September 2, 2024 • 31 mins
Join us as Jo Bills, Director for Global Insights at EverAg, breaks down the differences in supply chain dynamics, pasture-based efficiencies, and export strategies between New Zealand and Australia. Learn how Australia’s more productive cows compare to New Zealand's pasture-based herds. We also touch on greenhouse gas emissions and Fonterra's strategic manoeuvres, providing a comprehensive outlook on the unique challenges and strengths of each country's dairy sector.
The discussion delves into the pressures of reducing carbon footprints amidst rising customer expectations and the potential compensations for sustainability efforts. The team also cover China’s ambition for dairy self-sufficiency and the global ripple effects of their evolving market. Southeast Asia's growing importance as a key market for New Zealand is highlighted, alongside the competitive rise of the United States in the global dairy arena. Tune in for an in-depth exploration of the trends and challenges shaping the future of the global dairy industry.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (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.
Hi all, welcome to this episodeof Feed for Thought.
My name's Wade Bell and, asoften I do, I've got my
colleague Matt Dalley with and,yeah, look, it's a real
(00:25):
privilege again to be hosting anew guest.
So, jo Bills, welcome along tothis podcast.
Great to have you here, thankyou, yeah, so no doubt our
listeners will pick up veryshortly that you have a slightly
different accent to us.
We'll get to that in a moment.
But we're sitting in a roomhere in Brisbane just on the
back of attending a conferenceand obviously you've given a
(00:49):
really good global snapshot,particularly around the dairy
market, and we're going to getinto that shortly.
But before I do and I'll tryand get this right you're the
Director for Global Insights forEverAg, is that right?
That's quite a tongue twisterthat.
Speaker 2 (01:03):
It is a bit of a mouthful.
Speaker 1 (01:11):
That's why we we got you to say it yeah, correct,
exactly right, yeah, yeah, yeah.
So look great to have you along, uh, and look really privileged
to hear your presentation.
Uh, you know, you really mixthat up with a a little bit of
that new zealand aussie.
You know a few comparisonsthere.
I'd love to say we won allthose comparisons, but I'm not
so sure that we did, but thenbrought that out to some more
global perspectives.
But do you want to start on theNew Zealand-Aussie kind of?
(01:31):
You know what are some of thedifferences that you see between
those two dairy players?
Speaker 2 (01:36):
Yeah Well, look, I did sort of want to highlight
that we always have a reallygood rivalry between Australia
and New Zealand.
I can't actually believe you'vebeen allowed back into the
country, to be honest.
Speaker 1 (01:47):
We're only here for short term.
You've got a time limit.
Speaker 2 (01:52):
But I did want to sort of talk to the audience
about some of the differencesbetween our two industries
because for a long time throughthe 90s we were pretty much on a
similar trajectory, very muchboth pasture-based industries.
We were growing at about thesame volume through the 90s and
(02:12):
then we hit this hurdle of theearly 2000s with deregulation
and drought.
We've flattened out.
You guys kept going and thegrowth in New Zealand production
pretty much mirrored the growthin demand from China.
But after 2015, we've both kindof levelled out.
So we're both in that same kindof you know, at a macro level
(02:33):
Growth is hard to attain.
But some interestingcomparisons I thought in terms
of you know, bigger herds in NewZealand but much more
productive cows in Australia,because we do feed our cows.
Speaker 1 (02:47):
Yes, yeah, nice little dig there, yeah, yeah.
Speaker 2 (02:50):
I thought I'd get that one in, but also in terms
of our seasonal profiles, veryflat production in Australia.
Speaker 3 (02:59):
Yeah, you had an interesting stat on the peak and
trough.
Speaker 2 (03:02):
Yeah, peak to trough ratio, which is just the peak
month of production divided bythe lowest month of production,
and in New Zealand it's about 13to 1.
In Australia it's 1.6 to 1.
So we've really gone, we'veflattened our profile for
production and that's reallybeen reflected of the fact that
we don't have massive stainlesssteel, you know whole milk
(03:25):
powder machines in Australia.
We've got a very fragmentedsupply chain compared to New
Zealand.
So, as I said, there's onecompany in New Zealand that
accounts for 79% of all milkproduction and in Australia that
biggest company is 17% of milkproduction and it's Fonterra in
(03:46):
both places.
So really fragmented supplychain and the greenhouse gas
emissions that New Zealand dairyaccounts for around about 25%
and in Australia it's about 3%.
So some of those pressuresaround some of those
sustainability issues you wouldthink are a little bit different
, but in fact you know it'sstill a factor for Australian
(04:09):
producers as well.
Speaker 1 (04:12):
So a couple of things out of that One.
You've got very much probably amore TMR style system in
Australia versus what we call,say, total mixed ration here in
Australia versus, say, we're inZealand is very much
pasture-based and obviouslysupplements are added, but not
to the same level of intensity.
Speaker 2 (04:32):
Yeah, there's probably still not a huge
percentage of farms that aretotal TMR but we have a big
continuum just based on climateconditions.
But there will be a lot ofAussie farmers that have
invested in the feed pads andthe feeding out infrastructure
here and so are committed tofeeding, you know, for a big
chunk of the year, particularlyin some of the irrigated regions
(04:53):
here.
So it is a really different,you know, and much more
complicated perhaps, systemsthat we operate in in Australia
quite challenging in terms ofgetting that growth, whereas
we've seen in New Zealand reallygood at growing pasture, really
good at pumping that milkthrough those big stainless
(05:14):
steel factories.
It's a very, very differentpicture.
Speaker 3 (05:18):
We've got a compliment as well.
Yeah, absolutely.
Speaker 1 (05:21):
Yeah, absolutely.
And in terms of where theproduct goes, some real
differences there too, right?
So consumer versus the food andingredients.
Speaker 2 (05:31):
Yeah, look, in Australia our biggest use of
milk is cheese and most of thatcheese about half of it is
exported.
But a lot of that cheese goesinto retail packs.
So we've got a very good cheesemarket in Australia as well as
some good export markets,particularly in Asia.
But most of our production now30% goes into fresh milk, 40% of
(05:54):
manufacturing milk goes intocheese.
So ingredients is becoming asmaller and smaller portion of
our production here, which youknow, given Fonterra's
announcements in May, kind ofmakes sense that they've decided
that they want to put thatbusiness up for sale because it
doesn't necessarily fit withtheir strategy.
Speaker 3 (06:14):
Yeah for sure.
Yep and Jo, you went into a fewmacro or global comparisons, I
suppose, and something thatstruck me was the European
versus the US markets and thedemand through those markets are
very, very different.
Speaker 2 (06:31):
Yes, yeah, yeah, it's interesting.
At the moment both of thosemarkets are big producers of
dairy but also have very largelocal markets, but the kind of
constitution of their markets isvery different.
So much more dairy goes intofood service in the US, but in
(06:52):
Europe it's much more retailfocused and we're finding, in
this last cycle, where householdincomes are coming under
pressure, what we used to see inthe US particularly is their
demand for cheese would increasebecause a lot of people would
trade down to the takeawayoptions, the pizzas, the burgers
, very cheese-rich options.
But we haven't actually seenthat this time.
