July 15, 2024 • 36 mins
Join us as we explore the intersection between farm efficiency and reducing emissions with Malcolm Ellis, Fonterra's Strategic Advisor. Malcolm shares the difference between emissions intensity and absolute emissions and discusses Fonterra's strategic initiatives to support farmers in making impactful changes.
The team balances animal efficiency and environmental sustainability by examining the contrasts in productivity and efficiency, delving into actionable strategies to enhance herd quality without reducing stocking rates. Key factors like reproductive performance, feed efficiency, and emissions intensity take centre stage, providing a roadmap for farmers to boost productivity while lowering environmental impact.
The conversation also highlights the power of collaboration within the dairy sector. From rural professionals to regulatory bodies, we discuss the collective efforts needed to overcome challenges and optimize feed and pasture utilization. Reflecting on the evolution of the dairy industry, Malcolm sheds light on the wealth of data available to farmers and how leveraging new technologies is crucial for future success.
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Episode Transcript
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Speaker 2 (00:04):
G'day and welcome to Feed for Thought, a regular
podcast from Pioneer coveringeverything from farm systems to
crops and products, and much,much more.
Speaker 3 (00:15):
Welcome back to Feed for Thought, your podcast for
knowledge, hungry farmers, rps,I should say, and anyone
actually involved in theindustry, because, as I alluded
to in our last podcast, we'regoing global eh Wade.
Yeah, we are.
Speaker 1 (00:27):
Yeah, we are, we're trying.
Speaker 3 (00:29):
We're trying, as you can hear.
I've got me old mate Wade Bellwith me and we're leveraging off
the last conversation we had,where Charlotte Rutherford from
Terra talked about the why whenit comes to emissions, and so
we've got the man who's going totell us the how.
And, wade, you enlisted thisman.
(00:49):
I heard he was a reasonablerugby player, but we brought him
in for some other skills hereyeah, no, too true actually,
malcolm.
Speaker 1 (00:56):
Welcome, welcome along, it's great to have you.
Have you here, but interestingstory about Malcolm Ellis.
So Malcolm was my trainer whenI left high school.
Dairy farm trainee course Ithink it was Correct At the
Polytech, just not far down theroad from here.
Speaker 3 (01:14):
That's interesting.
He taught me how to fence and alot of practical skills.
Speaker 2 (01:18):
To be honest, it was the milk in the morning teach by
day and milk at night.
A bit of club rugby on aSaturday and the rest of the
farm stuff on a Sunday.
But I remember you well, wade.
I think I may have also givenyou the good oil to get off to
university and get yourself adegree.
Speaker 1 (01:32):
Yeah, absolutely, I was thinking you don't actually
look that old Malcolm, and whatI've been trying to do this
morning is process.
Speaker 3 (01:39):
I wonder how old he was when he was my trainer, I
would have picked you to be hissenior, wade.
Speaker 1 (01:46):
Well, I've got a lot less hair.
Well, that's a good start, yeah, but anyway, welcome, malcolm.
Good to be here.
Thanks, guys.
Speaker 3 (01:52):
So yeah, we are going to delve into the why, the how.
Sorry on the back of the why,but can you tell us a little bit
about yourself, your role nowwith Fonterra, but a little bit
about farming background,because that's where you started
yeah, yeah, very much so.
Speaker 2 (02:05):
So, you know, farming's been a big part of my
life, my family's life, both myown family and, and, of course,
um, my parents and beyond,because, um, you know, I'm proud
to describe myself as a fourthgeneration farmer.
Uh, in 2011, we moved off thefarm and I went to a role in the
breeding scheme at lic, spentfive years in that role and then
the the following seven as GMin New Zealand markets, and then
(02:26):
finished up my time a role thatI really enjoyed and an
organisation I really enjoyedwith LIC in December and then
started with Fonterra inFebruary.
Speaker 1 (02:35):
So, yeah, and you've got a pretty talented young
fifth generation farmer comingthrough too.
We should recognise the fact.
Speaker 2 (02:43):
Just won the national award for the trainee, yeah no,
it was a really cool momentactually, to be honest.
As a family, we were down, andmy parents were down as well,
and we were down in Queenstownfor the industry awards in
Queenstown recently and Kerwinwon the dairy trainee of the
year, which is a really coolmoment.
Look, I've long been a massivefan of that competition.
I think it does a great job oflifting up the real intent and
(03:05):
desire of young people, and soI've sat there a lot of times,
to be honest, with LAC being amajor sponsor of the awards for
a long time, and so I found it areally cool moment to sit there
and witness Kew and winningthat award.
Speaker 3 (03:21):
Yeah, and so now your role is strategic lead at
Fonterra.
Speaker 2 (03:26):
Sorry, in a strategy advisory role.
Yep, so yeah, look, at the endof the day, I'm sort of involved
in a number of different workstreams, but you know the topic
today, obviously, and they'resort of probably occupying a
good 80% of my time at themoment.
Is this emissions intensitypiece connected to the
announcement that was made thatI thought you know?
(03:46):
Charlotte did a great job ofdescribing the kind of why
around emissions intensity as atarget.
So yeah, I'm spending a gooddeal of time in there, and then
some other projects that I'mcontributing to as well, nice.
Speaker 1 (04:00):
So just before we delve into the detail of the
podcast, you've talked thereabout emissions intensity.
Farmers will have also heardabout absolute emissions and
they're kind of two verydifferent.
Do you want to just clarify thedistinction between the two,
because that will launch,obviously, where we go next?
Speaker 2 (04:18):
Yeah, and I think look, it'll be a pleasure to and
I, unashamedly, will give akind of a farmer hat on
definition of the two from myperspective, because that helps
a way to knife the door.
Speaker 1 (04:28):
It wasn't just about you guys.
Speaker 2 (04:30):
But you know, emissions intensity is just that
, when you think about a unit ofproduct, whether it be a ton of
dairy product or of whicheverthe SKU might be reality, the
customer is very interested inthe profile or the intensity
profile of that unit ofproduction.
(04:51):
And so when we focus onemissions intensity, we get to
focus on as we'll talk about alot in this podcast around some
of those efficiencyopportunities on farm.
So you know I'm a big fan ofthat focus.
Absolute reduction, on theother hand, is where you stand
back and say you know lots oftalk about potentially
electrifying the tanker fleet,how we're going to power up the
(05:13):
milk powder plants, but inreality they're all great
initiatives, make no mistake,but in reality they only make up
about 10% of the emissionsprofile, which leaves 90% of it
in the paddock.
And then, once you're in thatsituation as a sector, then you
are there for the taking as tojust essentially absolute
reducing or absolute reductionof those emissions.
(05:35):
How do you do that?
Take the cows out and hey, look, at the end of the day, the
main reason I guess I'm verynervous about that approach is
if you think globally, we end upthen in a situation where
someone else on the other sideof the world picks up that
production, who can't do it asefficiently as we can?
you know, and that doesn't makeany sense.
(05:57):
So, yeah, a lot of.
And I guess the other thingI'll just quickly add to that is
that you know I pride myself onbeing class mostly full when it
comes to all things dairy.
But if we'd had thisconversation four or five years
ago, I was genuinely concernedthat as a sector, we were
literally waiting for absolutereduction to come down the line
(06:18):
and we'd be regulated as to howwe farm and stocking rate, count
numbers and so on, and thatreally worried me, whereas now,
with a focus on emissionsintensity, we get to go after
on-farm efficiency opportunity,and that's a very, very
different narrative.
Speaker 3 (06:33):
Yeah.
And that's where we play, Isuppose, or want to play as well
.
So where is some of thatlow-hanging fruit then, I
suppose, with efficiencies?
Speaker 2 (06:42):
Yeah.
So I think the first thing weshould be very clear on when we
talk about the efficiencyopportunity on farm, with a
focus around emissions intensity, is that we need to be really
respectful of the fact thatfarmers have been going after
efficiency for generations, likeyou know we talk about
efficiency evolution, because wedon't want to be seen as
(07:03):
Fonterra, as a milk processorcoming out to farmer
shareholders and saying, hey,we've got a really cool idea.
Why don't we go after farmefficiency?
I mean, essentially we've beendoing it for years, but we also
need to own the fact that for 20odd consecutive years the
industry grew by 100,000 cows ayear.
We went from 2.9 to 3 millionto sort of just over 5, into
(07:24):
where we ultimately got to inthe cow peak of 2015.
And as a result of that kind ofcows are cow mentality we've
kind of opened up a really biggap in reproductive performance.
We've opened up a really biggap in cow quality and cow
efficiency within a herd.
And I think also there was amoment in time where a lot of
the business model was based oncapital gain and aspiration in
(07:46):
that area, and so we werevaluing farms on their
productive output, and so did wemake positive steps from
pasture utilization, some ofthose pasture principles.
So I think there's been somesignificant opportunity created
from the cow growth years.
