Interview: ViaLactia CEO Colin South

Even after its R&D budget was cut this week by parent company Fonterra, ViaLactia still has one of the biggest research budgets in New Zealand's biotechnology industry. CEO Colin South discussed his company's research programs with Australian Biotechnology News during a tour sponsored by New Zealand Trade and Enterprise in March.

ABN: Could you broadly describe ViaLactia's research?

Colin South: Australia and New Zealand are the two major, low-cost suppliers to the international dairy products industry. Our research aims to maintain New Zealand's competitive position and we're also looking at the genetics of differentiated dairy products. We were established by the NZ Dairy Board in 1999 to be the industry's dairy-gene discovery agency. In Australia, Victorian Primary Industry and the Cooperative Research Centre for Innovative Dairy Products have a similar focus.

Are you collaborating?

Not as much as we should, but we have some links with Primary Industries in Victoria. There's room for multinational players, and we're scanning each other to avoid duplication.

We have a solid dairy focus -- we're working for the benefit of New Zealand's pastoral dairy farmers, with a profit motive to drive money back to our shareholders.

We have a joint venture with the Livestock Improvement Corporation through BoviQuest, New Zealand's largest artificial breeding enterprise, looking for quantitative trait loci (QTLs) associated with milk production and composition. We have a dairy genetics project involving 800 Friesian-Jersey cross animals at a 60-animal rotary milking facility in Taranaki, which captures the genetics of about 90 per cent of the New Zealand dairy herd. We're intensively measuring phenotypes in the herd for traits like milk flows, milk composition, temperament, fertility and disease resistance.

How big is the NZ dairy industry, relative to the sheep industry, and how will you increase the industry's productivity?

The national sheep flock is declining at a rate of 4000 a day, and the dairy industry is becoming entrenched in traditional sheep-farming areas like Canterbury. We're hoping to have an impact through improving pasture productivity and forage quality, by understanding the genes involved in dry-matter production, metabolisable energy and flowering.

Dairying is a low-margin business. Most of the value [of the pasture genetics project] will end up back in the farmer's paddock -- give someone a perennial, and they'll have it for a long time. The value of additional dry matter to a farmer is substantial.

We're also mining the genetic diversity of the Fonterra herd. Three standard deviations from the mean still give you 20,000 animals defining the outliers. Our relationship with the Livestock Industries Corporation, and access to the national herd database, allows us to look at pedigrees going back 50 years. The biological resource is phenomenal.

The New Zealand herd was bred around high-fat [milk] cows. The emphasis in the market today is on protein, rather than fat, so the industry imperative is to move away from fat- to protein-rich products. That's the LIC's field -- their priority is to produce more milk, of improved composition. There are lots of unexploited, minority components in milk that could be commercialised. We haven't yet quantified where the natural variation lies. We're addressing amorphous targets, especially in the milk area -- we'll differentiate them and create value over time.

What about the genetic engineering approach?

Genetic modification isn't even a topic of our research -- it has negative value in our market. With long-term research, we need to know our market, and anticipate what will happen down the road.

But identifying genes is important for establishing platforms and capabilities to identify animals that can be applied to a given target. The more baseline knowledge we have, the more value we are to Fonterra. If we identify a target, we can do the gene discovery and bring it to market through natural breeding. That takes a long time -- it takes four to five years to get substantial penetration. If you add the process of gene discovery to that, the timeline is unrealistic.

We need an approach that will provide us with the tools to eventually make rapid progress towards trait improvement. Traditional breeding has done a great job of providing genetic gain in the NZ dairy herd, but it's difficult to focus on more than one trait. With genetic marker technology, we can bring valuable traits together and make much greater improvements.

How important is the pasture research?

It's probably even more important for the NZ industry than for Australia. In our predominantly pasture-fed dairying system, the amount of grass we grow determines how much milk we produce. Improving the quantity and quality of forage, and manipulating the timing of pasture growth, determines the quality of the milk, and the length of the production season.

With the Holstein-Friesian breed you can't get as much energy into the animal as you can in a [high-protein, grain-fed] system, but the NZ and Australian genotypes are well acclimated to grazing regimes.

We can make big gains in output from grazed pasture by improving the quality of what the animal is taking in, studying interactions between the forage and the rumen flora, and conserving energy so it is directed into metabolism. For example, there are huge energy losses through methane production in the rumen, while condensed tannins in ryegrass and clover have a big impact on protein assimilation.

We'd like to optimise the performance of the rumen. We have a program in which we're exploring the genetics of the rumen as a single entity, looking at the predominant proteins involved in breaking down biomass. Undefined, mixed cultures of microbes are very adaptable, but by definition, they go where they want to go.

Dairy cows are already very productive. We have only cents per day to play with in terms of feed additives -- it takes a lot to make a little more.

We'd like to minimise water use, to reduce the risk of losses in drought -- it's the same scenario in Australia. Once you begin to rely on a certain level of production, your ability to maintain it through periods of climatic adversity involves significant risks, whether you're a dairy farmer in Canterbury, or in Western Australia.

Grasses are already tolerant of abiotic stresses. But ideally, you'd like to fit the protein-to-carbohydrate ratios of the pasture to the cow's requirements, to minimise nitrogenous wastes, make it easily digestible for high throughput, and maximise the amount of food energy going into milk production.

We need more genetic knowledge so we can breed for specific products without compromising the animal, because [milk derived] commodities are going to be a major component of New Zealand's dairy production. Being able to differentiate products at the farm level provides an opportunity to build brand loyalty at the level of the herd, rather than the processed product.

There are opportunities to develop boutique products. Milk has been characterised through a number of clinical studies, and its ability to reduce obesity or improve general health has been recognised for some time, but never quantified. Yet it's surprising how little fundamental research has been done on milk as a raw material. That's now changing, because the tools for detailed analysis have been commodified in the past 10 years.

There's a lot of work into the synergistic impact of milk components on health. The clinical research will give more direction to marketing, and to our breeding programs.

We're looking at some of the easier targets, like lower levels of saturated fats. We're probably not going to be able to do anything about unsaturated fat levels, which are governed by the fundamental biology of the ruminant animal. But lower saturated fats may accompany other valuable compositional traits.

We're always searching for appropriate applications of genetic technology, because we don't want to chase things that are more easily manufactured, post-production, than selected for in the national herd. If you've got an expensive hammer, you want to make sure you're using it on the right nail.

Genetics is giving us new tools to increase the standard rate of genetic gain in the herd, but in the next generation we'll be looking beyond the standard components of milk. There is great interest in things in milk that have never had selection pressure applied to them.

If we achieve improvements [in the dairy industry], the value stays in New Zealand -- they can't be lured away.