(07:14):
In Europe their demand has alsobeen under a fair bit of
pressure because their inflationimpacts have been much more
severe.
Speaker 3 (07:22):
Yes.
Speaker 2 (07:23):
But they tend to be so much more of a traditional,
you know, butter consumer orcheese consumer.
Their demand is actually prettysteady.
But what's been interestingthis time is the US kind of
cycle has really changed andthere's been a bit of discussion
whether that's about Ozempicand some of those weight loss
drugs that they're actually notconsuming as much of that fast
(07:47):
food as they used to.
So it's something we're lookingat in the business and really
interesting stuff.
Speaker 1 (07:52):
So you spend a fair bit of your time, obviously in
the US and around those markets.
Speaker 2 (07:58):
Well, yeah, I mean we've sold out.
So our Fresh Agenda business.
We've been consulting in globaldairy markets for about 10
years and then last year we soldourselves to EverAg.
So we've got a fantasticinsights team that's a lot
focused on the US market and wewould always monitor the US
market.
But now we've got theseextremely deep insights into
(08:21):
what's happening in the US andjust with the size of that
market and also the size of theinvestment that's going into
particularly cheese in thatmarket, I guess that's given us
a real pause for thought interms of everyone's producing
cheese now and it's fairlyvolatile and fairly competitive,
(08:42):
and now we're going to have allof this US cheese capacity
coming on stream.
So again it kind of underlineswhy maybe Fonterra are saying
let's double down in thisingredients space and food
service but not try and you know, get too exposed to some of
those cheese markets where thecompetition is just going to
increase.
Speaker 3 (09:02):
Yeah, yeah, yeah.
Speaker 1 (09:03):
So do you see, you know, just talking about the US
in particular, you know they'reobviously a big milk supplier,
you know, do they?
You know we like to sort ofmake comparisons with ourselves
and the way we produce milk.
You know, where do they havesome competitive advantages that
perhaps we don't have, and viceversa?
Do you kind of get a feel forsome of those?
Speaker 2 (09:30):
Yeah, look, I think in the us there is, there does
seem to be a lot more access tocapital.
Um, for some really largeproduction facilities and a lot
of the, the new investment isreally highly integrated.
So large farms and they're someof them are just a group of
families, but very large farmsthat are now putting in cheese
capacity, so they're verticallyintegrated businesses and for
some of them they're literallypumping the milk through the
(09:53):
wall into the factory.
And a lot of those businessesare also because they're mostly
housed cows.
They're able to capture methane, convert it into gas, sell it
into the grid.
They're able to do a lot ofthose kind of additional usage
of some of the waste productsthat may be in a pastoral system
(10:16):
and it's the same in Australia.
Smaller scale, still mostlypasture-based.
That's really hard for us to do, but a lot of these new larger
farms are almost closed systems.
So you know they're kind ofgenerating all of this waste but
they're able to utilise it indifferent ways and close their
(10:36):
sustainability loop.
So it's not our vision ofsustainable from our perspective
in this part of the world, butthey would say it's very
sustainable in terms of beingable to capture those waste
streams and turn them intosomething good.
Speaker 1 (10:50):
So they're selling.
There's a value to the waste,or the by-product, if you like.
Speaker 2 (10:56):
Yeah, particularly in California, where the
government's really got behindsome of these carbon markets,
there are farmers that aremaking pretty good incomes from
selling the carbon that they'vetaken out of their system to
other industries so we wouldcall them offset.
So they're selling to otherindustries and saying we've
reduced our carbon by this muchhere, have that much to offset
(11:19):
your fossil fuel plant overthere.
Yeah, which, you know, itsounds like a bit of dodgy
accounting.
There's starting to be a bit ofconcern within the dairy
industry that we need to startinsetting because a lot of these
offsets have been sold out ofour value chain and we're
actually going to need them asan industry if things, you know,
(11:39):
change in five to ten years.
And I guess that's what'sinteresting about the US.
It's a really rapidly evolvingspace, yeah, quite different to
the European situation whereit's very much top-down
regulation.
The European Commission saysthis is the new grand deal, this
is what we need to achieve.
All of your countries go andput rules in place to achieve it
(11:59):
.
In the US it's like let's makesustainability as a service and
let's make a market out of itand let's, you know, start to
market carbon, reduced carbonfootprint, ingredients that
we've audited and we've, youknow, got this software to tell
you that it's all legit.
So it's a very fast-movingspace in the States.
Speaker 3 (12:20):
So do you reckon that's why we're getting more of
a favour for sustainabilitymessages in New Zealand?
Do you see that as a mouthful?
Is that getting that push downthrough those larger companies,
through that value being createdthere?
Speaker 2 (12:31):
Yeah, look, I think there's certainly the larger
companies the Nestles, theDanones, the Unilevers.
They're reaching back intotheir supply chains in every
part of the world to try and getthose scope three emissions
dealt with.
You know they are investing insome instances, which is really
good.
(12:51):
It's sort of a partnershipmodel.
But it's really tough for themand you know the reality is, if
you can't deliver thatcarbon-reduced ingredient, then
they'll go to someone else andin the future.
I mean, I know there's somescepticism around it, but in
terms of some of these syntheticproteins because they're not
(13:14):
trying to replicate a burger,it's just an ingredient that
people aren't necessarily awareof um, there's going to be
competition from that as well,because for most of these major
companies, the biggest part oftheir scope three emissions is
dairy.
So it's an issue.
It's very much on the radar allover the world Different
approaches to how we deal withit, but everyone's talking about
(13:37):
it.
Speaker 1 (13:38):
How big a part is technology playing in the
solution?
Because that's a debate we havehere in New Zealand about going
.
We feel like we're sitting in apretty good space from an
efficiency point of view.
We've got a good story to tellthere.
We're fearful of newtechnologies and other countries
potentially leapfrogging us.
What do you see in that space?
Is that stuff coming online?
Is it happening already or isit still developing?
Speaker 2 (14:01):
Yeah, look, we're seeing it develop fast and you
know, within the Everag business, as I said, you know already
accreditating reduced carbonfootprint ingredients, that's a
reality.
That's kind of come on streamalmost within the last six to
eight months.
It's been quick.
It's been quick, yeah, and soyou know the software around it,
some of the software being usedby, like Arla, for example, in
(14:25):
Denmark, with their farmers tomanage and reduce their carbon
footprint.
They've really taken this bythe throat and they think they
can do massive reductions onfarm with some of these new
technologies, some of it's.
You know it's going to be awhole lot of different
approaches depending ondifferent systems, or you know
(14:47):
the different, as you say, thedifferent opportunities that you
have in different markets, buteverybody's looking at this
issue across the world.
Speaker 3 (14:54):
And so we've heard from Terra and New Zealand how
it's going to affect us.
Is there going to be muchchanges between Australia and
New Zealand in terms of how thatwill be felt through the value
chain?
Speaker 2 (15:05):
Look, I think you know we don't have and I know
it's backed off a little bit inNew Zealand in terms of the
regulatory and compliance space.
We don't really have thatpressure because I mean, we're
doing the job by just shrinkingas an industry Didn't mean to,
but you know we're well belowthe radar because we have a lot
(15:26):
of issues with you know fossilfuels and the way we.
