data used for the scenario calculations come from the Farm Accountancy Data Network (FADN) of Wageningen Social & Economic Research. The FADN consists of approximately 1,500 agricultural and horticultural businesses, 100 fisheries enterprises, and 150 forestry companies, together forming a representative sample of the Dutch agricultural, fisheries, and forestry sectors. In total, data from 294 dairy farms in the FADN were used in this analysis.