Case Study

Southern Pastures: Measuring the Business Case for Good Welfare

With over $300 million under management, Southern Pastures LP is the largest New Zealand-based institutional agricultural fund. The fund has invested in over 6,600 hectares of predominantly dairy farmland in New Zealand. All the farms in which Southern Pastures invests use free-range, grass-fed and animal-welfare based sustainable farming methods to produce high quality premium dairy products. Southern Pastures is a signatory to the UN Principles of Responsible Investing [PRI] and to the Farmland Principles that have been adopted by a subgroup of PRI signatories.

Knowledge of this issue is growing

Southern Pastures’ mission is to farm sustainably to produce world-leading economic and environmental performance for the asset class. This is postulated on developing an ethical agricultural practice that balances community and social needs with productive and sustainable farming systems. At the core of it all is Southern Pastures’ commitment to animal welfare.

Prem Maan, Executive Chairman of Southern Pastures explains, “Animals are key to our business and ensuring strong animal welfare is a fundamental consideration. We rely upon our dairy cows for good returns. If a cow is stressed, ill or lame it produces both less and lower quality milk. Therefore, the health and wellbeing of the cows is crucial and good animal welfare is an essential part of Southern Pastures’ business.”

Moving towards antibiotic-free farms

Illness or injury to a cow not only reduces the cow’s ability to produce milk. It may require treatment with antibiotics, which would mean removing the cow from the production herd for treatment. This is critical for Southern Pastures as both Fonterra and Westland, the dairy cooperatives that acquire Southern Pastures farms’ supply, will not accept milk with traces of antibiotics and impose fines on farms that supply milk which contains antibiotics.

Over the last two years, Southern Pastures has increased its focus on the antibiotics issue and has instigated a range of measures to reduce their use. In the medium term, this commitment involves working towards only using antibiotics in situations that are clinically therapeutic and necessary for life preservation for the animal. Over the longer term, Southern Pastures is considerably more ambitious and is striving towards eliminating the use of antibiotics from all its farms.

Southern Pastures has publicly signalled its commitment by becoming a signatory to the Global Investor Statement on Antibiotic Stewardship – a statement that has now been signed by 68 investors representing over $3 trillion of assets.

Maan explains, “We are increasingly concerned about the emergence of anti-microbial resistance. Drug-resistant superbugs have serious implications, not only for the livestock industry but also for humanity. So not only are we working to reduce the use of antibiotics on our farms, but we have also established an antibiotic-free farm as a pilot. We are learning how to farm effectively without using antibiotics. Once we have mastered this, we will then work to roll out the new methods and learnings across all our farms.”

“Not only are we working to reduce the use of antibiotics on our farms, over the long term we have an ambition to eliminate antibiotics from our farms” – Prem Maan, Executive Chairman atSouthern Pastures

Running an antibiotic-free dairy farm means that animal welfare comes into even sharper focus for Southern Pastures. Maan continues, “We have an antibiotic stewardship plan which has us focusing on issues around the farm that reduce the challenges that create disease or damage; in other words, the emphasis is on prevention rather than cure. For example, we have increased our attention to the living conditions of our cows. Making sure that tracks, gateways etc. are well-formed and maintained to reduce wear on cows’ feet and therefore lameness. We have also focused on areas such as feed pads and exit areas of farm dairies to provide a clean environment and reduced mastitis challenges.”

Working to improve on-farm sustainability

Since its inception, Southern Pastures has prided itself on its commitment to sustainable farming, and it strives diligently to ensure that it is a responsible steward of the environment. At the farm pre-investment stage, Southern Pastures takes time to understand the climate, water availability and soil quality to ensure that optimum conditions exist-or can be created, to ensure a steady supply of high-quality grass and other natural forage for the animals to feed on. This means that Southern Pastures’ cows have a natural grass forage diet. This diet produces better quality milk that is significantly richer in omega-3 fats, vitamin E, beta-carotene and conjugated linoleic acid – a beneficial fatty acid.

The commitment to sustainability however does not end at investment. Southern Pastures strives to continually improve the sustainability of its land. One of Southern Pastures core founding touchstones is that New Zealand has to be better off in the long-term wherever Southern Pastures has invested. A critical component of this is maintaining and enhancing soil quality. Maan explains, “The health of our soils is as important as the health of our animals. It provides the foundation for the pasture our animals need to thrive, and if the soil is in poor condition, then we would have to rely on expensive bought-in feed to maintain a good condition for our animals. To help restore our soils and maintain the quality of our pastures we are continually improving the soil biology. We have inoculated our farms with populations of beneficial species of earthworms and are also trialling various species of dung beetles on a farm. This enhances the structure and nutrient profile of the soil, which improves the quality and quantity of grass produced whilst mitigating and improving the environment.”

“There is accumulating evidence to show healthy soils are effective carbon sinks. for example, a recent Stanford study showed that there is more carbon sequestered in soil than in the atmosphere and plants combined. Our farming practices provide a potential tool for mitigating climate change. Southern Pastures in conjunction with Ngāi Tahu has invited the New Zealand government to measure the carbon sequestered on their combined farms at regular intervals to quantify the benefits of sustainable farming practices. Southern Pastures is also  working on a project with Massey University to investigate how we could increase carbon sequestration even further.”

Intensive farming as the real risk to returns

Maan argues that “Although on paper, intensive factory farming can look profitable, it carries greater risk than traditional farming methods”.For example, he argues, animal factory farms are more vulnerable to fluctuations in feed price and the animals are more susceptible to discomfort and illness. They are prone to illness because they are consuming a diet they have not naturally evolved to eat, are unable to roam, and are kept in close confines which increases the risk of rapid transmission of diseases. Such farming systems generally require the copious use of antibiotics. Coupled with these risks, the cows will also produce milk with almost negligible levels of Omega 3 and other beneficial nutrients – and with a higher risk of antimicrobial resistance being transmitted to human consumers.

“To add to this, fast-evolving technology is enabling plant and synthetic products to masquerade as “milk”. The evolving consumer will demand a high standard set of values attached to animal products or they will opt for the non-animal alternatives. We believe that the future for dairy lies in being as close to nature as possible. The wonderful bonus is that such a farming system produces a far superior health-giving product for humans.”

Maan continues, “As the links between food production and megatrends, such as antimicrobial resistance, animal welfare, climate change and water stress are better understood, people want to know more about the provenance of their food. Simply put, a lot of people now are as concerned about values, as they are about value for money, and we aim to reflect that in the products we produce.”

Premium sustainable products

“In short, Southern Pastures is focused on delivering “values” for money” – Prem Maan, Executive Chairman at Southern Pastures

“We have put our money where our mouth is and formed a joint venture with Westland Milk Products to produce dairy products from Southern Pastures and other Westland cooperative farms meeting Southern Pastures’ 10 Star Premium Standards. These standards ensure that the cows (i) have a grass-fed diet, devoid of PKE or GMO feed; (ii) are free-range all year round; (iii) have their welfare protected; (iv) are hormone-free; and (v) have antibiotic stewardship. They also ensure that human rights are protected with the owners taking on global responsibility whenever possible, and where environmental sustainability and climate change mitigation is promoted.”

For Southern Pastures the business case for good welfare and sustainable farming methods is clear. Happy, healthy cows produce higher quality and health-giving milk. which is increasingly in demand as consumer awareness grows.

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