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kellogg

Sheep milking in New Zealand: An analytical review

Executive summary

The subject of my Kellogg Industry Applied Project is a discussion on the advantages and disadvantages for farmers investing in the production of sheep milk.

I have determined there is value in the compilation of a discussion document which identifies the key variables influencing successful commercial sheep milking business. These are current and potential dairy sheep industry dynamics and parameters, market and product opportunities, production cost structure based upon differing capital cost inputs, and the projected returns on investment.

My research is delivered as a discussion document due to the nature of my findings. Through substantial critical thought and analytical processes, I have found there to be many component permutations. This research could be extended into a fully-fledged business plan aimed at attracting investment into a new dairy sheep venture. 

The key elements of this report include:

  • Analysis of current industry strength, the identification of possible regional producer groups, and the availability of existing processing opportunities.
  • A comprehensive SWOT analysis.
  • An investigation of the potential supply chain model options both nationally & internationally.
  • An analysis of different sheep milk farming systems placed under different load pressures in order to assess return on investment viability.
  • An assessment of the opportunity to become a market (price) maker (either as an independent producer or collectively with others).
  • Key metrics will include capital expenditure requirements and potential ROIs, with sensitivity analysis to identify the risk and growth pain points.

This topic is of importance to me because it will provide the catalyst to develop an entry-level sheep milking business, capitalising on the intellectual property I have created through the project process. Sheep milking can provide a viable career or business pathway for me and my family. I would like to make a significant contribution to the industry and intend to take a leadership role within it.

Equally, this topic is important to the primary sector because it will provide business growth opportunities for traditional dry stock farmers to diversify, provide pathways for young people to build their careers, support the conservation of rural communities, improved returns for conventional sheep farmers (and others) through an additional income stream, and contributing to the preservation of a traditional pastoral industry.

Damian Buckley, Damien Buckly

Changing Perceptions of Health and Safety in Agriculture: Current farmer attitudes and frameworks for changing the culture.

Executive summary

Health and Safety in New Zealand’s Agriculture sect or is a hot topic both in the media and in farmer’s discussions. Due to high incidences of injury and deaths in agriculture, farmers are coming under increasing pressure to conform to current legislative standards; however there are multiple issues surrounding both the current and proposed legislation which have caused widespread confusion and frustration amongst farmers. 

The aim of this project is to explore the factors affecting current attitudes in Agriculture towards Health and Safety, and seek to understand how change can be brought about. It is not intended to be for the purposes of statistical analysis of future research; rather, the intention is to provide the reader with some understanding of the motivations and thought processes of farmers in regards to health and safety, and explore methods of bringing about change. A review of the projects being currently undertaken by government body WorkSafe NZ provides some context, however it is not intended to be an in-depth review or critique.

Relevant literature was reviewed and ten interviews with farmers were conducted in order to gain comprehensive insight into their perceptions on health and safety. Attending a farmers meeting also provided opportunity for better understanding of farmer’s attitudes. An interview with The Minister for WorkSafe Michael Woodhouse allowed the author to gain further insight into the wider issues and the steps being taken by the government to make progress.

The main issues include farmers’ perceptions of what good health and safety practices look like, and the perceptions around the current and future health and safety legislation. Similarly, the nature of farming in New Zealand means farmers are naturally inclined to be resistant to many of the concepts being introduced by the government body WorkSafe NZ.

However there are some clear strategies that can be applied to agriculture to bring about change in attitudes and perceptions, and although WorkSafe have admitted to having some unforeseen setbacks in their campaigns, they appear to be largely on the right track toward tackling a complex issue. Throughout these reports the findings were consistent. There is no single critical factor behind New Zealand’s poor performance in workplace health and safety. The issue is the result of widespread systemic failure in controls, process, management and culture. There is no single underlying factor or ‘Silver Bullet’ easy solution. In the agriculture and forestry sectors, the following issues and components have been identified in many of the reports:

  • There is a high level of risk tolerance amongst those involved
  • Inadequate leadership and poor worker engagement
  • Inadequate and insufficient understanding of risks, hazards and responsibilities
  • Confusing regulations and a weak regulator
  • A lack of incentives (positive and negative) to foster behaviour and drive improvement
  • Poor data and measurement due to underreporting of some incidents and near-misses

“People like to look for simple solutions for complex problems and that’s the trap … if the answer was simply regulations then it would have been done (in NZ) by now” – BC Forest Safety Ombudsman

Cam Brown, Cameron

Family business decision making.

