Pete McKenzie - Originally posted on Stuff
One of Graeme Gardyne’s first memories is of watching the blades of his father’s combine harvester whir through a field of oats. “As a child, you’re in awe of these machines going round – even though they were much smaller than what they are now.”
The Gardyne family farm sits in the rolling downland country of inland Southland near Chatton, surrounded on three sides by hills and mountains. In the winter they can have snow on them, and rainfall is about 800 to 850mm, “which is not high, but it’s adequate.” The farm is remote; Te Anau is an hour and half away by car, and Invercargill an hour. Asked to describe his farm, Gardyne cuts to the soil. “(It’s) a mixture of silt and clay. It’s heavy ground, which in the winter can get wetter. It does need drainage to be able to farm it.”
New Zealand’s history
Traditionally, oats were farmed in balance with a range of other crops and livestock. “You don’t just farm oats by themselves,” says Gardyne. “Otherwise you’d have problems with wild oats or grassy weeds. It needs to be part of a rotation. And livestock are also part of that too. They’re a restorative phase – when you get your ground back and pasture.”
That was disturbed by the dairy boom of the 1990s. For most of New Zealand’s history, most farmers didn’t consider dairy to be financially viable. It was more expensive to produce and harder to export than other products.
That changed in the late twentieth century. At the same time as successive governments stripped away agricultural subsidies, the global price of many agricultural products plummeted. Dairy prices were among the few which remained stable or grew.
Thousands of farmers converted to dairy. Between 1990 and 2019, the number of dairy cattle in Aotearoa almost doubled from 3.4 million to 6.3 million. That boom was particularly pronounced in Southland, where the number of dairy cattle grew from 37,800 in 1990 to 636,200 in 2019: a 1584 per cent increase. Balanced farming turned into industrialised dairying.
The massive expansion led to a jump in our greenhouse gas emissions. By the end of 2019, dairy cattle were emitting 17,700 kilotonnes of carbon dioxide equivalent – 21 per cent of Aotearoa’s overall emissions. Because the dairy boom affected Southland so profoundly, it makes an outsized contribution. Despite having only 2 per cent of Aotearoa’s population, in 2018 Southland contributed 9.7 per cent of Aotearoa’s gross emissions.
Climate and financial crisis
That will all have to change. In its first official advice to the Government, the Climate Change Commission noted that a reduction in dairy cattle numbers of at least 13 per cent would be required to meet our emissions targets.
But despite the environmental cost of our dairy farms, by this point dairy farmers are locked in. To transition to intensive dairying, farmers took on staggering quantities of debt. Between 2003 and 2019, the debt owed by dairy farmers increased by 267 per cent. Cumulatively, dairy farmers now owe approximately $40 billion. To service that debt, dairy farmers feel compelled to maintain their herd numbers.
This is the complicated financial and environmental equation which Aotearoa must solve in order to reach our climate goals: how do we make reducing cattle numbers not only environmentally necessary, but financially possible? Southland is particularly vexed by this challenge. It might also be where an answer can be found, with an eclectic mix of farmers, officials, environmentalists and investors in the region betting on a new product as part of the solution to this climate and financial crisis: oat milk.
Gardyne came across
While farmers around their district converted to dairy, the Gardynes stuck to oats. Graeme’s involvement in the wider oat industry started when the Flemings Mill in Gore shut down. Local farmers relied on the mill to process their oats.
Without it, they were stuck. Gardyne gathered a group to approach Harraways Mill in Dunedin to see if they could handle taking on Gore’s oats as well. That group evolved into the Oat Industry Group, which Gardyne now chairs.
While serving in that role, it became clear to Gardyne that there was a significant problem facing both current oat farmers and those wishing to diversify away from industrialised dairy: the price of oats wasn’t high enough.Problematically, the existing oat market – for porridge and baking, among other things – had been met. Growing oat prices would require developing a whole new product. It was in this search for something new that Gardyne came across Chris Wilkie.
