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Guest Editorial

From moo to microbes: Is this the end of NZ Dairy?

Imagine cheese without cows, and 100% identical milk proteins grown in vats using microbes. Far-fetched science fiction? Not anymore. Precision fermentation (PF) is poised to upend NZ’s dairy industry, and unless it diversifies swiftly, send it into a death spiral.
 |  Denis Tegg  | 

By 2030, identical dairy proteins made in a vat could be 5 times cheaper than those from a cow, and 10 times cheaper by 2035.

Demand for traditional dairy products could drop by 70%. Will New Zealand’s dairy industry adapt or join the ranks of bankrupt giants like Kodak who thought they were immune to innovation?

This isn’t about demonising dairy farmers or scaremongering, it’s a call to action. It’s about recognising a massively disruptive global force unfolding beyond our control overseas, and its grave consequences for dairying and our economy.

Imagine fermentation vats located in China and our other markets with microbes making perfect dairy proteins. Tiny organisms are programmed to produce identical dairy ingredients, impossible to distinguish whether from a cow or a vat. Like brewing beer, sugar feeds the microbes, which in turn, become dairy protein factories – minus the moo. That’s precision fermentation.

We delude ourselves with the fairytale that overseas consumers regard our dairy products as “pure” and “pasture-fed”. But 74% of Fonterra’s dairy exports are milk powder or other ingredients used as basic “fillers” in other products like biscuits, or chocolate bars.

Overseas supermarket shoppers are blithely unaware that the dairy ingredient in their processed food comes from our milk powder. While our “grass-fed” charade still resonates locally, it just doesn’t wash overseas where most of our dairy exports vanish into everyday products. When biscuits or chocolate bars have PF protein ingredients instead of our milk powder, overseas customers won’t notice the switch.

Global players have begun disrupting the business-to-business (B2B) ingredient market which dominates our export revenue. China, which takes one third of our dairy exports, is actively pursuing PF. The world’s largest food companies like Cargill, Kerry, ADM, DuPont, and Archer-Daniels-Midland (ADM), have invested billions in PF ingredient food tech.

Raising and milking cows, transporting, and processing milk and exporting across huge distances is a far cry from brewing proteins in vats close to markets. Once PF-made proteins match traditional dairy in price (predicted by 2030, possibly sooner), dairy ingredient businesses will have a cheaper, more sustainable alternative. This “tipping point” would see our established dairy industry displaced and in a tailspin.

PF-made dairy protein won’t just be cheaper, it’s an environmental champion. PF uses 25x less feedstock, 10x less water, and 100x less land for identical dairy protein. Plus 90% lower climate emissions.

PF dairy also offers superior quality. No lactose, and with the same taste, aroma, texture, and nutrition we crave. And no risk of contamination from faecal bacteria, antibiotics, or sensitive animal welfare issues.

Dairy products contribute one-quarter of New Zealand exports worth $26 billion and the industry employs 55,000 people. But many in the dairy sector already have high levels of debt and are extremely vulnerable to any downturn – a risk to the NZ economy the Reserve Bank sees as greater than housing.

Will consumers embrace alternative dairy? If new products taste the same or better, cost less, and are vastly more sustainable, the global market will decide, not Fonterra.

The “lab” factor is often a red herring. Most consumers have no qualms about vitamins or medicines produced in labs, so why dairy? With just some ingredients being switched to PF consumers won’t see packaging with “lab-made”, just delicious, sustainable products they already know and love.

Our politicians and farming leaders must ditch their denial or apathy and acknowledge and urgently respond to these existential risks.  Our competitors are making cow-free dairy alternatives, targeting the very ingredient – milk powder – New Zealand exports in bulk. Ignoring this brewing storm is a gamble with our economy we can’t afford.

We must pivot away from vulnerable ingredient commodities towards future-proofed products. Diversifying our food portfolio is key. The time for action is now. Embrace change, or we risk being left behind in the dust of disruptive innovation. The clock is ticking, and for New Zealand dairy, it’s time to rewrite the recipe.

Further reading: By Anna Benny, a Southland dairy farmer.