What we've got to be reallycareful of is that it's not my
(08:09):
generation, jodie and I'sgeneration that got the
opportunity to milk theopportunities of cow growth, and
then Kirwan and his generationhave to pay the price, coming
down the other side.
Speaker 1 (08:20):
So from an animal efficiency point of view, and
linking that through to youryoung fella Kirwan coming
through, you know, like, how doyou see those themes coming
together?
You know, like, what are theopportunities?
If it's not in, just, hey look,I'll get into shear milking and
grow my herd.
You know, grow the numbers.
You know I'm going to be a bitmore selective now about animals
that I use to achieve theoutcomes that I'm after.
(08:40):
What are the opportunitiesthere?
Like you, is this just cuttingcows out of the, the bottom of
the herd still, or what is itlooking?
Speaker 2 (08:47):
like.
I mean, I think the thing weneed to be really mindful of as
well is that going after thisemissions intensity targets not
all about cow quality, cowefficiency, it's not all about
repro, it's not all about um,feed efficiency, effluent
management, animal health.
In reality, if we think aboutthose as levers, it's a case of
kind of pulling those leversoptimally across the board.
(09:09):
What I will say, though andcertainly from my background,
I'm pretty passionate about this, obviously for my time that I
was at LIC is that it is anabsolute realisation now that
when we look at the gap betweentop and bottom quartile cows in
the industry and as part of theannouncement of emissions target
(09:32):
in November last year, we didjust that we took a real deep
look at 600-odd thousand cowsthat are herd tested, minder
subscribed, that supply FonterraFarms, and when you look at the
top quartile and the bottomquartile of those 600-odd
thousand cows, there's a 44%difference in productivity one
(09:52):
quarter to the next, to the onetop to bottom.
And there's a 42% difference inproduction efficiency, which is,
you know, kilograms of milksolids per kilogram of live
weight.
What was really interesting isthat then the smart people in
the environment team at Fonterrathen extrapolated that one step
further and said can we startto model out what the methane
(10:13):
CO2 equivalents per kilogram ofmilk solids is between that top
and bottom quartile?
The difference was just over16%, and so I'm kind of looking
at that and thinking, actuallywe kind of need to get on that.
One thing I have learned overtime is that in any race,
someone's got to win, someone'sgot to lose.
In other words, there's alwaysgoing to be a range in cow
(10:33):
quality within a given herd.
But the gap's got wide.
Yeah, you know, the gap's gotreally wide, and I guess what
we're calling for here is reallytrying to change the messaging,
change the narrative aroundthings like cow quality and cow
efficiency and sort of overlaythis focus of emissions
intensity.
Yeah, because clearly, uh, youknow, a cow that produces better
(10:56):
than a herd mate, um, arguablyeats more feed, but not 44% more
feed guys, let's be fair, sothere's an efficiency
opportunity there, right?
No doubt about it.
Speaker 3 (11:08):
And so what's the messaging like?
Because if you say you're inthe upper quartile, how do you
communicate to them that some ofthe stuff Fonterra is doing is
delivering for them, versusactually just lifting up the
bottom quartile?
Speaker 2 (11:22):
Yeah, maybe I'll use Repro as an example to answer
that in a moment.
But just to reiterate, based onyour question, think about that
herd improvement example I justgave you that just didn't take
600 odd thousand cows and sortof put all the system five cows
in one group and the system onesin another group.
It basically took, you know, ifyou had a farm that had 400
48-year-old cows, 100 went intoeach quartile.
(11:44):
So it was a very, very purecomparison which actually showed
absolute difference between,you know, good and average cows.
But if you think about, say,repro, we've been kind of stuck
with the reproductive key KPIsof, you know, 66%, 67%, six-week
(12:05):
in calf rate.
Geez, wade.
You know I've talked about thisbefore for as long as I can kind
of remember.
I think we started talking aboutthe KPI in 2008 and I think
we've been at sort of 66, 67 forabout the last eight or 10
years, and then that has theflow-on effect of a not-in-calf
rate of about 16 or 17%.
So you know, clearly, if you'vegot a dairy cow and you've got
(12:26):
more of them calving earlier,spending more time lactating
than dry, there is an emissionsintensity piece sitting right
there.
But where I'm getting to withthis matter is that, if I think
repro, I looked at thosenational stats and thought for a
long time that the average andlower quartile of reproductive
performance we're going to haveto do a lot of heavy lifting,
(12:47):
but what we've seen in this last12 months is a real healthy
lift in the national repro statsfrom spring of 2023.
And what's really encouragingis the top quartile have also
made a material gain.
So you know, I think we canlook at some of these situations
and some of these opportunitiesfor efficiency on farm and
(13:08):
realise that some of the leadingfarmers, some of the most
established and competentpasture managers and indeed farm
operators you know there'sstill a bit of headroom for them
too.
Speaker 1 (13:19):
So if you link those two things together though, so
how do you get?
So?
I'll take my 600 cow farm, andI've got this large differential
between the top quartile andthe bottom quartile.
I've got an empty rate of 16%,I've got a replacement rate of
22.
How am I going to have enoughheadroom to chop enough animals
out without reducing my stockingrate and achieve those kind of
(13:41):
efficiency gains in thetimeframe that we're kind of
tasked with here?
Speaker 2 (13:44):
yeah, so therein lies , um, a little bit of the
description as to why the gaphas opened up.
Um, and and look, I want to bereally clear that the type of
cows we milk these days are very, very good, like, there's no
doubt about it.
Like I, I think about the sortof cows I was brought up with,
uh, all those years ago, and Ithink about the sort of cows I
was brought up with all thoseyears ago and I think about the
quality of a quality Kiwi cowthese days and how she can
(14:05):
convert, you know, feed to milk.
But essentially, what'shappened is that, you know, with
the cow growth years, every cowI mean you know budget cows had
a.
They were like, they were acommodity mate.
They had value year in, yearout because of the cow growth.
But also, when we were grapplingwith 16 or 17%, not in calf
rate, and maybe a replacementrate of 21, 22, 23%, there
(14:28):
wasn't much discretionaryculling going on.
Eh, so those poor performerswere staying.
Well, I guess, while you'reidentifying, go back to your
example weight of a 600 cow farm.
You look at your bottom 25% ofthem.
You know 150 odd cows.
The advice is not to get rid ofthose cows tomorrow because
you're going to produce less andmake less if you're milking 25%
less cows.
But what we can do immediatelyis stop trusting those poor
(14:52):
quality cows.
With the next generation we'rebreeding far too many
replacements for the future ofherds and for the future of
national herds out of poorquality cows.
That's one of the keyobservations.
Speaker 1 (15:04):
Wade, so selective mating 100% Bringing in the sex.
You know all those othertechnologies that are currently
available.
Speaker 2 (15:10):
Here's an observation for you Like if you look at you
know I quite enjoy the numbersand when I look at the 3.7 odd
million cows that supplyFonterra as a milk processor and
if I look at the 90 odd percentof those, 91 odd percent of
those that are mindersubscribing and just use that as
a big data set, if I look atthe top 10% of those cows
(15:32):
genetically and I look at thebottom 10%, there's a 300 BW
difference between top andbottom.
So half mum, half dad.
If we're using the likes of sexsemen to get to prioritise
replacements out of that goodcow, then that's at the expense
of not requiring a calf at theother end.
That can potentially be a dairybeef calf or something similar.
(15:53):
You know these are not newprinciples.
You know the desire to improvereproductive performance is not
a new principle.
The desire to optimise pastureutilisation is not a new
principle.
The desire to optimize pastutilization is not a new
principle.
But I guess what we're trying todo is to really lift the energy
and create the narrative ofemissions intensity being a
(16:15):
reason and a why to go aftersome of these things, because my
view is quite clear that wehave a window of opportunity to
focus on shifting the bar inemissions intensity.
If we don't achieve in thatarea, then I'm quite mindful of
the fact that we will end upwith absolute reduction.
(16:36):
Yeah, so that's why I thinkthere's a very clear why.
But let's be really clear thatwhen I have conversations with
farmers around absolutereduction and emissions
intensity it is actuallyconveniently an and not an or
Like.
We need to acknowledge thatthere is quite a bit of
alternative land use challengegoing on.
(16:58):
We see cow numbers peaked atjust over 5 million.
Dairy stats last year say 4.67.
So we're getting a layer ofabsolute reduction anyway, and
when we achieve emissionsintensity we get another layer
of absolute reduction.
I guess all I'm really strongon now is let's make sure we're
(17:19):
primarily focused on emissionsintensity and allow the absolute
reduction to self-manage,because the other way around,
you know, I think I'd besuggesting Kew and probably
would have been best with atrade before he went out on the
farm.
Yeah, you know.
Speaker 3 (17:32):
How are you going about extending this information
and how is it being received byfarmers, I suppose, given that
I know you've been out on theroad of late- what are some of
the things that you guys andyour team are doing?
Speaker 1 (17:45):
Oh, answering the call from good people like
yourselves, he did pick up thecall.
