Episode 4: How to value-add to your business... and the entire agricultural industry

So far, we’ve learnt from the stories of others on why and how they navigated the innovation process. Now it’s time to talk about types of innovation. 

Australia is known for its high-quality produce, but when you factor in the costs of water and inputs – are farmers really getting enough value for what they grow?  Using milk as an example, research shows that value-add products such as cheese and yoghurt generate more profit per litre than just milk itself. 

So, if you have been considering moving up in the value-chain, this episode looks at how: from feasibility studies, accessing skills and resources and defining your target market. We also look at how industry players can work together to increase the value of their product. 


GUESTS

David Downie - Strategic Advisor Regional Development at the Centre for Rural and Regional Development, Deakin University 

David has over 30 years experience directing and implementing policy reform and delivering significant infrastructure projects for the State of Victoria, Australia. He was the former Head of the Office of Water, Victoria and also Secretary Department of Energy and Minerals, and Deputy Director General of Conservation and Environment. David is an expert in government relationships and strategy, and engagement with community, academia and business sectors. He was responsible for introducing and implementing major reform across the energy and water sectors. This included privatisation of energy in Victoria, creation of energy and water trading markets and development of inter-state (Murray Darling) water management arrangements. David has led structural reform in energy, water and the environment across the State of Victoria and nationally, including institutional, market and regulatory changes. 
 

Cressida Cains – Founder of Dairy Cocoon, a not-for-profit platform connecting and supporting dairy producers to move up the value chain. 

Cressida is a pioneer in the Australian dairy industry. As an entrepreneur, she believes in challenging the status quo of Australian farming and thinking differently.  

Cressida is the co-founder and director of the Pecora Group which includes Pecora Dairy, Pecora Cheese and Wine and Dairy Cocoon.  In 2018 Pecora Dairy became the first cheesery in Australia licensed to produce a raw milk cheese.
Cressida is the 2020 NSW/ACT AgriFutures Rural Women's Award winner and National Runner Up. Throughout her years in the dairy industry, she has been a strong advocate for small Australian dairy farmers.

In 2021 she founded Dairy Cocoon and online platform which assists dairy farmers to take back control of their businesses by transforming up the value chain. Cressida's dream is to see a thriving and vibrant dairy sector dominated by independent brands, much like what has been achieved in the craft brewery industry.


RESOURCES

Dairy Cocoon - a not-for-profit digital platform and support hub which provides a pathway for willing dairy farmers to begin their journey up the value chain.

Is value-adding a pipe dream for Australian agriculture? - John Ralph Essay Competition 2022, Australian Farm Institute

Riley and Robertson: The Virtual Good Farmer - 09 June 2022

This podcast has been created by the Victoria Drought Resilience Innovation and Adoption Hub and is funded through the Australian Government’s Future Drought Fund.

Transcript

Kirsten Diprose (00:00):

Innovation ag is made on the lands of the Gunditjmara and Wurundjeri peoples. We acknowledge the traditional owners of country throughout Australia. We pay our respects to elders past, present, and emerging.

David Downie (00:18):

The people that have been successful tend to have been people who've raised the question, what does the market want?

Cressida Cains (00:24):

It's just incredible to think about all of this dairy that we are importing, and yet we have small dairy farms who are finding it really difficult to compete in that commodity market. So there is huge room for value adding.

Kirsten Diprose (00:39):

Hello and welcome to Innovation Ag. I'm Kirsten Diprose. This podcast is brought to you by the Victoria Drought and Innovation Hub.

(00:47):

In the last episode about finding funding, value adding came up quite a few times and right now in Australia it's a hot topic. Is it just a pipe dream or the next pipeline to success? Ah, yes. My debating bell from episode one is back. Brilliant. So I suppose I'd better start with a definition. What is value adding? Well, it's changing the original state of a product to a more valuable state, like turning grapes into wine or milk into cheese. You could even call beef a value added product of grain after you feed it to a cow. The topic of value adding was recently debated in an SA competition by the Australia Farm Institute, and there's a variety of opinions. Some argue that value adding at a producer level has been touted as a solution for 20 years, but if it was so easy, then why aren't more people doing it? While others say now the time is finally right for value adding, with covid showing us the fragility of overseas supply chains, social media, opening doors to easy branding and marketing, the emergence of food trails as a tourism attraction, and consumers wanting to know more about where food comes from.

