The New Zealand Dairy System, One Canadians View #NuffieldAg

Farming systems around the globe are steeped in historical context, bound by geographical characteristics, demographic demands, political influences and climates which dictate farm types, size and location. Be it supply managed, vertically integrated, contract based or direct market; all farms have exactly that, a market!  It is just a matter of determining how that market is filled.

If I hear one more New Zealand farmer tell me ‘they punch above their weight’, it will only further confirm the cultural challenge it has in positioning itself on the global stage.  It is true, New Zealand, with a population of about 4.6 million people, was essentially bankrupt 30 years ago when they did away with all agricultural support to all commodities, hardest hit being dairy, beef and sheep at the time.  However what happened over the next three decades is a focus on land use change determined by the best rate of return for rural business.  Today, approximately 95% of agricultural output is exported with a population feeding capacity of around 40 million people, quite remarkable for a country of its size!

Today, New Zealand boasts one of the highest output countries per capita of milk production, with average farm size of about 420 cows.  Dairy conversions have a new meaning seeing the country first hand. Pervious sheep, beef and timber land changed to centralized grazing zones for dairy cattle.  New Zealand is in the free market, but having the world renown dairy cooperative Fonterra, who distributes about 85% of the milk in New Zealand, and essentially sets the national price, farmers have organized well to be a part of the market.  Fonterra shares equate to around $2400 per cow based on $6/milk solid at 400MS/year.


Having identified global opportunities nearly two decades ago, the mass conversion of land has now created mistrust with urban counterparts who view dairy as negative.  As such, I would have never thought of New Zealand’s broader populations not supporting farming, but like every other developed nation, the ‘social license to farm’ is by no means present.  As such, government policy will essentially limit the number of livestock units to current values and we can expect output to stabilize.  It is shocking at times, to witness certain terrain having livestock grazing and more so thinking back to the natural treed landscapes of a few generations ago.  However when economic rule drives change, other factors such as social or environmental concerns become secondary as markets typically put little value on externalities.

Unfortunately New Zealand dairy farmers faced a significant financial crisis with the down turn of the global dairy markets in 2015 and 2016, with long term outlook improving, farmers have not recouped lost revenues as of yet.  In the face of perceived financial ruin, farmers maintained positive working relationships with their banks, as such loans were converted to interest only, Fonterra provided $0.50 per milk solid of loans to be paid back upon milk exceeding $6.00 and additional working capital beyond these being injected into farm units, many of which were below their cost of production.  As one farmer pointed out, the high milk prices of a few years ago at $8.00 created a false economy in the sector by which cattle were fed high amounts of purchased feed and failing to fully leverage actual returns by hectare of land whereby grass is and in most case should be the only feed source.  Ironically, farmers reflect that the concern over access to bank support was far worse with the global financial crisis in 2008 compared to their working relationships with the downturn in the milk price last year.

However, one significant number is rarely communicated overseas in regards to the other major factor which has propped up the New Zealand dairy sector: land values!  Despite poor milk prices, historic land values had risen so dramatically over the past decade, farmers and lenders remained secured, perhaps not cash flow positive, but equity in the business remained.  Land values range significantly, like they do here in Ontario, but land with good fertility, flatness, good rainfall with a decent milking platform are selling for $30,000 up to $60,000 per hectare.  Based on a stocking density of about 3 cows/ha, that average 420 cow farm will need 140 ha plus room for young stock, thus costing upwards of between $7 and $8 million dollars (with the NZ dollar and Canadian loonie at par), that is a lot of money!  As such when doing the reverse math of cash flow, nearly 40% of equity is required with returns not more than 3%.  That seems an awful lot like our ridiculed system of supply management with quotas!  It is expected that as milk price returns over the coming year, additional farms under financial distress will come onto the market, but at a rate to not negatively affect overall land values.

Given New Zealand is essentially a captive market, its limited by space, its an island, compounded by looming environmental regulations, price is effectively set by one governing body, in this case a farmer owned, market oriented cooperative looking to be the single largest export driver in the country.

