The New Zealand dairy industry’s biggest challenge is the increased supply of commodity milk that is likely to come out of factory farms in China, Europe and the United States, Southern Pastures’ executive chairman Prem Maan says.

“Technology will also enable synthetic and plant milks to become cheaper,” Prem says.

“There are some massive deep pockets investing in this space, from Google to Goldman Sachs to New Zealand’s own Peter Jackson. We fear that commodity milk competition will get much tougher.”

These comments come on the back of a recent announcement signalling Southern Pastures’ intention to become a shareholder of, and to form a joint venture with, Westland Milk Products.

“These issues are a key reason why we have decided to partner with Westland to investigate creating a joint venture to process and market dairy products created to provide ‘values for money’ – based around grass-fed, free-range, animal welfare, sustainability, climate change and human rights,” he says.

Southern Pastures is NZ’s largest institutional dairy farmland fund. From the 2018/19 season, the company will transfer all milk produced by its nine Canterbury dairy farms to Westland, totalling more than 4 million kg milksolids (MS) each year.

“Here is an opportunity for us to put into practice what we’ve been promoting – premium products made sustainably,” Prem says.

“We believe discerning customers will pay a premium for high-quality, healthy, traceable products.

Prem also believes a massive challenge for the industry at a local level is an increasing focus on the so-called ‘licence to operate’.

“While our industry is already doing great things to minimise its impact on the environment, farmers need to become even more aware of the environmental impacts of farming,” he says. “There is already a lot of focus on water quality, but we believe that farmers need to become increasingly aware of climate change.”

Prem believes free-range, grass-fed dairying, undertaken sustainably with complimentary plantings, can be a force for carbon mitigation.

“Here is an opportunity for us to put into practice what we’ve been promoting – premium products made sustainably.” 

Southern Pastures uses its farms as a tool for reducing climate change.

The company incorporates smart soil management supplemented by soil biology and plantings to enhance carbon retention as it builds more productive soils.

“There’s so much misinformation out there about farmers destroying the soil. If you look at our Manako farm in Tokoroa when it was first converted from forestry back in 2008, there is an accumulation of humus and carbon in the top six inches of soil.

“Over the last 10 years and since it’s been converted to dairy, there’s no doubt that these farms have been huge carbon sinks. A recent Stanford study showed that organic matter in soil stored more carbon than plants and the atmosphere combined.

We are passionate about soil carbon and are working with Massey University on one of our Canterbury farms to try to understand the science a lot better.”

Prem believes we’ve seen milk production reach peak levels in NZ and volumes are on their way down.

“Most farms won’t be able to sustain the production levels and stocking rates they’ve managed over the last five-10 years. Our belief, and science backs it up, is that fewer cows producing higher-quality and more-nutritious milk is better for the environment and is more profitable.”

Perhaps the company’s most well published move has been its purchase of a 25% stake in boutique dairy products company, Lewis Road Creamery in October last year. Prem says Southern Pastures invested in Lewis Road because it saw a genuine common vision in its founder Peter Cullinane and his team.

“The future of New Zealand dairy lies in quality products, produced sustainably to the highest standards,” he says.

Cullinane believes his company has never been short on vision and what it believes is the best future for NZ dairy – high-value branded goods representing the best NZ has to offer from grass to glass.

“But we’ve been short on the resources required to demonstrate the viability of that vision,” he says. “What the partnership with Southern Pastures has allowed us to do is plan and resource for the expansion of our business, from a domestic market start-up to a global brand.