Julie Cameron, Meredith Dairy: Dairy Goat and Sheep - Overcoming the Transition Challenges

Julie Cameron, Meredith Dairy: Dairy goat and sheep- overcoming the transition challenges from local markets to exports

JULIE CAMERON: I stand here as actually a farmer first, a cheese-maker second, and a director with a lot of debt. Sorry, bear with me if I talk more about farming than economics. Meredith Dairy is a alternative agricultural system. Meredith is a little town just between Ballarat and Geelong. So we're just an hour and a half west of Melbourne in Victoria.

My presentation's in three parts. I'm going to talk about sheep and goat dairying across the world and then talk a bit about the Meredith Dairy story, and then I'll run past the export story. So sheep and goats are, in fact, the oldest of all domesticated production animals. And there are actually more sheep and goats milked in the world than there are cows.

Sheep and goats were actually milked on farms for food production before cows were even domesticated. 2% of cheese consumed in the developed world is actually cheese and dairy products made from non-cow's milk. And in the developing world, there's about a 30% consumption of milk other than cow's milk.

There's approximately 950 million goats in the world. And most of those goats are actually in Africa and Asia. So I was quite surprised by that.

Europeans, particularly the French, are famous for their sheep and goat products, as you probably well know. And France has a very mature industry, with 2.5 million dairy sheep and dairy goats. The French goat milk production is actually in billion litres. So if you convert that into Aussie dollars, that's about a billion Australian dollars.

The French animals produce on average about 1,000 litres per lactation. And a lactation goes for about 300 days. And since the 1950s, the French have developed cooperative breeding programmes and with genetic improvement have been able to lift their production by as much as 40%.

This is probably the most famous dairy goat breed in the world. It is a Swiss breed called a Saanen. And you'll see Saanens in all countries where dairy industry is growing.

They are high producers. They have a lovely temperament. They're quite robust. And in this case, they are pasture fed, but they also lend themselves to be in a housing situation.

This looks almost biblical, this slide. But I took this just two years ago. It's in northern Greece. The young lad who's a shepherd was possibly an illegal immigrant in Greece. And the breed is a Chios. And this is a sheep animal. And the milk goes to make true Greek feta.

This is the Saanen goat, and this is in a intensive farming system in the Netherlands. The Netherlands have become the second-biggest producers of goat milk outside of France in the European system. These girls are probably fairly either pregnant or heavily in lactation.

And of course, then you've got the other spectrum, with traditional farming. Of course, this is in Africa. And in Africa, you'll find dual-purpose goats and dual-purpose sheep.

This goat is probably a meat breed that's also producing milk. And they tend to adapt to their climatic conditions. You can see the long ears. It's possibly because of the climate-- quite a hot climate.

And then you go back to the intensive agricultural system again. This slide was taken in Holland. It's 180-heads milking stall, rotary dairy. Incredibly intensive. Over 4,000 goats being milked.

So now we go into the Australian situation. It's really hard to get accurate data because everybody who's milking sheep and goats are actually competitors because we're all trying to sell into the Australian domestic market, which is actually quite small. But in Victoria alone, there are 31 dairy licences for dairy enterprises that don't milk cows. The largest commercial scaled-up dairies for sheep and goats started emerging about 25 years ago. And of course, they were previously a cottage industry.

Australia probably has the most expensive milk in the world, even though I believe that Norway might actually be even beating us on price because of huge subsidies in Norway. But in Australia, our goat milk sells for about $1.20 to $1.50, and for sheep's milk, it's as much as $2. In the US, it's about $1.25 a liter, in France, $0.90.

About 1/3 of the licences for sheep and goat dairy in Australia have a vertically integrated enterprise, so making their own products and selling it domestically. It's been a fairly relative slow take-up by most sheep and goat farms in Australia. But there are some genetic improvement programmes. And some producers have made significant production gains by using artificial breeding and measuring production.

The commercial Australian goat produces about 25% less than the commercial goat in France. There's new genomic technologies being employed, particularly by my company. And we expect further production improvements by as much as 20%.

There are just two main players in the goat dairy industry in Australia. And Meredith Dairy is one of those. And we account for nearly 50% of the industry.

So now I'm going to talk a little bit about the Meredith Dairy story. So Meredith Dairy is in its 26th year. In 1990, about Christmastime, we went home to the family farm to be wool growers. And then in February 1991, all hell hit loose with the abolition of the floor price for wool. 4.7 million bales of wool was stockpiled. Sheep values collapsed. There was record interest rates. We were paying 22% for farmland loans. And of course, our treasury was telling us that we were a banana republic in a recession we had to have. So things were pretty tough for farmers in Australia in the early '90s.