David Downie (02:06):

So we don't just grow things and sell them. We value add, we manufacture food, we manufacture things.

Kirsten Diprose (02:12):

That's the vision David Downie holds for Australian agriculture. David's a Strategic Advisor for Regional Development at Deakin University, and he takes an economic perspective to the perennial problem of shrinking rural towns and stagnant, or slowly growing, regional centres. But while most economic thinkers talk about money, I reckon David's value measurement would be in water. David was actually the Director General of Water Resources in Victoria during the eighties and nineties. He then went to work in the energy sector before returning to the Office of Water in time for the millennium drought.

David Downie (02:50):

And at that time, the intersection between water and agriculture became even more apparent. And I remember politicians saying to me, "What's the problem with water policy?" And I can recall saying, "It's not a water policy problem, it's an agricultural policy problem". And they'd say, "Why is that?" And I'd say, "Well, because we've got plenty of water might be in the wrong places, but we use so much of it on agriculture that produces so little". And for example, if you are in the water industry in my time, then you'd make an observation that the people who called for drought subsidies were really people that had farms not near water infrastructure. Even when the drought of 2006 came along, which is very dry, probably the driest year in a hundred years of Australian history, at that time it was actually the driest year. There was over 3000 gigaliters of water in the Murray-Darling Basin and there was water in different areas. But given the way we used water in agriculture, there wasn't enough water for the people traditionally doing what they do. For example, in the Murray-Darling Basin, 70% of the water is used on rice, cotton and dairy. Despite that the GDP growth in the regions in Australia and the Murray-Darling Basin in particular is very low. It's around the naught to1% area. So there's not a lot of economic gain out of using all that water.

Kirsten Diprose (04:06):

So I want to ask you about two sides of this. This podcast is obviously about innovation, and so we want to try and find where that innovation happens and how we can think differently and do things differently. On a smaller scale, if I'm a producer, how can I think about value adding to get that higher value for my products?

David Downie (04:28):

I think the first thing that we need to think about is markets. A lot of what happens in Australian agriculture is producer-driven. The pressures on governments, the media, the research money, a lot of it's around primary production. A lot of producers continue to make what they've been making generation after generation. This is changing. I want to emphasise that. I'm not saying that it's all hopeless, it's changing quickly, and I'll go into that in a minute. So the people that have been successful tend to have been people who've raised the question, what does the market want? I remember someone said to me, not so long ago, well 15, 16 years ago, there's not much money in olives in growing olives. Then after a lot of reflection, some overseas tours and some research, they said, yes, but there's a lot of money in olive oil. The person that said that to me is now a producer of a major olive oil company, 70 or $80 million in revenue, Australian olive oil, which competes very favourably with Spanish and Italian olive oil, so it can be done.

Kirsten Diprose (05:28):

David Downey argues that value adding is necessary in a broader sense because relying purely on volume of produce is problematic in areas where there's not enough water. So the way to get around this, well, you could move the water or you can make the end product worth more, so you don't need to use as much water to produce as much.

David Downie (05:51):

When drought occurred, as we've termed it, because farms were set up in dry areas and there was no water infrastructure, the call went out for subsidies from government to keep people in there. There was no incentive to move out of it. There's a number of incentives. Now, perhaps I could just go back and say, how do we know we can do better? Well, I'll give you the case of the Netherlands. The Netherlands is a much smaller country than ours. There's only 17 million people there. The food bowl of the Netherlands is only about twice as big as Melbourne's, which in itself is not that big. Despite that they export over 180 billion worth of food. Australia's exports, I think last year were about 50 billion, and that was a rapid increase in two or three years because we had some rain. Again, we are relying on rain to export primary production. So there's a country like the Netherlands, much, much smaller in every way with vastly small amounts of land, uses vastly smaller amounts of water, but three times the economic value of food. And when you ask them what the difference is, they say technology and value add.