Having spent several weeks traveled and interacting with New Zealand Nuffield Scholars, I was quick to respect and credit their export natured disposition, at the same time as credit their business ability to competing in a global market place.  Every New Zealander I met, stresses that they produce without subsidy! However, I am not sure such credit is warranted based on the long term existing farmers inherent asset values in land.  But, the credit I do give to Kiwi dairy farmers is their ‘go getter mentality’ of the younger generation.  Like other land sensitive countries, the next generation of farmers are milking cows, or at least managing the dairies, and very often leasing or share milking on second and third sites to generate cash flow with long term goals of acquiring ‘the home farm’.  But with farm sizes reaching into the thousands, they truly look at return per hectare and the cattle become ‘sticks in the field’, in other words maximizing the cows as harvesters and converters of grass.

One area of credit worthy of noting is the investment in processing! With billions of dollars being invested in milk processing facilities, the entire value chain is realizing the need for efficient facilities to develop globally competitive products.  However, much of this investment, for the solely owned Kiwi cooperative, is in other countries as part of enhancing their global foot print, given that domestic production will remain flat.  Overall, with dividend payments of about $0.10 per milk sold in the high milk priced times a few years ago to $0.40 recently, the global corporation, remains profitable.

My take away message from New Zealand:

  • Kiwi’s do a great job at producing price competitive milk, exclusively based on its climactic advantage of year round grazing and market organization through a single desk market, Fonterra.
  • Return on investment is modest to low, given the high cost of land.
  • Grocery store prices at $2/litre, domestic consumers are not realizing any value in a large sector.  As one farmer put it, if the Chinese will pay that price, why shouldn’t our local consumers?
  • A wide range of management abilities and fully knowing cost of production remains a challenge, like other farming nations, remains a concern among advisors
  • In the face of economic driven decisions, with governments paying zero dollars for environmental preservation, the natural landscape will reflect the economy, not social value.  For example, too much livestock with its effluent affects the environment, and now the urbanites are insisting on regulation, but in a free market, regulation tends to be relaxed.
  • New Zealand must find a home for 95% of its milk, the higher value market, the better.
  • The push for global markets is coming from New Zealand farmers, those who own shares in Fonterra, who have plants in Australia, Asia and South America; so it may not be about NZ butter in Canada, but rather Fonterra owned milk from Chile reaching the US; which in the long term benefits NZ dairy farmers
  • Exported minded farmers is the only way to survive, as such the second generation of ‘free market’ farmers are coming into the business, therefore this cultural change that is happening around the globe is sure to further influence free market trade.
  • A glimmer of hope did arise, a couple of farmer said, ‘perhaps enough is enough’, meaning free market is fine, but particularly in developing countries, perhaps they have a right to develop local economies too.
  • Every industry person I met, reinforced their message of producing without subsidy, almost to the point it’s implied every other farmer in the world receives wheel barrows full of cash annually and it’s simply ‘not fair’.
  • Lastly, in a meeting with Mike Petersen, Special Agricultural Trade Envoy, who travels the globe promoting free trade of New Zealand dairy, sheep, beef and horticultural crops; the government is very aware of Canada’s new class of milk and the likes of New Zealand and Australia will follow to investigate trade breaches under WTO; its on their radar!

To conclude, the farmers and industry professionals I visited were open, honest and as inquisitive about our system and I was about theirs.  We each have misconceptions about each others market and overall we mutually struggle with consumer relationships, succession planning, labour relations, financial management to name a few; our main difference was simply around feeding the world versus feeding Canada.

 

 

Who owns your market? #NuffieldAg #AustralianHumour

It has been a long day, I’ve spent several hours driving to Toronto and back, productive meetings, turkey barns checked and time well spent with the family, but after too many social media feeds about Mr. Trump or Mr. Bernier, I needed some humour… and asked myself a recurring question, Who owns my market?

Check out Meat and Livestock Australia’s version of owing their market, lamb!  This award winning commercial is clever and touches on food as a uniting factor across cultures, with a twist of Aussie humour… take a look as they seek to ‘own Australia Day’.

In following with my quest of meeting consumer driven needs in the market place, a question around the use of dollars that are invested in marketing and communication, particularly in our supply managed boards is an important factor, what value do we have in promoting our products and how should the dollars be spent? Particularly with generic marketing where it is about informing, educating and ensuring product awareness is prevalent.

