Innovation in Joint Venture Dairy Enterprises

August 2012

Three Colombian businesses are planning dairy farms in Colombia using Kiwi Know-how

There is immense potential for exporting New Zealand’s primary sector technology and expertise. One company making headway in this area is Innovation Waikato. The company has been working in Colombia and is about to set up three joint venture enterprises with Colombian investors. The aim is to produce high quality milk for Colombian consumers (and eventually export) using a New Zealand model of low-input pastoral farming combined with advanced dairying techniques and technologies.

Three Colombian-based partners were identified and joint venture agreements were formalised between the first of the partners (Aliar) and Waikato-based Dairy Solutionz in June 2012.

The days of New Zealand as a low cost producer of commodities have gone. There are many people who believe it is time to reposition this country as a niche market provider, producing high quality, safe, nutritious food (produced with minimal adverse environmental impact) for high-end consumers.

But there is alternative way to earn international revenue. We have the knowledge to help other countries produce safe, low-cost protein through our experience as pastoral farmers, agri-scientists, agri-technologists and farm managers. In the process, there is immense opportunity for our agri-tech companies to sell equipment, technology and consulting services to these markets. There is also potential for the creation of ongoing international partnerships.

A group led by Derek Fairweather based at Waikato Innovation Park has created a venture called Dairy and Beef Solutionz to take advantage of these opportunities. They have been working on three joint ventures in Colombia. The companies are all involved with investment, agricultural expansion, protein retail and equipment:

1. Waikaliar with Aliar (Innovation Waikato 50% investment)

2. Maori Project with Promision (IW 30%)

3. Miraka Jato with Alqueria (IW 30%)

The opportunities were identified in 2009/2010 by a Colombian, Julian Ramirez-Luna. Julian is the Business Development Manager for Dairy Solutionz and Beef Solutionz Innovation Waikato. He previously worked for John Deere in Colombia and came to NZ, initially to study English but soon became involved with the team at Innovation Waikato. Julian believes the potential for the Llanos region is “massive” and the area is now is seen as the future of Colombia, with 4.8 million hectares available to grow agricultural products such as soy, maize, sugar, cane, palm oil and rubber as well as dairy production. Alongside this, it will create employment, social stability and improved infrastructure.

Aliar is the first company to sign up with Waikato Innovation. Aliar’s head office is in Bucaramanga, an hour’s flight north from Bogota towards the Venezuelan border. The joint venture farm is known as Waikaliar. Aliar is a vertically integrated company that owns and leases farms, growing soy and maize and producing pork for La Fazenda (“fresh protein”) brand stores.

Jaime Lievano is the head of Aliar. He is a forward-thinking, entrepreneurial agronomist and marketer, focused on producing high quality, affordable protein for Colombians. There are many Colombians who are undernourished and unable to take advantage of education opportunities and the subsequent improvement in their lives. Jaime Lievano is determined to change that by producing affordable protein for Colombians. He identified New Zealand’s pastoral farming systems as being low input yet producing a high quality outcome and one he wants to adopt for his new dairy operation.

Aliar’s farmland is sited on a plateau (the Altillanura) within an area in central Colombia known as the Llanos Orientalis. There is a vast amount of land ripe for development in this region. Jaime Lievano identified it about 12 years ago. At that time, buying land and setting up cropping farms was a bold move, as unrest between certain factions in Colombia had created an unstable country, particularly inland regions. However, in the past few years, there has been a shift in Colombian politics with resulting increased stability, and a commitment to building a safe and productive country.

Aliar currently has 78,000 hectares of farms in production and development in the Llanos. The farms are mostly planted in soy and maize, used to produce animal supplement feed used for a large pig operation on the home farm at La Fazenda. Aliar owns 48,000ha and leases 30,000ha. There are nine farms in operation or under development currently: La Fazenda, Gamanfrey, Marmoral, Buena Vista, Margaritas, Barlovento, San Francisco, San Benito and Santa Clara (formerly known as Brasil) the largest unit, at 15,000ha. San Francisco is the site of the dairy operation. The milking platform will eventually be 5,000ha with 50,000 cows and five dairy sheds. Initially 800ha will be developed in what is termed a “cookie”.

Existing Colombian dairy operations are typically based in the tropical highlands. The climate in these areas supports ryegrass and clover pastures. Dairy producers tend to have small herds (maximum 100, average 25 cows) using American genetics and a lot of supplement feed.

The environment in the Llanos is challenging for dairy production. Current herds are dual-purpose animals based on Indo-genetic heritage. The climate is on the edge of heat tolerance (about 35 degrees Celsius and high humidity) for dairy cows, and up until now, pastures could not support a New Zealand pastoral system. The soil is poor. Undeveloped soil is acidic (about 4.2pH) with high aluminium levels. Indigenous savannah pastures can’t support significant milk production. Jaime Lievano’s team is aware of these issues and is working to improve both the pH and organic content of the soil through cropping, and fertiliser and lime applications.

Pasture trial work run by New Zealander Paul Sharp has discovered the best grass to work with (Tifton 85 with African Star as a backup) and the most efficient management techniques to get the best nutrition for the milking herds. In addition, soy and maize sileage will be fed to the cows to provide the necessary carbohydrate requirements.

Mauricio Mojica is second in charge of cropping at Aliar. Mauricio says they will be providing local soil and crop management expertise to compliment the New Zealand consultants’ technical and animal knowledge.

New Zealand dairy genetics will play a big part in the success of the operation. Stuart Gordon (previously chief executive of LIC) now works with Dairy Solutionz as their Global Development Director. A combination of New Zealand and tropical genetics will create a purpose-built cow. In particular, heat stress and disease resistance will be targeted in creating a cow that will be able to be milked on an industrial scale in the lowland tropics.

Bogota-based Alqueria is a producer of UHT milk, with a farm (La Fagua) and milk treatment plant an hour out of Bogota. It is a third generation family-owned dairy company, run by chief executive, Carlos Cavalier. Carlos became involved with Dairy Solutionz through personal connections. His father was in New Zealand in 2008 looking for ways to increase the company’s investment in agriculture and dairy. Alqueria’s JV lowland tropics farm will be two to four hundred hectares in area, based in the Altianura and called Miraka Jato.

The third JV is called “Maori Project” and is between Dairy Solutionz and investment group Promision. Promision is based in Bucaramanga. It is a key partner for the transfer of New Zealand’s agricultural technology. The investment group was begun nearly 30 years ago for investment in regional infrastructure in the Santander region, of which Bucaramanga is the capital. It now manages an investment pool of about 50 million dollars.

The head of Promision is Carlos Chaverra. About six years ago they developed a strategic investment programme covering three areas, one of which was agriculture. Carlos says there is no time frame for their investment as long as they have the opportunity to create value. Their focus is on finding good partnerships and creating value.

Promision has created a company called Dairy & Beef Solutionz Latam (Latin America) which has been set up in Colombia as the investment vehicle for NZ agricultural technology transfer. NZ technology companies such as LIC and Milfos have assigned their distributorships to the joint ventures.