Milk is a core protein that is needed no matter who or where you are and is cheap on the shelve. There is and will be an expanded need for dairy products - don't forget the dairy derivatives such as cheese, yogut, butter and whey based protein supplements - its all about how to scale dairy farms and not about do we need it.
Conventional farming methods are typically family owned and run for generations and have an incredible love for the farming lifestyle. However they don't have the capacity (typically) to scale up because of finance and banks are very quick to bring in receiver/managers if they they miss payments, sadly the suicide rates are a national tragedy.
Corporates have the advantage of providing funding and scale but don't have the desire to get up at four in the morning so if they are smart they keep the farmer on site for the day to day and both are happy. I know of a couple of occasions where Chinese have bought up farms and thinking they know how to tell the cow cockies what to do and it has been a disaster.
So watch how your company sets up in the first instance. The farm gate price for your milk is based on a number of things but is typically (for good farms) 50-52c per litre at the moment and their costs (good farms) 35-38c per so for the individual small farms with no bargaining power would have EBIT returns of 5%. However with scale eg:
farm aggregation
genetic improvement
barns
robotic milkers
re-negotiation of farm input and output
etc
you could then achieve 15%+ return. And don't forget this is MONTHLY cash-flow not pie in the sky mining 10 years down the track. Also we have a domestic market and international markets for milk, milk powder, UHT, cheese etc etc etc. DOn't be under any illusion as to how good the common cow is as an investment.
AHF Price at posting:
32.0¢ Sentiment: None Disclosure: Not Held
(20min delay)