The process of agribusiness development
Colin Kay, and his wife Jan, have been raising pigs since 1985 and by 2004 owned and/or managed five sites involving a total of 900 breeding sows. That year, Colin turned 50, and in a classic what do I do for the rest of my life decision making process he decided to grow the business. He has planned and is about to build another piggery.
We look at the various stages he went through in decision-making, the ICEHOUSE seminar and its influence and benefits in showing him what investors look for, and how several critical factors affected his decisions, design and choice of business partner. These factors included animal welfare, organics, and effluent/manure disposal issues. Applying for a resource consent was a major hurdle, and has just been granted subject to some conditions, which Colin says will not be a problem.
He has also been closely involved with the export of chilled, packaged pork to Singapore, a venture that has had several types of government assistance to get off the ground, and involves innovative packaging. A great market response, but difficulties with export licensed killing capacity.
Colin Kay has been seriously into pig production since 1985. Between 1985 and about 2000 he developed his own farm and bought two others. As businesses they were becoming marginal, and there was overcapacity on one farm and undercapacity on the others, so in 2002 he joined with another pig farmer and they rationalised five sites into one viable stand-alone business that he manages.
The herd of 900 sows produces close to 20,000 pigs per year. Up to 1200 first cross large white Landrace maiden sows are sold to commercial farmers in the southern half of the North Island. The balance of the animals is sold at around about 70 kg carcass weight, most going into the Trim Pork or bacon markets.
Feed energy sources are barley wheat and maize, protein sources are largely meat and bone meal, dried blood, soya meal, fish meals and milk powder, plus vitamins and minerals. Their nutritionist designs the least-cost ration using a computer program that takes into account energy, protein, digestible energy etc.
Waste disposal -- different schemes on each of the farms. Pig manure, straw and wood chip bedding are spread in September and ploughed in immediately. Liquids are handled using dewatering screens to separate out solids, a travelling irrigator, ponds, and a tanker that spreads on local farms.
In 2004 Colin turned 50 and started to consider what he was going to do for the remainder of his working life and in retirement. The buildings on the farms were all heading towards the end of their economic lives, so one option was to stop spending anything on them and eventually close them down and retire. Another option was to reinvest to increase asset value and have a continuing income from it after retirement.
My wife Jan and I decided that we really needed to look hard at the reinvestment option and we went through the whole business structure, its strengths and weaknesses opportunities and threats, we looked at the New Zealand industry and the overseas industry and how they would affect us, and the more I looked at it more strengths that I saw we had, says Colin.
These included my knowledge and experience, the team that we have built up, a corporate-like business structure, good reporting systems, high genetic quality and high health breeding herd so the more I looked at the strengths the more I thought this is to good to throw away.
Seeing plenty of opportunities they decided that expansion of the business was a viable option, and Colin travelled to important centres of pig production in the USA, Germany, and Australia to see best international practice at first hand. He learnt many useful things, including the fact that the best building designs in the USA and Europe were not necessarily suitable for New Zealands climate.
I thought that by taking all good points I could come up with a business plan which suited our conditions. We had to compete with imports, so I developed a plan which I believe has got production costs to a level where we can compete successfully in the long term over the 30-year life of the project.
I then had to find a farmer with enough land to allow the spreading of piggery manure as a fertiliser, otherwise the cost of effluent and manure disposal would be too expensive. I also had to look for investors because it was going to take a considerable amount of money. So I had to get the technical aspects of the business plan right, then find land to put the piggery on, and then get the money.
I had never been involved in the investment world and didnt know what investors looked for, but the ICE HOUSE program came up just at the right time, so I went on that and came back with everything that I had hoped for, and more. From that I was able to develop my proposal into a format that investors could understand. Then I identified some farmers and approached them.
We have now applied to the Horizons Regional Council for resource consent and it has come through okay subject to a few conditions. We have also had to work out the ownership structure of the piggery, and an investment strategy.
Rather than seeing animal welfare as a problem Colin looked at all the positive aspects of it and the way good animal care would contribute to productivity in the long term. The operation had to last for at least 30 years, so he studied the animal welfare codes in Europe because they seemed to be the most advanced, and incorporated most of their innovations into his building designs.
They are certainly more advanced than the requirements of New Zealand animal welfare code, so hopefully we will be able to farm for many years without having to make any changes, he says.
