Goat Dairy: A New Kid for the Bay

Two New Zealand companies have recently confirmed their intention to establish processing plants and a supply network here to feed into a large and growing global niche market. In exchange, we offer the perfect climate (dry, sunny), cheap land, infrastructure, and a supportive local government.

But how to grow the industry and coordinate a regional approach are both up for discussion. The worries are, if Hawke’s Bay tarries another region might snap up the opportunity, or, on the other hand, we rush headlong into production before securing a consumer base, chasing the pot of gold at the end of a rainbow.

Alternatives to dairy

Infant formula is classed as a ‘nutraceutical’ (sitting between food and pharmaceuticals) – it’s a highly regulated, highly defensible product designed to mimic breastmilk. Global demand is growing, particularly in Asia where breastfeeding rates continue to plummet. New Zealand is already, steadily, tapping into that demand (as is every other country with grass and cows); its infant formula exports increased by $390 million last year.

But there’s a gap in the market for goat and sheep milk products, presenting us with an opportunity to diversify our dairy industry and, if we’re quick, carve a leadership role in what is an emerging growth market. The precedents are there, as a nation we’re known for our dairy innovation and farming expertise. Indeed, the Dairy Goat Cooperative (DGC) in Hamilton, with its suppliers clustered around the Waikato, produced the world’s first goat-milk infant formula in 1988 and continues to be a major global player.

Goat milk is the closest alternative to breastmilk – it’s more digestible than cow milk with better micronutrient uptake, it has probiotic properties and a lesser allergenic burden. While sheep milk, particularly high in calcium, vitamin D and protein, can be tolerated by those with lactose sensitivity (roughly 70% of the world’s population). With its high fat content, sheep milk also makes fantastic cheese, butter and novelty products like ice cream, and freezes well, meaning whole milk can be stored (and shipped) for later processing.

The West may be just discovering alternatives to bovine, but small ruminants have been a traditional source of milk for poorer farming communities around the globe for centuries. In other words, there are already consumers (particularly in South-East Asia) with a taste and preference for these products, as well as a discerning global elite who will pay top prices for healthy, premium products.

There have been attempts in New Zealand to establish a sheep dairy industry since the early ‘90s, with genetic research and breeding programmes now in a third phase. A steering group formed earlier this year to develop a coordinated business model and national brand along the lines of Zespri kiwifruit. There are currently five commercial sheep dairies in New Zealand, including the world’s largest operation, Blue River Dairy in Southland (now Chinese owned).

While sheep dairy makes intuitive sense for Hawke’s Bay, says HBRC’s senior land management advisor, Ian Millner, goat dairying is already on our doorstep.

A boon for the Bay

In early July, more than 200 delegates from as far afield as Taranaki, gathered at the Infant Formula Conference held in Napier, a turnout Catherine Rusby, conference organiser and food and beverage manager for Business Hawke’s Bay, was delighted with, having budgeted for only 100.

The atmosphere was tangibly zinging, with Gregg Wycherley confirming that his Auckland-based company, Fresco Nutrition, plans to build a $31 million spray dryer in Hawke’s Bay to process goat milk from its Manawatu and Hawke’s Bay farmers.

At present Fresco produces goat milk formula for the domestic market (the only NZ company to do so), as well as nutritional tablets and powders for overseas, but will be expanding into Asia once they’ve established a reputable New Zealand brand. “We want to be demand-pull, not supply-push,” says Wycherely.

The following week, Chris Berryman of NZ  Dairy Products, announced he too would be setting up shop here, with a $80 million processing plant, 70 jobs and a particular focus on producing the world’s first ‘Shegoa’ (sheep and goat milk blend) infant formula for the Asian market.

According to Rusby, Berryman had been weighing up Canterbury but was so overwhelmed with the support and interest shown by the Hawke’s Bay community that it tipped him in our favour. As Rusby exclaimed, “I’ve never seen so many excited farmers in my life!” She says since the conference she’s been inundated with calls from farmers wanting to convert to goat dairy and from businesspeople wanting to invest.