Yeah, yeah, yeah.
Speaker 2 (17:49):
But hey, look, our primary focus.
You're right, let's use theexample of us just completing a
roadshow in the last couple ofweeks.
So our primary focus there is,rightfully, our
farmer-sheholders.
And I knew I would, but I wasblown away by how much I learned
over those couple of weeksleading that presentation in the
North Island, just constantlygetting the feedback from
farmers recognising similarquestions, if not the same
(18:12):
questions, being asked at thesame stage of the presentation,
whether or not you're inStratford or Reparoa, you know,
as a moment of learning.
You know I've been involved inthis industry for all my working
life and I've seen some reallyuseful, positive collaboration
in the sector.
But it's got to get a lotbetter, you know.
And so we've had quite a bigfocus around engaging with rural
professionals because you know,if I think of Jodie and I's own
(18:35):
farm business, like we areindebted to the support of rural
professionals for a long timethere we had the same banker,
same accountant, same solicitorfor 20 years, each kind of style
.
These are key people to ourbusiness.
So we want to have a primaryfocus on engaging with farmers,
but we also want to be very,very engaged with rural
professionals and drive anunprecedented level of sector
(18:58):
collaboration, because you knowI'm of the view and being quoted
on this, don't mind sharing ithere.
But I think the emissionsintensity focus is an
intergenerational moment fordairy in New Zealand, because I
just know what the outcome wouldlook like if we were allowing
ourselves to accept theregulation as it comes down the
(19:19):
line via absolute reduction.
So you know, our message torural professionals is very,
very clear that we're not tryingto get ahead of ourselves as a
milk processor.
We want to sit right alongsideyou.
We have massive respect for thetrusted relationship that you
have with farmers.
I think about vets, I thinkabout accountants, I think about
bankers, I think about DairyNZ,I think about feed companies.
(19:40):
Yeah, this is the full courtpress moment.
Speaker 3 (19:43):
Yeah.
Speaker 2 (19:43):
This isn't Fonterra's moment.
This is New Zealand Dairy'smoment.
Speaker 1 (19:47):
So, taking some of the kind of how a little bit
further, we've talked a bitabout some of the animal
efficiencies.
What other areas arepotentially in the crosshairs or
in focus for farmers to makesome gains?
Speaker 2 (19:59):
Yeah.
So look, I have long pridedmyself of being a kind of a cow
and grass farmer, so thanks fortaking us to the feed site.
Speaker 1 (20:06):
We're going to hold on to that.
Thank that, we'll be easy onthem.
I was waiting for you to lobthis in.
Speaker 2 (20:12):
Should I go with cow and feed farmer?
Yeah, but hey, my point here isthat when you've got a
respectable number in front ofthe milk price, it makes good
sense to supplement.
I want to talk about feed andpasture utilization.
Look, I think when you've got arespectable number in front of
the milk price and you've gotcapable cows, it makes really
(20:33):
good sense to supplement thosecows.
In times of deficit, of feeddeficit, it makes a heck of a
lot of sense what I worry aboutover the last 10 to 15 years if
I could state this because Ihave great respect for farmers
in the full context but I thinkwe need to own the fact that
(20:54):
there's a hell of a lot ofsubstitution going on.
Like I say, there is good cointo be made supplementing good
quality cows at times of genuinefeed deficit.
But it is marginally profitableif you've already paid to grow
the pasture and then we'readding a feed supplement as well
.
You know when it's a substitute.
(21:15):
And so I just think there's amoment in time here now where we
have to dust off some of thatjust outstanding research that
was done in the 80s and 90s,when I dig that out and have a
look back through those Bryantdays and Kevin McDonald days,
and I mean geez, you can evenbring the McMeekin textbooks
into it if you want.
The reality is those principlesare very, very sound, and so I
(21:38):
think we need to get back toreally really focusing on the
fact that there is a very strongvalue proposition, as I say
again, to supplement cows ingenuine times of energy deficit.
But I worry that there's toomuch feed going in on farm where
there is, at times of the yearwhen there is pasture available,
(21:59):
yeah, so feed wastage isobvious Right feed, right time
yeah.
And I think there is a genuineneed for us to get back to.
You know, for a long time weidentified feed and contemplated
feed options on two things inmy view right.
One of them was kind ofavailability and price and the
other one was the sort of milkproduction response you might
(22:20):
get.
So, you know, was it cents perkilogram of dry matter or was it
, you know, megajoulemetabolizable energy?
We've actually got to startthinking about what the
emissions profile of that feedlooks like, and so we are
starting to see farmersrealising that actually some of
those home-grown feed optionsactually have quite a different
(22:40):
balance to the emissions profilefor the farm.
And I actually think we've gotto be mature enough to have that
conversation.
Because this has been actuallyquite a big learning, guys, for
me since I've been at Fonterra,when I look through the raft of
different feed options farmersconsider and when I look at them
sort of based on a you know,almost using pasture as a
(23:02):
baseline.
Not all feeds have the sameemissions profile.
Speaker 3 (23:06):
Let's be very, very clear.
Speaker 2 (23:08):
And so you know, and again, so you know, uh, and
again you start thinking aboutefficiency, you start thinking
about emissions intensity.
You know if you're going togrow a crop mays grow a really
good crop.
Yeah, because if you'redividing a high yield by the
fixed cost, yeah, and theemissions profile, uh, that's
very different than if you wereto slice off four or five ton of
of yield.
Speaker 1 (23:26):
It's a different number yeah, yeah, yeah, no 100,
so pasture crop husbandry isanother fundamental yeah, yeah,
yeah yeah with the um.
You know the profile of thefeeds and I'm sure it was a
graph that came from fromfontera.
But, you know, looked at theemissions profile, the intensity
profile across the systems, oneof the things that stood out to
(23:48):
me was it was relativelysimilar across all the systems.
So what's your explanation ofthat?
Speaker 2 (23:55):
Good, on you for bringing that up.
Good on you for bringing that up, because that's a conversation
we had a lot on the roadshow andI'm constantly having with
farmers at the moment.
So if we think about System 1,v, 5, just for a moment, I'm not
drawing a comparison, I'm justthinking about the narrative
from farmers.
Right, you've got system onefarmers that are going geez.
What's this going to look likefor me?
Will I be producing enoughproduction to dilute the
(24:17):
emissions within the profile ofthe farm?
And then you've got system fouror five farmers going geez.
What's it going to look likefor me to be able to continue to
operate the way I do if theacid goes right on some of these
different feed options I choose?
What we found in the data andyou know pulling a heap of that
stuff out of dairy-based withdairy NZ and so on is that it
(24:40):
supported the view that I'veheld for a very long time.
In fact, I may well have talkedabout this with you about 30-odd
years ago.
The point I would have madeback then, wade, was that
efficiency is efficiency,irrespective of the farm system.
My point there is I've seensome outstanding system 1
farmers from Northland toSouthland.
I've seen some outstandingsystem 3 farmers from Taranaki
(25:02):
to the east coast of the NorthIsland and system 5 Canterbury v
Southland.
The point is efficiency isefficiency, irrespective of the
farm system.
And when you actually look atthe data out of dairy base, yes,
there's a bit of noise and abit of variation between farm
systems, but the 90 percentileis literally flatlined through
the five farm systems.
So I just want to be and maybeusing this forum to again
(25:26):
reiterate the fact that thisfocus on emissions intensity is
not meaning we're coming downhard on a particular farm system
.
What we're looking to do isabsolutely stand next to and
support farmers to go after theefficiencies on farm,
irrespective of the farm system.
Speaker 3 (25:44):
Yeah, and that's been supported throughout, I think,
because dairy-based that data,there's some 2011 stuff and it
actually it's consistent overthe years as well.
There's so much to be gainedwithin a system than changing a
system.
That's been the profit message.
Speaker 2 (25:58):
Yes, we get caught up eh, we get caught up in the
stuff that when you stand backfrom it doesn't actually matter.
You know, and a lot of peoplesee, you know, significant
system changes is that this willlead us to the holy grail, this
will fix the problem ofmarginal profitability or
whatever the case is.
Actually, what really enhancessuccess in a farm system is
doing the basics really well.
Speaker 1 (26:19):
So one of the things, that's because you've privy to
all the data, obviously, andI've seen the box and whisker
graph and I'm kind of nowlinking that to the target,
which is the 7% on farm, and nowlinking that to the target,
which is the 7% on-farm.
Now what's your view on howachievable that kind of target
is, given your access to theinformation and the data that
sits behind all of that?
Speaker 2 (26:38):
Yeah, so look, you guys and your listeners would
have heard.
I thought previously mycolleague, charlotte Raleigh,
did a great job talking aboutthe why, and she spoke about the
responsibility that companieshave, like Fonterra has.
You can't just stand a long wayfrom the wall and throw a dart
and go oh, I landed at 7%.
You know these things have beenmodelled and kind of calculated
(26:59):
with the level of care thatfarmers should expect, and so
you know, if you ask me thequestion, you know how
achievable is it?