Kirsten Diprose (06:53):

That's my next question. How can we think of this on a macro level? I think a lot of producers feel as though it's all on them and they're busy running the day-to-day business to try and think about value adding and new markets and marketing products and owning the processing and all of those things. It's a lot and not everyone is cut out for it. Is there a space for business and governments to really change the way we think about agriculture and open up doors so that producers can easily find these pathways?

David Downie (07:26):

Well, look, I think there's a number of ways. The wine industry is an example of where things have changed in Australia. For example, the wine industry, and I know one producer who laughed when I said, oh, the dairy farmers and the others in the Murray-Darling are screaming because the price of water's got to $800 an megalitre. And he said, I can pay 2000 and expected to pay that. I'm expected to pay two and a half thousand to finish off my wine crops because I don't have a natural supply of water. I've got to export it from domestic water supplies, but because I make a premium product, I can do that. So what has this person done? They've put their time and effort into developing products that the market wants and will pay a premium for. When we had the French wine producers out here during my time in government, they said basically, it doesn't cost a lot more for us to produce a champagne or any of our expensive wines than you do, and your wines are just as good.

(08:19):

It's a matter of taste. But if you produce a bottle for $10 or $15, and we do too the US, we sell ours for a hundred, you sell yours for 20 with a picture of a kangaroo on it. So there's not been a lot invested in marketing and developing the concept of wine, Australian wine as a world leader, which it is in many respects. I've found it very difficult to get the wine makers to work together. For example, there's loose associations of winemakers, but they tend to think they're in competition with one another. Rather than that there's an option to develop a region of Australia potentially as a brand and a place that the world will want those wines. That's happening, I mean, if you look at the Yarra and the Mornington's and the Barossa's, you can see that the gradual identification of strong brands, strong wines and major exports, and that's all in the last 30 or 40 years, though it's taken that long to develop it. In other industries, we need that kind of development.

(09:14):

So what can be done? Well, it is hard for the small producers because it's hard to get capital in Australia. One of the problems is the risk aversion of financial markets and governments. Governments when they've tried to pick winners have often been failures. People in financial markets tend to look for things that give them a good solid six to eight, 10% return and a less risk averse than they are in places say like America. So that's the problem. But there are many good producers here who would have the opportunity to look at the markets and decide what needs to be done or can be done work together and change the range of their products that they produce, that link with the markets. There are a lot of other developments that are going to force that to happen in a way. For example, Deakin has a food traceability laboratory.

(10:01):

Food traceability is an emerging development in the world where a lot of the world markets for reasons of biosecurity, but also for reasons of customer preference are starting to say, we want to know exactly how that food was produced, what the fertiliser was that went into it, was it sprayed? What went into the soil? How was it harvested? How was it packed? How was it maintained? How was it transported? And unless it's going to meet a lot of consumer tests, it probably won't make it in a world market. But that's increasing. It's happening very quickly. We're seeing that. So already a lot of producers in Australia, even the primary producers have been asked to undertake expensive food traceability programmes, but one of the benefits of that will be the opportunity to create a premium brand, thus extracting more revenue for the product. So in other words, what I'm saying is that "What is the market looking for?" and then work back from there. Not the other way around, which is, "I've been growing milk for five generations and I'm having trouble this year. Please help me out". Because a lot of what we've done in, for example, milk is we spent a lot of money on research. Then the retailers just say, "If it's cheaper for you to produce the milk, we'll reduce the price we give you". Because there's no other market for this. So they're captive to the market. So you have to produce products that the market wants, create the brands, and then set the price.