Personally, she’s thrilled about the prospects:  “What an opportunity this is for Hawke’s Bay! We can do everything here, from primary production through to processing, packaging and shipment. This is a value-added opportunity for us, and it’s long-term, sustainable. I’m excited because it’s playing to our strengths – our farming expertise, production knowledge, our logistical capabilities, such as the Port – while also developing processing facilities and new skills.”

Economist Sean Bevin, at the behest of the regional council and Business HB, undertook an economic assessment of the potential industry for the region. It’s a 10-year accumulative projection, forecasting conservative linear growth based on the indications of Fresco Nutrition and an uptake of 18 farms. Bevin estimates an eventual $1.5 billion revenue across all industry activity (both direct and indirect income) and 178 new jobs. Or, using value-added GDP as a measure, we’re looking at $363 million value-added to our Hawke’s Bay economy by 2024, a figure which represents 9% of the current GDP for the region’s total agricultural sector and 30% of our pastoral GDP alone.

Rusby’s quick, however, to concede “It’s all speculation. But you have to start somewhere, and so far all the signals are really positive.”

Young, gutsy, pioneering

Lydia and Sean Baty, with the financial and practical support of Lydia’s parents, David and Jo Phillips, have converted 41 ha of the Phillips’ family farm (270ha sheep and beef near the Tukituki) to a goat dairy. It’s the first in Hawke’s Bay, and the costly investment in a 3,900m2 purpose-built loafing barn, stainless steel milking carousal (installed with future automation in mind), and the effort of hand-rearing 650 goats sourced from all round the country last year, has taken vision and singular determination.

Unable to get a foothold into the DGC “golden triangle”, for a while there was uncertainty around who they would supply, but they persevered regardless, selling fresh milk to local company Origin Earth, and earlier this year, becoming a contract supplier for Fresco Nutrition.

They plan to have increased their majority Saanen herd to 1,000 by the end of the season, and to double that again once they build a second identical barn over summer.

Lydia says sheep and beef were no longer bringing the returns they needed, and with Plan Change 6 coming into effect, they had been motivated to look at alternatives to cow dairy. The figures on goat dairy were compelling (with a gross profit margin 3-4 times higher than bovine dairy), and the intensive scale provided a succession plan that would enable her, as one of four siblings, to go into farming.

The father-daughter team have been generous and supportive of anyone trying to get into the industry: sharing information, welcoming visits, even selling goats to local farmers and keeping them on while they establish themselves. It’s good for them too in the long run, Lydia says, to get an industry up and running.

But it’s not just about the money or the entry card; goats are full of personality and curiosity, “we love working with them,” she says.

During the kidding season, she’s in amongst the goats daily, soothing, monitoring, helping with complications. Many of her goats are birthing multiple kids, some even 4-5. “Because goats are small we can handle them ourselves – there’s no way in the world I’d want to get in with a calving cow!”

The milking life of a goat is eight years, but Lydia believes if they’re looked after well they’ll go longer. She cares passionately about her “girls”, and says she’s only had one mortality so far this year, a testament to the Baty’s husbandry.

Controlled management

Goats, particularly pregnant and lactating does, don’t like cold and wet conditions; they are also highly susceptible to pastoral parasites and disease, and contrary to perception, are fussy, selective feeders with unique dietary requirements. Hence dairy goats are barned, with some outdoor access, and cut and carry fed for more controlled management and higher productivity.

Barned goats don’t produce much effluent and there’s virtually no nitrate leaching. Sheds are filled with fresh dry wood shavings to absorb liquid and well aerated so urine and faecal matter dries out quickly. The organic matter is cleared out about twice a year, and in the best case scenario applied as fertiliser to land for cropping. The collected effluent is hugely concentrated (high levels of nitrate, phosphate, potassium), and thus presents a high-risk profile because it’s essentially been “simmered down like a pot on a stove”– the opposite of a dairy cow system where the effluent is diluted.

