Chile takes its cue from NZ-based systems

01-09-2010 | Richard Rennie

The Osorno district 500km south of Santiago provides perhaps the closest comparison to New Zealand in terms of geography, latitude and potential for emulating Kiwi grass-based dairy systems.

Much of the initial pioneering work in the country has been done by New Zealanders lured there by lower land prices and relatively relaxed rules around land ownership. Land was first bought there more than 20 years ago by Waikato farmer and pioneer Paul Corkill; there are now dozens of New Zealand-owned and often NZ-operated farms in the volcanic region.

Traditionally based around United States-style confine feeding systems, the country is emerging into a more pastoral style of farming in the Osorno region, capitalising on a Taranaki-like climate, rich volcanic soils and input of NZ pastoral management skills.

Fonterra-owned processor Soprole has provided some guidance to farmers in the region on pastoral systems, largely through ownership of two dairy units managed by Kiwi Herb Smith. Smith's contract has just finished with the company and he and his wife, Dee Dee, have returned to NZ.

The more established property was bought from the family of original pioneer Paul Corkill and Herb Smith has run it for the past five years, with more than 3000 visitors coming to see how a pastoral system works. The second property, 160km to the south, is a more recent dairy conversion.

Smith concedes the region may never become a fully seasonal grass-based system, but progress has been made in the past four years.

"We would be seeing them going to have 70% of cows calve in spring versus 30% a few years ago. Whether they get to 100% depends on them being able to get all cows in calf for that period, which is still a challenge," he says.

He suspects genetics may contribute to this, with large-framed US-style Holsteins still predominant.

The farm averaged 1000kgMS/ha, milking 310 cows on 107ha, figures not out of place for a typical Waikato dairy unit. This is markedly ahead of the Soprole supplier average of 400kgMS/ha, and the national average of only 210kgMS/ha. The biggest challenge facing farmers was boosting milksolids from the heavy framed Friesian genetics.

"The milksolids test would be around 6.2%, despite the big volumes the herds may produce. Even our herd was not quite up to New Zealand standards, but we were streets ahead at 8.2%."

Smith is hoping the introduction of Kiwi cow genetics will lift herd performance further and prolong cow lactation life, which at present is only four years with the high-volume producers.

Greater sowing of New Zealand ryegrasses coupled to improved knowledge (largely Kiwi-sourced) on pasture management is seeing a gradual lift in herd performances. The national focus for the industry is not so much to increase the scale of farms, which average 130ha, but to intensify returns from that land.

To achieve this, better pasture quality has been critical, with Smith doing much to disavow Chilean farmers of the belief that grass needs to be "tractor bonnet" height in order to make silage.

"It is changing; we have two very good Chilean managers there now and the skills are growing, but it will take time."

Those who can afford it come to NZ to work on farms and up-skill.

Other players from New Zealand influencing the way Chileans pasture farm is Manuka company, milking 15,500 cows over 22,500ha. NZ staff are actively recruited to run the operations, and the company's 10-year plan is to milk more than 45,000 cows.

For Kiwis going to Chile, land ownership is quite possible. The legendary bureaucracy has reportedly become far easier to negotiate as Chile seeks to move away from its reliance upon copper, its main export earner accounting for 15% of its GDP.

For processors like Soprole, benefits come not only through the emerging lower cost pasture-supplied milk source. Chile is a member of the Trans-Pacific Strategic Economic Partnership, a trade agreement between it, Brunei, NZ and Singapore. This means processors can use Chile as a springboard into North America via Chile's free-trade agreement with North America. Soprole is one of six milk processors in the region, with a new Nestle plant due to begin operations in 2011.

Chile is regarded as the least corrupt nation in South America, having enjoyed a long period of economic and political stability. It also has the highest average per capita income on the continent at US$14,900 pa.

The country emerged relatively unscathed from the global financial crisis due to a conservative financial policy with minimal borrowing accounting for 4% of GDP, compared with NZ's 8%. Conservatism extends to rural lending, with farms low geared and banks only now beginning to lend on dairy cattle to help sharemilkers become established.

More banks are recognising the value of the dairy cash flow and Chileans are showing interest in Kiwi-style sharemilking contracts. Manuka has Chileans sharemilking on some of its operations.

Chile has not seen the rapid capital gains in land values NZ has experienced, thanks in part to the conservative lending policies and capital gains tax. It is possible to acquire high-quality dairy land for around $NZ25,000/ha including livestock.

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