13 minute read
NZ could lead cleantech
News NZ could lead cleantech
Richard Rennie richard.rennie@globalhq.co.nz
NEW Zealand’s decade-long focus on methane emission mitigation is likely to provide the leading light for a growing cleantech sector, with potential to generate global royalties, despite the challenge alternative proteins may pose to the red meat sector.
A recent Callaghan Innovation report titled NZ Climate Tech for the World has identified areas this country could excel in, with low carbon agriculture and energy production as two with the greatest potential.
The report is being used as a launch point for a NZ CleanTech Mission, an alliance between Callaghan Innovation, NZ Growth Capital Partners, the national science challenge and UniServices.
Cleantech is defined as technology that reduces or eliminates greenhouse gases (GHG) or improves the use of natural resources.
The report has compared NZ’s performance in developing such technology against other Small Advanced Economies (SAEs), defined as having a population of less than 20 million and “advanced” based on IMF criteria of per capita annual income over US$30,000.
With a number of crossovers and references to the $1.4 billion a year agritech sector, the report has placed methane vaccination, agricultural robotics, livestock breeding and digitalisation as areas the country should all be in the “advance” category.
The report found that in contrast to other wealthy, small economies like Israel and Sweden, successful NZ companies have tended to be backed individually by the Government, rather than benefiting by having the entire industry elevated through central government mandate.
Sweden, for example, has the Swedish Cleantech Initiative, and Israel the Israel Innovation Authority.
NZ has, however, proven its ability to commercialise technology, but researchers still often lack the incentives to bring new tech out of the lab and into companies.
This is an issue also identified in the agritech sector, and aimed to be addressed through the industry transformation plan released last year.
Callaghan Innovation CleanTech lead James Muir says often researchers were not fully appreciative of the commercial opportunity their work represents.
He pointed to methane mitigation, an area the rest of the world would only wake up to once the “easy” carbon emissions had been dealt with.
“And, it will be looking at the work we have been doing here for some time for solutions to their livestock methane issues,” Muir said.
The report identifies this country’s potential to leverage off low emissions research and innovation has been stymied by the relatively low levels of investment received compared to other SAEs.
As a country, NZ has a near average number of innovators (17 against average of 21) raising cleantech capital over the past decade, but they only raised $130 million against an overall SAE average of $600m.
But Muir says the main constraint in funding tended to come at the late-stage commercialisation of innovation, with a market failure in linking larger tech production companies with the innovative developers in NZ.
The work by the NZ Agricultural Greenhouse Gas Research Centre that started well ahead of other countries, offers one of the most promising cleantech opportunities through a methane vaccine.
The report cites a lack of significant involvement in innovation by domestic corporations, including Fonterra, as a brake on advancing this faster.
However, Fonterra is currently engaged in extensive trials around NZ on methane inhibitor Bovaer, while also working on Kowbucha cultured solutions and seaweedbased options.
In June, Fonterra’s chief scientist Dr Jeremy Hill said a methane vaccine offered huge global earning potential, thanks to the general acceptance and use of vaccines in many countries with high livestock populations, including India.
Livestock genetics as a pathway to decarbonisation are also cited as an area NZ holds a solid competitive advantage in. Commercialisation of lowmethane sheep genetics is already well under way and learnings from this are being applied to cattle.
Interestingly, the report suggests viewing alternative proteins as a complement, not a replacement to red meat.
It acknowledges the level of investment here in this sector is far behind the likes of the Netherlands and Israel.
Between them companies in those two countries have received $430m over 10 years, compared to a mere $6.9m for NZ innovators.
The possible loss of red meat sales to such competitors should sharpen NZ’s need to find angles to maintain traditional meat’s appeal in high income countries, including a reduced emissions footprint.
In all cases, the report recommends NZ look at working with other similar innovative regions.
Some progress has been made here, with companies including LIC working closely with peers in Ireland in advancing genetic research and innovation.
