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Rural Insight: Dairy sheep provide value add pathway

Tags: Rural Rural Insight

A slow but certain interest in dairy sheep is starting to build throughout New Zealand as some cornerstone corporate farmers cement the industry’s footing as a viable pastoral alternative to traditional land uses.

The ability to convert to dairying faces greater challenges on both environmental constraints and economic cost, and leaving the land as a milking sheep unit is coming into focus for farmers in regions like Southland and central North Island.

Bayleys rural consultant Hayden McCallum based in Invercargill says his patch of New Zealand’s rural landscape offers some significant opportunities for milking sheep, given its well established sheep sector and strong pastoral property base.

It is already home to one of the country’s largest dairy sheep operators, Antara Ag which has an exclusive supply agreement with Blueriver Nutrition HK, milking 15,000 East Friesian-Poll Dorset ewes on three Southland farms. It manufactures infant formula from sheep’s milk for export to China, the first company in New Zealand to do so.

Ultimately the company intends to take on farmer suppliers in what may be a syndicated ownership structure.

To the north the Central North Island is becoming something of a hub for the emerging industry with Waituhi Kuratau Trust milking 3000 ewes near Turangi.

Landcorp is also entering the industry this season in partnership with SLC Group.

The companies formed Spring Sheep Dairy, committed to a purely New Zealand based sheep dairy system focused on high value products rather than bulk dried powder exports.

This group is presently milking 3,000 ewes on Wairakei Estate between Taupo and Rotorua. Their milk is processed at Hamilton’s Innovation Park into high value yoghurt, pro-biotics, ice cream and protein products aimed at the fitness market.

As rural catchments come under stricter controls over farm nutrient losses and management, the ability to convert more land to dairying is being challenged. Dairy sheep with their relatively low level of nutrient losses offer an optional land use.

However Hayden McCallum cautions it is still very early days for an industry that is only coming from a production base of about 33,000 milking sheep.

“But it also appears to be an industry whose time may have come. For many sheep farmers seeking a potential succession plan, sheep milking may provide a pathway to helping boost farm returns for the next generation to buy into, without necessarily converting the entire farm.”

Globally the dairy sheep market is estimated to be worth US$8 billion at the farm gate, a mere 2% of the dairy cow milk market.

However growing markets of increasingly westernised Asian consumers with lower lactose tolerance were drawn to a product that was also more concentrated than cow’s milk.

Sheep’s milk averages 18-19% milk solids, compared to about 12% for cow’s milk. Returns from the milk were typically about $2 a litre, or $17 a kg milk solids.

Work by Nuffield Scholar Lucy Griffiths has identified some of the short term issues facing the industry in its efforts to expand.

A key one was the need to avoid the usual approach to marketing bulk commodity type product and focus on high value niche products in sectors like health, infant formula and gourmet food.

She also highlighted the need to have a robust financial model to show farmers the financial benefits of investing in the dairy sheep sector.

Keith Neylon, director of dairy sheep venture Antara Ag in Southland and founder of Blue River Dairy confirmed his company was poised to expand its sheep milking numbers next year. The company has grown its genetic base to a point it could offer genetic stock to new farmers.

He likened any supply arrangement to a conventional dairy farmer supply agreement with a processer, receiving monthly payments for milk supplied.

“We have made a point of ensuring our growth has been very much demand led, it’s not dissimilar to what the dairy goat industry has also experienced.

“We have managed to go to number two in the world for recognition in quality and it has taken us only 10 years to achieve it. Our best cheeses are renowned globally now, including our Blackmount cheddar as a gold medal winning cheese.”

He said the scale a new dairy sheep farmer may want to operate on will depend very much upon their financial position, and how much equity they already had in their property that would enable them to adapt the farm to dairy sheep.

Bayleys New Zealand country manager Simon Anderson says the sheep milking industry offers an exciting opportunity that many pastoral farmers would not have considered before.

“It has come almost from nowhere in a very short space of time, and ticks all the boxes as a high value, premium focused product delivered from a system that is environmentally very friendly.”

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