Kirsten Diprose (11:23):

And that's exactly what Cressida Cains has done in her value added business. She's created an award-winning brand called Pecora Dairy, a sheep milk dairy, and cheesery on a 200 acre farm at Robertson in the southern highlands of New South Wales. She didn't grow up in the country and funnily enough had a career in the wine industry. First.

Cressida Cains (11:44):

I actually grew up in Sydney, and then when I was 10, my parents bought a small farm in the southern Highlands, a couple of hours South-West of Sydney, and that's where I really found my feet once I got into the country and really, I mean it wasn't that country, the southern highlands, but I absolutely loved the wide open spaces and the possibilities there. And then after I went to university, I worked overseas for quite some time and then came back to Australia and started work in the wine industry. I was in sales that had lots of opportunities to go out to vineyards and see all sorts of production and things that were going on. It was during the Sydney Olympics as well, so it was a pretty fun time to be in the wine industry in Sydney. There was a lot going on in the food and wine scene.

(12:35):

And then I had my first child and really wanted to move out of Sydney. And so my husband and I bought a small property an hour and a half out of Sydney, and that was where we got the idea of sheep milking. We were very clear right from the beginning that we wanted to go into a very high value product. We don't come from a family farm, obviously. We had to buy the farm, work it all out ourselves. So it was a huge learning curve and it was a big step, but we had some very clear pillars that we wanted to stand by, which was to have a very high value product and to have good proximity to the main markets, Sydney and Melbourne and things like that. And also to have a very environmentally sustainable business and one that was very ethical towards our animals.

Kirsten Diprose (13:26):

You mentioned the wine industry, and I wanted to ask about that because what sort of lessons would you have drawn upon to bring to a high value product? Because wine is a high value product unlike a lot of our other ag products.

Cressida Cains (13:41):

Yeah, that's exactly right. And I think the wine industry is an interesting example in that back in the seventies, we really assumed that French wine and wine from overseas was far better than anything we could produce in Australia. And obviously a lot of it was, but as our skills as wine makers in Australia really developed, it took some time back in the day, you'd sort of go to a dinner party and if you wanted to be the height of sophistication, you'd take a French Beaujolais or something like that. But of course today we had such a dedication to our Australian wine industry and whatever town you're in, whatever area of Australia, of course you'd take the local wine. So I think there's some really good parallels there. The wine industry has done a fabulous job of branding and value adding to their product.

Kirsten Diprose (14:31):

Can any product become a high value product? I think wine is one thing and it's associated with celebration, with gift giving. And look, cheese certainly is too, but I don't know. Is grain the same? Are some of those other products the same? Is milk the same?

Cressida Cains (14:48):

Yes, I believe value adding is a really sustainable and profitable way of running a business. I think it can be done with everything in agriculture, obviously some areas more than others, but I think it's a really interesting and poignant area at the moment because particularly after Covid, there's all the supply chain issues. The supply chain issues is one thing. But the other thing of course is that when we walked into the supermarket during Covid, we suddenly realised that there were all these empty shelves and exactly how much we were importing into this country. So I think consumers together with environmental concerns they have in regards to climate change and the like with companies, consumers are really interested to know where their food comes from. So to be able to tell the story of your product and help the consumer understand where the product is coming from is really, really important. And the other element from that, from my point of view, is the health considerations. There's a lot of people who are turning away from meat or turning away from dairy, which is all of course completely up to their own desires. But I would also pose the question that maybe we should be looking at rather what is being farmed, how it's being farmed?

Kirsten Diprose (16:07):

Yeah, I think there's definitely a growing want to know about some of those things, about how things are being farmed. And it's interesting because 50 years ago, I don't think people had that question. They knew how things were farmed because they either lived on a farm or their grandparents did or their uncle and auntie did, but now we're so removed from them that there are these questions about how is this being produced, how is this being farmed? Does that sentiment play into it at all?

Cressida Cains (16:35):

Yeah, definitely. And of course, more broadly stakeholders are increasingly applying the ESG, those nonfinancial metrics to look at companies and assess risks and growth opportunities.

