Saturday, May 31, 2014

Quick Video Of The Mobile Cowshed

A quick video of the mobile cowshed & a look inside the milk processing room.

Friday, May 30, 2014

The Reasoning Behind My Micro Dairy Business

In the next 2 months, I'll begin milking a small herd of 15 cows. I'll sell the milk direct to the public. I'll milk my herd on leased lifestyle blocks, using my mobile cowshed.

In my last blog post I outlined 5 points that I wanted to achieve with my new business.
  • Create a truly environmentally sustainable dairy business
  • Create farming opportunities for young people that also provided a great lifestyle
  • Keep control of the value chain
  • Offer real unaltered whole milk to the public
  • Concentrate on building a brand rather than owning land
It's taken a few years of thinking about the issues and I wanted to briefly outline how I have come to settle on my current system.

Question Everything

I started off by questioning every aspect of traditional dairy farming.
I asked:
Why do we do what we currently do? 
Why do we need irrigated land? 
Why do we use ryegrass & clover pastures? 
Why do we milk twice a day? 
Why do we need a big concrete cowshed? 
Do we really need laneways? 
Why are their less small herds around now?

I investigated dairy farm cost structures and profitability.
I asked why do farmers supply dairy companies like Fonterra or Synlait? 
How do people progress in the dairy industry? 
How much money do dairy farmers make?

I questioned what we know about the environmental aspect of farming.
How exactly are water ways affected by farming?
How do nitrates work? 
Where do the nitrates come from? 
Why do we deal with effluent the way we do now? 
What is Phosphate & how does effect our effect the environment?

Environmental System

I started with a blank sheet of paper. The first priority was to design an environmentally sound dairy system. I’d worry about how to make it profitable later.

The research tells us that nitrates are the greatest pollutant caused by dairy farming in New Zealand. Turns out that the cows urine patch is the biggest contributor to nitrate leaching by a long shot. I learnt that the wetter the soil is, the more leaching occurred. Large amounts of nitrate are leached over the winter months. I discovered that plant root systems are the greatest absorbers of nitrates.

I thought, if we forget everything we know about farming and just designed a system that would leach no nitrate.

What would that farm look like?

We’d want to reduce the amount of urine on our paddocks, which means we want a lower stocking rate. We don’t want our cows on wet soils. So wintering cows on crops on a small area of land (as is the usual practice) is not going to work for us. We also want to use un-irrigated land because it leaches much less nitrate. We want plants/crops with deep roots to absorb the nitrate, which means ryegrass & clover pastures probably won’t work for us.

All these points put together basically mean, we would leach very little nitrogen. But more land is needed & that land will produce less because it’s not irrigated. Our wintering & feed costs will be a lot higher too.

It’s pretty clear that this farming system would not work financially, if we supplied Fonterra or another dairy company, we simply would not be profitable.

Make the farm fit around my desired lifestyle 

With the environmental aspects sorted, the second priority was how could we design a dairy farming system that I wanted to work in and that suited the lifestyle I wanted to lead. I assumed that if I could achieve this goal, then it would also be attractive to the best of today’s young people.

There are lots of brilliant young farmers out there, but we need more. Many great people are choosing other occupations and agriculture has to compete for good people.

So again I questioned every aspect of the daily duties on the farm.
Why do we start milking so early in the morning? 
Why do we milk twice a day? 
What activities take the most time?

Milking the cows took the most time and you can easily spend over an hour herding cows to the cowshed each milking.

So milking once a day milking is an attractive option. The research shows that most cows milked once a day were producing 19% less milk, but had less animal health & feed costs. Trading 19% less milk for about 40% less work still feels like a winning situation to me.

But the main attraction to once a day milking, is that dropping the afternoon milking gives you much more options for giving staff (& me) more time off. It allows much greater flexibility on when the jobs get done.

While milking once a day may help with a better lifestyle, the other half of the solution to attracting young people to farming is financial opportunities. This system had to be achievable and in reach of young (& cash poor) people.

Basically it needs to be cheap to set up.

Attainable to young people

I concluded that it needs to be small scale system. It's easier to find the money to buy 20 cows than 200 cows. Also when you have a small herd the amount of equipment needed is greatly reduced.

Land is by far the biggest expense when setting up a farm. The land required for a small 20 cow operation would cost at least $1,000,000. Which is hardly in reach of your average young person.