Yeah, other industries Like.
We're a very small part of ourcarbon footprint as a country,
but still we have customers, andin our case, it's the retailers
as well, who are very powerfulin Australia.
They also want to deal withthese issues.
They also want to reach backinto their supply chains and
(15:47):
start to be able to say thingsabout how they've reduced their
footprint and how they're doingthe right thing in this space.
So just about every customerfor everyone is looking at this
and reaching back into theirsupply chains and seeing what's
possible.
So I think the question foreveryone across the world is,
though and you raised it today,I think, wade who's going to pay
(16:08):
for it and how a farmer's goingto be paid for it, which is the
big one.
Speaker 1 (16:14):
And I think that's been an issue particularly in
New Zealand with New Zealandfarmers.
You know New Zealand farmershave been asking you know
where's the value?
You know we get told that we'rereally good, we're told we're
really efficient.
We're told, you know, weproduce products in a kind of
very much just socially,environmentally, sort of
sustainable way.
Where's the value?
And the kind of the story thatcomes back is go well, it's
(16:35):
actually it's kind of, you know,protecting the value that's
there.
The added value is not as greatas what our farmers would hope
it to be, so is that kind ofwhat you see going forward?
Speaker 2 (16:47):
Yeah, it's a ticket to play, you know, in the next
five to ten years.
It's a ticket to play becausethere are other sources of fat
and protein.
You know it doesn't have to bedairy all the time everywhere.
And you know, with thevolatility that we've seen in,
you know, at the moment, just inthe short term, in butterfat,
people are starting tosubstitute away from butterfat
(17:08):
when they can in theiringredients, in their you know
manufactured goods.
They're starting to tweak therecipes a bit because if that
price gets too far out of lineor if it's too much for your
scope 3 emissions, then youmight look at a way to
substitute away from that.
And it's not necessarily adifferent dairy supplier, it
could be a different source offat or protein.
(17:29):
So I think you know we'vereally got to be aware as an
industry that we're getting somevery strong messages about that
and we really need to respondas best we can.
Speaker 1 (17:39):
Yeah, nice.
Can you tell us a little bitabout and this is probably
really of interest to ourfarmers the China story, because
we hear a little bit aboutwhat's you know happening around
the demand for dairy in China.
We also hear stories about sortof a move towards protectionism
, so really looking after yourown sort of self-sufficiency, if
(18:04):
you like, and has there been amove to that?
What are you seeing in Chinaand how is that influencing
perhaps what we're seeing in theshort term with dairy prices?
Speaker 2 (18:12):
Yeah, that's a really interesting space and China, as
we know, and your listenerswould know, is a fairly opaque
market.
It's really hard to understandexactly what's going on.
But broadly, what we've seen isthere has been a big push in
China over many years to replacea lot of the smaller farms with
larger, more corporate-stylefarms, a lot of them in kind of
(18:36):
a US-style production system, toimprove the quality of the
local product, and part of thatis a self-sufficiency drive,
although when you're importingalfalfa hay, I mean, it's not
cheap milk, right?
Yeah yeah.
But we have seen this real pushby the Chinese government to
sort of clean out thatproduction sector and make it
(18:58):
much more, you know, efficientand also quite integrated with
some of the larger dairycompanies up there.
So we've seen a lot of thesebig farm projects and over the
years, you know, there's been abig live export trade obviously
and I know there's been a ban inNew Zealand and that's up for
grabs at the moment, but reallythat heifer trade has almost
(19:18):
stopped.
A lot of those projects haveeither been canned or they've
been slowed because the marginfor those guys is basically not
there.
So we're seeing production isnow slowing down but milk price
over there is slowing even moreor falling even faster.
So we're still in an oversupplysituation and that really
(19:42):
reflects that.
Post the second round of verysevere lockdowns in China, the
economy hasn't recovered and thegovernment has taken the view
that they're not going tostimulate the economy like they
have in the past and soconsumers are extremely cautious
.
So the offtake in terms of UHTmilk production, some of that,
you know, when people would goout and about and just get their
(20:03):
bubble teas or whatever theywant at a convenience store a
lot of that trade has reallyslowed and so, without that
trade, more of the localproduction has been dried into
whole milk powder, skim milkpowder to a much lesser extent.
So we've just seen thatrequirement basically for
(20:23):
imported product really slowdown over the last couple of
months.
We're starting to see thosestocks are coming back a little
bit.
But the other key thing wethink is that the preference for
imported product isn't there asstrongly as it was maybe five
to ten years ago when we weremuch closer to that melamine,
you know, contaminated product.
(20:44):
Because they've cleaned uptheir production sector, because
they've really pushed thequality of their local product,
there's not that strongpreference for imported product
anymore.
And so what we're sort ofseeing, we think, is a bit of a
reset in terms of China'srequirements for homework powder
and imported ingredients, thatthey will try and maintain some
(21:06):
self-sufficiency, although justin the last week the
government's announced that theywant to guide production of
milk.
Speaker 1 (21:13):
It's quite a loose term, isn't it Very loose.
What does that mean?
Speaker 2 (21:16):
Well, usually it means they're going to kill a
whole lot of animals.
So they did it with pork.
They got, I guess, the supplyand demand wrong and they
reduced the pork herd to try andget that supply chain into a
bit more balance.
And there's been anannouncement just in the last
week that they're going to dothe same with dairy, but we've
only seen one announcement.
So everyone's waiting going.
Speaker 3 (21:39):
You know, is it really happening?
How's this going to play out?
Exactly right.
Speaker 2 (21:43):
Yeah, but you know with China they've done it
before and if they say they'regoing to do it, they'll probably
do it again.
So they're going to try andrebalance their internal
production, and where thatactually comes out in terms of
their ongoing need for importedingredients is going to be
really interesting.
So, we don't know, but probablythe strategy would be don't
(22:03):
rely too much on China.
Speaker 1 (22:05):
I was wondering are we getting to a key message here
?
I think you've probably hit thekey message on the head.
Yeah, yeah.
Speaker 2 (22:12):
Which you know.
Speaker 1 (22:13):
New.
Speaker 2 (22:13):
Zealand has already done has reduced its reliance on
China and looked at those othermarkets and all that sort of
stuff and that seems like areally smart strategy.
Speaker 1 (22:22):
Yeah, are there other markets that stand out to you
as opportunities over the nextkind of five to ten years, like
where might they sit?
Speaker 2 (22:30):
Yeah, look, I suppose the obvious one for our part of
the world is Southeast Asia andthat as a region is the biggest
buyer of dairy products andit's right on our doorstep.
We're not as competitive intothe Middle East just because of
proximity.
Europe's got proximity thereand that's also, you know, quite
a low value market, for youknow it's quite price sensitive
(22:51):
in terms of a market.
So Southeast Asia is theobvious one.
Just in the short term.
A couple of those larger dairyimporting countries have been
really hard hit out of COVID aswell and so they're still
experiencing quite high levelsof inflation.
Food inflation is increasing.
The currency has really movedagainst them as well.
(23:11):
So there are some affordabilityissues for that region.
But certainly long-term justproduction growth, a bit of
income growth.
