Sheep milk examined as additional earner for farmers

30-08-2010 | Alan Williams

Milk production from sheep is being investigated by Alliance Group Ltd as a way of achieving new income streams for farmers.

The concept would not suit all farmers, with three lambing cycles probably required every two years and milk and lambing flocks being run separately, but the results of work done so far were encouraging, said chairman Owen Poole.

Alliance has been looking closely at sheep milking operations in Southland, said chief executive Grant Cuff after a shareholders meeting in Christchurch on Tuesday. No details were about for numbers and timeframes of any development.

"They are impressive operations, on a scale bigger than before, but a bigger step-up would be needed if it can be developed further.''

He said sheep milk was full of vitamins and nutrients and fetched high prices in world markets where it was sold.

At the meeting he and Poole gave an optimistic view for the next lamb processing season and said the meat industry was far from broken, as suggested by some recent comment.

Poole reminded about 200 supplier shareholders that this season's lamb and sheep returns for farmers had been the second best on record after the 2009 year. No shareholder got up to complain about returns and they seemed generally relaxed about their situation.

They were told that Alliance was profitable, with a very strong balance sheet and cash flows for the year ending September 30, and that they would receive pool payments and an end of year dividend, with the levels to be decided on at the October board meeting.

Cuff said market indications for next season were that farmers would receive an extra $4 to $5 per lamb, despite an average 15% rise in the NZ dollar against the main export currencies, the US dollar, sterling and euro. On top of this, they could expect another $2 to $5 on the company's quality yield contracts.

The market outlook for the short to medium term was positive, with lower world supply in the face of steady demand in established markets and new demand in emerging markets. Indications were for a 300,000 tonne shortage of supply over the next five years.

All Alliance's lamb supply was spoken for, and this year it had sourced carcases from Uruguay to meet demand for a long standing European customer.

Alliance also sees gains of $10 to $12 a head for sheep returns in the coming season, and $20 to $30 for cattle. The sharper rise of the dollar against euro is negative for venison returns, with a fall of $10 to $15 for deer.

Beef prices have not made the same gains as lamb in the last decade, so its rise is off a low base, and some farmers have switched to lamb. Cuff said that beef prices, after inflation, were effectively the same as 10 years ago.

With just 6% of the world trade, NZ supply was swamped by volumes of United States, South American, and Australian beef. NZ's pasture-fed beef also battles to compete against grain-fed beef's high customer acceptance in world markets.

While lamb prices have improved, Poole said farmer incomes needed to improve, and Alliance was seeking new income streams for them. Wool was one of these areas and was of special interest for the company. As the biggest sheep meat processor, Alliance was also one of the biggest wool exporters.

He said farmers also had the power to improve returns by working for aggregation in the processing industry, rather than "gaming'' their lamb supply between companies, as many do now.

If farmers increased volumes to one farmer-owned co-operative by 30%, this would have the similar aggregate effect of a mid-size industry merger, but would not carry the risks of capital spend or regulatory issues.

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