I know that 'A2 Platinum' infant formula is a very lucrative product for the A2 milk company. But how lucrative is it for farmers?
If this 2015 reference is in any way current, not a lot more lucrative.
http://www.scoop.co.nz/stories/BU150...r-interest.htm
"A2 Milk pays a premium of around 5 to 7 percent to its small number of farmer suppliers in New Zealand, Australia, and the UK, which has become more attractive as the farmgate milk price for standard milk has dropped markedly this season."
The converse to this statement is that the premium for A2 becomes less attractive if milk prices rise (as is the case now).
From this forum, talking about trying to buy an A2 cow.
https://www.lifestyleblock.co.nz/for...n-a2-dairy-cow
"LIC charge $22.50 + GST for the test, though there is also the cost for collecting the blood/tissue sample, and there is a 6 week turnaround."
So the question is, does the premium offer price compensate for the A2 test and all the ancillary downstream costs? For one farmer, on one farm the answer is 'no' as the cost of duplication of stock handling and separation of herd facilities is too great. But what is the situation if the farmer wants to sell their cows outright?
If only one in three cows is fully A2, then the average test cost will be 3x $22.50 + GST (because you don't know if the cows you test will be A2 in advance). So that is $75.94 per A2 cow, on average. To test 100 cows would cost $7600, plus the collection fees. I reckon you would be doing well to get a vet to do this for 100 cows for $2,400. So round figures, we are talking $10,000 for 100 cows to 'do the test', and get 33 pure A2 cows identified.
Then say the premium milk price offered is 7%, and an A2 cow is worth 5% more as a result. At $2,300 per A1 cow, that would suggest an A2 premium of $115 on the A1 cow price. Over 33 cows this adds up to $3,795. So our farmer doing the 'cow swap' might expect a $3795 payout for 33 cows, after incurring costs of $10,000. And that means the farmer selling the cows would be looking at a
'net loss' of:
$10,000 - $3,795 = $6,205!
This is without including transport costs or stockyard fees. So to me the economics of 'cow swapping' look unviable, which is possibly why I have never heard of a farmer who has done it! Still a great many investors in ATM
believe it is going to happen. Go figure!