This article featured in the
April 2019 edition of NZ Dairy Exporter
Words by: Bob Edlin
Bridling against proposals
to change the regulations which govern the dairy herd improvement industry and
expand the core database, Livestock Improvement Corporation (LIC) raises
concerns about the consequences for investment in research.
“It’s when the core data base is expanded that
our concerns begin,” Richard Spelman, LIC’s chief scientist, says.
Reforms proposed in a
Ministry for Primary Industries discussion paper (see sidebar) will generate
deleterious uncertainties, he says.
LIC emphasised this
concern in its submission to the ministry: wholesale reform would stifle
innovation, increase costs for dairy farmers and ultimately be detrimental to
the long-term interests of farmers because significant uncertainty would cloud
whether innovators can retain the ownership and/or benefits of their
innovations. Vital long-term research would be discouraged and investors in
datasets and analytics would be penalised if their innovations were made
publicly available for others to use to their commercial advantage.
Spelman, who has been
involved in the company’s research and development team of around 40 people for
the past 20 years, says much of the company’s substantial investment in R&D
provides no short-term payback.
“As a co-operative we are
more comfortable to invest for long-term benefit for farmers and so the
business gets a commercial return, but we do take a longer-term horizon than if
we were just ruthlessly commercial,” he says.
“This requires a degree
of certainty that our data won’t be nationalised – but if it becomes ‘core
data’, that’s pretty well what would happen.”
Spelman’s talk of
nationalisation of data is a reference to a proposal to expand the core
database to include an unknown number of fields of data now held by the LIC.
are under consideration, he says – one is a high-risk approach of opening the
database and letting everyone have access, hoping innovation will occur; the
other is to safeguard the information and intellectual property paid for by New
Zealand dairy farmers over the decades and developed by LIC, thereby providing
the certainty and incentives needed to ensure ongoing investment in even more
Farmers would be in a
poorer situation if the core database was expanded, Spelman says. “The
uncertainty would cause less investment rather than more.”
On the other hand, he
references the genetic gain generated by animal evaluation. According to the
ministry discussion paper, this delivers economic benefits to the NZ dairy
industry estimated at about $300 million a year.
“On the basis we could
increase that rate of improvement by 20%, it would be $60m of worth to farmers
every year,” he says.
“That would be a
significant industry benefit.
“And yes, we [LIC] also
want a return on the investment.”
LIC collects thousands of
fields of data. As well as the 46 in the core database, it provides about 50
fields to NZ Animal Evaluation Ltd (NZAEL) for the calculation of breeding
The data have a
commercial value: other companies wanting data outside the 46 core fields for
animal evaluation must pay for it.
The LIC submission in
response to a Ministry for Primary Industries discussion paper on the dairy
herd improvement regulations was heavily laced with data to underscore the
value and significance of its investment in R&D.
It is owned by 10,377
dairy farmers, inseminates three out of four cows, tests over 10 million milk
samples, despatches five million straws of fresh semen for insemination,
analyses more than 800,000 samples for disease identification and parentage
verification and captures and delivers data and information through its Minda
technology to more than 90% of dairy farmers.
In the past five years it
has invested close to $77m of shareholder funds in research and development.
The average over the past seven years has been 6.9% of revenue, well above the
NZ and OECD average.
LIC invests around $8-10m
a year in the development of its breeding scheme and a further $3-4m in
research and development specific to genetic improvement.
Its initiatives into
automation (including in-line milk meter technology), diagnostic testing
(including parentage verification), genomics, long-last liquid semen, animal
evaluation, sire proving, artificial intelligence and complex databases “have
delivered huge returns to NZ Inc”.
SPACE, a pasture
management system which utilises satellite technology to estimate a farm’s
pasture cover, is among comparatively recent developments.
Some funding for R&D
has come from government but most comes from the reinvestment of revenue
generated by the sales of LIC products and services (herd testing, animal
health and parentage testing, automation, Minda software, and so on.
“We do much more than
just selling straws,” Spelman says.
LIC is confident NZ
farmers fully understand the need for it to charge them for the information
generated by the herd improvement system and appreciate the benefits –
including the funding of further innovation – that result.
Farmers receive valuable,
up-to-date herd improvement information while the service provider focuses on
generating value-added information and services that meet farmers’ needs.
But the contribution of
data through herd testing and recording is vulnerable to changes in costs,
technology and compliance/regulation. In the 2015/16 dairy season, 1408
fewer herds undertook testing – a decline of about 16% as a result of the
reduction in milk price.
similarly fall when herd testing charges are increased.
LIC and the core database
The Livestock Improvement
Corporation – as a subsidiary of the Dairy Board – was solely responsible for
herd testing and management of the resulting data before 2001. The legislation
which established Fonterra turned it, too, into a farmer-owned co-operative,
paving the way for competition in the herd testing market.
LIC managed the core
database, an industry-good repository for a regulated set of 46 data fields
about cows’ milk production, their parentage, mating, calving and so on, which
forms the basis for animal evaluation. It contains data on more than 35 million
animals, the oldest record dating back to 1903.
The Core Database – along
with copies of additional unregulated data, including data from CRV Ambreed and
the dairy breed societies – subsequently was placed under DairyNZ management
and forms the Dairy Industry Good Animal Database (DIGAD). This enables DairyNZ
to carry out animal evaluation runs to update key indices, such as breeding
While technical issues
are being sorted out LIC continues to play a role in the operation of the Core
But further changes are
in the offing. During a Ministry for Primary Industries’ review of the
regulations, the industry was invited to comment on three options for the core
- Stick with the regulated
‘core’ dataset of 46 data fields and rely on herd testers to provide additional
data to the DIGAD voluntarily.
- Expand the regulated
dataset to include fields needed to calculate breeding values and animal
- Provide a more broadly
focussed mechanism which allows the regulated fields to be updated without
requiring amendment to the legislation or the regulations.
Read more about LIC’s submission here.