The rapid growth of precision fermentation technology that produces dairy products in a laboratory rather than from a cow is going to be a major disrupter for New Zealand’s dairy industry, warns foresight practitioner Melissa Clark-Reynolds.
There has been massive growth of investment in this technology over the past five years, which involves dairy products grown from microbes in a vat.
“I truly believe there are now parts of our sector that are going to disrupted by this in ways that I couldn’t even imagine five years ago,” Clark-Reynolds told dairy farmers at DairyNZ’s Farmers’ Forum at Lake Karapiro.
It will be the dairy ingredients market that could be affected the most by this new technology rather than whole milk.
Given that many of these ingredients are derived from milk, it will be interesting to see what this technology does for the milk price as the cost of this new technology falls, she said.
The other major advantage vat-produced milk has is consistency. Cow-produced milk varies in composition depending on the time of the season, whereas vat-produced is the same all the time.
“I think you should think about this product as being your best milk on a good day – and they can do that every day of the year.”
The dairy industry needs to ask itself what it would do in a world where this technology exists.
“I don’t want to scare you but there are some headwinds that we should probably be thinking about and we should be thinking about how do we compete with that,” she said.
The answer is to produce artisan milk at scale.
NZ has the capacity to do this and it would be a way for the country’s dairy industry to compete against these headwinds rather than fight them.
It will mean marketing the milk around it being produced from cows that are grass fed with high animal welfare requirements, as well as wider social attributes around how the farm supports its staff and the wider community.
Doubling down on these attributes will differentiate this milk from a lab-produced substitute, she said.
“We are going to have to think about how we compete in a world where our product can be made better and cheaper in a different way,” she said.
It could also mean even tighter restrictions on animal welfare and better integration between the dairy and beef industries.
“Be curious and think about what your real advantages are and double down on those advantages in a world where there is a lot of change coming in the next 10 years.”
Clark-Reynolds said the push from customers demanding greater transparency in food production is another emerging trend. Customers want not just emissions measurements, but proof of what is being done to reduce those emissions.
“We’re coming into a period of turbulence in farming where we are not just going to be asked to reduce our emissions, but there are going to be some new challenges in the way that we farm and the way that land use is happening at the moment.”
In the United States, the most expensive milk is from companies that market their product around having multiple attributes such as regenerative farming, carbon neutrality or being cruelty free.
NZ is also going to have to keep a close eye on changing demographics in China, whose its birthrate and the sheer scale of its population have driven consumption and demand.
The absence of superannuation schemes in China mean parents throw all of their resources into their child’s wellbeing, relying on that child’s success to be able to care for them later in life.
“We have done very well on the back of that,” Clark-Reynolds said.
However, China’s population growth has peaked, along with its middle class. The country that is taking over is India, which has far greater domestic dairy production growth than China.
These changing demographics will, over time, mean a decline in demand in China and an increase in demand in India.
“We need to keep an eye on this. It’s not going to happen tomorrow, but it is going to happen over the next 10 years,” Clark-Reynolds said.