Earnslaw is one of two Landcorp farms receiving the organic tag after a three-year transition from conventional dairying, one farm is still in the process and three others are beginning the conversion this season.
Landcorp expects Earnslaw to get a $2/kg MS premium on Fonterra’s standard farmgate price for its organic milk this season. A smaller but still significant premium was received by Earnslaw and the Tasman farm in Manawatu in years one and two of the transition, the Government-owned farming company says in its annual report.
Synthetic fertilisers have been removed and the farm team applies alternative nutrients such as chicken manure and grows legume crops as a natural source of nitrogen to build soil fertility.
It has raised the overall sustainability of the Earnslaw operation compared to that of a conventional unit, the report says.
Landcorp, which trades as Pamu, had 860 cows being milked at last season’s peak on Earnslaw’s 675ha of irrigated ryegrass, clover and mixed pasture.
Cow numbers were reduced from conventional farm levels as imported supplementary feed was taken out of the diet. Earnslaw is a closed-unit growing all its own feed and retaining nearly all calves as eventual herd replacements, for dairy-beef production or to sell to bull beef finishers.
Young stock from Tasman and its sister organic transition farm Tutoku are grazed on Earnslaw’s run-offs to help achieve optimum herd sizes across the farms.
After a difficult start to managing an organic health regime on Earnslaw the farm’s cow death rate is now the third lowest across all the Wairakei dairy units.
Landcorp had earnings before interest, tax, depreciation, amortisation, and revaluations of $34 million for the year ending June 30. That is its favoured measure of earnings, being based on ordinary business cashflow operations.
The result was lower than the $48m in 2017-18 and $36m in 2016-17. After revaluations in the latest year there was a bottom-line loss of $11m.
The farm operations benefited from high red meat prices but dry late summer and autumn conditions cut into milk production.
Operating cashflow was $24m, down from $28m previously.
In their report chairman Warren Parker and chief executive Steven Carden said they are disappointed by the result and see room to improve Pamu’s performance.
The group farms about 154,000ha of the 336,000ha it manages across the country, running 440,000 sheep, 80,000 beef cattle, 74,000 dairy cows and 89,000 deer. It has 9458ha of pines.
Landcorp is also trying reduced nitrogen and phosphate applications on a conventional Canterbury farm, saying there has been no or minimal loss of fertility. Lucerne, not requiring nitrogen inputs and with very low leaching, now makes up 15% of the Canterbury farmland.
The group is firmly focused on reducing carbon emissions to help NZ reach ambitious goals, they said.
The country’s long-term export competitiveness is contingent in part on achieving emissions profiles better than the rapidly emerging and potentially disruptive alternatives to pastoral farmed meat and milk.
“We are cognisant, too, of the need for a well-managed transition in livestock and plant genetics, energy systems and farming practices to achieve the targets proposed in the Zero Carbon Bill.”
While committed to the environmental outcomes, Parker and Carden said the role of Landcorp’s environmental reference group (ERG) is often mischaracterised as one that directs overall farming strategy.
This is not the case. It offers a diversity of insight and advice that is balanced with other factors such as the need to achieve an acceptable return for the shareholder and the physical practicality of being able to implement the changes across the business.
At the same time Landcorp’s stakeholder group covering a wide range of agri-sector, government, Maori, environment, women and banking representatives said it wants greater recognition this country’s production has lower greenhouse gas intensity than global competitors.
It also said farmers need to recognise they operate in a global market and consumer preferences and perceptions are paramount, even those that seem ill-founded.
During the year Landcorp started exporting speciality milk products including organic to China and is selling sheep milk products from the Spring Sheep Dairy joint-venture business to Asia.
The 50%-stake in Spring Sheep is valued in the accounts at $6m. Genetic improvement in the East Friesian flock resulted in a 25% increase in milk flow in the 2019 year. The flock size grew to 4000 ewes from 3600 and 2050 in 2016-17.
The plan is to develop a New Zealand industry achieving $200m to $700m in gross revenues by 2030.
Landcorp also has a 35%-stake in Melody Dairies, which is due to complete a speciality spray drying plant near Hamilton in July. That stake is valued at $7m. Spring Dairy will be a supplier to the facility.
The annual report said Pamu deer milk is being sold to a leading South Korean pharmaceutical company for its range of cosmetic products.
In the core red meat business Landcorp had lifted its share of the high-value venison trade into the United States. Total livestock revenue was $124m, made up of $50m in sheep meat, $36m in beef, $17m in dairy and $21m in deer.
Milk revenue was $92m, down from $95m a year earlier. Wool and forestry revenues were $4m each.
Landcorp made a $6m one-off profit on the sale of its shares in Westland Milk to Chinese group Yili and $5m of it was paid to the Crown as a dividend.
The annual report shows Landcorp’s total assets were $1.78 billion at balance date with shareholder funds making up $1.42b of that.