The government and fertiliser co-op Ravensdown are investing $22 million to investigate how nitrogen loss could be reduced on farms.
Ravensdown is investing $11 million and the government is contributing $7.3 million through the Sustainable Food and Fibre Futures Fund to the seven-year programme called N-Vision.
It will look at three options to reduce leaching.
N-Retain is a new nitrification inhibitor technology which will look at new ways to block the biological processes in the soil that lead to nitrous oxide emissions and nitrate leaching.
N-Test is a new soil test to inform nitrogen fertiliser decisions on pastoral farms, that will help capitalise on the nitrogen already in soil organic matter. This could mean less nitrogen fertiliser needs to be applied.
The third product, N-Bio Boost, is a fungal bio-inoculant to increase nitrogen use efficiency, which will examine how naturally occurring fungi boost the nitrogen efficiency of plants as another way to future-proof productivity.
The fungi research is being led by scientists at Lincoln University, who started looking at the use of naturally occurring fungi in soil to reduce nitrogen seven years ago.
Professor of seed technology John Hampton said they were looking at the interaction between microbes in soil, plants and fertiliser use.
He said they looked at multiple different strains of fungus before narrowing it down to two which have since been involved in field trials around the country.
"Things are going really well we're finding that when urea is applied, in the presence of our fungus, we get reductions in ammonia production, reductions in nitrous oxide production, and reductions in nitrate loss down through the soil system - we getting reductions in losses between about 25 and 40 per cent depending on the site."
Hampton said the new funding will enable the university to scale field trials.
"We're delighted by the funding because the endpoint is going to be a commercial product, so over the next two years we will do more trials and then we will work to refine the application technology.
"After such a long research programme it's great to be able to see an end point and to know what started off as an idea seven years ago is going to be a commercial product that farmers can use - we're hoping this can happen by 2026.
That commercial product can be either a prill applied to existing pasture or for new pasture farmers could use a seed coated in the fungus.
Hampton said the type of fungus being tested was under wraps for now.
Minister of Agriculture Damien O'Connor said the products and technologies developed through the N-Vision NZ programme will be made widely available under commercial terms.
"This will ensure that the environmental and economic benefits extend to the whole of New Zealand and not just Ravensdown's customers.
"This government is focussed on helping farmers reduce their environmental footprint, this work aligns with the sustainability goals of the Fit for a Better World food and fibre sector roadmap. Partnerships like N-Vision NZ will help us meet these goals and maintain our economic strength.
"Finding new methods to take action for healthier soil, waterways and climate will pave the way towards a healthier future for us all," O'Connor said.