Kirsten Diprose (16:48):

Tell me about your own company, Pecora Dairy. How did you grow that? Because you started quite a while ago now, I think more than 10 years ago. How did it start, particularly for someone listening to this who's really wanting to create their own brand and grow their business. How did you start and then grow?

Cressida Cains (17:06):

Yeah. Well, we did start very small. We were in a situation where I was on farm full time and my husband moved into more of a consulting role, so he was working in Sydney and gradually we grew and identified markets that we wanted to move into, and gradually my husband was doing less consulting and more work on the farm, so it was a very organic process. We didn't at that time have the ability to travel overseas widely and do a lot of research and things like that. So our research was really online and also setting up the systems ourselves. So what we have to a great extent on farm are those systems that we've developed ourselves. And in some ways it was quite interesting because neither of us come from a traditional Australian agricultural background, so we were able to perhaps look at things with fresh eyes. Obviously we are dairy sheep, not dairy cows, so the systems that we put in place were really those that we developed and that really worked for us on farm.

Kirsten Diprose (18:08):

Did you have to network a bit? Did you find other sheep, dairy farmers to connect with? How did you learn what was best practise, what worked?

Cressida Cains (18:18):

Well? It's an interesting area because it's still in the 12 years that our business has been in operation, there is basically the same number of sheep dairies in Australia, which is sort of half a dozen. And to me, there's a massive opportunity with sheep dairying. Certainly if you look at New Zealand, they're taking the ball and running with it in a big way. There's a huge amount of government investment and stakeholder investment in sheep because there's massive markets in Asia, a lot of the Asian market can't tolerate the dairy proteins, and so sheep milk is a very, very good alternative. So there's no doubt that sheep milking is a very sustainable and very profitable industry as yet. There's not the interest I'd like to see from the Australian perspective, but hopefully one day there will be.

Kirsten Diprose (19:03):

Why do you think that is?

Cressida Cains (19:05):

I think agriculture in Australia is in quite an interesting position where in the past we've always considered Australian agriculture to be massive farms with commodity-based products. The bigger the better, the bigger machinery, the bigger the land, the bigger the number of animals, the better. But I think with all of those issues that we were talking about before, things are starting to flip and things are starting to be more interesting for small farmers and small producers also for innovation and technology and all of those issues that are feeding into what makes a sustainable and profitable small business. There's no doubt that people are interested in alternative forms of agricultural alternative forms of protein, all those interesting non-traditional, I guess, areas of agriculture that are really, in my opinion, the future of agriculture.

Kirsten Diprose (19:59):

So I'm going to challenge value adding here for a moment, not because I don't love artisanal produce or the concept of provenance because I do, I'm into the fancy wine and cheese with the best of the fancy folks except for blue cheese. That's too fancy and it's gross. But the thing is, we need cheese for our kids' school lunches too. And has anyone seen the price of sliced cheese lately? Anyway, my point is we want bread, butter, milk, we want fruit and vegetables as staples and we want them reasonably priced. Indeed, research consistently shows that cost is one of the biggest consumer choice factors at the supermarket.

Cressida Cains (20:37):

That is a tricky one. We obviously need food to be a very fair price for consumers to be able to feed their family proper nutritious fresh produce, so is always a difficult one to weigh up. One comment I would make is that maybe we need to look at actually consuming less. I think the issue of food waste in this country is the massive one and yet to be sort of seriously addressed, but we were all to look at buying better quality and eating less of particular products. I think those sorts of issues are ones that should be considered in that conversation.

Kirsten Diprose (21:12):

I think for farmers who have traditionally been on the commodity market, it can be a really tricky switch to start thinking about value adding. I think it's a big barrier, and I'm perhaps speaking from personal experience when I talked to my own husband about it, he cannot see the value in value adding at all, and it's hard for me to show him a business case without starting the process of it. You can see the wheat prices and yes, they change, but you can lock some of them in. You know what your input costs are. You can make some really good decisions and know what you're going to get so long as it rains, but know what you're going to get somewhat within the next year. It's a different way of thinking to the kind of building a business perhaps around a brand or that value adding experience.