It's absolutely achievable.
It's absolutely achievable.
It's absolutely achievable.
But a lot of the success ofachievement is going to come
down to our ability to build theenergy and capture the.
In essence, the narrative ofthis is a kind of an
(27:23):
intergenerational New Zealanddairy moment to one.
The easy thing to do is comeout with a target.
The second easiest thing is toput a number on.
It Actually got to execute.
Now you know, and I guess whatwe've been trying to do a lot in
recent times is what does 30%actually mean?
What does 7% on farm efficiencyactually mean?
(27:43):
What we're trying to do is talkincreasingly in farmer currency
, talk about the sort ofutilization of feed, talk about
the sort of utilisation of feed.
Talk about the sort of increasein production efficiency.
Actually get in and look at aherd situation and unpick the
difference between good andaverage cows.
That's how we're going toachieve this target.
Speaker 3 (28:04):
So what are some of the tools that are going to help
us to achieve these targets?
Speaker 2 (28:08):
So, look, I think clearly the novel technology
piece is you know, futuretechnology is coming and heavily
invested in, and I'm all forthat sort of innovation and that
sort of focus.
But in answering your questionhere, matt, I think one of the
things we've got to be reallycareful of is luckily it's the
minority, but I do talk tofarmers who go, hey, the silver
(28:29):
bullet will come along.
You know, it's always workedfor us.
I worry a little bit that we'vebeen over-reliant on the future
technology solving.
So I like to think of noveltechnology and future technology
as being an and and.
So, realistically, what gives megreatest hope around the
achieving of the 7% bucket, ifyou like, of on-farm efficiency,
(28:52):
is that it's not a matter ofhaving to encourage farmers to
do something different or to usepractices or dust off research.
That's yet to be done.
You know, this is really justthe moment where we go hey,
we've been talking about reprofor years, let's really get on
(29:12):
it.
We've been talking about thevalue of good cows for years,
but now let's absolutely uncoverthe difference.
So you know, let's just keepusing the good techniques.
We've got the good research,the good data, the excellent
sector collaboration that we cancontinue to enhance.
We've just got to keep.
We just got to go hard at this,eh.
Speaker 3 (29:33):
Can I pick up Wade's negative hat from the last one?
That's fair mate.
Speaker 1 (29:39):
Yeah fair, yeah, the black hat on.
Speaker 3 (29:42):
If we're talking future tools, yep, they'll
deliver something.
But if these tools are alreadyhere and practices are already
there, why aren't they beingadopted?
Speaker 2 (29:48):
Yeah.
So let's look at a couple Again.
I find easiest I'm going totouch on repo and then I'm going
to go back to the cow andpasture piece a bit in a moment
as well.
So let's think about changeover the last 10 or 15 years.
My God, there's been a fair biton farm.
You know, if you had 16 or 17odd percent not in calf rate,
you know, 10 years ago in thecow growth years I mean, there
(30:09):
was some pretty reasonablegrazing at the end of a four
hour truck ride out of theWaikato over to the Hawke's Bay,
get her in calf, bring her backand she's a part of the next
conversion.
You know, here's the news.
Cow peak means that supply anddemand is in a very different
sort of scenario now.
And the value of that.
So that cow needs to be in calfnow.
You know the value of that.
So that cow needs to be in calfnow, you know.
And then you think about thingslike the cow quality gap that's
(30:33):
opened up.
The cows are cow mentality.
Actually did the industry okaybecause we were growing at such
a rate and the focus was sostrongly on the capital gain
model.
You know, I believe that some ofthe slippage in some of the
principles of pasture and feedutilization occurred because the
(30:53):
key focus was, you know, wewere valuing farms per kilogram
of milk solids.
I always wondered if that wasrisky, because the value is in
the dirt, not the productionsystem, and as long as you're
valuing farms on a productionsystem per kilogram of milk
solids, you're going to drivethe productivity of that farm at
any cost, and so all of asudden, feed just gets thrown at
(31:16):
farm systems.
Now, I'm probably being a bitdisrespectful by making those
statements, but the reality iswe actually just need to dust
off what's made this industryworld-leading.
The late Colin Holmes taught mein the early 90s in my dip-ag
days about comparative advantageand, as Charlotte said to you
(31:37):
guys in a previous podcast, thatwe do have a comparative
advantage.
We are at the front of the pack.
But gee, I'll tell you what.
There's some fast chases, eh,and I'm not taking comparative
advantage for granted anymore,yeah.
Speaker 1 (31:49):
Last question from from me, malcolm the, and again
I'll put my try and put a farmerhat on uh, which is a little
bit odd, because uh and Ihaven't been close.
It's been a few years it's beena long time because you've
you've talked about some ofthese gains almost been like
stacked, almost right yeah, Ican do this, I can do this, I
can do, you know so if I'm afarmer and I'm kind of sitting
down and let's say I'm sittingdown with you and going, let's
(32:11):
have a look at your farm andyour system and where what's the
size of the prize here arethere, are there tools that kind
of help with like facilitatingthat conversation?
Or where does fonterra sit withthat?
Speaker 2 (32:24):
yeah, so I.
There is a lot of tools,there's a lot of data.
I think we often talk aboutdata almost like as a currency
and how do we get value from itand everything else, but at the
end of the day, there is a lotof information that is at
farmers' fingertips.
You know, quite often when I dosort of a deep dive into a herd
relating to cow efficiency,farmers will say, oh, thanks so
(32:44):
much for this insight.
I said, hey, listen, essentiallyall I've done is turned that
investment you've made in animalrecording and herd testing for
the last 20 years into a fewnuggets you know, so I'm of the
view there's a lot of very goodinformation out there already,
but we really now need to just,you know, lift the intensity of
our ambition to shift this bar.
(33:06):
I do want to be really carefuland clear, as we, you know, go
close to rounding out here isthat this is not a case of
Fonterra or Malcolm on thispodcast being all wise all of a
sudden and suggesting howfarmers should farm, and God
only knows what else.
We do a pretty good job of thisin this country.
We are pretty efficient atconverting pasture feed feed to
(33:28):
milk.
All we're saying here is that,with a focus on emissions
intensity, if we can reallyshift that lever again, shift
that dial again, we will stay infront of the race.
Like I'm competitive by natureI meet a lot of competitive
farmers I would far rather haveour sector at the front than in
the middle of the pack, there'sno place to be.
Speaker 3 (33:48):
That's a that's an amazing message, which I'd like
to finish on.
But you, as a farmer, what aresome of the things that you guys
are looking at as we start tomove into the future?
What are you guys on farm?
Speaker 2 (34:00):
Look, I mean Kerwin is heading back to the farm in
June 2025, so a season away andI'm really looking forward to
that.
I'm excited about farmsuccession.
Right, and why am I excitedabout farm succession?
One is the young fella's hungry, which is always good, but also
I'm excited about successionbecause I now start to genuinely
(34:23):
believe in the future for theindustry.
Most people will know that, knowme well, that will be listening
to this, know that I havegenerally always been positive
about dairy but, as I say, fouror five years ago I was somewhat
more concerned.
So, like I'm positive aboutwhat it looks like, I've got
some energy around whatsuccession looks like and and I
guess the really cool challengehere is for Kerwin and for his
(34:44):
generation is leveraging offwhat's been done before.
I'd like to think that Jodieand I, you know, really went
after every piece of efficiencywe could within the system, but
that won't be enough for thenext generation.
You know there'll be new tools,there'll be new technologies,
and I also need to seriouslyencourage Kirwan to do all the
stuff that mum and dad didbetter.
Speaker 1 (35:06):
Yeah, and he'll bring new energy 100% 100%.
Yeah, as your energy slows down, does that kind of happen?
Speaker 3 (35:13):
It's always a possibility, it is always a
possibility.
Speaker 1 (35:16):
Yeah, but he's a pretty bright young man.
Heard and seen him a couple oftimes.
Sharp young guy.
Speaker 3 (35:21):
Thanks, Malcolm, for running over there.
I mean, Wade, is there anythingfinal from you?
Speaker 1 (35:27):
No, not really.
Malcolm and I have had someconversations before about some
of these things that we'retalking about in terms of
efficiency.
Sometimes they can sound reallyeasy, but there's got to be a
real intent, I suppose, in termsof trying to make those or
trying to generate thoseefficiency gains.
There is a strong why there.
Speaker 3 (35:48):
so that drives the intent, and I guess part of the
role that we play is is reallytrying to get alongside farmers
and support them where we can toextract them from from the
business they are there, sohelping with the what, the how
and I suppose thanks, thanks,malcolm, for explaining that the
how, because I think Charlotteset it up perfectly and you've
smacked it home with with thehow, and there's so many
(36:09):
different factors and I supposewe were trying to just get
little nearly sound bites out ofyou, but there's so much to
this, this puzzle, uh, thatwe're trying to navigate.
So thank you very much forcoming on and and explaining and
, uh sharing with our listeners.