According to Wilkie, he could see the impact of industrialised dairying on the landscape. “The Ruamahanga River runs down the valley and through our farm. Growing up, all summer long, I’d swim in that with my brother. I was really eager to get my kids to do the same. The first time I went down we went with my parents. My kids started to waddle in and my folks said, ‘Oh, they’ll be OK, but probably best they don’t put their heads under the water’. That was really one of those ‘what the hell’ moments for me.”
Just as Wilkie decided to do something to address intensive dairy farming, his friend Tim Ryan reached out. Ryan had spent years as a globetrotting advertising executive for Nike, but he had recently come home as well. Both Wilkie and Ryan had watched the rise of businesses like Impossible Foods, which was trying to cut American emissions by replacing beef burgers with ones made from plants or lab-grown meat.
Otis isn’t the only New Zealand oat milk company. Local brands All Good and Boring also produce oat milk. The trio seem to have a viable business model. The alternative milk market has grown rapidly in recent years – the amount spent by Kiwis on plant-based milks almost tripled from $52 million in 2017 to $144 million in 2019, with further growth since.
Ryan suggested they create an oat milk company. According to a University of Oxford study, producing a glass of dairy milk consumes at least nine times more land and produces at least three times more greenhouse gas emissions than any plant-based milk. Oat milk is one of the most environmentally friendly plant-based milks. Wilkie enthusiastically signed on and together they founded Otis.
Given Southland’s history of oat growing, they focused their efforts there (that’s how they met Gardyne). They wanted to create a product which would raise the price of oats enough that Southland farmers could rebalance away from dairy.
“Farmers have been told their herd sizes need to reduce by 13 per cent,” said Wilkie. “For them to be able to keep servicing their debts, something needs to go in place of that. And we hope that by having a premium brand, that people are prepared to pay good money to consume, we’ll be able to give them a farmgate price that softens that blow.”
But these companies quickly found that their dreams of sustainable oat-based agriculture faced an enormous hurdle. Turning oats into oat milk requires a specialised, large-scale processing plant – something Aotearoa lacks. To create their product, Otis and All Good had to transport most of their oats to Sweden for processing and then import the resulting milk all the way back. (Boring processes its milk in Hawke’s Bay.) That global detour caused their greenhouse gas emissions to balloon beyond what they expected. Their costs have similarly jumped, meaning less of the purchase price goes to oat farmers.
To connect environmentally conscious producers and consumers – and ensure oat farming was sufficiently viable that dairy farmers could convert to it – an oat milk processing plant in Aotearoa was necessary. Great South stepped up.
“It’s rather unusual for an economic development agency to be literally establishing companies and businesses like this,” says Graham Budd, the chair of Great South, Southland’s economic development agency. “But the core purpose was to intervene where, in effect, we identified market failure.”
Budd takes a distinctly farmer-oriented view of the climate challenge. “We want to help our region meet emissions targets before more regulations are imposed on them to do so. There’s already enough regulation being imposed, and more is coming thick and fast.”
But despite that appetite for a proactive approach, says Budd, “We absolutely know that many dairy farms have many millions of dollars tied up in dairy equipment and there’s some really large debt around that. In no way can anybody expect that any change or evolution of farm practices can happen without it giving at least the same level of return.”
Accordingly, when Great South started to hear about the challenges the Oat Industry Group and businesses like Otis and All Good were having as a result of the absence of an oat milk processing plant, it piqued their interest. “While oat milk was rapidly growing internationally, there was nobody stepping up either in our region or in New Zealand [to invest in a processing plant] … So to unlock that opportunity for the region, Great South asked, ‘can we do this?’”
Great South has established a subsidiary company – New Zealand Functional Foods – and identified Makarewa, near Invercargill, as the new plant’s future home. It was aided by an infusion of cash from Sir Stephen Tindall’s investment company K1W1. Conditional on more investors coming on board, New Zealand Functional Foods aims to complete construction by the end of 2022. (Graeme Gardyne is more conservative; he expects the project to take three to four years to complete.)