You know that is a reallyimportant ongoing region for us
in the oceania region, morespecifically for new zealand,
that's going to be where we'vegot an advantage.
We've got free trade agreements, we've got the proximity.
(23:32):
But you know the question isthe in the into the medium term,
how much of that demand comesback and at what price, is a
really tricky thing.
Speaker 3 (23:45):
You had a graph there that showed the states out in
the medium to long term being alarge player in terms of output.
Are they going to be a real?
Are we going to be battling forthem in that growing market?
Speaker 2 (23:59):
Yeah, look it is.
You know, in terms of theexisting exporting producing
regions, the US is the only onethat we see has got the
opportunity to increase cownumbers and increase production
significantly, and they arealready in those regions.
We do have a head start becausethere's not a really good
(24:21):
exporting culture in the USdairy industry at the moment,
because it's been more of anopportunistic thing.
When you've got such a bigdomestic market, it's kind of
like oh, the CME is just a bit,you know, oversupplied, we'll
chuck a bit too.
Speaker 3 (24:35):
Sorry, CME.
Speaker 2 (24:37):
Sorry, the Chicago Mercantile Exchange, yes, Good
work mate.
Speaker 3 (24:43):
It wouldn't just be me, I'm sure yeah sorry about
that.
Speaker 2 (24:48):
So the US market's a bit oversupplied.
We'll just sling some, you know, offshore somewhere and it's
been very much price-basedcompetition.
They, with this additionalcapacity that they're investing
in with that growth, they'regoing to get a lot more serious
about exporting.
So it's staying out in front ofthat.
(25:08):
You know, being the exporter ofchoice is going to be really
important in the next five toten years because they will
definitely begin testing in ourmarkets, mostly for cheese, but
also for ingredientsincreasingly.
Speaker 1 (25:21):
Yeah, Any tips for how we stay out on front?
I really wanted to get those.
Just keep being nice guys, yeah.
High quality you know, deliverwhat the customer wants all that
sort of stuff, the good stuffyeah, that's right, it's the
Kiwi way.
Speaker 2 (25:37):
It's always the Kiwi way.
You're famous for it.
Yeah Look.
Speaker 1 (25:42):
I guess, joe, you know what we're keen to sort of
just wrap up on.
You have given us a greatoverview of kind of what's going
on in various markets, but arethere some things that you know
from our listeners' point ofview, things that you think
would be really good to sort oftake away or sort of sum up some
of the trends?
And hopefully some of thosethings are good for the outlook
(26:06):
of the New Zealand dairyindustry.
But can you give us thatinsight?
Speaker 2 (26:09):
Yeah, absolutely look , I think in the short term.
I think the message is milkproduction is hard everywhere
around the world.
It's not just in New Zealand orAustralia like milk is not
growing but the demand for it isdefinitely there.
So into the medium term we willsee those markets, particularly
in our part of the world,increase.
(26:29):
It will apply upward pressureon commodity prices and that
flows, of course, through tofarm gate milk prices.
But I also think that therewill be more recognition and
more requirement for sustainableproduction systems that are
auditable, that people believein, that are real and not just
(26:50):
an accounting trick.
So that's gonna.
That's gonna flow right backinto what cows are being fed,
where it comes from and the therequirements for that are only
going to increase, I think,because I don't think, even with
the regulation space backingoff, I think the market will
still be there and still bedemanding that the dairy does
its bit in terms of thatsustainability piece.
(27:12):
So keep fighting that goodfight, I reckon.
Speaker 1 (27:15):
Well, yeah, it's interesting to get your
perspective on it because weobviously hear a lot of that in
New Zealand and we hear itlargely via the dairy companies
in terms of the market demandsfor the way the product is
produced.
Hear a lot of that in NewZealand and we hear it largely
via the dairy companies in termsof the market demands for the
way you know the product isproduced.
And your interesting point youmake about auditing you know
we're seeing more of thatstarting to flow through and how
numbers are captured andrecorded and we're probably not
(27:38):
getting a good oversight as tohow that's going back to the
customer, but but it's certainlybeing captured, the
information's being captured.
So I'm assuming for auditpurposes.
Speaker 2 (27:46):
Yes, yeah, I mean, I think trust is a big piece in
all of this, that consumers wantto feel good about what they
consume, especially some of themore, I guess, affluent
consumers that can afford to pay.
They want to feel good aboutwhat they're consuming and so
you need to, you know, reallydevelop and maintain that trust
which dairy has, which NewZealand dairy has in spades.
(28:08):
But it's really important tokeep in front of that, I think,
in the next five to ten years.
Speaker 3 (28:13):
We've always talked about having the story right and
you've got the cow and thepasture and everything, and so
for us it's now leveraging offthat with low emissions milk.
Speaker 2 (28:23):
Yes, absolutely it's us.
It's now leveraging off thatwith low emissions milk.
Yes, absolutely it's where it'sat.
Speaker 1 (28:28):
I want to finish with one final comment from you.
Jo, you talked a little bitabout competition and I think
you might have mentioned itbriefly.
But synthetic proteins Do yousee that as a serious threat or
has that kind of come and gone?
Is that yesterday's fish andchip paper?
Speaker 2 (28:44):
Well, we certainly have seen that the rise and fall
of of alternative meats hasthey've really fallen out of
favor.
Um, I think, with the, the costof living pressures that people
around you, they're just notprepared to pay for it and in
some cases it's not a greatproduct.
I think where the competitionmay come for dairy is in some of
the ingredient spaces, thelower value ingredient
(29:06):
applications, where maybeconsumers aren't so sensitive
about that but it's yet to beproven scalable.
I mean, there has been a lot ofmoney thrown at that part of
the you know agri-tech foodcomplex and it's difficult to
actually get that working atscale.
But I think it's more themessage that it sends that
(29:29):
there's a lot of money goingtowards these products that
maybe we need to address some ofthe concerns that people have,
which is making them invest inthat area.
So I think, ignore it at yourperil.
I don't think we should relax,but we should hope it all falls
over as well.
Speaker 1 (29:46):
I did have a meatless burger recently.
It was chicken and bacon.
Speaker 2 (29:50):
How did that go for you?
Speaker 1 (29:52):
It was pretty.
It was reasonably average, tobe fair.
Speaker 3 (29:54):
But had they told me, I think you're better off just
not having the bread with itmate, yeah, I had to try it.
Speaker 1 (30:01):
You know, I was in a meat-free restaurant, so when in
Rome, give it a try.
Speaker 3 (30:07):
Walk past that restaurant, yeah walk past the
restaurant.
Speaker 1 (30:10):
Yeah, yeah, totally.
No, for next time, totally yeahLook, Joe, it's been absolutely
awesome having you here thisafternoon and really enjoyed
your presentation as well.
You've given us some good sortof global overviews.
Before I wrap up, Matt, anykind of final points from you or
anything that we've missed?
Speaker 3 (30:27):
No, I just think it's great that we're getting the
Aussie flavour coming through.
So thanks Jo, it's been apleasure and really enjoyed your
talk today.
Speaker 2 (30:35):
So thanks for joining us, thanks so much for having
me, guys, it's been a greatpleasure Very good, all right,
so A great pleasure.
