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The business today

The business today. 2500 Ha – Located Central West NSW 750Ha – Irrigation Crop rotation – Corn, Winter Cereals and Lucerne. Dairy Operation. 2000 milk cows 27 million ltrs milk/year 37 ltrs per cow 3x milking Expansion Plans. The game plan.

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The business today

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  1. The business today • 2500 Ha – Located Central West NSW • 750Ha – Irrigation • Crop rotation – Corn, Winter Cereals and Lucerne

  2. Dairy Operation • 2000 milk cows • 27 million ltrs milk/year • 37 ltrs per cow • 3x milking • Expansion Plans

  3. The game plan Supply domestic fresh milk market Value add to feed (land and water resource) Add value through entire production chain Farm operations Logistics Compost / waste to energy Surplus and elite stock Maintain a better margin than our competitors

  4. Business Structure • Family Business – Family Board relying on advisors • Recently appointed CEO • 55 Employees.

  5. Looking into the Future • Dairy will become an increasingly complex business • We need to understand the things that influence our industry • We need to review our enterprise and understand the potential demands and challenges going forward. • The nature of these challenges and how we choose to respond will form a big part of what this industry looks like in the future.

  6. Influences on industry performance Outcomes – affecting productivity, competitiveness and sustainability Drivers Enablers Globalisation increasing developing world affluence Volatility in farmgate prices for milk Dairy processing technologies enhancing shelf-life and product applications Rising prices but value of milk not gaining in real terms Trade protectionism from 1980 to 2003 Trade liberalisation since 2004 Bought-in grains and supplements priced off global benchmarks external The internet IT and digital technologies Greater transparency and commoditisation of food/feed markets New ownership and investment models A range of interrelated “mega” trends and responses to changing demands, combine to raise the bar. Greater competition for labour Diversity in career options Greater competition for land and water assets driving values Greater mobility of capital Improved animal genetics for better feed conversion Advances in biotechnology Climate change – less reliable and more variable weather Greater reliance on bought in grains & supplement feed Improved know-how in cow nutrition & feeding internal Development of irrigation water markets Intensification of production (to get more from less) Community demands for a sustainable environment Environmental standards in law Higher compliance costs Increasing influence of advocacy groups on policy Community demands for animal welfare assurances

  7. Dairy – A Complex Enterprise Water Irrigation resource Water use Soil health Pasture/forage production Land Fertiliser use Genetic quality Forage conservation Herd Feed utilisation Supplement purchase storage People management Effluent management Herd management Dairy DAIRY FACILITY Milk harvesting ROI Other costs & overheads Milk income Feed costs Labour costs Trading income

  8. Future Demands and Challenges The demands within the dairy enterprise have escalated over time. The graphic below illustrates areas within the farm business environment where demands have increased due to higher complexity of the pressures on the dairying operation. These complexities will continue to be amplified going forward. Water Irrigation resource Improved Feed Conversion Balancing of environmental priorities along with strict environmental standards On farm sustainability initiatives Water use Soil health Pasture/forage production Land Fertiliser use Genetic quality Forage conservation Herd Feed utilisation New ownership and investment models + greater competition for capital Supplement purchase storage Increased demand for automation Need for better cow performance People management Effluent management Herd management A stronger focus on people Dairy DAIRY FACILITY Milk harvesting ROI Milk income Other costs & overheads Feed costs Labour costs Trading income Complex business management

  9. Looking Forward

  10. A huge driver of on farm productivity. Genetics, Genomics, Markers Understanding cow comfort Balanced TMR feeding Individual cow management software Improved Feed Conversions

  11. On farm sustainability initiatives • Improved plant varieties • New irrigation technologies • Humified Compost • Waste to energy technologies

  12. Dairy Ownership • Farms will get bigger as we use scale to remain competitive • Corporate money will continue to flow to the sector • Ownership horizons may change as these new structures emerge. • It appears challenging to align investor interest along side current agricultural returns and traditional management structures. • It seems difficult to provide investors with a level of comfort to have them participate in on farm operational risk.

  13. Dairy Automation The increasing competition and cost of labor is leading to the development and adoption of a range of new technologies. • Individual cow management software • Robotics

  14. A stronger focus on people • As farms get bigger we become more dependant on our people • Dairy is all about detail • New technologies and management practices are demanding higher levels of skills (technical, operational and financial) • Increasing levels of compliance are challenging us to improve our human resource management and employee training

  15. Where will we be in 5 – 10 Years • Who knows? We operate a marginal business that is constantly evolving. • Become more professional and more corporate as we chase scale as a means to reduce costs and deliver a defined product to our customer. • More global in terms of our markets and sourcing of information & technology. • More integrated with other key markets such as energy, carbon and water.

  16. Closing comments • It is an extremely exciting yet potentially uncertain era for Agriculture. • What will come of carbon trading? • What will evolve in China? • When will food security become priority in developed countries? • How will the domestic sale of milk play out in the retail market? • Can we convince the consumer to pay more for our product? • Efficient and sustainable agricultural production is a long-term commitment/ investment in best practice that requires a clear price signal from the market and certainty of government policy. • Many Australian Farmers are leaders in their fields and the opportunities to grow rural Australia are huge!

  17. Thank You

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