My solution is to lease land. But you are hardly going to build a small cowshed on land you don’t own. This is where the mobile system becomes important. If I could build a fully contained cowshed that is totally mobile, then milking off leased land becomes an option.

My research into dairy farming financials showed that interest paid on land was one of the biggest expenses on a farm. By leasing land rather than buying it, I could save a lot of money. Which could offset the extra costs & lower production caused by our no nitrate leaching measures.

As I thought about this more, the mobile system looked like it could save a lot of time on farm as well. For instance, I would not have to spend time herding the cows to the cowshed as I’ll milk the cows in the paddock. No concrete yard to clean, which saves time & water. No need for a conventional effluent system, which is one less cost. No need for lane ways or permanent fencing either.

At this point I had a rough idea of how I could farm dairy cows and leach very little nitrate. I worked out that a mobile cowshed could be achieved & the mobile system made it possible to set up a small scale herd on leased land for a relatively low amount of money.

Who will buy the milk?

Now it was time to ask the question, who will buy my milk & how can we make it financially viable?

From my research, it was clear that there are a number of people who would love to buy a sustainable or eco brand of milk. This is a brand that can promise its farming practises do not adversely affect the environment. 

The public are aware of the environmental impacts that dairy farming has on our water ways & a good number of people say they would support a brand that stood for more eco dairy farming practices.

There is also a growing number of people who are concerned about what is happening to our food in these modern times. The whole food movement is growing.

There are clearly people would buy my milk if they had the opportunity.

Could I make it pay though? 

The following thoughts were going through my head; 

All the trends are for farms to get bigger and have greater scale & I’m proposing going smaller!

On farm costs have been increasing which is putting pressure on farm profitability. I’m proposing even higher costs combined with production drops in order to meet my self imposed environmental & lifestyle standards.

A trip to the supermarket showed that 1 litre of Organic milk was retailing for $3.40, 1 litre of Anchor or Meadow fresh blue top sells for $2.45.

If I could receive $2.50/ litre for my milk, then I could make it work financially. I worked out that if I could keep the money that the farmer & the processor get, then I could break even. 

But breaking even is not a very sustainable goal. I would also need to retain the 30-40% margin the the retailer receives in order to make the business viable.

So, I would need to be the farmer, the processor, the delivery man & the retailer in order to be profitable.

In conclusion:

I've just described, very simply the thought process that occurred over a couple of years that has brought me to where I am now.

I hope that I have found a way for us to milk cows sustainably that is attractive & within reach of young people & profitable too.

We’ll see if it works. Stay tuned.

Friday, May 9, 2014

Why Bother With A Mobile Milking System?

Well, I've finally got my act together and started building my mobile cowshed.

The question I get asked a lot is, why? 

There are plenty of opportunities to go dairy farming. I could go lower order sharemilking or contract milking. Those two options don’t require a huge amount of money & I've got the experience to do a good job of it. 

But there are certain aspects of the dairy industry that don’t fit with me. I'm not saying that these aspects are wrong. But for me, I want something different.

So I've spent the last few years thinking about how I could create the perfect farming business that suited my family and my beliefs.

So I’d like to explain what my 5 issues are. Once people understand the 5 issues it becomes a bit clearer as to why I'm building a milk business based on a mobile cowshed.

Real milk
When I left the farm & moved to town, I was surprised by how different the supermarket milk was compared to the milk I got from the vat every morning, while living on the farm. Any dairy farmer will tell you that the milk we buy in the super markets is quite different from the milk that comes straight from the cow.

Virtually all milk brands in New Zealand put their milk through a number of processes. The result is milk that isn't really like the real thing.

There has been a lot of demand from the public for raw milk. It’s common to hear people rave about how great raw milk tastes etc. 

But the difference in the milk is not because it's raw, but because its real milk that has not being heavily processed.

It’s crazy that New Zealand produces so much milk, but it’s so hard for kiwis to buy real milk.

So I’ll give people the opportunity to buy milk straight from the cow. I’m going to simply milk our cows, gently pasteurise the milk and then deliver it to the public. 

Brand is better than land
You can generalise by saying the farming business model in New Zealand is to, borrow heaps of money & buy a farm. 

You then need to farm it like crazy to pay the interest bill. Farmers then make a small return of about 4% of asset per year. But that doesn’t matter because the land always seems to increase in value, and the capital gain that is made on the land is tax free.

