Got milk?

MALAYSIA is far from self-sufficient in fresh milk production, as consumption grows but the number of milk cows remains stagnant.

In fact, according to data gleaned from the National Agrofood Policy 2021-2030, the self-sufficiency level of milk fell by 37.35% from 2010 to 2020 as people took to drinking more milk.

Annual per-capita consumption grew from 0.7 litres to 2.1 litres in the same period, a compound annual growth rate of 11.61%.

Fraser & Neave Holdings Bhd (F&N), which has ambitious plans to expand its dairy business with a RM3bil investment into a 2,726ha integrated dairy farm in Gemas, Negri Sembilan, sees further growth potential.

The company noted that Malaysia’s per-capita consumption of fresh milk has risen to six litres, with room for growth – Vietnam’s is 10 litres, while Thailand, South-East Asia’s biggest milk producer, has 18 litres per capita.

However, F&N’s plans for milk production to start in 2025 saw a temporary setback when its permit to import 2,500 US-bred cows was cancelled as a precautionary move following an outbreak of avian flu.

Chief executive officer Lim Yew Hoe said plans are in place to source for cows from other countries, but he did not elaborate further at a briefing on Nov 6, except to say that the delay could last up to 12 months.

Consumption of milk and milk products is rising across the region, according to the Food and Agriculture Organisation, with demand fuelled by economic growth, changing diets due to higher incomes, and urbanisation.

Given the rise in per-capita consumption, there is a commercial basis for the setting up of an integrated dairy farm, but a number of factors curdles milk production, according to analysts StarBiz 7 spoke to.

They are cautious about F&N’s ambitious targets of producing an average 30 to 32 litres of milk per cow daily – double that of Farm Fresh Bhd.

One analyst notes that while this may be possible in temperate climates, where the soil and climate conditions are more ideal, the feasibility in Malaysia remains uncertain.

“The cows have to be here first before we can find out whether this is achievable,” she says.

Another analyst says that while the production targets are ambitious at this juncture, she is bullish on the company’s outlook given its stable profits.

“It really depends on whether they can get the same quality of cows that they originally ordered, but yes, the production targets are optimistic.”

The cows that were supposed to be shipped here were, genetics-wise, optimum for milk production, with the possibility of producing up to 40 litres per day at peak production age.

According to Australia’s Department of Agriculture, Fisheries and Forestry, a total of 8.8 billion litres of milk was produced in the 2022 to 2023 period.

There was a total of 2.1 million dairy cows as of June 30, 2023, according to the Australian Bureau of Statistics.

Extrapolating from these figures, Australian cows produced an average of 11.48 litres of milk per cow per day, primarily from mostly the temperate south and south-eastern regions.

F&N plans to eventually produce up to 200 million litres of milk annually from 20,000 cows once its integrated farm is fully operational.

According to Lim, the company will continue developing the farm and intends to start planting corn for animal feed this month, which should be ready for harvesting next April.

It aims to diversify production by eventually producing not only milk, but also beef and animal feed.

Lim shared in the briefing that animal feed could, over the next five years, become F&N’s next growth pillar.

Malaysia produced 39 million litres of milk in 2022, according to the Agriculture and Food Security Ministry, down from 41.8 million litres in 2020.

The country aims to achieve 100% self-sufficiency for fresh milk by 2030.

However, the self-sufficiency ratio has dropped below 2017 levels, despite attempts by the government since the 1970s to increase domestic milk production.

Challenges such as climate, high feed costs, poor farm management, and low-yielding cows and goats hindered the objective.

In a 2019 report, Khazanah Research Institute suggested that “importing milk may still be comparatively less costly to ensure adequate and affordable supply for the country”, given the climate and natural limitations.

While F&N seems to be addressing these challenges, only time will tell whether the combination of ideal local weather conditions in Gemas, skilled farm management and quality cows will yield the desired results.