So and very good thanks,appreciate it and wade cheers
mate always thanks for uh,thanks for joining, and thanks
(36:30):
to Bianca For everyone who'senjoyed this.
And we've talked about theextension of Feed for Thought.
Make sure you like andsubscribe, because that's how we
get further afield, as I said,kenya, but I think there's a few
in Ireland and a few others.
So, to our global listeners,thank you very much and we'll
talk to you next time.
Thanks, cheers, thanks, cheers,thanks, mate.
G'day and welcome to Feed for Thought, a regular
podcast from Pioneer coveringeverything from farm systems to
crops and products, and much,much more.
Speaker 3 (00:15):
Welcome back to Feed for Thought, your podcast for
knowledge, hungry farmers, rps,I should say, and anyone
actually involved in theindustry, because, as I alluded
to in our last podcast, we'regoing global eh Wade.
Yeah, we are.
Speaker 1 (00:27):
Yeah, we are, we're trying.
Speaker 3 (00:29):
We're trying, as you can hear.
I've got me old mate Wade Bellwith me and we're leveraging off
the last conversation we had,where Charlotte Rutherford from
Terra talked about the why whenit comes to emissions, and so
we've got the man who's going totell us the how.
And, wade, you enlisted thisman.
(00:49):
I heard he was a reasonablerugby player, but we brought him
in for some other skills hereyeah, no, too true actually,
malcolm.
Speaker 1 (00:56):
Welcome, welcome along, it's great to have you.
Have you here, but interestingstory about Malcolm Ellis.
So Malcolm was my trainer whenI left high school.
Dairy farm trainee course Ithink it was Correct At the
Polytech, just not far down theroad from here.
Speaker 3 (01:14):
That's interesting.
He taught me how to fence and alot of practical skills.
Speaker 2 (01:18):
To be honest, it was the milk in the morning teach by
day and milk at night.
A bit of club rugby on aSaturday and the rest of the
farm stuff on a Sunday.
But I remember you well, wade.
I think I may have also givenyou the good oil to get off to
university and get yourself adegree.
Speaker 1 (01:32):
Yeah, absolutely, I was thinking you don't actually
look that old Malcolm, and whatI've been trying to do this
morning is process.
Speaker 3 (01:39):
I wonder how old he was when he was my trainer, I
would have picked you to be hissenior, wade.
Speaker 1 (01:46):
Well, I've got a lot less hair.
Well, that's a good start, yeah, but anyway, welcome, malcolm.
Good to be here.
Thanks, guys.
Speaker 3 (01:52):
So yeah, we are going to delve into the why, the how.
Sorry on the back of the why,but can you tell us a little bit
about yourself, your role nowwith Fonterra, but a little bit
about farming background,because that's where you started
yeah, yeah, very much so.
Speaker 2 (02:05):
So, you know, farming's been a big part of my
life, my family's life, both myown family and, and, of course,
um, my parents and beyond,because, um, you know, I'm proud
to describe myself as a fourthgeneration farmer.
Uh, in 2011, we moved off thefarm and I went to a role in the
breeding scheme at lic, spentfive years in that role and then
the the following seven as GMin New Zealand markets, and then
(02:26):
finished up my time a role thatI really enjoyed and an
organisation I really enjoyedwith LIC in December and then
started with Fonterra inFebruary.
Speaker 1 (02:35):
So, yeah, and you've got a pretty talented young
fifth generation farmer comingthrough too.
We should recognise the fact.
Speaker 2 (02:43):
Just won the national award for the trainee, yeah no,
it was a really cool momentactually, to be honest.
As a family, we were down, andmy parents were down as well,
and we were down in Queenstownfor the industry awards in
Queenstown recently and Kerwinwon the dairy trainee of the
year, which is a really coolmoment.
Look, I've long been a massivefan of that competition.
I think it does a great job oflifting up the real intent and
(03:05):
desire of young people, and soI've sat there a lot of times,
to be honest, with LAC being amajor sponsor of the awards for
a long time, and so I found it areally cool moment to sit there
and witness Kew and winningthat award.
Speaker 3 (03:21):
Yeah, and so now your role is strategic lead at
Fonterra.
Speaker 2 (03:26):
Sorry, in a strategy advisory role.
Yep, so yeah, look, at the endof the day, I'm sort of involved
in a number of different workstreams, but you know the topic
today, obviously, and they'resort of probably occupying a
good 80% of my time at themoment.
Is this emissions intensitypiece connected to the
announcement that was made thatI thought you know?
(03:46):
Charlotte did a great job ofdescribing the kind of why
around emissions intensity as atarget.
So yeah, I'm spending a gooddeal of time in there, and then
some other projects that I'mcontributing to as well, nice.
Speaker 1 (04:00):
So just before we delve into the detail of the
podcast, you've talked thereabout emissions intensity.
Farmers will have also heardabout absolute emissions and
they're kind of two verydifferent.
Do you want to just clarify thedistinction between the two,
because that will launch,obviously, where we go next?
Speaker 2 (04:18):
Yeah, and I think look, it'll be a pleasure to and
I, unashamedly, will give akind of a farmer hat on
definition of the two from myperspective, because that helps
a way to knife the door.
Speaker 1 (04:28):
It wasn't just about you guys.
Speaker 2 (04:30):
But you know, emissions intensity is just that
, when you think about a unit ofproduct, whether it be a ton of
dairy product or of whicheverthe SKU might be reality, the
customer is very interested inthe profile or the intensity
profile of that unit ofproduction.
(04:51):
And so when we focus onemissions intensity, we get to
focus on as we'll talk about alot in this podcast around some
of those efficiencyopportunities on farm.
So you know I'm a big fan ofthat focus.
Absolute reduction, on theother hand, is where you stand
back and say you know lots oftalk about potentially
electrifying the tanker fleet,how we're going to power up the
(05:13):
milk powder plants, but inreality they're all great
initiatives, make no mistake,but in reality they only make up
about 10% of the emissionsprofile, which leaves 90% of it
in the paddock.
And then, once you're in thatsituation as a sector, then you
are there for the taking as tojust essentially absolute
reducing or absolute reductionof those emissions.
(05:35):
How do you do that?
Take the cows out and hey, look, at the end of the day, the
main reason I guess I'm verynervous about that approach is
if you think globally, we end upthen in a situation where
someone else on the other sideof the world picks up that
production, who can't do it asefficiently as we can?
you know, and that doesn't makeany sense.
(05:57):
So, yeah, a lot of.
And I guess the other thingI'll just quickly add to that is
that you know I pride myself onbeing class mostly full when it
comes to all things dairy.
But if we'd had thisconversation four or five years
ago, I was genuinely concernedthat as a sector, we were
literally waiting for absolutereduction to come down the line
(06:18):
and we'd be regulated as to howwe farm and stocking rate, count
numbers and so on, and thatreally worried me, whereas now,
with a focus on emissionsintensity, we get to go after
on-farm efficiency opportunity,and that's a very, very
different narrative.
Speaker 3 (06:33):
Yeah.
And that's where we play, Isuppose, or want to play as well
.
So where is some of thatlow-hanging fruit then, I
suppose, with efficiencies?
Speaker 2 (06:42):
Yeah.
So I think the first thing weshould be very clear on when we
talk about the efficiencyopportunity on farm, with a
focus around emissions intensity, is that we need to be really
respectful of the fact thatfarmers have been going after
efficiency for generations, likeyou know we talk about
efficiency evolution, because wedon't want to be seen as
(07:03):
Fonterra, as a milk processorcoming out to farmer
shareholders and saying, hey,we've got a really cool idea.
Why don't we go after farmefficiency?
I mean, essentially we've beendoing it for years, but we also
need to own the fact that for 20odd consecutive years the
industry grew by 100,000 cows ayear.
We went from 2.9 to 3 millionto sort of just over 5, into
(07:24):
where we ultimately got to inthe cow peak of 2015.
And as a result of that kind ofcows are cow mentality we've
kind of opened up a really biggap in reproductive performance.
We've opened up a really biggap in cow quality and cow
efficiency within a herd.
And I think also there was amoment in time where a lot of
the business model was based oncapital gain and aspiration in
(07:46):
that area, and so we werevaluing farms on their
productive output, and so did wemake positive steps from
pasture utilization, some ofthose pasture principles.
So I think there's been somesignificant opportunity created
from the cow growth years.
What we've got to be reallycareful of is that it's not my
(08:09):
generation, jodie and I'sgeneration that got the
opportunity to milk theopportunities of cow growth, and
then Kirwan and his generationhave to pay the price, coming
down the other side.
Speaker 1 (08:20):
So from an animal efficiency point of view, and
linking that through to youryoung fella Kirwan coming
through, you know, like, how doyou see those themes coming
together?
You know, like, what are theopportunities?
If it's not in, just, hey look,I'll get into shear milking and
grow my herd.
You know, grow the numbers.