“Agricultural digitalisation” is also cited for its potential, where NZ develops a digital “stack” of technology that encompasses real-time tracking of stock and crops, management platforms and precision interventions.
At present this is limited by a lack of coordinated outward innovation to push into other countries and a lack of finance to develop hardware.
James Muir Callaghan Innovation
OPPORTUNITY: NZ’s methane mitigation work offers significant commercial potential as the rest of the world grapples with “hard” emissions issues, Callaghan Innovation CleanTech lead James Muir says.
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LIC’s high-value products prosper
Hugh Stringleman hugh.stringleman@globalhq.co.nz
LIC has reported a strong set of results for the 2021 financial year, highlighted by no debt in the farmer-owned co-operative and increasing use of higher-value products by the country’s dairy farmers.
Net profit after tax was up 31% to $22.1 million in the year ended May 31 and revenue was up 3.4% to $249m, excluding the automation division which has been sold.
This year’s sale to multinational MSD Animal Health realised net $24m, received after the balance date, and the board is now considering the use of these funds.
Shareholders may be expecting a special dividend as the FY2021 dividend was no improvement on the year before despite the lift in net profit.
LIC chair Murray King says that was a result of the dividend policy being 80% of underlying earnings, which were down slightly to $22.3m after a one-off tax benefit in the prior year.
Underlying earnings excluded bull valuation, nil paid share valuation movements and any gain from the automation business divestment.
That dividend expectation would be reflected in the recent share price history, up 57% in the past 12 months to $1.21 currently.
The price has risen 30c since early March, most of the gain ahead of the divestment announcement in early June.
LIC will return $17.8m in dividend to shareholders, which equates to 12.51 cents a share.
The fully imputed dividend is a 14.4% gross yield based on the current share price and will be distributed on August 20. LIC has 127m shares issued and a current market capitalisation of $153m.
King says dairy farmers were responding to the refocusing of LIC to its core business as a modern, progressive co-op, especially in purchasing premium genetics.
“Young, genomicallyselected bulls are used to fasttrack genetic gain and deliver more value on-farm through increased productivity and efficiency, including improved environmental efficiency.”
Combined with the dividend payments, this was a win-win for farmers.
Premium genetics now accounted for 41% of all AB inseminations, being 1.79m out of 4.3m semen straws, more than double the rate three years ago.
Most of the premium straws purchased were from the Forward Pack or A2/A2 bull ranges.
That included sexed semen, which accounted for 110,000 straws, three times the previous year.
The number of traditionally daughter proven bulls used for AB continued to decline, now down 40% from three years ago.
That shift reflected growing confidence in LIC’s genomic work and the adoption of new tools and solutions for farm sustainability.
“We have invested heavily into genomics for our farmers because the DNA of our dairy herd can do a lot of the heavy lifting to help meet our sectors’ climate goals,” he said.
“World leading pastoral dairy genetics and genomics are a much more precise tool for farmers than the blunt instrument of reduced cow numbers.”
LIC was working with the NZAEL subsidiary of DairyNZ to include genomics in future animal evaluations to support the national breeding objective.
In the financial year, herd testing was up 7.3% and animal health testing up 23.9%, primarily for Johne’s disease and milk pregnancy testing.
International exports were up 23% by value after some initial challenges getting product to market due to covid-19.
Expenditure on research and development was up 15% to $17m, plus $3m on improvements to MINDA LIVE herd management system.
The board is recruiting a new chief executive after the decision of Wayne McNee to stand down in November.
It expected underlying earnings to be in the range $19m to $25m in the current financial year.
INVESTMENT: LIC chair Murray King says they have invested heavily into genomics because the DNA of a dairy herd can do a lot of the heavy lifting to help meet the sectors’ climate goals.
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News Calf rearers dropping numbers
Hugh Stringleman hugh.stringleman@globalhq.co.nz
HIGH beef schedules and store cattle prices are not feeding through into four-day calf values and calf rearing margins, which march to the beat of different drums.