Executive summary

Family businesses play an important role in the New Zealand business landscape and are especially important in sheep and beef sector. The overriding aspect that sets them apart from other business forms is the level of complexity with the combination of family and business. The quality, speed and execution of decision making are the hallmarks of high performing businesses. How farming families in the sheep and beef sector make good family business decisions was the focus of the report.

Early general reading shaped my thinking and I proposed good family business decision making was based on clarity, governance and simple processes and systems. 

Further academic knowledge gathered on family businesses during the report period challenged this hypothesis but it was the real life stories of people faced with making family business decisions every day that really got my attention and altered my views.

Four family businesses and four advisors were interviewed and the results analysed identifying key themes. Critical thinking pulling the learnings of the literature review, interview phase and key themes resulted in my view that family businesses decision making is not necessarily about balancing the competing and often conflicting needs of family and business, but about integration. Integrating both family and business and applying three pillars; communication, a technical plan and oversight help to make good family businesses decisions. Decision-making truly is a unique practice and that there is no one process that is better than the other or simple model that can be applied to different scenarios.

It is hoped that this report will stimulate further discussion and debate on family business decision making by families and advisors.

Amanda Bowie

The hunt for the missing billion: NZ’s dairy beef opportunity.

Executive summary

Purpose: 

To analyse and investigate the opportunity to develop a stronger Dairy Beef Industry from New Zealand ’ s growing Dairy Industry.

Method:

  1. To understand the existing Dairy Beef industry in New Zealand and identify the strengths, weaknesses, opportunities and threats within the existing framework
  2. Identify and analyse the existing value chains
  3. Identify opportunities to develop further value

Findings:

New Zealand has an established and functional Dairy Beef industry. Existing value chains and enterprise options are available to farmers that can meet the needs and demands of different markets within the New Zealand pastoral farming sector.

A significant resource of animals is created by the New Zealand Dairy industry annually. Information available indicates 2.3 million calves are not making it beyond 4 days of age.

The prospects for the Global Beef industry suggest that there is an opportunity for New Zealand to grow more Beef to meet strongly growing global demand over the next 50 years.

New Zealand has an increasing share of it’s food exports being sold to China, and a Meat schedule market in New Zealand that has been stable for a number of years.

As the New Zealand Beef cow herd continues to shrink, growth in New Zealand’s total Beef production can realistically only be expected to come from a larger Dairy Beef industry.

Significant prejudices and stigmas exist among New Zealand Beef rearers and finishers toward Beef Cattle with Dairy ancestry (especially Jersey) and large value discounts are applied because of this. Information available does not support these beliefs and, in instances, proves them incorrect.

The possibility of sexed semen provides opportunity to improve the productivity and rate of genetic progress in the New Zealand Dairy industry and also for the Dairy Beef industry to expand.

The prospect of rearing more Calves from the Dairy Industry, sired by Beef Bulls, feeding them for a shorter duration on high performance pastures and forages, provides a pathway to much more efficient and profitable Beef production in New Zealand.

It is imperative that Beef Bulls used by Dairy Farmers are appropriate and do not interrupt the primary purpose of the Dairy Cow: to produce Milk.

Recommendations:

  1. Further research in to the number of Calves being born on New Zealand Dairy farms annually, and the fate of those Calves, is recommended. This will allow an accurate picture of existing Farm practices and the inherent opportunities and risks that exist.
  2. For New Zealand Meat Processing Companies to adjust payment schedules that reward Meat Quality and saleable meat yield, rather than the current fatness and muscularity measures which penalise Carcasses of Dairy ancestry and reward those of accepted Beef ancestry.
  3. That information to hand regarding Meat Quality , and breed effects, be distributed among the Beef Industry in an effort to prevent or reduce the value discounts toward some breeds.
  4. That the findings of the Beef and Lamb NZ, MPI Sustainable Farming Fund initiative to finish Beef Cattle by 20 months, be rolled out further and encouraged.
  5. That Case Studies of Farming businesses successfully taking Crossbred Dairy Beef Cattle through to slaughter be identified and exhibited to demonstrate what can be accomplished.

