Low Cost LeaderEfficiency is key for farmers in New Zealand who rely on global markets
In the rolling hills of New Zealand’s South Island lies Waitaki Valley, a valley with a rich history of farming that is still an attractive region for agriculture. Morgan Easton grew up on a farm there just like three generations of his family before him. Today, he and his wife Hayley are raising thier three children in the same region, but the farm looks nothing like it did in the early days.
New Zealand is one of the world’s largest producers of milk. According to Dairy NZ, the island nation, which is smaller than California, has nearly 12,000 dairy herds milking 5 million cows and producing 3% of the world’s milk supply. It is known as the world’s largest exporter of milk. With a dairy herd larger than California’s and a reliance on global markets, efficient, low cost milk production is critically important.
Easton grew up on a farm that specialized in sheep and beef production. In 1993, Easton’s parents converted their family farm to a dairy farm. At the end of high school Easton was faced with a troubling question, continue farming or pursue another career? A week before classes would start, he decided to pursue farming and enrolled at Lincoln University to study agriculture. At the time Lincoln didn’t have a degree to specialize in dairy, so Easton spent a year at Cornell University on an exchange program, a year that he says changed his life. Shortly after his year at Cornell, Easton came back to New Zealand to work for a company called Dairy NZ. As a dairy consultant he conducted educational programs similar to the roll of extension in the U.S. “I wasn’t ready to come home to the farm yet so I decided to pursue a Master’s degree,” he says. The recipient of a Fullbright scholarship, Easton could have earned a second degree just about anywhere, but settled on returning to the U.S. to attend Purdue University where he studied economics.
In 2008, I came back to New Zealand. Mom and dad had just purchased a new farm called Twin Terraces. It was a rundown farm that was owned by a power company,” he explains. Easton entered into a lower order sharemilking agreement with his parents and transformed the property before going 50/50 in 2011. “We dropped cows down to 450 and redeveloped the farm from scrap,” he says. “We took internal trees and fences down, installed new irrigation systems and designed the farm how we wanted it to be.”
It was at that time they also built a new 60-stall rotary parlor. “To go from 700 to 450 wasn’t that big a deal, we went to 900 cows the next year,” he says. “[Trimming the herd] was just to give us a bit of breathing room.” Now, the Eastons milk 1,300 cows at Twin Terraces. Because they were given a chance to build equity through sharemilking with Easton’s parents, he and Hayley bought a farm of their own. “Three years ago when the milk price was really good, Hayley and I, as majority shareholders, bought a wee farm next door,” he says. A similar transition was done on the new farm as was on the other farm. The only difference is that this farm already had a sufficient milk shed, so a new parlor was not built. “We’ve been milking about 300 cows and wintering around 1,200 cows there on fodder beat crops,” he explains. “We’ve been doing that since the price has been low, but this year we will milk 450 cows there.”
At an average cow size of 1,040 lbs., Easton’s pasture-based herd doesn’t give a lot of milk, making an average of 41 lbs. of milk per day. In comparison, DairyNZ reports the national average for the 2015/2016 season was 32 lbs. of milk per day. According to USDA, the average daily milk production of a cow in the U.S. is 70 lbs. Because they don’t produce as much milk, efficiency is key at Twin Terraces. Costs must be limited for the farm to be successful. “For us the focus isn’t volume of milk produced, it’s efficiency,” he says. “I think maintaining a low cost of production on the farm is a New Zealand mindset, but we put a big focus on profitability here and I’d say we are quite good at it.”
One way that they maximize profitability is by running a lean staff. The two dairy farms employ a combined seven full-time Pilipino employees. In addition, two interns join the team during calving season. “Our cows don’t have as much milk so we’ve got to be really efficient with labor or we’ll eat up that margin,” Easton says.
On the larger farm, the 60-stall rotary is managed by one employee, made possible in part because they don’t pre-prep cows. “Because the cows are out on pasture they are clean,” Easton explains. “Every 12 hours they’re on a fresh break, so that’s why you don’t really need to pre-dip or pre-strip.” Once the cows are milked out, cups are removed by automatic take offs and an automatic post-dip sprayer finishes the routine. Even though there is only one employee in the parlor, cows are milked very quickly. “At the slowest, we’re doing 300 cows an hour,” he says. “Later in the season, we’ll get up to 450.”
Another area of extreme profitability is how the cows are fed. Raised on pasture for their entire lives, Easton’s cows have a diet that consists of grass, silage on occasion, and grain in the parlor which is chosen based on both nutritional needs and cost. “The biggest driver of profitability on our farm is how much grass I can grow and how much of it we can use,” explains Easton. “That’s the difference between being a good farmer and a great farmer.”
Reproduction is another area that Easton focuses on to be profitable. “It is worth so much to your business to have cows get pregnant in the first one or two cycles,” he says. To achieve that goal, Easton puts an emphasis on building back body condition. After milk reaches an average solids content of less than 3.5 lbs. per day, the cows go from being milked twice per day, to 16 hour milkings. When solids reach that level, Easton doesn’t worry about milk production decreasing because of fewer milkings. Because the cows are on pasture, they can walk up to one mile each direction to be milked. All that walking can cause a cow to lose body condition, so they take a few walks out of the equation by switching the milking schedule. The only downside is that the employees don’t care for the 16-hour schedule where the cows are milked at 4 a.m., 6 p.m. and then 10 a.m. the following day. “We don’t do it all year,” he says. “The employees don’t really like it.”
The U.S. Dairy Export Council says that 15% of milk produced in the U.S. is exported. In New Zealand, that export figure is more than 96%. As a result, farmers are alert to the importance of a global marketplace. “Because we’re a tiny population, we see ourselves as part of the world flow of milk,” Easton says. “Our milk goes everywhere.”
Unlike his friends who dairy in New York and know New York City will buy milk, Easton says farmers in New Zealand rely on countries like China to buy their milk. “We don’t just have to worry about whether or not everyone in New York still goes and gets pizza,” he explains. “If we’re interested in our industry, we’ve got to know what’s going on internationally.”
Having so much exposure to the world market doesn’t worry Easton. One reason he says he has so much resolve is being a Fonterra farm. “We’re fully shared Fonterra farmers here and we’d not have it any other way,” he says. “The strength of the New Zealand dairy industry is because of Fonterra. Without Fonterra we’d be price takers like much of the rest of the world.”