New Zealand's state farmer courts "premium" market by banning palm feed

New Zealand's state-owned farming company on Monday said it would cease feeding a controversial palm by-product to its cattle -- a move welcomed by international environment campaigners.

Landcorp said palm kernel expeller (PKE) would be replaced with locally-sourced feeds by June next year.

"One of the real points of difference for New Zealand farming is our ability to grow grass and produce grass-fed animals. There is a growing interest in this food globally," chief executive Steven Carden said in a statement.

"We need to anticipate shifting consumer expectations on how their food is produced and change how we farm accordingly," he said.

"Our shift to remove PKE from our farms is expected to be virtually cost-neutral and we think there are significant longer term gains in terms of our ability to attract new premium customers."

Guy Salmon, chair of Landcorp's independent environmental reference group, said the palm kernel, which was imported from Southeast Asia, had a large carbon footprint.

The oil palm industry and government authorities were struggling to gain effective control over tropical forest clearance and peat fires driven by oil palm industry expansion, Salmon said in the statement.

In 2013-2014, PKE represented about 6 percent of the average total diet of a Landcorp dairy cow.

Landcorp, which runs 140 farms and 1.6 million stock units, is one of New Zealand's largest farming organizations.

The opposition Green Party said New Zealand imported a record 1.95 million tonnes of PKE in the year to June 2015, and its use undermined the country's clean and green brand.

"PKE production destroys rainforests, and also impacts New Zealand's environment by enabling dairy intensification. More intensive farming leads to higher climate-damaging greenhouse gas emissions and poorer water quality," Green Party primary industries spokesperson Eugenie Sage said in a statement.

The Green Party and environmental campaign group Greenpeace both called on the farmer-owned dairy giant, Fonterra, to follow suit and refocus on sustainable farming.

New Zealand was the largest importer of PKE, using about a quarter of the world's supply each year, Greenpeace spokesperson Grant Rosoman said in a statement.

"As well as climate change impacts, the loss of rainforest habitat is pushing the orangutan and Sumatran tiger toward extinction -- not the sort of thing you want associated with New Zealand food products," he said.

In November last year, international environment campaign groups accused the New Zealand dairy industry of fuelling the devastating fires in Indonesia, where rainforests and peat lands had been set alight to clear the ground for palm plantations.

Greenpeace claimed New Zealand's biggest company, Fonterra, was feeding the demand for palm plantations as it was the world's single biggest importer of PKE. Endit