Speaker 1 (30:40):
Very good, all right, so look, hopefully listeners
have enjoyed this episode.
As I said, jo, it's been greatto have your views.
For those that have enjoyed thelisten today, be sure to like
and subscribe.
You know that's how we get yoursupport and continue to offer
podcasts going forward.
So please do that, share itwith your friends and we'll look
(31:00):
forward to listening or for youguys to listen in next time.
Speaker 3 (31:05):
Thanks very much Thanks, joe.
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.
Hi all, welcome to this episodeof Feed for Thought.
My name's Wade Bell and, asoften I do, I've got my
colleague Matt Dalley with and,yeah, look, it's a real
(00:25):
privilege again to be hosting anew guest.
So, jo Bills, welcome along tothis podcast.
Great to have you here, thankyou, yeah, so no doubt our
listeners will pick up veryshortly that you have a slightly
different accent to us.
We'll get to that in a moment.
But we're sitting in a roomhere in Brisbane just on the
back of attending a conferenceand obviously you've given a
(00:49):
really good global snapshot,particularly around the dairy
market, and we're going to getinto that shortly.
But before I do and I'll tryand get this right you're the
Director for Global Insights forEverAg, is that right?
That's quite a tongue twisterthat.
Speaker 2 (01:03):
It is a bit of a mouthful.
Speaker 1 (01:11):
That's why we we got you to say it yeah, correct,
exactly right, yeah, yeah, yeah.
So look great to have you along, uh, and look really privileged
to hear your presentation.
Uh, you know, you really mixthat up with a a little bit of
that new zealand aussie.
You know a few comparisonsthere.
I'd love to say we won allthose comparisons, but I'm not
so sure that we did, but thenbrought that out to some more
global perspectives.
But do you want to start on theNew Zealand-Aussie kind of?
(01:31):
You know what are some of thedifferences that you see between
those two dairy players?
Speaker 2 (01:36):
Yeah Well, look, I did sort of want to highlight
that we always have a reallygood rivalry between Australia
and New Zealand.
I can't actually believe you'vebeen allowed back into the
country, to be honest.
Speaker 1 (01:47):
We're only here for short term.
You've got a time limit.
Speaker 2 (01:52):
But I did want to sort of talk to the audience
about some of the differencesbetween our two industries
because for a long time throughthe 90s we were pretty much on a
similar trajectory, very muchboth pasture-based industries.
We were growing at about thesame volume through the 90s and
(02:12):
then we hit this hurdle of theearly 2000s with deregulation
and drought.
We've flattened out.
You guys kept going and thegrowth in New Zealand production
pretty much mirrored the growthin demand from China.
But after 2015, we've both kindof levelled out.
So we're both in that same kindof you know, at a macro level
(02:33):
Growth is hard to attain.
But some interestingcomparisons I thought in terms
of you know, bigger herds in NewZealand but much more
productive cows in Australia,because we do feed our cows.
Speaker 1 (02:47):
Yes, yeah, nice little dig there, yeah, yeah.
Speaker 2 (02:50):
I thought I'd get that one in, but also in terms
of our seasonal profiles, veryflat production in Australia.
Speaker 3 (02:59):
Yeah, you had an interesting stat on the peak and
trough.
Speaker 2 (03:02):
Yeah, peak to trough ratio, which is just the peak
month of production divided bythe lowest month of production,
and in New Zealand it's about 13to 1.
In Australia it's 1.6 to 1.
So we've really gone, we'veflattened our profile for
production and that's reallybeen reflected of the fact that
we don't have massive stainlesssteel, you know whole milk
(03:25):
powder machines in Australia.
We've got a very fragmentedsupply chain compared to New
Zealand.
So, as I said, there's onecompany in New Zealand that
accounts for 79% of all milkproduction and in Australia that
biggest company is 17% of milkproduction and it's Fonterra in
(03:46):
both places.
So really fragmented supplychain and the greenhouse gas
emissions that New Zealand dairyaccounts for around about 25%
and in Australia it's about 3%.
So some of those pressuresaround some of those
sustainability issues you wouldthink are a little bit different
, but in fact you know it'sstill a factor for Australian
(04:09):
producers as well.
Speaker 1 (04:12):
So a couple of things out of that One.
You've got very much probably amore TMR style system in
Australia versus what we call,say, total mixed ration here in
Australia versus, say, we're inZealand is very much
pasture-based and obviouslysupplements are added, but not
to the same level of intensity.
Speaker 2 (04:32):
Yeah, there's probably still not a huge
percentage of farms that aretotal TMR but we have a big
continuum just based on climateconditions.
But there will be a lot ofAussie farmers that have
invested in the feed pads andthe feeding out infrastructure
here and so are committed tofeeding, you know, for a big
chunk of the year, particularlyin some of the irrigated regions
(04:53):
here.
So it is a really different,you know, and much more
complicated perhaps, systemsthat we operate in in Australia
quite challenging in terms ofgetting that growth, whereas
we've seen in New Zealand reallygood at growing pasture, really
good at pumping that milkthrough those big stainless
(05:14):
steel factories.
It's a very, very differentpicture.
Speaker 3 (05:18):
We've got a compliment as well.
Yeah, absolutely.
Speaker 1 (05:21):
Yeah, absolutely.
And in terms of where theproduct goes, some real
differences there too, right?
So consumer versus the food andingredients.
Speaker 2 (05:31):
Yeah, look, in Australia our biggest use of
milk is cheese and most of thatcheese about half of it is
exported.
But a lot of that cheese goesinto retail packs.
So we've got a very good cheesemarket in Australia as well as
some good export markets,particularly in Asia.
But most of our production now30% goes into fresh milk, 40% of
(05:54):
manufacturing milk goes intocheese.
So ingredients is becoming asmaller and smaller portion of
our production here, which youknow, given Fonterra's
announcements in May, kind ofmakes sense that they've decided
that they want to put thatbusiness up for sale because it
doesn't necessarily fit withtheir strategy.
Speaker 3 (06:14):
Yeah for sure.
Yep and Jo, you went into a fewmacro or global comparisons, I
suppose, and something thatstruck me was the European
versus the US markets and thedemand through those markets are
very, very different.
Speaker 2 (06:31):
Yes, yeah, yeah, it's interesting.
At the moment both of thosemarkets are big producers of
dairy but also have very largelocal markets, but the kind of
constitution of their markets isvery different.
So much more dairy goes intofood service in the US, but in
(06:52):
Europe it's much more retailfocused and we're finding, in
this last cycle, where householdincomes are coming under
pressure, what we used to see inthe US particularly is their
demand for cheese would increasebecause a lot of people would
trade down to the takeawayoptions, the pizzas, the burgers
, very cheese-rich options.
But we haven't actually seenthat this time.
(07:14):
In Europe their demand has alsobeen under a fair bit of
pressure because their inflationimpacts have been much more
severe.
Speaker 3 (07:22):
Yes.
Speaker 2 (07:23):
But they tend to be so much more of a traditional,
you know, butter consumer orcheese consumer.
Their demand is actually prettysteady.
But what's been interestingthis time is the US kind of
cycle has really changed andthere's been a bit of discussion
whether that's about Ozempicand some of those weight loss
drugs that they're actually notconsuming as much of that fast
(07:47):
food as they used to.