We looked seriously at how we could operate this farm organically, and although we could, we wouldnt get any premiums. Organic pork would be a brand for a small niche market and I think it would eventually be sidelined by best practice conventional products, so we have designed our system to be nature friendly, high health status, with good practices so we won't have to treat the animals with antibiotics as they do in Europe of the USA.
The farm on which the new piggery is to be built is a dairy farm, and in producing data for the resource consent Colin has used the nutrient budget program Overseer to gauge the effect on the farm of both the dairy and piggery operations. Piggery manure, he says, is a balanced NPK fertiliser, so it will readily substitute for chemical fertilisers.
The volumes of liquid involved will be quite large, and to tanker the effluent off would be too expensive. However, on this farm there are two centre-pivot irrigation devices that will be used for spreading the liquid manure. Solids from the dewatering screens and the bedding from the pig houses would be stockpiled and ploughed in in September.
ICEHOUSE:
The ICEHOUSE agribusiness programme that Colin participated in was developed and run by a joint group of universities: Massey, Auckland and Melbourne. It provides inspiration, information, seminars, contacts, and guidance. Colin found many like-minded people at the agrbusiness programme he attended, and learnt much that was helpful in honing his business plan so that it would be of interest to potential investors.
Colin is a shareholder and director of the marketing company Five Star Pork, a preferred supplier to Progressive Enterprises supermarkets. Three years ago they started looking at the Singapore market and with the help of a former Progressive meat manager identified an opportunity to supply a supermarket chain there.
We developed a brand called Koru Farms, we developed some new packaging, investigated the market and sent the first shipment in October, says Colin.
We sent up by air what the company in Singapore estimated they would use in three weeks but they sold out in three days.
It sounds easy, but there was a lot of preparation involved. Seed money for the venture came from the NZ Pork Industry Board, FORST provided funds for Massey University to study the characteristics of Asian pork and to develop suitable long-life chilled packaging, and NZ Trade & Enterprise gave assistance. It was a concerted team effort, says Colin.
You have to understand that Australia can airfreight pork to Singapore at about the same price that we can send it by sea, so sea freight is essential to the economics, and because pork has a short shelf-life the long-life packaging is essential, he says.
The good response to the first shipment caused us all sorts of problems because we didn't have the licensed killing or cutting capacity in New Zealand to handle it. However, another plant is being licensed, and by the beginning of February will be underway with sea freight.
The lessons we have learnt in Singapore we can apply to other countries, although talking to our general manager yesterday he said that had he known how hard it was going to be he would never have started on it!
We look at the various stages he went through in decision-making, the ICEHOUSE seminar and its influence and benefits in showing him what investors look for, and how several critical factors affected his decisions, design and choice of business partner. These factors included animal welfare, organics, and effluent/manure disposal issues. Applying for a resource consent was a major hurdle, and has just been granted subject to some conditions, which Colin says will not be a problem.
He has also been closely involved with the export of chilled, packaged pork to Singapore, a venture that has had several types of government assistance to get off the ground, and involves innovative packaging. A great market response, but difficulties with export licensed killing capacity.
Colin Kay has been seriously into pig production since 1985. Between 1985 and about 2000 he developed his own farm and bought two others. As businesses they were becoming marginal, and there was overcapacity on one farm and undercapacity on the others, so in 2002 he joined with another pig farmer and they rationalised five sites into one viable stand-alone business that he manages.
The herd of 900 sows produces close to 20,000 pigs per year. Up to 1200 first cross large white Landrace maiden sows are sold to commercial farmers in the southern half of the North Island. The balance of the animals is sold at around about 70 kg carcass weight, most going into the Trim Pork or bacon markets.
Feed energy sources are barley wheat and maize, protein sources are largely meat and bone meal, dried blood, soya meal, fish meals and milk powder, plus vitamins and minerals. Their nutritionist designs the least-cost ration using a computer program that takes into account energy, protein, digestible energy etc.
Waste disposal -- different schemes on each of the farms. Pig manure, straw and wood chip bedding are spread in September and ploughed in immediately. Liquids are handled using dewatering screens to separate out solids, a travelling irrigator, ponds, and a tanker that spreads on local farms.
In 2004 Colin turned 50 and started to consider what he was going to do for the remainder of his working life and in retirement. The buildings on the farms were all heading towards the end of their economic lives, so one option was to stop spending anything on them and eventually close them down and retire. Another option was to reinvest to increase asset value and have a continuing income from it after retirement.
My wife Jan and I decided that we really needed to look hard at the reinvestment option and we went through the whole business structure, its strengths and weaknesses opportunities and threats, we looked at the New Zealand industry and the overseas industry and how they would affect us, and the more I looked at it more strengths that I saw we had, says Colin.