As a turkey farmer, I am envious to my dairy peers in the dollars allocated to budgets at a national level, but at the same time, what is the message, the purpose and does it make a difference?  With a niche (and preferably not so niche) protein like Turkey, perhaps we don’t have a vision, or we have lost sight of the goal.  Are we simply a festive protein with duality year round? Or have we even given up this festive space to other meats?  Do we even have an identity?

In meeting with the marketing representative at Woolworth Grocery Retailer in Sydney last month, he recommended I look at the humorous pork advertisements that helped stabilize consumption in the country.  I know most certainly that marketing is much more about product, price, positioning etc., but the funny side of cultural advertisements, at least makes you think about ‘putting pork on your fork’.  I realize its the lighter of side of marketing, and to be fair, I am not sure all Canadians would see the same humour, but seeing how our food is marketed elsewhere is at least worth a watch.

So again, Who owns your market?  I sure hope the answer is that we do, the socially organized, market responsive industry that ultimately meets consumer needs with availability, fair pricing and a knowledge that local farmers are a part of responsibly and competitively growing this food for you!

 

Is a Nuffield Canada Scholarship right for you? The deadline is April 30th! @NuffieldCanada #NuffieldAg

Okay, so truth be known, I applied for my 2016 Nuffield Scholarship on April 30th. Yes, I left it to the last minute to hit send, but it was after two years of following previous scholars on social media, quietly talking to those in my own network, past Canadian scholars and industry mentors, as well as the contemplation that Kathryn and I mulled over.

Is a Nuffield Scholarship right for you? More importantly are you ready for a Nuffield journey?

Here are a few factors to consider?

Is the timing right in your life? (my friends and family are doing a major eye role as they read this, wife, three kids, farm, career?) but what many don’t understand is that I was compelled to think it was okay. It’s a very personal question, but think about this; your Nuffield starts in early 2018 and goes for up to 18 months. As such, think about your life out for nearly 2.5 years from today! Just think about it! Do you have a minimum of 10 weeks, or in many cases 14+ weeks to invest in yourself and the agriculture industry outside of your farm or agriculture based career?

Do you have a meaningful topic? If you are about to invest time and money, are you passionate about your subject matter? Your passion needs to persevere through the interview process, but motivate you to dig deeper and ask the hard questions, at the same time as people questioning your motives. Take my topic for example, examining our supply managed commodities to free market thinkers in the Southern Hemisphere. Or convincing the majority of the world that turkey is a great protein to consume!

Are you resourceful? The easy question is bringing cash to the table. In truth, the Scholarship provides a ticket to the world, but my goal was to maximize the experience which consequently did the same for my budget, with zero regret I might add! The reality is that it costs money to travel and for me, I chose the Global Focus Program which took nearly 7 weeks alone. In addition to travel, it was also about additional farm labour and child care for my family and ensuring the balance of life remains intact.

Are you in a positive space; mind and body, to step up and be a leader within your area of expertise and shoulder responsibility for the extended task at hand? It is exciting ‘winning the award’, but planning and coordination are key to long term success. I can’t even say that I am the expert as I haven’t finished my travel, let alone the report. However, I can attest to the time and challenges which are dedicated to executing a very independent project.

Lastly, are you ready for a journey filled with once in a lifetime experiences, meeting new people and developing new friends, being challenged and challenging others on their agricultural beliefs, and allowing your mind to be opened?  If so than it is not too late to hit SEND!

If you are still curious, check out http://www.Nuffield.ca, http://www.clairdoan.com or follow along @clairdoan

 

Sights, sounds & observations of a Nuffield Scholar on tour in Australia #NuffieldAg #NotEnoughTime

I was fortunate to spend a short week and a half in Australia on the final leg of my Nuffield Canada Scholarship.  Filled with gracious hosts, familiar faces and new industry contacts, my time did not disappoint.  For those that would rather watch versus read my adventures, than this short video is for you!

 

The Influence of Change in Agriculture; My Nuffield Australia Tour #NuffieldAg

The past week was filled with conversation, exploration and laughter as I experienced first hand, Australian hospitality and culture. However the term ‘change’ best relates to my agricultural visits as each business has experienced varying degrees of change within their farm; bare in mind, change is not always bad. 

