A New Zealander is working with three partners to 'revolutionise' the dairying sector, writes Nigel Stirling

Former Fonterra director Earl Rattray is at the forefront of a shift to larger-scale dairy farming in India.

For the past four years on a patch of leased cropping land 70km from New Delhi, Rattray and his local business partners have been developing a new dairy farming model for a nation of 1.2 billion people.

Though small by New Zealand standards -- a milking herd of 150 cows targeted to double to 300 by 2019 -- Binsar Farms is large for India.

Rattray says of India's estimated 70 million dairy farmers nearly 80 per cent own fewer than 10 cows.


"To picture it, just go back 100 years and think what New Zealand was like in its pioneering days when most households had a few cows and sold a bit of surplus milk, perhaps at the gate," he says.

At the same time a massive demographic shift is putting pressure on India's dairy farmers to keep the country in milk.

In the next 10 years 300 million people are expected to shift from the countryside to the towns in the biggest migration in human history.

The waves of this demographic tsunami are already lapping at Binsar's edges with fertile cropping land making way for a development expected to accommodate 10,000 families over the next five years.

"Every time I go out to the farm the landscape has changed around. We are on the urban periphery they are building a city around our farm there are schools and universities and hospital so all sorts of institutional markets popping up there for us."

Accounting for nearly a fifth of global milk production, India is already the world's single biggest producer.

But its ability to supply itself is being stretched by the same demographic trends supercharging its thirst for milk.

"More of those children of village farmers will move to town, and they can't take their cow or buffalo with them, but they still need milk, so the supply gap widens," says Rattray.

We are getting a call a month now from some Indian group or individual serious people who have got land and an idea that they want to establish a dairy farm.

It is a trend being noticed by India's entrepreneurial classes and investment is flowing into the sector.

As a first step to entering the industry, three IT executives sent a letter of introduction to 100 global dairy contacts in 2011.

Dairy initiative to slake India's thirst for milk

We are getting a call a month now from serious people who have got land and an idea that they want to establish a dairy farm answered and the group established Binsar Farms the following year.

"We bought 50 heifers and leased a small bit of land and called it our 'proof of concept farm'. Our mission for that first year was to learn about feeding cows in India and get them in calf and grow them to target weights."

Former Dell executive and Binsar partner, Pankaj Navani, says dairy farming in India is a family affair and highly labour-intensive.


Taking into account the time of the farmer and his family, India has the highest costs of producing milk anywhere in the world.

India has a great opportunity to improve its resource use.

"At the end of the day what they get is one or two litres of milk surplus."

The drive for bigger and better in India is backed up by a Rabobank report, which stimated a 200 per cent milk yield advantage exists for medium-scale Indian farmers (50-300 cows) over smaller rivals less inclined to adopt the same standard of animal husbandry or genetic improvement in their herds.

Navani says farming knowledge considered basic in New Zealand is lacking in India. Though the traditional European breeds of Holstein-Friesen and Jersey are available, a lack of innovation in breeding techniques has held back the animals' productive potential.

Rattray realised what he was up against after he was advised by a local veterinarian against crossing the two breeds. Well-known to New Zealand farmers, the Kiwi-cross proved itself resilient to high summer temperatures of 40C or more typically found in northern India. Cows were longer in milk, while animal maladies such as lameness and mastitis were less.

Importantly, empty rates -- cows unable to get in calf -- were also minimised.


Rattray has identified more gains through changes to feeding regimes and irrigation. Drought in India during the past two years has pushed up grain prices and eaten into the dairy farmers' profitability.

As much as possible, Rattray has encouraged the substitution of grain feed with fodder crops which can be grown more easily under irrigation and are more efficiently converted into milk solids. A shift from flood irrigation to more efficient surface irrigation systems like centre pivots is also under consideration.

"India has a great opportunity to improve its resource use."

Rattray says though the price of milk to the farmer in India is relatively high (equivalent to NZ$7.50 per kg of milk solids), commensurately high costs means margins are thin.

Already operating profitably, Binsar has bolstered its margins through low-cost feeding regime and the premium from bottling and selling milk directly to locals rather than through middlemen or local processing co-operatives.

"We are getting a call a month now from some Indian group or individual serious people who have got land and an idea that they want to establish a dairy farm," says Rattray.


India's dairy imports to hit $65 billion

Forecasts for India's future appetite for dairy products are mind-blowing.

The Australian Bureau for Agricultural Resource Economics (ABARE) estimates India's demand for imported dairy product will leap from near-zero today to nearly US$48 billion (NZ$65 billion) by 2050.

Demand from China, today's milk-importing powerhouse, would be a mere US$15 billion (NZ$20.5 billion).

However, so long as India maintains dairy tariffs as high as 60 per cent it is difficult to see foreign farmers being able to cash in.

New Zealand has been pushing for a tariff-busting free trade deal with India since 2011, but dairy has been a stumbling block and negotiators have not met for 18 months.

Progress through regional trade talks involving New Zealand and India has scarcely been any better.


Former Fonterra director and Indian farm investor, Earl Rattray, believes in the longer term India will be forced to take a more flexible approach towards allowing imports.

But he questions whether the chances of getting in ahead of the pack are being scotched by New Zealand negotiators doggedly sticking to their traditional bottom line of full tariff elimination across all major products. He says for India to bend to New Zealand's demands it is risking the livelihoods of 70 million dairy farmers and social upheaval.

"For them this is the difference between having the cash to send their daughters to school or not they live on the breadline over there and they depend on that [income]. New Zealand negotiators shouldn't underestimate that sensitivity."

Rattray says that is not to say New Zealand should give India a free pass in the talks.

"They shouldn't be using that either as a means for preventing a legitimate trade which should certainly be occurring in a whole bunch of areas of manufactured product that India doesn't make."

Rising incomes are expected to boost demand for branded yoghurts, cheese, ice cream, infant formula and UHT milk, all of which will require a step-up in the quality of India's milk.


Up to 70 per cent of Indian milk is thought to be adulterated in one way or another -- from watering milk down to, less benignly, the addition of household detergents to increase whiteness.

Rattray says India's rickety dairy supply chain also presents commercial opportunities to New Zealand companies -- from genetics companies such as LIC to milk-testing companies and cool storage service providers.

They are all a possible leverage in stalled trade talks.