Cressida Cains (22:00):

It definitely is a different way of thinking, and like I said before, we definitely do need larger producers and we really do need to be able to produce food in this country at a good price. I can't, I suppose comment too much on a big producer because that's not my area of expertise, but in terms of being a really small producer, I think starting having a good idea and putting in the work, I mean to a certain extent, if you've got all the ideas and you've got a clear plan that you want to implement, I think it's important as a small producer to be able to jump in and have a go because you're never going to have all of the details. You're never going to have everything crossed off. So at some point you have to hop in and make decisions on the fly knowing that they are moving towards your overarching goal of a clear picture of where you see your product and how you want it to be produced and sold.

Kirsten Diprose (22:55):

There's value adding open up agriculture to just other forms of businesses, other business models that perhaps you don't need to have large tracks of land to be able to have a successful farming business.

Cressida Cains (23:07):

Well, most definitely. I think that's one of the really interesting issues, and obviously for young people who don't come from a farming background, it's incredibly difficult in Australia to be able to get land to start a farm if you don't come from a family farm. And it's great to see that there are all sorts of different models now being talked about in terms of share farming and leasing land, and there's a huge amount of food that you can produce on a reasonably small area of land. I was working with one small dairy in the Camden area, and of course we know that Camden in New South Wales is one of the first areas of dairying, and they are now the last dairy farmer in that area, and it's pretty amazing going to their farm because you're sort of rocketing down four lanes of very, very fast traffic, and then you take a quick right, and then suddenly you're on 150 acres of prime dairy country, and it's absolutely extraordinary to me.

(24:03):

It's really wonderful that we can still have that dairy farm and that dairy farm can be part of our history and to be sustainable. He's moved into a model where they still sell the majority of their milk to processes, but he's also now making his own cheese and selling that at farmer's markets. And he has a Maltese heritage, so he makes some cheeses that are influencers from that heritage, and he has a very, very strong following. I know that he sells out every single time he goes to his local farmer's market. And on the other hand, we've also got some areas of Australia who have done those food trails incredibly well. If you look at the regions of Mudgee and Orange and the South Coast and things like that, that really those food trail areas from a tourism point of view and for the long-term viability of some of our small towns, those are really fantastic initiatives.

Kirsten Diprose (24:56):

That's a good point. There really is more on offer for smaller value added businesses now than there was 20 or even 10 years ago, and there's no denying there are strong avenues for profit for innovative producers. The next question is, do these types of value added businesses have the power to grow rural and regional Australia? Well, it's not that simple. Here's David Downie again.

David Downie (25:22):

Well, there needs to be some basic infrastructure and a lot of the work we've done in Deakin, and as you know it's been in the regional development phase. When you go to towns, especially the smaller ones, the internet is appalling, transport systems are weak, water systems haven't been developed, energy systems are below par. So some of the basic infrastructure that industry needs for innovative industry just aren't there. I'll give you an example, the Pyrenees wine area. Now people say where? Where's that? But most people know anything about wine, know that they make some very good wine.

Kirsten Diprose (25:54):

Very good reds in the Pyrenees.

David Downie (25:55):

Very good reds, but the internet coverage there is appalling. Anyone who knows anything about the wine industry knows that the wine industry to be very profitable has a combination of wine, tourism, accommodation and food. There's almost no accommodation there. There's very few food providers. Now, why is that? There's a whole heap of planning restrictions that are preventing that. There's no WIFI. Now, why would Telstra and N B N go there? Well, there's hardly anyone there, so you've got a vicious circle. So there's not an economic planning tool that enables that to happen. And it's the same in where you are in the Southwest. There's opportunities for the water. The energy that's already been developed out of wind in the Southwest offers huge opportunities for electrically intensive industry, but no one's doing anything about it. It needs more grid and it needs people to take advantage of that.