So it's something we're lookingat in the business and really
interesting stuff.
Speaker 1 (07:52):
So you spend a fair bit of your time, obviously in
the US and around those markets.
Speaker 2 (07:58):
Well, yeah, I mean we've sold out.
So our Fresh Agenda business.
We've been consulting in globaldairy markets for about 10
years and then last year we soldourselves to EverAg.
So we've got a fantasticinsights team that's a lot
focused on the US market and wewould always monitor the US
market.
But now we've got theseextremely deep insights into
(08:21):
what's happening in the US andjust with the size of that
market and also the size of theinvestment that's going into
particularly cheese in thatmarket, I guess that's given us
a real pause for thought interms of everyone's producing
cheese now and it's fairlyvolatile and fairly competitive,
(08:42):
and now we're going to have allof this US cheese capacity
coming on stream.
So again it kind of underlineswhy maybe Fonterra are saying
let's double down in thisingredients space and food
service but not try and you know, get too exposed to some of
those cheese markets where thecompetition is just going to
increase.
Speaker 3 (09:02):
Yeah, yeah, yeah.
Speaker 1 (09:03):
So do you see, you know, just talking about the US
in particular, you know they'reobviously a big milk supplier,
you know, do they?
You know we like to sort ofmake comparisons with ourselves
and the way we produce milk.
You know, where do they havesome competitive advantages that
perhaps we don't have, and viceversa?
Do you kind of get a feel forsome of those?
Speaker 2 (09:30):
Yeah, look, I think in the us there is, there does
seem to be a lot more access tocapital.
Um, for some really largeproduction facilities and a lot
of the, the new investment isreally highly integrated.
So large farms and they're someof them are just a group of
families, but very large farmsthat are now putting in cheese
capacity, so they're verticallyintegrated businesses and for
some of them they're literallypumping the milk through the
(09:53):
wall into the factory.
And a lot of those businessesare also because they're mostly
housed cows.
They're able to capture methane, convert it into gas, sell it
into the grid.
They're able to do a lot ofthose kind of additional usage
of some of the waste productsthat may be in a pastoral system
(10:16):
and it's the same in Australia.
Smaller scale, still mostlypasture-based.
That's really hard for us to do, but a lot of these new larger
farms are almost closed systems.
So you know they're kind ofgenerating all of this waste but
they're able to utilise it indifferent ways and close their
(10:36):
sustainability loop.
So it's not our vision ofsustainable from our perspective
in this part of the world, butthey would say it's very
sustainable in terms of beingable to capture those waste
streams and turn them intosomething good.
Speaker 1 (10:50):
So they're selling.
There's a value to the waste,or the by-product, if you like.
Speaker 2 (10:56):
Yeah, particularly in California, where the
government's really got behindsome of these carbon markets,
there are farmers that aremaking pretty good incomes from
selling the carbon that they'vetaken out of their system to
other industries so we wouldcall them offset.
So they're selling to otherindustries and saying we've
reduced our carbon by this muchhere, have that much to offset
(11:19):
your fossil fuel plant overthere.
Yeah, which, you know, itsounds like a bit of dodgy
accounting.
There's starting to be a bit ofconcern within the dairy
industry that we need to startinsetting because a lot of these
offsets have been sold out ofour value chain and we're
actually going to need them asan industry if things, you know,
(11:39):
change in five to ten years.
And I guess that's what'sinteresting about the US.
It's a really rapidly evolvingspace, yeah, quite different to
the European situation whereit's very much top-down
regulation.
The European Commission saysthis is the new grand deal, this
is what we need to achieve.
All of your countries go andput rules in place to achieve it
(11:59):
.
In the US it's like let's makesustainability as a service and
let's make a market out of itand let's, you know, start to
market carbon, reduced carbonfootprint, ingredients that
we've audited and we've, youknow, got this software to tell
you that it's all legit.
So it's a very fast-movingspace in the States.
Speaker 3 (12:20):
So do you reckon that's why we're getting more of
a favour for sustainabilitymessages in New Zealand?
Do you see that as a mouthful?
Is that getting that push downthrough those larger companies,
through that value being createdthere?
Speaker 2 (12:31):
Yeah, look, I think there's certainly the larger
companies the Nestles, theDanones, the Unilevers.
They're reaching back intotheir supply chains in every
part of the world to try and getthose scope three emissions
dealt with.
You know they are investing insome instances, which is really
good.
(12:51):
It's sort of a partnershipmodel.
But it's really tough for themand you know the reality is, if
you can't deliver thatcarbon-reduced ingredient, then
they'll go to someone else andin the future.
I mean, I know there's somescepticism around it, but in
terms of some of these syntheticproteins because they're not
(13:14):
trying to replicate a burger,it's just an ingredient that
people aren't necessarily awareof um, there's going to be
competition from that as well,because for most of these major
companies, the biggest part oftheir scope three emissions is
dairy.
So it's an issue.
It's very much on the radar allover the world Different
approaches to how we deal withit, but everyone's talking about
(13:37):
it.
Speaker 1 (13:38):
How big a part is technology playing in the
solution?
Because that's a debate we havehere in New Zealand about going
.
We feel like we're sitting in apretty good space from an
efficiency point of view.
We've got a good story to tellthere.
We're fearful of newtechnologies and other countries
potentially leapfrogging us.
What do you see in that space?
Is that stuff coming online?
Is it happening already or isit still developing?
Speaker 2 (14:01):
Yeah, look, we're seeing it develop fast and you
know, within the Everag business, as I said, you know already
accreditating reduced carbonfootprint ingredients, that's a
reality.
That's kind of come on streamalmost within the last six to
eight months.
It's been quick.
It's been quick, yeah, and soyou know the software around it,
some of the software being usedby, like Arla, for example, in
(14:25):
Denmark, with their farmers tomanage and reduce their carbon
footprint.
They've really taken this bythe throat and they think they
can do massive reductions onfarm with some of these new
technologies, some of it's.
You know it's going to be awhole lot of different
approaches depending ondifferent systems, or you know
(14:47):
the different, as you say, thedifferent opportunities that you
have in different markets, buteverybody's looking at this
issue across the world.
Speaker 3 (14:54):
And so we've heard from Terra and New Zealand how
it's going to affect us.
Is there going to be muchchanges between Australia and
New Zealand in terms of how thatwill be felt through the value
chain?
Speaker 2 (15:05):
Look, I think you know we don't have and I know
it's backed off a little bit inNew Zealand in terms of the
regulatory and compliance space.
We don't really have thatpressure because I mean, we're
doing the job by just shrinkingas an industry Didn't mean to,
but you know we're well belowthe radar because we have a lot
(15:26):
of issues with you know fossilfuels and the way we.
Yeah, other industries Like.
We're a very small part of ourcarbon footprint as a country,
but still we have customers, andin our case, it's the retailers
as well, who are very powerfulin Australia.
They also want to deal withthese issues.
They also want to reach backinto their supply chains and
(15:47):
start to be able to say thingsabout how they've reduced their
footprint and how they're doingthe right thing in this space.
So just about every customerfor everyone is looking at this
and reaching back into theirsupply chains and seeing what's
possible.