Conclusions:

New Zealand has a significant opportunity to become much more efficient in its Beef production and capture the opportunity of Global Beef demand growth. A very large resource of potential Beef Cattle is born and available annually from the New Zealand Dairy industry.

Only a small portion of that available resource is being reared annually and of those reared, many are being carried through to slaughter at 30 months or older, requiring a second Winter and the poor Feed Conversion Efficiency that goes with it. Better utilisation of the findings of the Beef and Lamb, MPI work in this area, would see improvements to Farm systems that create much better returns to Beef Finishers and allow greater throughput of Livestock.

The Dairy industry has vulnerability in how some farms deal with this particular by-product and there are risks inherent which need to be planned for. Having a Dairy Beef industry that is able to transform as much of that by-product as is practically possible, is an important component in managing the public relations risk.

A better understanding of the inherent Meat Quality and Meat yield characteristics of Dairy Beef cattle among Beef Rearers and Finishers and Stock Agents could be expected to see much better acceptance of those animals in Livestock Markets and stronger underlying value which would lift 4 Day old values.

Alan Cook

Daring to have it all.

Executive summary

Worldwide, there is a scarcity of women in leadership (Sandberg, 2010). In many organizations, even at the lowest level women struggle to make up 50% of the workforce. This number decreases steadily as you get successively higher. Worldwide, only 3–4% of women reach CEO level (Herminia Ibarra, 2013). Despite key advancements in the workforce for women over the last few decades, women remain underrepresented in senior management and leadership roles.

As a 25 year old female within the next 10 years I have a decision to make.

Do I pursue a big career, and aim for a senior leadership position? 

Do I start my family, and if so how long do I take off work?

Do I dare to have it all?

I would like to think that I could opt for option three and dare to have it all. However the statistics are concerning and therefore I have conducted this report to investigate the barriers to women in senior leadership positions with a focus of how you can successfully balance a career and children.

Regan Barkla

The current and future impact of machine to machine technology on the dairy industry in New Zealand.

Executive summary

This paper and the associated research sought to answer the following research question:

What is the impact of machine to machine (M2M) communication on the dairy industry in New Zealand, and what is the likely impact in the future?

Information and communication technology (ICT) plays a significant role in the information flow across the dairy value chain. M2M communication is a critical component of this information flow. For the dairy industry to move from where it is today, to where the benefits that can be achieved from the adoption of ICT’s are maximised will take significant advances in thinking.

There were three components to the research that was undertaken for this paper. These were; a thorough literature review to identify key concepts, a survey of 64 dairy farmers, and four interviews with providers of solutions that utilise M2M communications.

A key finding from the research was that, M2M communication is currently having a limited impact on the dairy industry in New Zealand. The potential impact is much greater than what is currently being experienced. Attempts should be made to accelerate the rate of adoption in order t o increase the impact.

The information flow that M2M communication enables will help add value and ensure sustainability in the increasingly competitive, and volatile dairy industry. This paper recommends that an increase in the impact of the solutions that utilise M2M communication, can be achieved by:

  • Gaining a greater understanding of why and how technological change occurs.
  • Increasing the level of understanding of the technologies behind the solutions.
  • Prioritising the solutions that are going to give the greatest return on investment.
  • Industry collaboration around the direction of M2M communication.

M2M communication presents a great opportunity to be able to gain significant control of the dairy value chain. Today the technology is emerging and its impact is limited. This relative immaturity of M2M communication in the dairy industry, will eventually be overcome by time. It is the responsibility of all stakeholders in the dairy industry to play a role in maximising what is such a large opportunity, through the acceleration of its uptake.

Jeremy Anderson

Are there opportunities for faster innovation in the kiwifruit industry.

Executive summary

New Zealand is well known for being heavily involved in the primary sector and exports of horticultural crops are a significant part of the New Zealand economy. In particular the kiwifruit industry is of significant export value, contributing around $930 million towards a total horticultural export value of $3,901 million in 2014 (Statistics New Zealand, 2014). The area of land in kiwifruit production currently stands at around 12,000 hectares and is predicted to continue growing. The industry is looking forward to a promising future as it recovers from the bacterial disease Pseudomonas syringae pv. actinidiae (Psa) and experiences improvements in productivity and orchard gate returns (Zespri, 2014). 