You know I'm going to be a bitmore selective now about animals
that I use to achieve theoutcomes that I'm after.
(08:40):
What are the opportunitiesthere?
Like you, is this just cuttingcows out of the, the bottom of
the herd still, or what is itlooking?
Speaker 2 (08:47):
like.
I mean, I think the thing weneed to be really mindful of as
well is that going after thisemissions intensity targets not
all about cow quality, cowefficiency, it's not all about
repro, it's not all about um,feed efficiency, effluent
management, animal health.
In reality, if we think aboutthose as levers, it's a case of
kind of pulling those leversoptimally across the board.
(09:09):
What I will say, though andcertainly from my background,
I'm pretty passionate about this, obviously for my time that I
was at LIC is that it is anabsolute realisation now that
when we look at the gap betweentop and bottom quartile cows in
the industry and as part of theannouncement of emissions target
(09:32):
in November last year, we didjust that we took a real deep
look at 600-odd thousand cowsthat are herd tested, minder
subscribed, that supply FonterraFarms, and when you look at the
top quartile and the bottomquartile of those 600-odd
thousand cows, there's a 44%difference in productivity one
(09:52):
quarter to the next, to the onetop to bottom.
And there's a 42% difference inproduction efficiency, which is,
you know, kilograms of milksolids per kilogram of live
weight.
What was really interesting isthat then the smart people in
the environment team at Fonterrathen extrapolated that one step
further and said can we startto model out what the methane
(10:13):
CO2 equivalents per kilogram ofmilk solids is between that top
and bottom quartile?
The difference was just over16%, and so I'm kind of looking
at that and thinking, actuallywe kind of need to get on that.
One thing I have learned overtime is that in any race,
someone's got to win, someone'sgot to lose.
In other words, there's alwaysgoing to be a range in cow
(10:33):
quality within a given herd.
But the gap's got wide.
Yeah, you know, the gap's gotreally wide, and I guess what
we're calling for here is reallytrying to change the messaging,
change the narrative aroundthings like cow quality and cow
efficiency and sort of overlaythis focus of emissions
intensity.
Yeah, because clearly, uh, youknow, a cow that produces better
(10:56):
than a herd mate, um, arguablyeats more feed, but not 44% more
feed guys, let's be fair, sothere's an efficiency
opportunity there, right?
No doubt about it.
Speaker 3 (11:08):
And so what's the messaging like?
Because if you say you're inthe upper quartile, how do you
communicate to them that some ofthe stuff Fonterra is doing is
delivering for them, versusactually just lifting up the
bottom quartile?
Speaker 2 (11:22):
Yeah, maybe I'll use Repro as an example to answer
that in a moment.
But just to reiterate, based onyour question, think about that
herd improvement example I justgave you that just didn't take
600 odd thousand cows and sortof put all the system five cows
in one group and the system onesin another group.
It basically took, you know, ifyou had a farm that had 400
48-year-old cows, 100 went intoeach quartile.
(11:44):
So it was a very, very purecomparison which actually showed
absolute difference between,you know, good and average cows.
But if you think about, say,repro, we've been kind of stuck
with the reproductive key KPIsof, you know, 66%, 67%, six-week
(12:05):
in calf rate.
Geez, wade.
You know I've talked about thisbefore for as long as I can kind
of remember.
I think we started talking aboutthe KPI in 2008 and I think
we've been at sort of 66, 67 forabout the last eight or 10
years, and then that has theflow-on effect of a not-in-calf
rate of about 16 or 17%.
So you know, clearly, if you'vegot a dairy cow and you've got
(12:26):
more of them calving earlier,spending more time lactating
than dry, there is an emissionsintensity piece sitting right
there.
But where I'm getting to withthis matter is that, if I think
repro, I looked at thosenational stats and thought for a
long time that the average andlower quartile of reproductive
performance we're going to haveto do a lot of heavy lifting,
(12:47):
but what we've seen in this last12 months is a real healthy
lift in the national repro statsfrom spring of 2023.
And what's really encouragingis the top quartile have also
made a material gain.
So you know, I think we canlook at some of these situations
and some of these opportunitiesfor efficiency on farm and
(13:08):
realise that some of the leadingfarmers, some of the most
established and competentpasture managers and indeed farm
operators you know there'sstill a bit of headroom for them
too.
Speaker 1 (13:19):
So if you link those two things together though, so
how do you get?
So?
I'll take my 600 cow farm, andI've got this large differential
between the top quartile andthe bottom quartile.
I've got an empty rate of 16%,I've got a replacement rate of
22.
How am I going to have enoughheadroom to chop enough animals
out without reducing my stockingrate and achieve those kind of
(13:41):
efficiency gains in thetimeframe that we're kind of
tasked with here?
Speaker 2 (13:44):
yeah, so therein lies , um, a little bit of the
description as to why the gaphas opened up.
Um, and and look, I want to bereally clear that the type of
cows we milk these days are very, very good, like, there's no
doubt about it.
Like I, I think about the sortof cows I was brought up with,
uh, all those years ago, and Ithink about the sort of cows I
was brought up with all thoseyears ago and I think about the
quality of a quality Kiwi cowthese days and how she can
(14:05):
convert, you know, feed to milk.
But essentially, what'shappened is that, you know, with
the cow growth years, every cowI mean you know budget cows had
a.
They were like, they were acommodity mate.
They had value year in, yearout because of the cow growth.
But also, when we were grapplingwith 16 or 17%, not in calf
rate, and maybe a replacementrate of 21, 22, 23%, there
(14:28):
wasn't much discretionaryculling going on.
Eh, so those poor performerswere staying.
Well, I guess, while you'reidentifying, go back to your
example weight of a 600 cow farm.
You look at your bottom 25% ofthem.
You know 150 odd cows.
The advice is not to get rid ofthose cows tomorrow because
you're going to produce less andmake less if you're milking 25%
less cows.
But what we can do immediatelyis stop trusting those poor
(14:52):
quality cows.
With the next generation we'rebreeding far too many
replacements for the future ofherds and for the future of
national herds out of poorquality cows.
That's one of the keyobservations.
Speaker 1 (15:04):
Wade, so selective mating 100% Bringing in the sex.
You know all those othertechnologies that are currently
available.
Speaker 2 (15:10):
Here's an observation for you Like if you look at you
know I quite enjoy the numbersand when I look at the 3.7 odd
million cows that supplyFonterra as a milk processor and
if I look at the 90 odd percentof those, 91 odd percent of
those that are mindersubscribing and just use that as
a big data set, if I look atthe top 10% of those cows
(15:32):
genetically and I look at thebottom 10%, there's a 300 BW
difference between top andbottom.
So half mum, half dad.
If we're using the likes of sexsemen to get to prioritise
replacements out of that goodcow, then that's at the expense
of not requiring a calf at theother end.
That can potentially be a dairybeef calf or something similar.
(15:53):
You know these are not newprinciples.
You know the desire to improvereproductive performance is not
a new principle.
The desire to optimise pastureutilisation is not a new
principle.
The desire to optimize pastutilization is not a new
principle.
But I guess what we're trying todo is to really lift the energy
and create the narrative ofemissions intensity being a
(16:15):
reason and a why to go aftersome of these things, because my
view is quite clear that wehave a window of opportunity to
focus on shifting the bar inemissions intensity.
If we don't achieve in thatarea, then I'm quite mindful of
the fact that we will end upwith absolute reduction.
(16:36):
Yeah, so that's why I thinkthere's a very clear why.
But let's be really clear thatwhen I have conversations with
farmers around absolutereduction and emissions
intensity it is actuallyconveniently an and not an or
Like.
We need to acknowledge thatthere is quite a bit of
alternative land use challengegoing on.
(16:58):
We see cow numbers peaked atjust over 5 million.
Dairy stats last year say 4.67.
So we're getting a layer ofabsolute reduction anyway, and
when we achieve emissionsintensity we get another layer
of absolute reduction.
I guess all I'm really strongon now is let's make sure we're
(17:19):
primarily focused on emissionsintensity and allow the absolute
reduction to self-manage,because the other way around,
you know, I think I'd besuggesting Kew and probably
would have been best with atrade before he went out on the
farm.
Yeah, you know.
Speaker 3 (17:32):
How are you going about extending this information
and how is it being received byfarmers, I suppose, given that
I know you've been out on theroad of late- what are some of
the things that you guys andyour team are doing?
Speaker 1 (17:45):
Oh, answering the call from good people like
yourselves, he did pick up thecall.
Yeah, yeah, yeah.
Speaker 2 (17:49):
But hey, look, our primary focus.
You're right, let's use theexample of us just completing a
roadshow in the last couple ofweeks.
So our primary focus there is,rightfully, our
farmer-sheholders.
And I knew I would, but I wasblown away by how much I learned
over those couple of weeksleading that presentation in the
North Island, just constantlygetting the feedback from
farmers recognising similarquestions, if not the same
(18:12):
questions, being asked at thesame stage of the presentation,
whether or not you're inStratford or Reparoa, you know,
as a moment of learning.