So I think the question foreveryone across the world is,
though and you raised it today,I think, wade who's going to pay
(16:08):
for it and how a farmer's goingto be paid for it, which is the
big one.
Speaker 1 (16:14):
And I think that's been an issue particularly in
New Zealand with New Zealandfarmers.
You know New Zealand farmershave been asking you know
where's the value?
You know we get told that we'rereally good, we're told we're
really efficient.
We're told, you know, weproduce products in a kind of
very much just socially,environmentally, sort of
sustainable way.
Where's the value?
And the kind of the story thatcomes back is go well, it's
(16:35):
actually it's kind of, you know,protecting the value that's
there.
The added value is not as greatas what our farmers would hope
it to be, so is that kind ofwhat you see going forward?
Speaker 2 (16:47):
Yeah, it's a ticket to play, you know, in the next
five to ten years.
It's a ticket to play becausethere are other sources of fat
and protein.
You know it doesn't have to bedairy all the time everywhere.
And you know, with thevolatility that we've seen in,
you know, at the moment, just inthe short term, in butterfat,
people are starting tosubstitute away from butterfat
(17:08):
when they can in theiringredients, in their you know
manufactured goods.
They're starting to tweak therecipes a bit because if that
price gets too far out of lineor if it's too much for your
scope 3 emissions, then youmight look at a way to
substitute away from that.
And it's not necessarily adifferent dairy supplier, it
could be a different source offat or protein.
(17:29):
So I think you know we'vereally got to be aware as an
industry that we're getting somevery strong messages about that
and we really need to respondas best we can.
Speaker 1 (17:39):
Yeah, nice.
Can you tell us a little bitabout and this is probably
really of interest to ourfarmers the China story, because
we hear a little bit aboutwhat's you know happening around
the demand for dairy in China.
We also hear stories about sortof a move towards protectionism
, so really looking after yourown sort of self-sufficiency, if
(18:04):
you like, and has there been amove to that?
What are you seeing in Chinaand how is that influencing
perhaps what we're seeing in theshort term with dairy prices?
Speaker 2 (18:12):
Yeah, that's a really interesting space and China, as
we know, and your listenerswould know, is a fairly opaque
market.
It's really hard to understandexactly what's going on.
But broadly, what we've seen isthere has been a big push in
China over many years to replacea lot of the smaller farms with
larger, more corporate-stylefarms, a lot of them in kind of
(18:36):
a US-style production system, toimprove the quality of the
local product, and part of thatis a self-sufficiency drive,
although when you're importingalfalfa hay, I mean, it's not
cheap milk, right?
Yeah yeah.
But we have seen this real pushby the Chinese government to
sort of clean out thatproduction sector and make it
(18:58):
much more, you know, efficientand also quite integrated with
some of the larger dairycompanies up there.
So we've seen a lot of thesebig farm projects and over the
years, you know, there's been abig live export trade obviously
and I know there's been a ban inNew Zealand and that's up for
grabs at the moment, but reallythat heifer trade has almost
(19:18):
stopped.
A lot of those projects haveeither been canned or they've
been slowed because the marginfor those guys is basically not
there.
So we're seeing production isnow slowing down but milk price
over there is slowing even moreor falling even faster.
So we're still in an oversupplysituation and that really
(19:42):
reflects that.
Post the second round of verysevere lockdowns in China, the
economy hasn't recovered and thegovernment has taken the view
that they're not going tostimulate the economy like they
have in the past and soconsumers are extremely cautious
.
So the offtake in terms of UHTmilk production, some of that,
you know, when people would goout and about and just get their
(20:03):
bubble teas or whatever theywant at a convenience store a
lot of that trade has reallyslowed and so, without that
trade, more of the localproduction has been dried into
whole milk powder, skim milkpowder to a much lesser extent.
So we've just seen thatrequirement basically for
(20:23):
imported product really slowdown over the last couple of
months.
We're starting to see thosestocks are coming back a little
bit.
But the other key thing wethink is that the preference for
imported product isn't there asstrongly as it was maybe five
to ten years ago when we weremuch closer to that melamine,
you know, contaminated product.
(20:44):
Because they've cleaned uptheir production sector, because
they've really pushed thequality of their local product,
there's not that strongpreference for imported product
anymore.
And so what we're sort ofseeing, we think, is a bit of a
reset in terms of China'srequirements for homework powder
and imported ingredients, thatthey will try and maintain some
(21:06):
self-sufficiency, although justin the last week the
government's announced that theywant to guide production of
milk.
Speaker 1 (21:13):
It's quite a loose term, isn't it Very loose.
What does that mean?
Speaker 2 (21:16):
Well, usually it means they're going to kill a
whole lot of animals.
So they did it with pork.
They got, I guess, the supplyand demand wrong and they
reduced the pork herd to try andget that supply chain into a
bit more balance.
And there's been anannouncement just in the last
week that they're going to dothe same with dairy, but we've
only seen one announcement.
So everyone's waiting going.
Speaker 3 (21:39):
You know, is it really happening?
How's this going to play out?
Exactly right.
Speaker 2 (21:43):
Yeah, but you know with China they've done it
before and if they say they'regoing to do it, they'll probably
do it again.
So they're going to try andrebalance their internal
production, and where thatactually comes out in terms of
their ongoing need for importedingredients is going to be
really interesting.
So, we don't know, but probablythe strategy would be don't
(22:03):
rely too much on China.
Speaker 1 (22:05):
I was wondering are we getting to a key message here
?
I think you've probably hit thekey message on the head.
Yeah, yeah.
Speaker 2 (22:12):
Which you know.
Speaker 1 (22:13):
New.
Speaker 2 (22:13):
Zealand has already done has reduced its reliance on
China and looked at those othermarkets and all that sort of
stuff and that seems like areally smart strategy.
Speaker 1 (22:22):
Yeah, are there other markets that stand out to you
as opportunities over the nextkind of five to ten years, like
where might they sit?
Speaker 2 (22:30):
Yeah, look, I suppose the obvious one for our part of
the world is Southeast Asia andthat as a region is the biggest
buyer of dairy products andit's right on our doorstep.
We're not as competitive intothe Middle East just because of
proximity.
Europe's got proximity thereand that's also, you know, quite
a low value market, for youknow it's quite price sensitive
(22:51):
in terms of a market.
So Southeast Asia is theobvious one.
Just in the short term.
A couple of those larger dairyimporting countries have been
really hard hit out of COVID aswell and so they're still
experiencing quite high levelsof inflation.
Food inflation is increasing.
The currency has really movedagainst them as well.
(23:11):
So there are some affordabilityissues for that region.
But certainly long-term justproduction growth, a bit of
income growth.
You know that is a reallyimportant ongoing region for us
in the oceania region, morespecifically for new zealand,
that's going to be where we'vegot an advantage.
We've got free trade agreements, we've got the proximity.
(23:32):
But you know the question isthe in the into the medium term,
how much of that demand comesback and at what price, is a
really tricky thing.
Speaker 3 (23:45):
You had a graph there that showed the states out in
the medium to long term being alarge player in terms of output.
Are they going to be a real?
Are we going to be battling forthem in that growing market?