Increasing returns to growers and increasing value of the industry is largely attributable to the premium pricing that New Zealand kiwifruit can achieve overseas. New Zealand kiwifruit is well recognised for consistent high quality and much of this is associated with the values associated with the Zespri brand, under which New Zealand kiwifruit is marketed. Zespri are grower owned and are focussed on the export and marketing of kiwifruit. Zespri do not export any other commodities. Further they are not directly involved in fruit production or post-harvest handling and storage of kiwifruit. Zespri kiwifruit are primarily sourced from New Zealand growers, however, as the company moves to provide a 12 month supply of fruit, sourcing from other kiwifruit producing countries has begun.

The kiwifruit industry in New Zealand is already relatively innovative in comparison with other primary sector industries. The different sectors of the supply chain all demonstrate an innovative side. Examples include, growers exploring tools like trunk girdling for improving fruit quality and plastic coverings for reducing disease impacts. Examples for the post-harvest sector include the implementation of controlled atmosphere storage for extending storage periods as well as research into and a move by some into using plastic rather than wooden picking bins. Zespri also have a strong focus on innovation, with innovation as one of the businesses four strategic pillars, a dedicated innovation team and an annual innovation budget that currently stands at around 1.5% of annual revenue. An example of Zespri’s innovation success includes outputs from the new cultivar development programme. This programme is ran in close collaboration with a key research partner. The kiwifruit industry has historically relied on the production of the green kiwifruit variety, ‘Hayward’, until a new, gold fleshed fruit was released as a result of the new cultivar development programme and following years of R&D effort. This variety extended Zespri’s product portfolio and it’s unique, sweet taste was highly desirable to customers, resulting in improved sales and in turn improved returns to growers.

The kiwifruit industry is not without its challenges. As kiwifruit production continues to increase in other countries, New Zealand kiwifruit and Zespri must stay ahead of competitors by maintaining strong brand positioning. A strong focus on innovation is recognised as helping businesses to remain competitive. Therefore Zespri and the wider kiwifruit industry need to maintain a focus on innovation and look for ways to improve the rate of innovation and the rate of innovation adoption.

The aim of this project was to explore how other successful companies utilise innovation to maintain competitive advantage and brand positioning and to see if there are lessons that can be learnt and adopted by Zespri to enable a faster rate of innovation and innovation adoption.

Mary Black

Antibiotics and dry cow therapy: What’s the problem.

Executive summary

There is global concern about food safety and the effect antibiotic use in animal production has on our ability to treat human infections in high profile “superbugs” such as MRSA. Antibiotic use in animals has come under significant scrutiny, with a call to reduce their use. Global consumer brands have increased the profile of this issue by announcing their desire to reduce antibiotic use in their supply chains. This has further fuelled public perception of the potential implications of antibiotic resistance.

New Zealand is a recognised leader in food production, particularly in dairy products, and it is the aim of this project to review how the use of antibiotics in this economically important sector may create both risks and opportunities.

Antibiotics are an important tool for treating disease and have a critical role in food production systems. By volume and importance, the greatest use of antibiotics in the dairy industry is for dairy cow mastitis (mammary gland infection) and in particular the treatment of cows finishing their milking season, known as dry cow therapy (DCT). In many cases whole herds are treated prophylactically with these antibiotics. In a competitive marketplace where many trade partners are seeking barriers to prevent imports and protect local business, this prophylactic, or blanket use, creates a potential market access risk.

After reviewing the literature and interviewing a cross section of stakeholders in the use of DCT, several conclusions were drawn.

Put simply, there are two ways to reduce the use of antibiotics and mitigate risk. The first is to reduce the number of animals needing treatment with antibiotics through improved integrated herd management, disease prevention and alternative treatment approaches. The second is the more judicious use of antibiotics, targeting known disease only and not treating the herd prophylactically. Both strategies reduce the volume of antibiotics used.

The management of disease in a production environment is complicated , creating a range of barriers to reduced and more judicious use of antibiotics. Broadly these are related to people, economics, technology and information.

