Robotic dairy a test case for growth
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Second-generation dairy farmer Ross Woodhouse is behind the computer as much as he is out in the paddocks these days, drawing up plans for the future of his farm.
Peninsula Downs was established by Ross’s war veteran father in 1952, just 16 kilometres inland from Karridale, between Margaret River and Augusta.
Mr Woodhouse took charge of the 93-cow operation in 1988 and today is milking about 3,200 animals.
“Opportunities present themselves, like lease properties, next door properties for sale,” Mr Woodhouse said of his journey to become Western Australia’s biggest dairy farmer.
“If you look at the way all businesses go, the corner store goes to a supermarket, the service station goes from one man cleaning your windscreen to self-service, forty bowsers.
“My growth was pushed a little bit by interest rates in the 1980s, because when I took over they went from twelve per cent to twenty-three.
“That was a good impetus to try and hang on to the asset, not lose it, so I had to milk more cows.”
The next step for Peninsula Downs will be the development of WA’s first autonomous dairy, to be built on site at Warner Glen.
The new facility will seek to monetise waste product, with Mr Woodhouse suggesting there was potential to power homes with hydrogen produced from cow faeces.
It is a far cry from where Mr Woodhouse was two years ago, when his portfolio was up for sale, and he was looking to get out of the industry.
Low farmgate milk prices and rising costs were taking their toll.
“There wasn’t one single cost that didn’t just lift, but skyrocket, so we thought ‘Well, if we continue down this path, we’re going to lose the asset’.
“We were probably trading insolvent in all reality with that sort of milk price against those sorts of costs that we had no control of.
“Rather than lose everything, there was an opportunity to sell the farms.”
Rabobank estimated at the time that farmland in the nearby Busselton district was worth $16,000 a hectare, more than three times the state average.
Between corporates, hobby farmers, and developers looking to turn farmland into eco-villages (such as nearby Witchcliffe and Karridale), there was plenty of interest.
However, after a third-party management trial failed to provide the expected returns, farmgate prices improved, some costs eased and Mr Woodhouse is back at the helm.
It is dairy country, after all, and it is evident in speaking to Mr Woodhouse he feels a responsibility to fly the flag for the industry.
Robots and cows
In January this year, Mr Woodhouse was awarded a $2 million state government grant to progress phase one of the autonomous dairy project.
The five-phase project is estimated to cost $50 million and increase milk production from 20 million litres to 80 million litres.
Phase one will involve installation of a free-stall barn, biodigester and water recycling reverse-osmosis machine to capture water from waste housed in one of the paddocks.
From there, the plan is to invest in the farm’s pivot irrigation to improve feed production ahead of boosting the herd size to 5,000 head.
At that stage, an 80-stall rotary dairy and pyrolysis plant for biochar production will come into play.
Phase four is where the robotics come in: allowing cows housed in barns to self-milk, reducing the need for human capital.
The processing of municipal organic waste has the potential to boost the plant’s biochar and energy production ahead of the final phase, which will involve a herd of 8,000 cows producing milk for people and hydrogen for vehicles and the agricultural machinery.
Put simply, cows housed in barns and fed by high-grade feeds walk themselves to the robotic milkers.
The waste products – manure, wastewater sludge, food waste and other organics – would feed into an anaerobic digester to produce biogas and digestate.
Biogas can produce electricity, heat, fuel and gas, while digestate can become fertiliser, building material, and animal bedding.
While the project is innovative for WA, Mr Woodhouse points out that he’s not reinventing the wheel.
“We are working with proven technology, so there is no fear from that regard,” Mr Woodhouse told Business News.
“We have got good bank support, initially. We have got reasonable equity in our operation with land values increasing.
“The grant obviously will help, and we are looking to potentially attract investors if we can find the right people.
“We can start on a small scale: have the cows, the barns, the milking system, the reverse osmosis, and the biodigester, and then generate our own power.
“Once we start the process, attracting capital and servicing capital will become reasonably easy.”
Numbers crunched for the project suggest housing cows in barns will improve production by 17 per cent per cow and reduce food waste by 20 per cent.
The waste-to-energy system is expected to drive significant cash flow.
“Our social licence to operate is also very important,” Mr Woodhouse said.
“We are living in a pristine area of the state and water is becoming scarcer by the day.
“I don’t think the model we are currently operating is sustainable going forward from an environmental point of view or a financial point of view.”
On the move
There has been a host of changes in WA’s dairy industry during the past year.
Busselton’s The Cheeky Cow bought Margaret River Dairy Company and Mundella from China’s Bright Food Groups in a deal brokered by PwC and Capes Advisory Services.
Harvey Cheese changed hands locally last year for $1.2 million, according to CoreLogic data.
Brownes Group has been on a diversification drive, launching a club cheddar to compete with Mersey Valley, ‘cheese lollipops’ to compete with Babybel snack cheese in Asia, and bringing back the popular Yogo Dirt Dessert.
Co-owned by Gina Rinehart, Bannister Downs Dairy has launched a foray into the flavoured milk market. In December, it turned to Visy to produce WA-made milk cartons out of 100 per cent recyclable materials.
And Masters, owned by Andrew Forrest-backed Bega Cheese, has embarked on an advertising blitz to remind Western Australians who really owns the dairy products they consume.
By the numbers
Last year, the sector contributed $233 million to the economy.
Western Dairy’s 2022-23 annual report showed volume has been decreasing while value has increased since 2018.
Farmgate value has improved from 49 cents per litre to 69c/L in the same timeframe, average herd size is up to 446 head, and the total herd has remained stable at about 50,000.
The average WA dairy farm made $818,000 profit in 2022-23, according to Dairy Australia, about $200,000 above the 10-year average (every farm’s balance sheet captured in the data was in the green).
But there are headwinds.
High land values are restricting growth and hampering succession, while machinery replacement being put off due to interest rates is leading to increased repair and maintenance bills.
Like most industries since the onset of COVID, staffing has been an issue, according to Western Dairy regional manager Jo Saunders.
“Employment has always been up there as one of the concerns for us as an industry, and then when we get the added issues of struggling to find housing and things like that,” Ms Saunders said.
“We have the Cows Create Careers program that … is exploring and demonstrating the opportunities the dairy industry has for school leavers.
“Kids don’t know what they don’t know, so that is where it is our responsibility to get out there and highlight the opportunities.
“There is lots of innovation and technology and that does interest some kids.”
Sustainability is becoming a focus, Ms Saunders said, in large part due to years such as this where water is scarce.
Dairy Australia data found the average WA farm produced 3,346 tonnes of carbon in 2022-23, down from about 3,550t in 2019-20.
Supply chain disruptions are part of the domestic capacity and sustainability puzzle.
Mr Woodhouse sums it up well.
“If we’re serious about our carbon footprint … importing is ridiculous,” he said.
“We need to look at efficiencies right across the industry; from the farm to the processing to the market opportunities … rather than crying out for a better milk price all the time.
“We need to control our own destiny.”
WA produced 338.4 million litres of milk in 2022-23, according to Dairy Australia.
An accurate (current) figure on how much dairy is consumed locally is hard to come by. In 2016, analyst Andrew Weinert placed it at 787 million litres.
Of this figure, drinking milk accounts for about 247 million litres, with the remainder made up of cheese, yoghurt, ice cream, formula, and other products.
Western Dairy’s annual report found strong positive sentiment in the industry, but only 10 per cent of farmers were thinking of growing their enterprises.
The organisation’s current research profile revolves around clay amelioration to improve pastures and ryegrass trials.