The Value of Nitrogen Fertiliser to the New Zealand Economy

Nitrogen fertiliser is an important input into the New Zealand primary sector. For the horticultural, vegetable and arable sectors, it is a crucial input in ensuring high yielding and good quality crops. In the pastoral sector it is primarily used as a substitute for supplementary feed, especially as nitrogen-boosted pasture is around half the cost of other supplements.

"While removal of nitrogen as a farm input would reduce farming impacts on water quality and greenhouse gas emissions, there would also be a significant economic cost," says Vera Power, Chief Executive of the Fertiliser Association.

The Fertiliser Association of New Zealand commissioned this study to explore the costs to the primary sector both at the farm gate and to the wider New Zealand economy, associated with removing nitrogen fertiliser or using a substitute. For pastoral farms this includes use of supplementary feed.

The assessment has been done on a 'with' versus 'without' basis across five sectors:

• Pastoral agriculture - dairy
• Pastoral agriculture - sheep and beef
• Permanent horticulture - tree and vine crops
• Vegetables
• Arable

The implications for the primary sector without nitrogen fertiliser are as follows.

Overall costs at the farm gate are estimated at:

• $1.7 billion if N fertiliser is removed and no substitution is used; or
• $2.1 billion if substitution with other supplementary feeds and legume cover crops are utilised.

And at the national level, these impacts would flow through as:

• a drop in gross output by $19.8 billion
• a drop in Value Add (GDP) of $6.7 billion or over 2% of national GDP
• a reduction in employment by 73,760.

It should be acknowledged that the report looks at the economic consequence of not using nitrogen fertiliser in farming production systems, it does not cover the environmental costs or the potential costs of any clean-up of waterways. A key finding was that leaching of nitrogen is not eliminated by removal of nitrogen fertilisers.

The graphic below provides a summary of the key findings from the report.