Major calf rearers say their businesses are dependent on calf supply numbers in sale yards, input and labour costs, seasonal weather and demand down the track from beef farmers for 100kg weaners.
The numbers of calves being reared are going down, which is counter-productive for the industry, despite good markets for beef and the availability of better beef genetics over dairy cows.
The biggest operators are hanging in, but not expanding, while low margins and uncertain outcomes have decimated the ranks of smaller businesses.
Calf rearer Ian Farrelly, at Pokuru, near Te Awamutu, says this year dairy farmers may cut back on the numbers of calves retained and reared, thereby releasing more into the sale yards and keeping prices down.
Although rearing costs had risen, he was hopeful that margins would turn out like last year.
“Costs of rearing have gone up by $20 a head for milk powder, meal, labour and animal health,” Farrelly said.
“In contrast to last year, demand for autumn-born weaners has been very strong – I could have sold my 2000 of those calves twice over.
“Export beef markets are booming, supply and demand are balanced, China is buying aggressively and those things drive weaner prices a little.”
Farrelly is hoping that healthy demand for weaner bulls in the spring will hold them in the current range of $525-$600 and $475-$500 for heifers, depending on live weights.
His business will do 10,000 calves over the whole year, ideally about half of them contracted, alongside a family dairy farm.
Joanne Leigh of Top Notch Calves in Cambridge says fourday spring calf purchasing had only just begun and calf values had not settled down.
“The season is shaping up to be similar to last year, but I think there is more demand for Friesian bull calves, which is what we mostly rear,” Leigh said.
“That reflects the strong bull beef price schedules for slaughter and the recovery from drought.
“We need to keep the calf purchase prices reasonable and not get carried away with the high schedules.
“These bull calves are two years away from realisation, so the dairy-beef farmers are cautious over what they will pay at the 100kg stage.”
Leigh says costs increase every year and most recently, Top Notch had to factor in another week’s sick leave for staff members.
Calf meal costs have risen and calf milk replacer (CMR) has gone up about $10 a bag because of increased whole milk powder prices.
Top Notch was not going to increase the numbers of calves reared, staying at 7500 annually, 4500 of them being spring-born Friesian bull calves.
Some heifer calves for local dairy farmers were being reared under contract because of staff shortages on farms and a preference to put milk in the vat at the present high prices.
Top Notch has sold about half of its autumn-born weaned calves, including white-faces, at prices similar to last year.
Leigh says she had noticed more demand, making them easier to move in contrast to last year’s drought situation.
Te Awamutu-based rearer of large calf numbers Mark Bocock has contracts with both calf suppliers and weaner buyers.
Costs are rising every year and, for example, this year CMR is up 11%.
Rural suppliers’ websites show 20kg bags of standard Ancalf, Milligans or Ngāhiwi CMRs between $100 and $105, plus GST, compared with $90-$95 last year.
“That alone has put the costs of rearing a calf up $10, although I don’t begrudge the dairy farmers getting more for their milk,” Bocock said.
He says calf rearers who might have done 500 or 600 in the past have shut up shop because there is no money in it.
Bocock pointed to a lack of a common objective along the supply chain.
Beef finishers watching schedule prices rise don’t want to pass the benefit on to R1 cattle farmers, who in turn won’t pay more for weaners.
Hawke’s Bay calf rearer, supplier and livestock agent Carol Milligan says the numbers of four-day calves purchased off dairy farms for independent rearers had fallen considerably over the past decade.
Rearers she knew were doing one-third or one-quarter of their previous numbers and many had stopped the practice.
The reasons include land-use changes to forestry, Wagyu-cross contracts or lamb finishing and the lack of reliable returns for all the expense and effort of rearing.
She did not think the high price of beef currently was an incentive to rear calves.
“Calf rearers need the security of good margins and contracted prices for 100kg weaners,” Milligan said.
IMPACT: The numbers of calves being reared are going down, which is counterproductive for the industry.
Ian Farrelly Calf rearer
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