To overcome these barriers and set the standard to which others aspire will require strong leadership. Education, science & innovation, and importantly, a focus on the principles of stewardship and a prioritisation of “food safety”, will be enabling. It will require support for our farmers and veterinarians and courage by industry leaders to question the status quo and be willing to continually set new standards for improvement.

This paper recommends that a national strategy is developed by industry leaders. This strategy should be inclusive, aspirational and bind stakeholders throughout the value chain, from producers to consumers. Regulation should be seen as a tool to be used sparingly to influence change. It is a change in culture that will create the sustainable leadership position desired. Most importantly the strategy and its leadership should aspire to position New Zealand product as t he gold standard for food safety.

Duncan Mackintosh

Red meat career pathway.

Executive summary

Currently the red meat sector does not have a clearly defined and documented pathway for young people to build a business to increase equity to pursue the goal of land ownership. Succession in the industry is a challenge as the average age of land owners is high beyond 55+.

The purpose of this research is to understand the current successful pathways selected entrants have followed to enter the industry. This was conducted by interviewing 12 farmers around the country who are currently in a process to build their equity. A range of questions were asked to gain an understanding of both how they got to where they are and where they are heading in the future.

There were three common pathways that were found through the report including Equity Partnerships, leasing land and buying undeveloped land.

The Equity Partnerships arrangements varied but they all had the common underlying goal to build equity. The options included investing in the operating entity or investing in the land owning entity and the operating entity . All young people managed the farms and either received a profit share which could be reinvested into the business or the profits were used to reduce debt or were invested back into the business through development.

The second option was the traditional leasing method. This method evolved from leasing one property to taking on more leases which gave the ability to create wealth. The disadvantage is that leases are usually passed on through word and mouth and are usually only the more run down properties available.

The third option was to invest in land that was undeveloped and not attractive to many people which gave the option to develop it while leasing other land to create cash flow to do so.

Primary ITO has developed a flow chart of the pathway through shepherding and farm management with the different training available at each stage which is a great pathway to learn the ropes of the industry.

The red meat sector is not the only industry that does not have a clear pathway. For example it is also difficult to invest in commercial property until you have enough equity to do so in which there is currently no clear pathway of how to get there in the industry.

The advice that was given by the 12 farmers interviewed included; the importance of networking and building relationships with key people, involving a team of people to support you, seeking opportunities, working hard, diversifying your income, getting the governance right before you enter the arrangement and taking the opportunities that present themselves.

In conclusion, there are currently people out there building equity to get to their goals but there is not always one pathway that fits all. The pathways vary depending on the opportunity that you get and the availability of support around you. But most importantly it can be done if that is what you want to achieve.

Kirsty Stratton

Success of rural cooperatives.

Executive summary

This report looks at co-operatives as a whole. To gain experienced insight into the rural sector co-operatives a number of high level management and directors involved with co-ops have been interviewed. Essentially looking to define the mechanisms operating within co-operatives to ensure their long term success in the rural community.

The Co-operatives section covers what they are, differences between a co-operative and a traditional privately owned company, types of co-ops and why belong to a co-op. Then we discuss the success of co-ops and look at definitions from references and also individual co-ops. The ratios of shareholder vs cash buyer/suppliers of co-ops that were interviewed are shown in a graph. Asking them to define success firstly and then to express ways they measure success and how often these measurements are consulted. Innovation, markets and technology are forever changing and to keep business sustainable co-ops need to embrace these changes.

Co-ops don’t exist without the loyalty of their shareholders and it is one thing to join a co-op initially but what keeps a shareholder loyal and what measures do co-ops take when that loyalty is waivering? Also covered is the two way mechanism of co-op loyalty to the shareholder as that is often questioned by shareholders of producer co-ops when concerned about receiving income for their stock. The power of the individual versus the power of the co-op can be a very powerful factor and has been expressed time and again and can come from any section of the company. Some co-ops have said they place emphasis on it while others have less regard for this factor.

The decisions made by co-ops can be a turning point for them so it is important to understand how they are made, the process used and then also the accountability of those making the decisions. Finally the warning signs of co-op failure are covered. The interviewees have experience with co-ops both as shareholders and as management or directors so know the warning signs to watch for if their co-op is starting to struggle.

Sarah Heddell