I began my week with a visit to Wade and Nicky Mann of Roses2Go, a greenhouse flower and fruit farm on the Central Coast. Both Nuffield alumni of 2016 and 2015 respectively, I have long been intrigued by their story of emigrating to Australia 15 years ago in search of a better life for their family after instability in their native Zimbabwe. I envy their perseverance and ability to adapt to change which wasn’t planned, but rather thrust upon them. The conversation we had about their combined enthusiasm of connecting to their consumers and growing a natural crop was a great way to start my week. I left our conversation being challenged to look at my business and to have confidence that sometimes change is difficult but to embrace it and shape your future and not have it determine your destiny. 

Staying on Mangrove Mountain, I was hosted for two days by Bernadette Mortensen and her family. With the sounds of little voices, it felt like home with constant chatter and excitement of a foreigner in the house. Bernadette farms with her parents Joe and Carmen and sister Andrea Galea. Their story of change infiltrates their business in a couple of ways; firstly the family was proactive in switching their large chicken broiler farm to outdoor access, free range production. This diversification was encouraged by their long term poultry processor as a way to differentiate in the market. As Joe pointed out, he could see the necessity to conform in an effort with reasonable scale to participate in a long term grower relationship. 

Given the location of their farm to a high mix of urban and rural neighbours, this ‘green’ way of farming serves as a negative as well; with poultry expansion in mind; Bernadette was declined the opportunity to build several more chicken sheds, instead she harnessed this energy for her 2015 Nuffield research; as such it is evident in the families passion for poultry the limitations they face from their neighbours and local council. It will be interesting to see the future of their farm, be it the avocados recently planted or another enterprise altogether.

Heading west over the Great Divide,  I called upon Rob Peffer in Molong. Rob works in a family corporation marketing eggs from 130,000 laying hens under the Canobolas Eggs brand; a combination cage, floor and aviary type production. Like any direct marketing firm, evolving with consumer needs is important, however for me, the essence of change revolved around the deregulation of the egg sector over 20 years ago. The Peffer family was faced with multiple decisions of the time, including that if developing their own regional brand despite the vast number of farmers who exited the market or chose to contract with a handful of large graders. As Rob spoke, change will continue to be part of their business in this highly competitive market.

Is I travelled south, Luke Mancini his brother Xavier and parents Sam and Liz welcomed me to their farm. As my first true introduction to flood irrigation, I soon realized how critical the system and water security is to the viability of their farm. I was fascinated to hear Sam’s experience as first generation Italian immigrants to the area and how their business evolved. 

The Mancini family business continues to change and adapt for the future. Past decisions to diversify into olives and grapes 20 years ago proved good decisions of the time. But today, as cotton genetics improve, coupled with a strong market, additional acreage of this high intensity crop continues to be a guiding force for now. But any family business wouldn’t be settled until the next generation is integrated into the farm. However as Luke and Sam toured me through the area; the one constant variable that inflicts change is water; it’s availability and consequently its price!

My last farm visit I would like to highlight is that of John and Michelle Keely of Cohunna. Operated as a family farm with their son Harrison, I was impressed at the dairying intensity of Northern Victoria. Like most dairy farms, John toured me through their farms and explained how the farm has grown and evolved with time. Again, water represents about half of the total real estate investment on farm, these channels are truly the ‘river of life’. Fascinated by the water flow, control and manipulation from the Murray River, the farm is fed through these channels which are perhaps more work than milking the cows themselves in finding a balance in supply of feed without the overuse of this limited resource. 

However aside from water, a key challenge faced by Australian dairy farmers is milk price! Unfortunately certain milk companies in Australia made poor decisions, ones that involved mismanagement of milk stocks and others around milk price manipulation. As such, the Keelys recently chose to invest in a new milk processing relationship, one that will provide the management, price and stability that farmers expect. Change is reflected in making decisions to react and better position the farm for the future. 

In addition to changes on farm, I was pleased to spend two days with large agribusiness firms, Baiada and Woolworths, learning about their poultry business. Intrigued about market connectivity, they were able to shed light about market decisions and how they affect farmers like myself.  As I will soon begin to draw conclusions on my own Nuffield report, the process by which decisions are made at this level, have an over riding affect on the success and profitability of the industry. 

Despite my blog pertaining to the more formal learnings of the week, I want to point out that my time, hospitality and social engagement with my hosts was a highlight! I truly appreciate the time and conversation shared, particularly over Easter Weekend.