The plant is expected to produce 40 million litres of oat milk a year – enough to supply domestic and international consumers, without the cost or emissions of transporting oats to Sweden and back.
Tindall compared it to the work being done by some global oil and gas companies. “The smart ones are starting to put hundreds of millions into renewable technologies. They know that if they don’t in 30 to 40 years’ time, people won’t be using oil and gas … That’s what farmers and producers and processors in New Zealand need to start considering as well. If it’s a fast transition, it could be devastating. But if it’s a transition they can invest in and be part of, the transfer of wealth can change.”
Budd is right that this is not a normal intervention for an economic development agency. Most such agencies focus on providing financial or technical support to existing businesses, not on developing commercial projects themselves. But it’s the kind of bridging project necessary to shift Kiwis away from the polluting business models which they’re so deeply invested in currently. If nobody else is doing it, they asked, why not Great South?
Fonterra has been a critic of the growth of oat milk. Dr Jeremy Hill, Fonterra’s chief science officer, has criticised oat milk for having higher greenhouse gas emissions than dairy when compared on the basis of their nutrient content, and for having fewer nutrients overall.
Federated Farmers has called for the use of the term ‘milk’ in relation to plant-based products to be banned. Chris Lewis, the chairman of Federated Farmers, said oat milk should really be called ‘juice’. It’s an approach similar to that being taken in Europe, where the European Court of Justice has ruled that plant-based foods cannot be sold using terms like ‘milk’ or ‘cheese’, and being advocated for in America, where the National Milk Producers Federation is lobbying for the Food and Drug Administration to make a similar decision.
But even Fonterra concedes that the rise of plant-based alternatives seems inevitable. Its chief financial officer this year announced that Aotearoa had reached “peak milk”, and the co-operative has signalled that it will also be branching into plant-based milks in some form or another.
Mark Piper, the co-operative’s director of strategy and innovation, said, “We are keeping an open mind when it comes to plant-based milks. We believe there is a place for both in the future; we do not believe it to be ‘an either or’, rather an ‘and’.”
Piper is right that plant-based milks are unlikely to eliminate our dairy industry. While companies like Impossible Foods and Beyond Meat have vowed to end all animal farming in the next few decades, their Kiwi equivalents have much more modest goals.
“We’ve swung too far towards dairy,” says Wilkie. “It’s not that we want to get rid of all the dairy cows in New Zealand. It’s that we want to rebalance and substitute back.”
The shift to plant-based milks also won’t happen overnight. According to Bruce Thorrold, who leads Dairy NZ’s New Systems and Competitiveness team, “growing oats is [still] quite a lot less profitable than milking cows”. He cited internal Dairy NZ figures which suggested that dairy farmers would make around $3000 in profit per hectare, while oat farmers would make just $1500. Over time, the profitability of dairy will be pushed down by costs like the Emission Trading Scheme’s carbon price (in recognition of dairy’s environmental impacts). The price of oats will also have to go up.
But progress is being made. The construction of a new oat milk processing plant and the emergence of so many new oat milk companies is likely to make oat farming financially viable and help dairy farmers reach the 13 per cent reduction in cattle numbers necessary to achieving climate goals.
Climate advocates often talk about a ‘just transition’ – the idea that achieving climate goals must be done in a way that supports the people whose livelihoods depend on our current, highly polluting economic model. If everything goes to plan, industry says, the growth and future path of plant-based alternatives like oat milk will help us achieve that ‘just transition’ in practice.
Correction. This story has been updated to remove reference to Te Anau being the closest town. Story updated October 17, 10.35am. It’s also clarified that Boring does not send its oats to Sweden. Second update made October 17, 12.17pm.
This story was published with the support of Boomers for Real Climate Measures, a charity that pays for research into climate change solutions. The charity took no part in writing or editing the story.