Q and A: Chief executive of Landcorp, Steven Carden
Producing More And More Milk Not New Zealand’s Future: Landcorp Head
The chief executive of Landcorp, Steven Carden, on TV One’s Q+A programme says the business is reviewing all land conversions and looking for alternate uses for land that are economically more viable, and environmentally more suitable, than dairy farming.
“I think if you look at Landcorp – and we farm throughout the country – we are looking at all of our land portfolio and thinking, “What is the right land use for it?” And I think what we’ve found is that we can’t really find dairying as the justified new additional land-use conversion option,” he told Corin Dann.
“So we are looking at alternatives. I think New Zealand can sustain a few more cows, so long as there are the farm systems set up to do that. So people are looking at herd homes and other farm infrastructure which would require us to farm quite differently but allow us to produce more milk. Having said that, that’s not our future, I don’t think, as a primary-sector country, to just produce more of a commodity product like milk, necessarily.”
Mr Carden also told Corin that the company, with a 140 farms around the country, would also be considering using its land for crops.
“It’s a new shift for our organisation to start
looking at alternative land uses outside of traditional
pastoral animal land uses. We’ve got a sheep milk business
underway, we’re looking at deer milk, and now we’re
starting to look at more plant-based proteins as an
alternative.”
Q
+ A
Episode
27
STEVEN
CARDEN
Interviewed by CORIN
DANN
GREG Landcorp is our
biggest corporate farmer with 140 farms around the country.
It's state-owned, but like other businesses involved in
dairy, they've had a tough year, posting a $9.4 million
operating loss in the year to June. Its chief executive,
Steve Carden, sat down with political editor Corin Dann at
the end of last week to talk about the future for the dairy
business. Corin began by asking whether the SOE was having
trouble finding Kiwis willing to work on the
farm.
STEVEN The
farming sector is concerned about the number of people
coming into farming, in particular. Farming’s becoming
much more complex, much more technology-driven and
data-driven than it has been in the past. So naturally what
it takes to be a successful farmer is changing quite
quickly, and we are concerned there aren’t the right
number of skilled New Zealanders coming through for those
roles.
CORIN So it
could be a problem in the future? If the training isn’t
done, you would need to look offshore more. So something
needs to be done in that training
area.
STEVEN Correct.
I mean, we have a requirement for, I think, 50,000 new
people to come into the sector to meet its growth plans in
the next five years or so. So clearly that puts a lot of
pressure on the schools and universities to produce people
with the skills we need to farm what are very complex
businesses as
farms.
CORIN And
you come back to that point about what it is to be a farmer
– the branding, your brand – but I guess the attraction
for young New Zealanders. How do you get that
right?
STEVEN Well,
I think young New Zealanders expect different work
conditions and different outcomes from their employment than
those in the past. Many won’t be in farming forever.
They’re coming into farming and they expect to be kept
safe, and they don’t expect to do unusually long hours;
they expect to work in farm environments that look after the
environment; they want to have access to good technology and
be connected through social media, which is often difficult
in rural settings. So their expectations of what we need to
do as an employer continue to lift, and that requires us to
lift our game, as a
result.
CORIN So
you need to provide them with Wi-Fi and things like that,
don’t you?
STEVEN Yeah,
correct. They’re on social media the entire time. They
want to be on Facebook. In fact, they use Facebook as a
work tool now. So we need to be investing in our broadband
and bandwidth for staff so they’re
connected.
CORIN And
do you come across any issues with attitude in terms of Kiwi
workers?
STEVEN No,
not at all. In fact people who are going to farming, I
think, have a passion for farming. It’s not an easy job.
It requires you to be very committed to do quite long hours
at times. You’re up at 3am in the morning to milk, if
you’re on a dairy farm. But people love what we’re
about. They love where we’re going as a company, and I
think they’re very passionate about doing something
that’s very meaningful for them for this
country.
CORIN Looking
at where you are, you’re a massive operation – 140 farms
across the country – pretty much the biggest operator in
the country. But you have cut back quite a bit in dairy
since the slump in prices. So, what about 55,000 cows? Now,
that would be quite a reduction in where you were. Why the
sudden pull back?
STEVEN Well,
it’s not so much a reduction in the number of cows that we
have, but we’re just choosing to not do as many new
conversions of dairy farms as we had planned to do. I think,
like a lot of New Zealanders, we’re concerned about the
environmental footprint of extensive dairying and have taken
a move as our strategy to shift away from being exposed to
marginal conversions, which also give us lots of exposure to
commodity milk, which is essentially what we’re
producing.
CORIN Was
it the environment or was it the fact that the milk prices
collapsed – that you had no choice,
really?
STEVEN No,
this had been on the cards for a few years. In fact, we made
this decision when the milk prices were at $8.40. We just
weren’t seeing either the long-term returns coming off
those conversions or the right environmental metrics coming
out of those farms, and we were quite keen to re-allocate
our strategy towards more value-added products over
time.
CORIN I mean,
it’s been picked over a fair bit, the reality was Landcorp
got locked into some massive amounts of conversions in the
Wairakei area around Taupo. What’s happening there?
You’re still stuck having to do these conversions –
40-year contract, wasn’t
it?
STEVEN It’s a
45-year lease, and we are not putting as many dairy farms on
to that lease as we had originally planned. We’re going to
do about half the number that we’d originally planned and
are looking for alternative uses of that land which we think
are both economically more viable and environmentally more
suitable.