(26:44):

So Deakin University's involved, for example, in trying to help that, including developing a hydrogen high cell production unit down there, which can take advantage of the potentially huge amount of renewable energy, but it needs a number of players, not just university. It needs investors. It needs people that can see the opportunity and it needs councils to enable it. It needs local citizens to understand the opportunities. That's the great debate in many ways that whether you're in government or in the private sector: Do we build it and people will come, or do we wait for them to be there and screaming for the resources? Now, I think it's a balancing act, but at the moment there are areas where there's no intention to put those infrastructure facilities in place and that's holding back investment.

Kirsten Diprose (27:24):

Yeah, I think anyone who lives in a rural area listening to this will just think about their own roads and of investment and lack of investment. It's a perennial issue with no solution, it seems.

David Downie (27:35):

Well, how do you justify having 60 or 70% of the population in seven capital cities in a fraction of the land area of Australia? The only way is to develop our regions, and that means that infrastructure's got to be put in place, but it's got to be done intelligently, and there's big risks in that at the moment.

Kirsten Diprose (27:52):

So it's worth remembering that in business and innovation, there are always going to be multiple factors that are out of your control. David says, doing your market research is therefore essential to creating a successful value added business.

David Downie (28:07):

You've got to do the due diligence and the research to understand the environment in which you are operating. Most of the really good investment decisions are not based on intuition. They're based on really solid investment analysis and research and finding out what's really going on, not what people are telling you. So if you are, for example, a grain grower and most of the grain growers I know they produce grain or it goes into a silo and that's the last they see of it, then they get a price. Now they can see the European market saying, we've got to trace more and more of what's happening. And therefore a grain grower's got to worry about the total performance of everything. So then I'd be thinking, well, how do I get this business to change? How do I become less reliant on this system that's in place?

(28:53):

Then I'd be saying, well, who uses grain? And for example, most of Australia's bakery products are imported. How can that be? Well, that is because we don't bake enough, and that comes from grain obviously. So I'd be looking at the people who make the food products that use grain. For example, some of our bread gets eight to nine to $10 a loaf - I know I paid that off - versus a lesser brand in the supermarket that gets $2 or $3 a loaf, and how do I get into that? Well, maybe I've got to go and talk to that manufacturer. What grain do you want? What is it that's going to make your product different? Does it have to be organic? Does it have to be certified sustainable? Does that have to be grown from certain kinds of fertilisers? There's a lot of pathways that no matter what you do, you can say, how can I make this better?

(29:39):

And then decide once you've done a of due diligence, is there an option there? And another thing I'd say at this point is that too many of our producers think of themselves as competitors. They're not really, they should be getting together far more than we do and thinking, "Now if we've got this bread company that wants to make a special bread, is it possible that we could actually supply them rather than that system over there where we lose it and all we get's the common price?", which is always going to be a price taken, commodity price. It depends on prices overseas. And then we might be able to strike a deal. We might be able to do the same with lamb. And I know for example, at the moment, there's a lamb producer who sells that lamb to a particular butcher, and it's what I'd call marbled lamb. So they produce their lamb in a particular way to get a brand around it that gives them two or three, four times the price of normal lamb because that butcher wants to be able to sell that for $60 a plate in a high class restaurant.

Kirsten Diprose (30:35):

The problem sometimes with that is scale. And I suppose that's when your numbers come into it, how much you're getting for it.

David Downie (30:41):

But it's also the opportunity to grow something that can get a lot bigger. For example, I'm sure that's how champagne got to be where it is. It started small, created a brand that everyone wanted, wanted to drink in the right places, the halls and palaces of Europe, and all of a sudden you can produce heaps of it because it's wanted.

Kirsten Diprose (30:57):

I suppose, in your assessment, and going back to that decision making about "How do I innovate, or find a new market, value add?", there's an element of patience. You have to work hard and grow it, but you can't get lucky with the commodities and have the price jump. You're going to have to ride it out.