This is actually very similar to what urban New Zealanders do too, except they do it with their home. 

The goal of many driven young farmers is to own their own farm. 

I take a different view; I believe owning a brand is just as good or even better than owning land. 

If we look at some well-known companies we find that the value of the tangible assets, like land, plant & equipment is only a fraction of the total value of the company. The intangible assets or the goodwill of these companies are worth more than the actual assets that you can touch.

The “McDonalds” brand accounts for 70% of the total value of the company. This is despite the fact McDonalds owns some of the best commercial real estate in the world. 

The Coca cola brand is said to account for 51% of the company’s value. This is despite the fact that the company owns many other drink businesses too.

So I'm not really interested in owning the land that our cows graze. There is a limit to the amount of production a piece of land can produce, but there is no limit to how far you can grow a brand.

I feel that New Zealand agribusiness doesn't concentrate on building the consumer brands enough. We are very good at producing commodities. But the consumer brands are where the action is, in my opinion anyway.

My focus is on the building a consumer brand.

Sustainable farming
Rightly or wrongly, farmers are copping a fair bit of criticism about the environmental impact of modern intensive farming systems, especially dairy farmers.

I've decided that environmental sustainability is imperative, both on farm and off farm. 

These days, just about every farmer will say that caring for the environment is very important. It seems that “environmental sustainability” is a relative term used by everybody regardless of their farming practices.

I've looked at the science around water quality & nutrient leaching. It appears that the science is quite clear. We know what factors cause environmental damage. 

Unfortunately it can be quite difficult for a traditional dairy farm to change their practices to meet the science & stay profitable at the same time.

We've designed our farming system so that it is adaptable & fits around what the science tells us about nutrient leaching & effluent run-off.

The farming system we employ, has to be pure. That means our goal is zero nutrient leaching, zero waste & eventually carbon neutral.

Now, that’s a ballsy claim to make! 

To be clear, I'm not saying we will achieve those goals from the start, but that is our goal. 

We’re prepared to get radical & funky with the way we farm to ensure we get there. 

Value chain control
If we look around the world we see farmers who have lost control of their product.

Many dairy farmers in the UK have found themselves at the mercy of the milk processors & the major supermarkets. 

The supermarkets have all the power and they use their power to drive down the price that the farmers receive.

Our friends in the Australian dairy industry have found themselves bearing the brunt of the supermarkets using milk as a loss leader. Again the farmers find that they have little power.

Recently in New Zealand we have seen many suppliers complain about the business practices of our supermarkets, which happen to be owned by the same Australian supermarkets, which (quite by coincidence) are being run by the same bunch of Poms who used to run the UK supermarkets. 

So, I want nothing to do with supermarkets. (Actually, I don't think the supermarkets would want anything to do with me either.) 

It’s easy to say “we’re going to take control of our product”. It’s quite another thing to actually do it. 

The easy thing to do is to sell our milk via a retailer. They have the customers and it’s easy to get the volume that I require to be profitable. But in the long term, I would find myself dependent on the retailers for my distribution.

I'm going to spend a little more time and effort now & get set up to sell our milk direct to the customer.

But in order to produce a truly sustainable product with a small scale herd, I need to know that I'm not going to get screwed down by a retailer.

Opportunity & Lifestyle
This section comes out of the “I want my cake & I want to eat it too” department.

I want a great lifestyle where I can spend quality time with my kids & wife. I don’t want to be tied to the cows and I don’t want to be running around in a frantic rush, trying to get all the jobs done in the day. 

I also want to earn a good living and to top it all off, I don’t have much money to spend setting up this business. 

So it has to be cheap to set up.

Some will say I'm an unrealistic dreamer to think i can have all those things together. Well maybe I am, but I'm going to give it a crack.

If this works, there is no reason why young eco conscious, entrepreneurial men & woman from around New Zealand, can’t set up their own milk business.

When I was 25 I found an investor, who helped me go into business for my self.  There’s so many good young people out there who don’t think farming is an option for them. I want to get young people into agriculture. Many young people give dairy farming a go but decide to leave the industry & do something else (like myself). I want to see if we can create opportunities for young people to start their own farming businesses that provide the lifestyle we all want.

So those are this issues that have been on my mind for the past few years.

In my next post I'll explain how the mobile milking business will work and why it addresses these 5 points.