CORIN That’s
interesting. Do you think that might have been the
peak for dairy in New Zealand? People talk about it –
intensification; yes, the price slumped – but do you think
that maybe New Zealand has reached a peak in terms of that
conversion rush that was
on?
STEVEN Mm.
Well, I think if you look at Landcorp – and we farm
throughout the country – we are looking at all of our land
portfolio and thinking, “What is the right land use for
it?” And I think what we’ve found is that we can’t
really find dairying as the justified new additional
land-use conversion option. So we are looking at
alternatives. I think New Zealand can sustain a few more
cows, so long as there are the farm systems set up to do
that. So people are looking at herd homes and other farm
infrastructure which would require us to farm quite
differently but allow us to produce more milk. Having said
that, that’s not our future, I don’t think, as a
primary-sector country, to just produce more of a commodity
product like milk, necessarily.
CORIN So
what does that mean for things like the Ruataniwha Dam, for
more water storage, for more intensification? Are you saying
that it’s
marginal?
STEVEN Well,
I think people have a very high threshold now for what a
suitable use of land is, given the environmental impact that
people expect from that land use. Clearly we need to use our
resources very effectively, and water is a scarce resource
globally that we have an abundance of. So irrigation schemes
do make a lot of sense, but I think the environmental
threshold’s quite high now to
justify.
CORIN And
it’s not just the environmental threshold; the public
threshold has risen, hasn’t it? Do you get a sense that
the public is becoming, obviously with Havelock North, more
concerned about water quality. And rightly or wrongly,
they’re pointing the finger at agriculture,
intensification of farming as an issue. Do farmers, whether
they want to or not, have to think about
that?
STEVEN I
think all farmers are very aware of the issues and are
wanting to do the right thing by the environment, and
certainly at Landcorp that’s a core part of our strategy.
We recognise that consumers have different expectations now
about not only how their food tastes but also how it’s
produced, and we need to be showing them that we can produce
their food in a really environmentally sustainable
way.
CORIN Farmers
on an individual level farm by farm may feel like they are
environmentally conscious, but collectively it can create
problems around nitrogen run-off if you’ve got lots and
lots of dairy farming. You as a big player, what can you do
to lead and I guess convince people that you’ve got to be
more conscious about that intensification and the nitrogen
run-off and those sorts of things, cows in the
streams?
STEVEN Well,
I suppose what we can do is lead by example and make sure
that our farms are as clean as possible, so we have a big
riparian planting programme underway, like the rest of the
country does. We’re really looking at land use, so taking
very intensive land uses away from land which isn’t
suitable. We’re looking at how we can apply our inputs,
like fertiliser, in much more precise places so there’s
less run-off and less wastage. So we’re employing a whole
lot of new technologies to ensure we have the most
environmentally sustainable
farms.
CORIN What
about crops? Will you look at crops as opposed to just
livestock?
STEVEN Yeah,
absolutely. It’s a new shift for our organisation to start
looking at alternative land uses outside of traditional
pastoral animal land uses. We’ve got a sheep milk business
underway, we’re looking at deer milk, and now we’re
starting to look at more plant-based proteins as an
alternative.
CORIN You’ve
put quite a big focus since you’ve come in on the branded
value-added side of the business. You’ve got the new meat
brand. As a whole, has agriculture suffered in New Zealand
because of a lack of that and do companies like Fonterra
need to lift their game with the
value-added?
STEVEN Well,
I think for 150 years New Zealand’s been great at
producing lots of meat and milk off the hectares under farm.
But what we’re finding now is we can’t continue to just
have that as our primary strategy. We have to look at ways
in which we can extract more value from our products. And
that means differentiating our products in a way that
consumers offshore are prepared to pay more for, so that’s
new products and also finding alternative ways in which we
can produce existing commodities like milk, say, for
example, in organics or grass-fed programmes or
antibiotic-free milk that does attract a premium offshore
for those particular
consumers.
CORIN Just
very quickly on your result – an operating loss of around
9 million. On an asset of $1.7 billion, I guess you could
see why the Government, I think, has said things like
disappointing about where Landcorp is at at the moment. Why
can’t you sort of drive a bigger result off an asset that
big?
STEVEN Well,
we had a $30 million profit two years before that based on a
high milk price. I think the frustration in farming is
it’s a capital-gains business, capital growth, so the
underlying value of the farms increases and that’s how
farmers make most of their money. And if you look at
Landcorp’s assets over the last 30 years, we’ve had a
9.5% return year on year, plus paid half a billion
dollars’ worth of dividends back to the New Zealand
people, which is a fantastic result in any business. But
year on year when you’re exposed to commodities in
farming, you get years when you make a lot of money and
years you don’t make much money. That is unfortunately the
shift we we’re trying to make in our strategy to get away
from it.
CORIN So
what’s the bit that makes it worthwhile keeping Landcorp?
Because if you’re just making that return and holding that
asset, what’s the benefit for the government? Where’s
the added value in owning
this?
STEVEN Well,
I think the added value is that Landcorp at this scale that
we farm is able to innovate in a lot of areas that others
can’t. So if you look at what we’re doing around
development of new products like the sheep milk and the deer
milk opportunities, the new farm systems and innovations
that we’re developing, the new environmental standards
that we’re rolling out, big investment in safety
programmes, all of these become over time available to the
general farming public. It is very hard for individual
farmers, even collectively, to generate those innovations
without the scale that Landcorp
has.