Leadership: Courage & Responsibility 

Leadership In Action!


What is a ‘Leader’? It’s a word that creates images of awe inspiring people from lives past to current people labelled with such title; but lack any of the qualities we deem valuable or socially responsible. We most certainly do not need to aspire to carry such a title, yet we all bare responsibility to our own leadership in our everyday lives, be it to our children, local community groups and professionally in our career and industry sectors. 

The subject of ‘Leadership’ struck me last weekend at a retirement celebration for my longest serving and highly motivating manager at National Bank; Denis Boudreau retired after 29 years. A man who stood just over five feet, four inches tall with English as a language he learned after turning 40 years old; demanded the full attention of any room with his boisterous personality and desire to be front and centre at every event and meeting. I most certainly don’t exhibit the extroverted characteristic, but rather I truly valued his positive, ‘can do’ attitude. Denis has a passion to excel and motivate others by encouraging his people and working as a constant advocate for their goals and that of creating his own corporate culture. Denis had the courage to always speak up! If it wasn’t for his commitment to bringing National Bank Agriculture to Ontatio, I would not be where I am today. It’s the power of persuasion, persistence, motivation and commitment are the values I take from the years of working with Denis. 

The adage ‘you work for people, not the company’ is alive and well in many workplaces. Certainly in my current role, I encourage sharing our corporate culture and values with my team, but I also know people are directly motivated by their managers and peers, as such this perpetuates responsibility and adds pressure to being the best person everyday, not just a manager, but a leader. At the same time, my team shines with individual leaders who step up each and everyday to not only do their job, but go beyond to coach, advise and influence clients and peers.

But leadership is not only in corporate environments, for me it starts at home, most people call it parenting. This is the most influential role I will ever play in life. I’m fortunate this is a shared role with my wife Kathryn, but the daily actions, large or small never go unnoticed. It is the most rewarding, yet challenging role in life. 

All influencers carry varying responsibility, however when I reflect on the leaders that influence my family’s life; it’s our extended family, selfless skating coaches, teachers and childcare providers to name a few who unknowingly build character in their young followers.

In the current political light; influencers Trudeau, Wynne & Trump may not reflect our personal values, however we allow labels to be applied including that of ‘leader’. However with any title, the power we grant is only as strong as the accountability we expect. But with every great leader, it is about knowing their strengths yet acknowledging other factors require greater support. Too often leaders are expected to be masters of every subject matter. As followers we generate feelings of  reluctance when their weaknesses appear; yet like any team, we should hold hope in their ability to assemble people with complementing skills to support the broader needs of their peers. 

Finally, as I reflect on the notion of leadership and how it has affected my life, I encourage you to reflect on those that impact your life and more importantly the lives you may be impacting, knowingly or not as a leader. Everyday it bares great responsibility yet takes courage to lead, labeled or not!

2017; My Continuing Mission To Connect  Food, Farming & Consumers #NuffieldAg #EatTogether

Okay, so maybe 2017 is only 23 hours old and everyone has professed their goals and positive outlook for the year ahead, but how can we not help but celebrate our blessings of family, friendship, personal, emotional and spiritual wealth we celebrated over the holidays. I debated about a blog post highlighting my last year, and it may come yet, but I was struck by a very simple commercial tonight which I wanted to share:

#EatTogether Video to Watch – Connecting Food & You

As much as we all journey on individual roads, I have most enjoyed the personal opportunity to share with you some of the people, places and stories I’ve encountered along the way of my Nuffield Scholarship learning about food and our farming systems.

However, I have been left with many unanswered questions about how and why food is consumed and the relationships, or lack thereof we have with it.

I’m not suggesting you all become ‘foodies’ and radicalize your viewpoints to extremist demands like veganism, but rather consider where your food comes from, who was involved from farm to fork at the same time as reflect on the needs of nourishment, quality and food wastage.

I look to complete my studies and bring back my conclusions on that support a dynamic poultry sector in Canada, but what I know now, is that people continue to lose focus and interest on food, it’s safety and the diverse range of food production that comes right here from Canada for our every changing and culturally diverse country. So to 2017, I look forward to talking food and what it means to you!

Clair Doan,
http://www.ClairDoan.com
@clairdoan

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