A New Zealand-based syndicate of international dairy farm investors has set its sights on expanding its United States operation into southeast states.
Grasslands Consultants already owns 5000ha in Illinois and employs 70 people to milk 6500 cows through 12 dairy sheds, but has its eyes on expansion in to southeastern states where 120 million people live but where just half the region's fresh milk needs are produced.
Grasslands chief executive Gary Townshend said the US was fragmented - effectively five dairy markets in one - but that created opportunity, he told visiting reporters in Chicago last month.
California accounted for 20% of the US milk production, the upper Midwest was the country's traditional dairying area but expansion was slow, the northeast had fulfilled its dairying potential and dairying was growing in the southwest states, as soaring California real estate prices pushed the industry into New Mexico and Texas.
That left the southeast, an area Mr Townshend said was hot and humid but with huge potential, and he believed Grassland's pasture-based, profit-driven model could succeed, despite those climatic challenges.
"The opportunities in the US are just absolutely unrealised and unabated," he said.
The decision to set up in the US followed a worldwide search for opportunities over four years, by the Canterbury-based company.
With US land prices between $5500 and $6500 a hectare, the move has been viable, but required a mind-change in management from being production focused to profit-driven.
Mr Townshend said it was easy to be sucked into being production-driven, which was a characteristic of the US dairy industry, and he said he continually hammered home to staff the need to be driven by profit.
"We're profit-focused, not production-focused."
Under his system, between 60% and 70% of cow diet was pasture, with the balance grain, but Mr Townshend said its viability varied depending on the grain price.
This year it was expensive, but in 2007-08 and, he suspected 2010, prices were low, making it more viable.
Overall, the foray in to the US had been worthwhile, helped by less bureaucracy than he encountered in New Zealand.
"We are very, very happy with our investment."
He declined to reveal the financial details, but said the business had strong cash flow.
Getting the farms established took patience and time.
Mr Townshend said finding contractors to replicate New Zealand dairy systems including sheds, tracks and fences, was a challenge.
The company did not irrigate, but finding pasture mixes suited to dairying was an issue, and it was testing several varieties.
He estimated 20% of those varieties were New Zealand grasses, 60% US and 20% European.
Many of the farms in the southeast grew a variety of pasture Mr Townshend said would be a weed in New Zealand, and the trials would hopefully establish a mix suited to that area.
Another issue was the lack of industry-good research and development, virtually all of it led by corporates which had a vested interest and tended to be production-driven.
"It's a major impediment to the industry."
The cows were based on US genetics and produced between 330 and 350kg m/s a head, but he intended introducing New Zealand genetics.
Within a few years, their Illinois farms, which were within a 60km radius of each other, would be running 10,000 cows.
Mr Townshend said the company had also introduced New Zealand-based sharemilking and contract milking structures for staff, and in the coming season US, Irish and New Zealand farmers would be advancing into sharemilking or contract milking roles.
He said the New Zealand dairy industry was close to maturity and Grasslands was leveraging off its assets and knowledge.
The US move had reinforced the competency and quality of the New Zealand dairy industry, which allowed companies like Grasslands to transfer New Zealand's intellectual property and low-cost operation to countries such as the US, with profits returned to New Zealand.
The Irish, US and English shareholders own five farms in Southland, Canterbury and Waikato, milking 8000 cows, along with farms in Chile.
Mr Townshend said while the US farms were strong generators of cash, the Chilean business was based more around capital growth.
Looking ahead, he said there were further opportunities in Chile and the US along with China.
Set-up costs such as immigration, taxation and legal issues were more easily absorbed if the project was large in size.