Speaker 2 (23:59):
Yeah, look it is.
You know, in terms of theexisting exporting producing
regions, the US is the only onethat we see has got the
opportunity to increase cownumbers and increase production
significantly, and they arealready in those regions.
We do have a head start becausethere's not a really good
(24:21):
exporting culture in the USdairy industry at the moment,
because it's been more of anopportunistic thing.
When you've got such a bigdomestic market, it's kind of
like oh, the CME is just a bit,you know, oversupplied, we'll
chuck a bit too.
Speaker 3 (24:35):
Sorry, CME.
Speaker 2 (24:37):
Sorry, the Chicago Mercantile Exchange, yes, Good
work mate.
Speaker 3 (24:43):
It wouldn't just be me, I'm sure yeah sorry about
that.
Speaker 2 (24:48):
So the US market's a bit oversupplied.
We'll just sling some, you know, offshore somewhere and it's
been very much price-basedcompetition.
They, with this additionalcapacity that they're investing
in with that growth, they'regoing to get a lot more serious
about exporting.
So it's staying out in front ofthat.
(25:08):
You know, being the exporter ofchoice is going to be really
important in the next five toten years because they will
definitely begin testing in ourmarkets, mostly for cheese, but
also for ingredientsincreasingly.
Speaker 1 (25:21):
Yeah, Any tips for how we stay out on front?
I really wanted to get those.
Just keep being nice guys, yeah.
High quality you know, deliverwhat the customer wants all that
sort of stuff, the good stuffyeah, that's right, it's the
Kiwi way.
Speaker 2 (25:37):
It's always the Kiwi way.
You're famous for it.
Yeah Look.
Speaker 1 (25:42):
I guess, joe, you know what we're keen to sort of
just wrap up on.
You have given us a greatoverview of kind of what's going
on in various markets, but arethere some things that you know
from our listeners' point ofview, things that you think
would be really good to sort oftake away or sort of sum up some
of the trends?
And hopefully some of thosethings are good for the outlook
(26:06):
of the New Zealand dairyindustry.
But can you give us thatinsight?
Speaker 2 (26:09):
Yeah, absolutely look , I think in the short term.
I think the message is milkproduction is hard everywhere
around the world.
It's not just in New Zealand orAustralia like milk is not
growing but the demand for it isdefinitely there.
So into the medium term we willsee those markets, particularly
in our part of the world,increase.
(26:29):
It will apply upward pressureon commodity prices and that
flows, of course, through tofarm gate milk prices.
But I also think that therewill be more recognition and
more requirement for sustainableproduction systems that are
auditable, that people believein, that are real and not just
(26:50):
an accounting trick.
So that's gonna.
That's gonna flow right backinto what cows are being fed,
where it comes from and the therequirements for that are only
going to increase, I think,because I don't think, even with
the regulation space backingoff, I think the market will
still be there and still bedemanding that the dairy does
its bit in terms of thatsustainability piece.
(27:12):
So keep fighting that goodfight, I reckon.
Speaker 1 (27:15):
Well, yeah, it's interesting to get your
perspective on it because weobviously hear a lot of that in
New Zealand and we hear itlargely via the dairy companies
in terms of the market demandsfor the way the product is
produced.
Hear a lot of that in NewZealand and we hear it largely
via the dairy companies in termsof the market demands for the
way you know the product isproduced.
And your interesting point youmake about auditing you know
we're seeing more of thatstarting to flow through and how
numbers are captured andrecorded and we're probably not
(27:38):
getting a good oversight as tohow that's going back to the
customer, but but it's certainlybeing captured, the
information's being captured.
So I'm assuming for auditpurposes.
Speaker 2 (27:46):
Yes, yeah, I mean, I think trust is a big piece in
all of this, that consumers wantto feel good about what they
consume, especially some of themore, I guess, affluent
consumers that can afford to pay.
They want to feel good aboutwhat they're consuming and so
you need to, you know, reallydevelop and maintain that trust
which dairy has, which NewZealand dairy has in spades.
(28:08):
But it's really important tokeep in front of that, I think,
in the next five to ten years.
Speaker 3 (28:13):
We've always talked about having the story right and
you've got the cow and thepasture and everything, and so
for us it's now leveraging offthat with low emissions milk.
Speaker 2 (28:23):
Yes, absolutely it's us.
It's now leveraging off thatwith low emissions milk.
Yes, absolutely it's where it'sat.
Speaker 1 (28:28):
I want to finish with one final comment from you.
Jo, you talked a little bitabout competition and I think
you might have mentioned itbriefly.
But synthetic proteins Do yousee that as a serious threat or
has that kind of come and gone?
Is that yesterday's fish andchip paper?
Speaker 2 (28:44):
Well, we certainly have seen that the rise and fall
of of alternative meats hasthey've really fallen out of
favor.
Um, I think, with the, the costof living pressures that people
around you, they're just notprepared to pay for it and in
some cases it's not a greatproduct.
I think where the competitionmay come for dairy is in some of
the ingredient spaces, thelower value ingredient
(29:06):
applications, where maybeconsumers aren't so sensitive
about that but it's yet to beproven scalable.
I mean, there has been a lot ofmoney thrown at that part of
the you know agri-tech foodcomplex and it's difficult to
actually get that working atscale.
But I think it's more themessage that it sends that
(29:29):
there's a lot of money goingtowards these products that
maybe we need to address some ofthe concerns that people have,
which is making them invest inthat area.
So I think, ignore it at yourperil.
I don't think we should relax,but we should hope it all falls
over as well.
Speaker 1 (29:46):
I did have a meatless burger recently.
It was chicken and bacon.
Speaker 2 (29:50):
How did that go for you?
Speaker 1 (29:52):
It was pretty.
It was reasonably average, tobe fair.
Speaker 3 (29:54):
But had they told me, I think you're better off just
not having the bread with itmate, yeah, I had to try it.
Speaker 1 (30:01):
You know, I was in a meat-free restaurant, so when in
Rome, give it a try.
Speaker 3 (30:07):
Walk past that restaurant, yeah walk past the
restaurant.
Speaker 1 (30:10):
Yeah, yeah, totally.
No, for next time, totally yeahLook, Joe, it's been absolutely
awesome having you here thisafternoon and really enjoyed
your presentation as well.
You've given us some good sortof global overviews.
Before I wrap up, Matt, anykind of final points from you or
anything that we've missed?
Speaker 3 (30:27):
No, I just think it's great that we're getting the
Aussie flavour coming through.
So thanks Jo, it's been apleasure and really enjoyed your
talk today.
Speaker 2 (30:35):
So thanks for joining us, thanks so much for having
me, guys, it's been a greatpleasure Very good, all right,
so A great pleasure.
Speaker 1 (30:40):
Very good, all right, so look, hopefully listeners
have enjoyed this episode.
As I said, jo, it's been greatto have your views.
For those that have enjoyed thelisten today, be sure to like
and subscribe.
You know that's how we get yoursupport and continue to offer
podcasts going forward.
So please do that, share itwith your friends and we'll look
(31:00):
forward to listening or for youguys to listen in next time.
Speaker 3 (31:05):
Thanks very much Thanks, joe.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!