In about 1991, this article came out from the Fairfax Media, from the Age newspaper. It's written by John Legge and was written on the 20th of January, 1991. The cartoon is illustrated by Spooner. And it symbolises big fish eating a little fish and a level playing field. And it's quite amusing. There's a Aussie rules playing field there.

The opening paragraph reads, and I quote, "Australia is going to be a loser unless there is a move from a commodity exports to innovation and consumer services." John Legge in this article compares the price of wheat over 160 years not in the dollar value but in what can be purchased with labour hours.

So in the early 1900s, a farm labourer would have to work some 300 days to earn enough money to buy a tonne of wheat. In 1991, when this article was written, a tonne of wheat cost about $160. And farm labour at the time on about $100 a day only needed to work for 1 and 1/2 days to be able to buy a ton of wheat. So John Legge calculated that the price of wheat therefore had fallen by 200 times.

This long decline in the affected price of wheat illustrates the power of the free commodity market. Costs and prices are forced down. Therefore, for farmers to maintain incomes, they needed to get more and more and more productive and reduce costs.

And last week, in the Age newspaper, I read that ASW Wheat sold for $160 a tonne. So we're still getting the same price for wheat 26 years later.

So after we read this, we decided we needed to change what we were doing. We needed to innovate. Innovation is about doing things in a different way.

We needed to control our prices for farm purchase. We could no longer rely on the auction system. And at the same time, we had a chance meeting with a cheese maker who told us the best cheese in the world is actually made from sheep's milk. And we had the sheep.

So 26 years down the track, Meredith Dairy was first introduced. It's a vertically integrated enterprise. We have 110 staff. We have an annual growth of 10% to 25%. This year it's 20% growth.

We've been able to expand our farm from a 500-hectare property to 1,600 hectares today. We've developed a genetic-improvement programme. And last year, we started DNA parentage and analysis and genomic studies.

We never stop milking, despite sheep and goat being quite seasonal. And that is, in fact, one of our points of difference because right across the rest of the world, sheep and goats are only milked in a seasonal way. We milk seven days a week and 365 days a year.

We've got quality management systems, which include, obviously, a QA programme. But also, we have an ARP financial system, standard operating procedures, which are all documented, animal production programmes, electronic ID on all animals, and automatic data recording. We have an export accredited facility, and the manufacturing facility runs seven days a week.

The main thing is we've been able to maintain our margin. And that was with a consumer pull rather than producing products in a commodity way. We purchased a logistics centre in 2015 on the outskirts of Melbourne. And this is facilitated inventory control-- pick and packs, cold storage, et cetera.

But our mission really is to maintain margin to ensure return on investment and to maintain our enterprise in the most sustainable way possible. I'll just go through a bit of a slide show, a bit like Granny coming back from a holiday. But it's just a slide show of some of the activities on the farm.

This is our milking sheep. We've now registered this breed and called it the Australian milking sheep. They are white-wooled, so there's no stress for the Merino industry. There's no black ticks. They have really good feed conformation so they lend themselves to pasture feeding.

The dairy goats are actually-- we have two forms of farming. But when in high production and also in the winter time, they are shedded or housed and they are fed a total TMR. And this-- if I can get it right. That's not going to work. But the-- sort of like a muesli that we feed them.

We also do some grazing, but we only graze when there's really high feed values and dry goats or pregnant goats not being milked. We've got about 9,000 goats. This was taken in 2009.

We could no longer get the photo like this because we've now separated the goats up into small individual farm lots. And we've got 3,000 dairy sheep. But those numbers, the 9,000 goats and the 3,000 sheep, include dry sheep, pregnant sheep not in milk, and also young animals.

We've got four milking enterprises, all on the one main farm. One of those is a sheep dairy and three goat dairies. Each of the enterprises has its own infrastructure, has its own staff, has its own plant equipment, and runs independently of the main centre of the farm.

The dairies we use are 36-side herringbone design. This one is actually a double-up dairy, and it has the capacity to milk 400 animals in an hour with one load a unit. Each of the dairies are fitted with electronic ID. We have electronic milk metres, electronic recording, and all sorts of automation, which includes cup removers, auto drafting, and also, we have detection for animals that should not be being milked. The cups don't actually work on those animals if they happen to walk into the dairy.

