Market demand should dictate the pace of growth of New Zealand's sheep milking industry if it is to avoid a boom-bust price cycle trap often seen in emerging industries.

Growing too quickly could collapse the market, Landcorp consultant and agri-businessman Andrew MacPherson said at the New Zealand Veterinary Association Conference in Hamilton.

This was a possibility as cash-strapped bovine dairy farmers looked for new ways to increase their returns, he said.

"We run the real risk that every man and his dog is going to try and milk sheep. The problem with that, especially if they are able to get their milk dried, is that they will be in the market potentially with a commodity and if that happens, I don't think we will be facing a very happy future in the medium term."

Landcorp had entered the sheep milking industry in partnership with the SLC Group to form Spring Sheep Dairy and had no interest in selling bulk sheep milk powder in Asia or selling it in the market and taking a commission, he said.

"Landcorp and SLC have been vocal critics of New Zealand's commodity trade because we believe that if we do this right we can create long term (sustainability). And actually we believe it's the right thing to do for our investors."

Milk from Spring Sheep Dairy is processed at Waikato Innovation Park in Hamilton and is used to create yoghurt, pro-biotics, ice cream and specialist niche milk powders such as protein products used by high performance athletes. The company will also launch its sheep's milk gelato product in New Zealand late this month.

The biggest challenge the industry faced was low production among milking ewes. The answer was better genetics in its milking flock and plans were under way to introduce genetics from the lacaune, a French sheep breed known for its high milk production.

Ideally, the New Zealand milking sheep would be a high milk producing animal and produce at least two lambs. The challenge would be to feed this sheep adequately so it maintained proper body condition, he said.

Maui Milk's Peter Gatley​ said New Zealand production levels were poor in comparison to overseas sheep milking industries at around 100-150 litres of milk per ewe.

Ewe production on intensive European and Israeli sheep milking farms was more than 500 litres of milk solids per ewe all year round. In France, which has the closest farm systems to New Zealand, had an average production of 400L/ewe.

The lack of international trading of sheep milk products meant New Zealand had adopted a price using the kilogram of milksolids price including lactose used by the Dairy Goat Co-operative as a guide. This came to around $17/kg MS or $3.06/litre, he said.

But it was not necessarily an economic goldmine because sheep milking farms had high, fixed on-farm costs. On the flipside, there was a stable milk price, its environmental sustainability had a lot of appeal and New Zealand was experienced in sheep farming and in turning pasture into milk production.

Sheep milk offered an alternative for those intolerant to cow's milk. It had a different taste and properties to goat's milk. It was extremely concentrated compared to other milk types, comprising 18-19 per cent milk solids, higher than about 12 per cent for cow's or goat's milk.

That meant it had to be diluted when milk from their farm in western Taupo was processed.

​Gatley said the industry faced a lot of challenges. Genetically, it did not have the right sheep yet, they were not being adequately fed and the industry's management systems needed further refinement.

"At $3 a litre, and $17/kg milk solids, we can make a go of this. We are only limited by market demand and our ability to sell the product and that final link in the chain is extremely important."

He believed it had the potential to grow to $200 million by 2030. Given most of the on-farm costs were fixed, most of the gains in ewe milk production would be made through better genetics and feeding.

"I think we can grow it to the same size as the dairy goat industry but a lot more quickly."

Gatley said they planned to expand their existing sheep milking operation by converting another western Taupo farm, Waikino Station, to sheep milking. The farm will be a hybrid system where the sheep are farmed using both barns and outdoor pastures.

"We are going to convert that and milk 4000 ewes there and run it the way we think it ought to be done, bearing in mind everything we have learned in New Zealand so far and everything we have gleaned from offshore."

He was confident the industry could make the on-farm gains for it to be a successful industry, but overseas marketing at the expected prices was key.

"From what we have seen so far and what we have seen offshore, I'm very confident we can produce those 300-400 litres per ewe and do it very efficiently if they can sell the product. We have a business here all right."

This article was originally sourced from Stuff.