These included my knowledge and experience, the team that we have built up, a corporate-like business structure, good reporting systems, high genetic quality and high health breeding herd so the more I looked at the strengths the more I thought this is to good to throw away.
Seeing plenty of opportunities they decided that expansion of the business was a viable option, and Colin travelled to important centres of pig production in the USA, Germany, and Australia to see best international practice at first hand. He learnt many useful things, including the fact that the best building designs in the USA and Europe were not necessarily suitable for New Zealands climate.
I thought that by taking all good points I could come up with a business plan which suited our conditions. We had to compete with imports, so I developed a plan which I believe has got production costs to a level where we can compete successfully in the long term over the 30-year life of the project.
I then had to find a farmer with enough land to allow the spreading of piggery manure as a fertiliser, otherwise the cost of effluent and manure disposal would be too expensive. I also had to look for investors because it was going to take a considerable amount of money. So I had to get the technical aspects of the business plan right, then find land to put the piggery on, and then get the money.
I had never been involved in the investment world and didnt know what investors looked for, but the ICE HOUSE program came up just at the right time, so I went on that and came back with everything that I had hoped for, and more. From that I was able to develop my proposal into a format that investors could understand. Then I identified some farmers and approached them.
We have now applied to the Horizons Regional Council for resource consent and it has come through okay subject to a few conditions. We have also had to work out the ownership structure of the piggery, and an investment strategy.
Rather than seeing animal welfare as a problem Colin looked at all the positive aspects of it and the way good animal care would contribute to productivity in the long term. The operation had to last for at least 30 years, so he studied the animal welfare codes in Europe because they seemed to be the most advanced, and incorporated most of their innovations into his building designs.
They are certainly more advanced than the requirements of New Zealand animal welfare code, so hopefully we will be able to farm for many years without having to make any changes, he says.
We looked seriously at how we could operate this farm organically, and although we could, we wouldnt get any premiums. Organic pork would be a brand for a small niche market and I think it would eventually be sidelined by best practice conventional products, so we have designed our system to be nature friendly, high health status, with good practices so we won't have to treat the animals with antibiotics as they do in Europe of the USA.
The farm on which the new piggery is to be built is a dairy farm, and in producing data for the resource consent Colin has used the nutrient budget program Overseer to gauge the effect on the farm of both the dairy and piggery operations. Piggery manure, he says, is a balanced NPK fertiliser, so it will readily substitute for chemical fertilisers.
The volumes of liquid involved will be quite large, and to tanker the effluent off would be too expensive. However, on this farm there are two centre-pivot irrigation devices that will be used for spreading the liquid manure. Solids from the dewatering screens and the bedding from the pig houses would be stockpiled and ploughed in in September.
ICEHOUSE:
The ICEHOUSE agribusiness programme that Colin participated in was developed and run by a joint group of universities: Massey, Auckland and Melbourne. It provides inspiration, information, seminars, contacts, and guidance. Colin found many like-minded people at the agrbusiness programme he attended, and learnt much that was helpful in honing his business plan so that it would be of interest to potential investors.
Colin is a shareholder and director of the marketing company Five Star Pork, a preferred supplier to Progressive Enterprises supermarkets. Three years ago they started looking at the Singapore market and with the help of a former Progressive meat manager identified an opportunity to supply a supermarket chain there.
We developed a brand called Koru Farms, we developed some new packaging, investigated the market and sent the first shipment in October, says Colin.
We sent up by air what the company in Singapore estimated they would use in three weeks but they sold out in three days.
It sounds easy, but there was a lot of preparation involved. Seed money for the venture came from the NZ Pork Industry Board, FORST provided funds for Massey University to study the characteristics of Asian pork and to develop suitable long-life chilled packaging, and NZ Trade & Enterprise gave assistance. It was a concerted team effort, says Colin.
You have to understand that Australia can airfreight pork to Singapore at about the same price that we can send it by sea, so sea freight is essential to the economics, and because pork has a short shelf-life the long-life packaging is essential, he says.
The good response to the first shipment caused us all sorts of problems because we didn't have the licensed killing or cutting capacity in New Zealand to handle it. However, another plant is being licensed, and by the beginning of February will be underway with sea freight.
The lessons we have learnt in Singapore we can apply to other countries, although talking to our general manager yesterday he said that had he known how hard it was going to be he would never have started on it!