Ian Millner has modelled different land-use scenarios and worked out that a profitable, efficient goat dairy needs to be on a scale of at least 600-700 does, and ideally integrated into an arable farm system where farmers have the most control of all: “It’s about de-risking your business by utilising your asset in a more reliant manner.”

He says if it’s managed well then “it’s a pretty benign system”, but if not things can go “spectacularly wrong”. Ultimately, this will depend on “what you feed your goats, how sharp you are in working the systems, and scale”. “If your land is solely used for intensive goat dairying,” Millner explains, “you’re going to have to work harder to manage your outputs than if your goat dairy is integrated into an arable system, such as a sheep and beef farm.”

While there are no specific council guidelines around managing goat dairy effluent, Millner is “relaxed” that the current processes will be enough to ensure good management.  When applying for a goat dairying resource consent, farmers will need to produce both a nutrient budget and a farm plan, and Millner says any potential issues with effluent management will be red-flagged at this stage. He’s confident that the industry itself will ensure best management: “It’s rare these days to get a completely new industry coming into the region, and there’s no doubt that the new farms will be state of the art, using the best technology available and the latest science.”

Happy, healthy goats make a better conversion of feed into milk, says Millner, and farmers will be manipulating concentrations of nutrient to give the goats a balanced diet and maximise their returns with little waste.

But Craig Prichard, professor in leadership and management at Massey, believes a robust agriculture needs to be diverse with different entry levels to suit the farmer, and not just offer one model. For example, in Hawke’s Bay, Andy and Kat Gunson milk 70 ewes for Origin Earth’s award-winning artisan cheeses, and such enterprises, while comparatively small, play an important role in creating a profile for alternative milk products, educating people’s palates and raising awareness, as well as helping develop best farm practice.

Animal welfare and management is critical, both for consumer perception and farm sustainability. Diseases, like ketosis, are a serious problem, where industry mortality rates for dairy goats can be up to 30%.

A goat produces bigger offspring and more milk solids for her body weight than a cow, placing her under considerable oxidative stress, and requires high energy dense food, such as lucerne, maize, pea hay.

She needs lots of iodine to produce milk, in direct conflict with the low-level set for infant formula compliance. She’s also sensitive to high levels of sulphur (found in conventional superphosphate programmes), which contributes to sub-acute ruminal acidosis (common and often fatal), and is unique in her requirement for copper.

What to do with the boys?

No one wants to talk about the boys, the buck kids that have no future in a dairy. Currently the options are limited to a pet-food company in Wellington, an option Lydia Baty rejects as “cruel” for the live transport entailed.  She’s involved with an SPCA companion programme but it’s not a solution, and ultimately there will need to be a parallel industry developed.

No one wants to really talk about water either – it’s political – but the question must be asked: how much is premised on the assumption that the Ruataniwha Water Storage Scheme will go ahead? Intensive farming is thirsty business, but what demand and how this will be met remains unclear.

Ian Millner has no doubt that there will be challenges ahead, and acknowledges that water is one of them, but he’s confident we can deal with them as they come.

Catherine Rusby agrees, and says she’s encouraging farmers to get together, to share information: “If we want to bring up an industry from scratch, then we have to collaborate.” But she won’t be advocating a cooperative model as she believes “the industry has to evolve.”

In the longer term, Rusby sees the need for a champion to take this forward but is confident that this will all ‘bubble up’ in due course. In the meantime, “We’re really focused on at least one of these guys getting their processing plants happening, because any farmer taking the punt wears that cost of the industry not taking off. Let’s help them get there. It’s not about local government funding this (that would undermine our integrity) but there are innovative ways to work with them to spread costs, remove some barriers, and get things happening.”

Rusby believes Hawke’s Bay’s climate and infrastructure will ultimately place it as the obvious choice for goat dairying, but: “It will be 5-10 years before we can sit back and say, ‘Look at our beautiful industry’; as with anything worthwhile, it takes time to build.”