David Downie (31:13):

So what I'd say is that there were 1700 dairy farmers in the GMID about four or five years ago. They're now about 700. So if you don't move and adjust, life's going to move on. So you've got to, as a producer, start thinking about what to do and where life's going. And that's the encouraging thing. And I've been a bit critical in a lot of ways generally, but there's a lot of people starting to do this. We're doing a lot of work with the Gippsland Food and Fibre Group with the Southwest Food and Fibre Group Hopping Group and a G21 group around Geelong. And there's a lot of farmers in that space who are looking at what can be done that's different. At the moment, we're sitting down with some of the farmers in one area and we're looking at a digital marketing place, a system of marketing produce that enables a bigger return to the producer.

(32:00):

If their returns are bigger, they can invest more in their business, they can grow their business, they can change their business, they can add to their business. Cobram Olive oil's a great example. I mean, that's a $70 or $80 million business now started from very small business, but they did all those things. They looked at manufacturing olive oil, they designed a factory to do it. They had the olive oil tested, and when they went to the retailers, they said, our olive oil is better than Spanish or Italian, and they could prove it. Now, all that takes time and money and space, but if you can find the right people get together and you convince an investor or you put it in yourself, obviously then you can get there. But it needs that vision and innovation.

Cressida Cains (32:39):

There's a huge opportunity. If you look at the dairy industry, there's a huge amount of important product that we have every year coming into the country. Last year we imported over a hundred thousand tonnes of specialty cheese, and that's rising every year. 35,000 tonnes of butter, would you believe? It's just incredible to think about all of this dairy that we are importing, and yet we have small dairy farms who are finding it really difficult to compete in that commodity market. So there is huge room for value adding in my opinion.

Kirsten Diprose (33:12):

And Cressida says one of the joys of her business is being able to share what's going on at the farm with her customers on social media. An experience you just don't get when you are a commodity producer.

Cressida Cains (33:24):

Well, we have a hugely loyal customer base. So to be able to share that with consumers, for example, we have a very naughty bottle raised lamb on farm called Kevin, who's a female and part of the dairy. And I started telling stories about her on my Instagram, and she's a real connector. People will come up to me all the time and say, "Oh my goodness, how's Kevin? Oh, I saw what Kevin did. She's so cheeky." And it's really lovely. And particularly during the pandemic, sharing a lot of even just day-to-day things for me, which are the sheep walking to the dairy and things like that. And I had so many people writing to me saying, "I'm stuck in a little flat in wherever, and your stories of seeing those sheep walking through the mist to the dairy really make my day. And I just absolutely love having that connection to your farm".

(34:14):

And we've just now embarked upon a project where we're actually working with a producer who's going to be able to take our raw wool and be able to give it back to us washed and carded and things like that. So we're actually going to be able to sell the wool from our particular animals and have that connection, have that farm connection for people to have a piece of Kevin's wall in their jumper. And these sorts of things really are a great connector for people from the city. I do think that there is a big divide between people's understanding of farming, of what's really going on, and how hard farmers try to do all the right things and to be sustainable and to be ethical, and to be all the things that consumers and rightly consumers rightly do, expect us to have a social licence to operate as farmers. But to be able to share that with people and get them on our journey is something that is just very close to my heart.

Kirsten Diprose (35:10):

And that's it for another episode of Innovation Ag. Thank you for listening. And thank you to our guests, David Downie, Strategic Advisor for Regional Development at Deakin University's Centre for Rural and Regional Futures, and Cressida Cains, Co-Founder and Director of Pecora Dairy and Founder of the Dairy Cocoon, which is a great resource for anyone looking to value add in the dairy industry. Our next episode as we go through this innovation journey is all about making good use of digital tech and data. What's worth our time and what can we even use all this data for? You can find the episode transcript on our website, vicdroughthub.org.au. Thank you for listening. This episode is written and hosted by me, Kirsten Diprose, produced by Rachel Thompson, and we have editorial input from scientists, academics, and farming groups involved in the Victoria Drought and Innovation Hub. This podcast is funded by the Australian Government's Future Drought Fund. I'll catch you next time.