You know I've been involved inthis industry for all my working
life and I've seen some reallyuseful, positive collaboration
in the sector.
But it's got to get a lotbetter, you know.
And so we've had quite a bigfocus around engaging with rural
professionals because you know,if I think of Jodie and I's own
(18:35):
farm business, like we areindebted to the support of rural
professionals for a long timethere we had the same banker,
same accountant, same solicitorfor 20 years, each kind of style
.
These are key people to ourbusiness.
So we want to have a primaryfocus on engaging with farmers,
but we also want to be very,very engaged with rural
professionals and drive anunprecedented level of sector
(18:58):
collaboration, because you knowI'm of the view and being quoted
on this, don't mind sharing ithere.
But I think the emissionsintensity focus is an
intergenerational moment fordairy in New Zealand, because I
just know what the outcome wouldlook like if we were allowing
ourselves to accept theregulation as it comes down the
(19:19):
line via absolute reduction.
So you know, our message torural professionals is very,
very clear that we're not tryingto get ahead of ourselves as a
milk processor.
We want to sit right alongsideyou.
We have massive respect for thetrusted relationship that you
have with farmers.
I think about vets, I thinkabout accountants, I think about
bankers, I think about DairyNZ,I think about feed companies.
(19:40):
Yeah, this is the full courtpress moment.
Speaker 3 (19:43):
Yeah.
Speaker 2 (19:43):
This isn't Fonterra's moment.
This is New Zealand Dairy'smoment.
Speaker 1 (19:47):
So, taking some of the kind of how a little bit
further, we've talked a bitabout some of the animal
efficiencies.
What other areas arepotentially in the crosshairs or
in focus for farmers to makesome gains?
Speaker 2 (19:59):
Yeah.
So look, I have long pridedmyself of being a kind of a cow
and grass farmer, so thanks fortaking us to the feed site.
Speaker 1 (20:06):
We're going to hold on to that.
Thank that, we'll be easy onthem.
I was waiting for you to lobthis in.
Speaker 2 (20:12):
Should I go with cow and feed farmer?
Yeah, but hey, my point here isthat when you've got a
respectable number in front ofthe milk price, it makes good
sense to supplement.
I want to talk about feed andpasture utilization.
Look, I think when you've got arespectable number in front of
the milk price and you've gotcapable cows, it makes really
(20:33):
good sense to supplement thosecows.
In times of deficit, of feeddeficit, it makes a heck of a
lot of sense what I worry aboutover the last 10 to 15 years if
I could state this because Ihave great respect for farmers
in the full context but I thinkwe need to own the fact that
(20:54):
there's a hell of a lot ofsubstitution going on.
Like I say, there is good cointo be made supplementing good
quality cows at times of genuinefeed deficit.
But it is marginally profitableif you've already paid to grow
the pasture and then we'readding a feed supplement as well
.
You know when it's a substitute.
(21:15):
And so I just think there's amoment in time here now where we
have to dust off some of thatjust outstanding research that
was done in the 80s and 90s,when I dig that out and have a
look back through those Bryantdays and Kevin McDonald days,
and I mean geez, you can evenbring the McMeekin textbooks
into it if you want.
The reality is those principlesare very, very sound, and so I
(21:38):
think we need to get back toreally really focusing on the
fact that there is a very strongvalue proposition, as I say
again, to supplement cows ingenuine times of energy deficit.
But I worry that there's toomuch feed going in on farm where
there is, at times of the yearwhen there is pasture available,
(21:59):
yeah, so feed wastage isobvious Right feed, right time
yeah.
And I think there is a genuineneed for us to get back to.
You know, for a long time weidentified feed and contemplated
feed options on two things inmy view right.
One of them was kind ofavailability and price and the
other one was the sort of milkproduction response you might
(22:20):
get.
So, you know, was it cents perkilogram of dry matter or was it
, you know, megajoulemetabolizable energy?
We've actually got to startthinking about what the
emissions profile of that feedlooks like, and so we are
starting to see farmersrealising that actually some of
those home-grown feed optionsactually have quite a different
(22:40):
balance to the emissions profilefor the farm.
And I actually think we've gotto be mature enough to have that
conversation.
Because this has been actuallyquite a big learning, guys, for
me since I've been at Fonterra,when I look through the raft of
different feed options farmersconsider and when I look at them
sort of based on a you know,almost using pasture as a
(23:02):
baseline.
Not all feeds have the sameemissions profile.
Speaker 3 (23:06):
Let's be very, very clear.
Speaker 2 (23:08):
And so you know, and again, so you know, uh, and
again you start thinking aboutefficiency, you start thinking
about emissions intensity.
You know if you're going togrow a crop mays grow a really
good crop.
Yeah, because if you'redividing a high yield by the
fixed cost, yeah, and theemissions profile, uh, that's
very different than if you wereto slice off four or five ton of
of yield.
Speaker 1 (23:26):
It's a different number yeah, yeah, yeah, no 100,
so pasture crop husbandry isanother fundamental yeah, yeah,
yeah yeah with the um.
You know the profile of thefeeds and I'm sure it was a
graph that came from fromfontera.
But, you know, looked at theemissions profile, the intensity
profile across the systems, oneof the things that stood out to
(23:48):
me was it was relativelysimilar across all the systems.
So what's your explanation ofthat?
Speaker 2 (23:55):
Good, on you for bringing that up.
Good on you for bringing that up, because that's a conversation
we had a lot on the roadshow andI'm constantly having with
farmers at the moment.
So if we think about System 1,v, 5, just for a moment, I'm not
drawing a comparison, I'm justthinking about the narrative
from farmers.
Right, you've got system onefarmers that are going geez.
What's this going to look likefor me?
Will I be producing enoughproduction to dilute the
(24:17):
emissions within the profile ofthe farm?
And then you've got system fouror five farmers going geez.
What's it going to look likefor me to be able to continue to
operate the way I do if theacid goes right on some of these
different feed options I choose?
What we found in the data andyou know pulling a heap of that
stuff out of dairy-based withdairy NZ and so on is that it
(24:40):
supported the view that I'veheld for a very long time.
In fact, I may well have talkedabout this with you about 30-odd
years ago.
The point I would have madeback then, wade, was that
efficiency is efficiency,irrespective of the farm system.
My point there is I've seensome outstanding system 1
farmers from Northland toSouthland.
I've seen some outstandingsystem 3 farmers from Taranaki
(25:02):
to the east coast of the NorthIsland and system 5 Canterbury v
Southland.
The point is efficiency isefficiency, irrespective of the
farm system.
And when you actually look atthe data out of dairy base, yes,
there's a bit of noise and abit of variation between farm
systems, but the 90 percentileis literally flatlined through
the five farm systems.
So I just want to be and maybeusing this forum to again
(25:26):
reiterate the fact that thisfocus on emissions intensity is
not meaning we're coming downhard on a particular farm system
.
What we're looking to do isabsolutely stand next to and
support farmers to go after theefficiencies on farm,
irrespective of the farm system.
Speaker 3 (25:44):
Yeah, and that's been supported throughout, I think,
because dairy-based that data,there's some 2011 stuff and it
actually it's consistent overthe years as well.
There's so much to be gainedwithin a system than changing a
system.
That's been the profit message.
Speaker 2 (25:58):
Yes, we get caught up eh, we get caught up in the
stuff that when you stand backfrom it doesn't actually matter.
You know, and a lot of peoplesee, you know, significant
system changes is that this willlead us to the holy grail, this
will fix the problem ofmarginal profitability or
whatever the case is.
Actually, what really enhancessuccess in a farm system is
doing the basics really well.
Speaker 1 (26:19):
So one of the things, that's because you've privy to
all the data, obviously, andI've seen the box and whisker
graph and I'm kind of nowlinking that to the target,
which is the 7% on farm, and nowlinking that to the target,
which is the 7% on-farm.
Now what's your view on howachievable that kind of target
is, given your access to theinformation and the data that
sits behind all of that?
Speaker 2 (26:38):
Yeah, so look, you guys and your listeners would
have heard.
I thought previously mycolleague, charlotte Raleigh,
did a great job talking aboutthe why, and she spoke about the
responsibility that companieshave, like Fonterra has.
You can't just stand a long wayfrom the wall and throw a dart
and go oh, I landed at 7%.
You know these things have beenmodelled and kind of calculated
(26:59):
with the level of care thatfarmers should expect, and so
you know, if you ask me thequestion, you know how
achievable is it?
It's absolutely achievable.
It's absolutely achievable.
It's absolutely achievable.
But a lot of the success ofachievement is going to come
down to our ability to build theenergy and capture the.
In essence, the narrative ofthis is a kind of an
(27:23):
intergenerational New Zealanddairy moment to one.
The easy thing to do is comeout with a target.
The second easiest thing is toput a number on.
It Actually got to execute.
Now you know, and I guess whatwe've been trying to do a lot in
recent times is what does 30%actually mean?
