Outdoor-grazing payments in dairy farming

Area characterisation: 
  • NO Kaasmakers’ is a co-operative, and some 460 dairy farmers are member of the co-operative.
  • Some 92% of the dairy farmers who are member of the CONO co-operative adopt pasture grazing, which exceeds national average. Branded cheese ‘Beemsterkaas’ is produced from branded grazing systems. Grass is considered essential for the quality of the product. The size of the parcel near the farm is critical for the pasture grazing. With an average of 50 ha per farm with grazing, the size of the parcel near the farm is some 33 ha.
  • Pasture grazing requires additional labour for milking, but reduces costs for feed and disposal of manure. With an average of 55 kg per day, fodder represents more than 90% of the food of dairy cows. This is complemented with an average of 5 kg of compound feed, and composed of maize, soya and other products. Moreover, a cow on average drinks approximately 100 litre of water, and is fed with 100 grams of vitamins and minerals (NZO, 2016).
  • Creating high-quality agricultural land was one of the main reasons at the time for draining the Beemster Polder (in 1612). Originally the drained land was used for grain production, but as time went by this land gradually turned into pasture land for cattle. The reasons for this were the fact that the groundwater level and the soil composition produced a less favourable result for agriculture than the investors in agriculture had anticipated. As a result, dairy farming and cheese production quickly developed after the polder had been drained and have since been an integral part of the Beemster Polder. Since 1999, the Beemster Polder is a UNESCO World Heritage Site.

34 case studies were planned by the H2020 PEGASUS project in different farming and forest systems and along the supply chain in 10 EU countries, to: 

  • examine the issues faced in ensuring effective provision of public goods/ecosystem services from farming & forest activities; and 
  • find solutions to enable the economic social and environmental sustainability of the EU’s farmed & forest areas.

A private cheese making cooperative, CONO, pays member dairy farmers a premium price for the milk of cows
grazing outdoors. The payment aims to deliver various benefits such as animal welfare, an attractive landscape
and more extensive dairy systems.

The company initiated a premium for pasture grazing in 2002. The premium by CONO to dairy farmers for the delivery of meadow farm milk can be regarded, or interpreted, as a particular type of governance arrangement aimed to stimulate animal welfare (‘happy cows’), to create an attractive landscape, and to make the most delicious cheese from the best milk. Of course there are other governance arrangements could have been considered to achieve these envi-ronmental and socially beneficial outcomes, such as (public or private) command-and-control regulations (e.g. specific guidelines prescribed by the government to the dairy sector, that prohibit the full-time housing of cattle). Recently (February 2017), the Dutch parliament has decided to make pasture grazing mandatory for dairy cattle in the Netherlands.

Each member of the co-operative delivering milk according to the requirements of the Sus-tainable Dairy Chain (Duurzame Zuivelketen) is eligible for the premium paid by CONO. The requirements are an effective monitoring by dairy producers who process raw farm milk. They are responsible for the task of checking on and taking primary responsibility for compliance with the obligation that meadow milk cows are out for grazing during at least 120 days a year and a minimum of 6 hours a day. Pasture grazing is considered essential to reach high quality standards of cheese.​

In this case study, CONO cheesemakers offers a premium of € 1 per 100 litre of milk (situation 2016), subject to outdoor-grazing of 120 days (at least 6 hours a day). The company will double the premium from 2017 onwards, to be € 2 per 100 litre of milk. Dairy farmers who comply with outdoor-grazing requirements receive the premium if the cows stay out for at least 120 days and a minimum of 6 hours a day. The premium is to acknowledge appreciation by the consumers for outdoor grazing and evidence to offer a ‘fair price’ to farmers. Outdoor grazing is important in branding the cheese.

Potential impacts/benefits: 

Landscape features are an important public good related to outdoor-grazing. Such farming practice might also be beneficial for animal health. Although complex and dependent on farm management practices, it might also be beneficial for nature.  Outdoor-grazing is an important management practice in dairy farming.

Trend in outdoor-grazing (currently) is stabilizing. Outdoor-grazing requires grassland and it largely takes place at field parcels that are near the farm house that also need to be sufficiently large for grazing.

There is a trade-off between manure legislation and outdoor-grazing: increasing the scale of production tends to be more efficient with in-house production systems. Environmental legislation is nowadays largely felt to be the new system to limit milk production and replacing the former milk quota regime.

Transferability of the result: 
  1. Farmers understand and appreciate being rewarded for specific farming practices which they voluntarily implement.
  2. There is increasing awareness about the perceived benefits of outdoor grazing among consumers (social acceptance and willingness to pay more for milk from grazing cows) and it contributes to the dairy sector’s image (corporate social responsibility). Corporate social responsibility is a key feature of the marketing of CONO Kaasmakers, with focus on a fair price for farmers, happy cows (to reflect high animal welfare conditions) and high levels of soil functionality.
  3. Outdoor grazing often is a condition for being able to supply retailers in the Netherlands and increasingly in Germany as well.
  4. Dairy farms willing to maintain or transition to outdoor grazing systems need to carefully consider the number of dairy cows and the size of the grassland area available near the stable.
  5. Advanced ICT technology (i.e. GPS system) can assist the monitoring of animals grazing outdoors. Grazing needs to be implemented in modern production systems (e.g. automatic milking system, with milking robots to be integrated with grazing systems; increas-ing scale of production).
  6. Knowledge transfer about grassland management and grazing cows needs to be improved, especially for farmers who are transitioning from indoor production towards grazing systems.

The main factors limiting outdoor grazing relate to the abolishment of milk quota. The abol-ishment of milk quota induced an increase in the number of dairy cows in the Netherlands, which eventually reduces the possibility to feed all dairy cows from the grassland that is near the farm house. In addition, manure legislation tends to stimulate livestock producers towards in-house production systems, mainly to control emissions and dispose livestock manure.

Payments for delivery of public goods might be most appropriate if it could be linked with product quality rather than public payments. Public policy aims to reverse the decline in out-door-grazing and have 80% of the cows in outdoor-grazing by 2020. It remains a challenge how outdoor-grazing could be secured in the coming ten to twenty years. Such an understand-ing could offer perspective to the dairy sector in a highly volatile market.

Lessons learned: 
  • Synergies with outdoor grazing and dairy farming could be achieved when the field parcel is sufficiently large to provide food and fibre.
  • Outdoor grazing might be a way to communicate the broader context of farming in a region, both to civil society and consumers.
  • Payments for the delivery of social and environmental benefits (e.g. public goods) may be more appropriate and sustainable if they could be associated with product quality as well. In the Netherlands, public policies aim to reverse the decline in outdoor grazing and have set a target of 80% of outdoor grazed cows by 2020. It remains to be seen how outdoor grazing could be secured in the coming 10 to 20 years in the Netherlands. Such an understanding could offer perspective to the dairy sector which faces highly volatile market conditions.

DLO Foundation, Horizon 2020 PEGASUS project