This is just taken from the cheese factory. This is a small pasteurizer we use for yoghurt production. Goat's milk lends itself to a form of cheese-making process called lactic-curd fermentation, unlike cow's milk, which is more-- lends itself to rendered-curd fermentation. These are just two of six maturation tanks we use for goat's milk.

This is like the nursery rhyme, Little Miss Muffet sat on a tuffet. But that's the curd. And the solid part of milk and the liquid part is removed. And we make our products from the curd.

This is just one of our three manufacturing rooms. And the bottom is our distribution centre on the outskirts of Laverton. So we're packing here marinated goat's cheese.

So these are the products that we make. And just I was lying in bed last night and thinking, what's innovative about our products? Well, I guess it's sheep and goat's milk. It's not cow's milk. That's innovative enough.

But this product here, which possibly most of you know. It's widely available in Australia and available in all of the supermarkets and food chains. But when I think about it, they're actually fairly innovative. It's a unique packaging. It's got unique texture, unique flavours, and it's made completely of Australian product ingredients.

So Meredith Dairy in the market-- 90% of our products are sold domestically. We've got, like I said before, 10% to 20% growth, 60% retail, and 40% other. We do export. It's not a big part of our marketing, but we export to countries where we have representatives, so that's export direct. But we use consolidators to export to countries where we don't have representation through various consolidating businesses.

So now I'm going to talk about our export. In 2013-- before 2013, we had quite a lovely little business going on in China. The high-end chefs could not get fresh goat's milk from Europe in the European autumn. But the European autumn, of course, is our spring. So we actually had a fantastic business going on in the springtime, which really helped us because that's when we had most of our milk.

The other thing pre-2013 was sheep and goat was a non-prescribed good, which meant we could send sheep and goat anywhere in the world without an export licence. But that soon changed, with the, in China, for example, with the health scare-- with the melamine in infant milk powder and the death of some infants. The Chinese FDA really brought in lots and lots of changes, including requirements of strict accreditation.

So post-2013-- and I hope there's no one here from China. But anyway, the Chinese FDA have become incredibly unpredictable. And we find lots and lots and lots of what I call non-tariff barriers-- incredibly bureaucratic. And the paperwork that's required is really quite extraordinary.

The Chinese government also have built and own their own testing laboratories. So each batch of product going into China needs a nutritional panel. And that batch must reflect exactly what the nutrition is in that product by the label. And if you get rejected, your product comes off the register. And it takes 18 months to 2 years to get the product back on the register.

There's also requirements for cold-chain control. So an importer needs to control cold chain for a perishable product, not just from Australia to the customs in China on the China border but from Australia through to the retailer within the Chinese borders. So it's pretty difficult to, at the moment for us and now be cow-dairy industry as well, to get product into China.

But there's enormous potential. And I've written down there that Chinese perceive goat's milk to be healthier than cow's milk. So there's a real wake-up call there for people in the cow-dairy industry.

Australian's products are very trustworthy. The Chinese community know that Australian food is safe, unlike their own food. There's a growing middle class, and it's expected that within five years, China will have 40% of their population in the middle class. And they want to eat dairy.

The free trade agreement is working on our behalf. At the moment, we're paying 12% tariff. But that will be 0% in the next five years. So that should work really well for us. And the other thing is the Chinese really want to invest in dairy goats, both in their own country and in Australia.

I'll talk about the USA. Oh no, before I do that, I just want to show you this slide. This is just gorgeous.

I took this in a supermarket in China. It is actually a cow-milk product. But it just shows you the love the Chinese have for Australian dairy products.

So the Meredith Dairy business in USA-- and so this is as of last year-- minimum tariff barriers, unlike what we're finding with the Chinese market. And our product is really at the high end of the degrees of quality when it comes to sheep- and goat-milk products in the US. The US FDA actually accepts Australia accreditation. It accepts our labelling. It accepts the rules that we have as part of our accreditation here in Australia for export licencing.

It's expensive to establish in the USA. And it's a very competitive market because there's lots of Europeans' products over there. But the opportunities are also good. And the Aussie dollar has helped, as long as it stays below $0.80.

The free trade agreement-- we're currently 3% tariff. But that's reducing by half a percent per year. So within a few years, that will be 0%.

The other thing is the USA sheep and goat dairy industry is not at all sophisticated. There's no innovation happening. So there's lots of openings there.

And the USA products are of a really poor quality. And I've said before how at Meredith Dairy, we're milking all year round despite the animals being very seasonal. In the United States, they only milk seasonally.

And they freeze their milk and freeze their curd. So how can you make good cheese out of that? And the big population, of course, and they know their-- they have a really good palate for dairy.