What does 7% on farm efficiencyactually mean?
(27:43):
What we're trying to do is talkincreasingly in farmer currency
, talk about the sort ofutilization of feed, talk about
the sort of utilisation of feed.
Talk about the sort of increasein production efficiency.
Actually get in and look at aherd situation and unpick the
difference between good andaverage cows.
That's how we're going toachieve this target.
Speaker 3 (28:04):
So what are some of the tools that are going to help
us to achieve these targets?
Speaker 2 (28:08):
So, look, I think clearly the novel technology
piece is you know, futuretechnology is coming and heavily
invested in, and I'm all forthat sort of innovation and that
sort of focus.
But in answering your questionhere, matt, I think one of the
things we've got to be reallycareful of is luckily it's the
minority, but I do talk tofarmers who go, hey, the silver
(28:29):
bullet will come along.
You know, it's always workedfor us.
I worry a little bit that we'vebeen over-reliant on the future
technology solving.
So I like to think of noveltechnology and future technology
as being an and and.
So, realistically, what gives megreatest hope around the
achieving of the 7% bucket, ifyou like, of on-farm efficiency,
(28:52):
is that it's not a matter ofhaving to encourage farmers to
do something different or to usepractices or dust off research.
That's yet to be done.
You know, this is really justthe moment where we go hey,
we've been talking about reprofor years, let's really get on
(29:12):
it.
We've been talking about thevalue of good cows for years,
but now let's absolutely uncoverthe difference.
So you know, let's just keepusing the good techniques.
We've got the good research,the good data, the excellent
sector collaboration that we cancontinue to enhance.
We've just got to keep.
We just got to go hard at this,eh.
Speaker 3 (29:33):
Can I pick up Wade's negative hat from the last one?
That's fair mate.
Speaker 1 (29:39):
Yeah fair, yeah, the black hat on.
Speaker 3 (29:42):
If we're talking future tools, yep, they'll
deliver something.
But if these tools are alreadyhere and practices are already
there, why aren't they beingadopted?
Speaker 2 (29:48):
Yeah.
So let's look at a couple Again.
I find easiest I'm going totouch on repo and then I'm going
to go back to the cow andpasture piece a bit in a moment
as well.
So let's think about changeover the last 10 or 15 years.
My God, there's been a fair biton farm.
You know, if you had 16 or 17odd percent not in calf rate,
you know, 10 years ago in thecow growth years I mean, there
(30:09):
was some pretty reasonablegrazing at the end of a four
hour truck ride out of theWaikato over to the Hawke's Bay,
get her in calf, bring her backand she's a part of the next
conversion.
You know, here's the news.
Cow peak means that supply anddemand is in a very different
sort of scenario now.
And the value of that.
So that cow needs to be in calfnow.
You know the value of that.
So that cow needs to be in calfnow, you know.
And then you think about thingslike the cow quality gap that's
(30:33):
opened up.
The cows are cow mentality.
Actually did the industry okaybecause we were growing at such
a rate and the focus was sostrongly on the capital gain
model.
You know, I believe that some ofthe slippage in some of the
principles of pasture and feedutilization occurred because the
(30:53):
key focus was, you know, wewere valuing farms per kilogram
of milk solids.
I always wondered if that wasrisky, because the value is in
the dirt, not the productionsystem, and as long as you're
valuing farms on a productionsystem per kilogram of milk
solids, you're going to drivethe productivity of that farm at
any cost, and so all of asudden, feed just gets thrown at
(31:16):
farm systems.
Now, I'm probably being a bitdisrespectful by making those
statements, but the reality iswe actually just need to dust
off what's made this industryworld-leading.
The late Colin Holmes taught mein the early 90s in my dip-ag
days about comparative advantageand, as Charlotte said to you
(31:37):
guys in a previous podcast, thatwe do have a comparative
advantage.
We are at the front of the pack.
But gee, I'll tell you what.
There's some fast chases, eh,and I'm not taking comparative
advantage for granted anymore,yeah.
Speaker 1 (31:49):
Last question from from me, malcolm the, and again
I'll put my try and put a farmerhat on uh, which is a little
bit odd, because uh and Ihaven't been close.
It's been a few years it's beena long time because you've
you've talked about some ofthese gains almost been like
stacked, almost right yeah, Ican do this, I can do this, I
can do, you know so if I'm afarmer and I'm kind of sitting
down and let's say I'm sittingdown with you and going, let's
(32:11):
have a look at your farm andyour system and where what's the
size of the prize here arethere, are there tools that kind
of help with like facilitatingthat conversation?
Or where does fonterra sit withthat?
Speaker 2 (32:24):
yeah, so I.
There is a lot of tools,there's a lot of data.
I think we often talk aboutdata almost like as a currency
and how do we get value from itand everything else, but at the
end of the day, there is a lotof information that is at
farmers' fingertips.
You know, quite often when I dosort of a deep dive into a herd
relating to cow efficiency,farmers will say, oh, thanks so
(32:44):
much for this insight.
I said, hey, listen, essentiallyall I've done is turned that
investment you've made in animalrecording and herd testing for
the last 20 years into a fewnuggets you know, so I'm of the
view there's a lot of very goodinformation out there already,
but we really now need to just,you know, lift the intensity of
our ambition to shift this bar.
(33:06):
I do want to be really carefuland clear, as we, you know, go
close to rounding out here isthat this is not a case of
Fonterra or Malcolm on thispodcast being all wise all of a
sudden and suggesting howfarmers should farm, and God
only knows what else.
We do a pretty good job of thisin this country.
We are pretty efficient atconverting pasture feed feed to
(33:28):
milk.
All we're saying here is that,with a focus on emissions
intensity, if we can reallyshift that lever again, shift
that dial again, we will stay infront of the race.
Like I'm competitive by natureI meet a lot of competitive
farmers I would far rather haveour sector at the front than in
the middle of the pack, there'sno place to be.
Speaker 3 (33:48):
That's a that's an amazing message, which I'd like
to finish on.
But you, as a farmer, what aresome of the things that you guys
are looking at as we start tomove into the future?
What are you guys on farm?
Speaker 2 (34:00):
Look, I mean Kerwin is heading back to the farm in
June 2025, so a season away andI'm really looking forward to
that.
I'm excited about farmsuccession.
Right, and why am I excitedabout farm succession?
One is the young fella's hungry, which is always good, but also
I'm excited about successionbecause I now start to genuinely
(34:23):
believe in the future for theindustry.
Most people will know that, knowme well, that will be listening
to this, know that I havegenerally always been positive
about dairy but, as I say, fouror five years ago I was somewhat
more concerned.
So, like I'm positive aboutwhat it looks like, I've got
some energy around whatsuccession looks like and and I
guess the really cool challengehere is for Kerwin and for his
(34:44):
generation is leveraging offwhat's been done before.
I'd like to think that Jodieand I, you know, really went
after every piece of efficiencywe could within the system, but
that won't be enough for thenext generation.
You know there'll be new tools,there'll be new technologies,
and I also need to seriouslyencourage Kirwan to do all the
stuff that mum and dad didbetter.
Speaker 1 (35:06):
Yeah, and he'll bring new energy 100% 100%.
Yeah, as your energy slows down, does that kind of happen?
Speaker 3 (35:13):
It's always a possibility, it is always a
possibility.
Speaker 1 (35:16):
Yeah, but he's a pretty bright young man.
Heard and seen him a couple oftimes.
Sharp young guy.
Speaker 3 (35:21):
Thanks, Malcolm, for running over there.
I mean, Wade, is there anythingfinal from you?
Speaker 1 (35:27):
No, not really.
Malcolm and I have had someconversations before about some
of these things that we'retalking about in terms of
efficiency.
Sometimes they can sound reallyeasy, but there's got to be a
real intent, I suppose, in termsof trying to make those or
trying to generate thoseefficiency gains.
There is a strong why there.
Speaker 3 (35:48):
so that drives the intent, and I guess part of the
role that we play is is reallytrying to get alongside farmers
and support them where we can toextract them from from the
business they are there, sohelping with the what, the how
and I suppose thanks, thanks,malcolm, for explaining that the
how, because I think Charlotteset it up perfectly and you've
smacked it home with with thehow, and there's so many
(36:09):
different factors and I supposewe were trying to just get
little nearly sound bites out ofyou, but there's so much to
this, this puzzle, uh, thatwe're trying to navigate.
So thank you very much forcoming on and and explaining and
, uh sharing with our listeners.
So and very good thanks,appreciate it and wade cheers
mate always thanks for uh,thanks for joining, and thanks
(36:30):
to Bianca For everyone who'senjoyed this.
And we've talked about theextension of Feed for Thought.
Make sure you like andsubscribe, because that's how we
get further afield, as I said,kenya, but I think there's a few
in Ireland and a few others.
So, to our global listeners,thank you very much and we'll
talk to you next time.
Thanks, cheers, thanks, cheers,thanks, mate.
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