Inside the cutting edge Waikato farm technology hub which makes our pastures greener and impregnates up to 80% of New Zealand’s dairy herd.

The inside of a cow’s anus is warm and cavernous, and getting your hand inside is a breeze. After smearing a dollop of lubrication to a sleeved glove you simply beak your fingers as an Italian chef might, press them against the beast’s rubbery sphincter, and facing only gentle resistance, insert your hand palm-up, like a magician revealing a card.

To locate the cervix, you turn your hand over and grab ahold of the meaty, sausage-like tube that serves as the opening to the cow’s reproductive organs. So far, so good. Raising your stainless steel inseminator, a straw of New Zealand’s finest bull semen at the tip, you insert the rod gently inside the cow’s vagina and push it ever so slightly through the cervix – provided you can actually find the opening. Most of what happens at Livestock Improvement Corporation is high-tech science; this part is an art.

Henryetta the plastic cow, a Damien Hirst-like segment of a beast, serves as LIC’s in-house insemination training device. Accuracy is all-important: three out of four dairy cows in New Zealand are sired by an LIC bull, and farmers pay a premium to get the job done right. A farmer-owned cooperative, LIC has spent the past 100 years working to improve the productivity of the national dairy herd through cutting-edge genetics, herd improvement, genomics and pasture management technologies, creating one of the largest breeding programs in the world in the process.

Now, as the nation approaches Peak Cow – the moment at which the land can no longer sustain our epic herds – LIC is undergoing a transformation, advancing projects incorporating everything from satellite imaging to artificial intelligence in a bid to push the frontiers of farming here and abroad. At the head of a recent overhaul of the shareholder model and diversification of business interests, chief executive Wayne McNee says the co-operative is gearing up to lead the dairy industry into a new era of farming.

“The last three or four years we’ve really come to realise the implications of being at this crossroads between the information economy and agriculture,” he says.

“There is a growing population in the world. There will be 9 to 9.5 billion people by 2050, there is more desert forming, the land available is shrinking, and so it’s important to make more efficient farming systems. You need technology for that – which is why you see a lot of venture capitalists coming in, they can see this area is going to grow.”

I met McNee at LIC’s main campus at Newstead, just outside of Hamilton. A farm, laboratory, testing facility and research centre all at once, LIC is its own Silicon Valley for the agricultural industry. Semen valley, if you will. It’s growing fast: revenue at the half year in November, rose 16.6% year on year to $153m. What’s more, it’s exactly the kind of research-based entity everyone from business to government thinks New Zealand desperately needs: a huge $14m, or around seven percent of full year revenue, was reinvested in Research and Development – a figure McNee says outpaces almost all agribusinesses.

With open plan offices, communal gardens, a speaker series, and a lunchtime yoga program, LIC is a long way from the lino floors and instant coffee that typify most buildings even tangentially connected to farming. Walking past the in-house library, issues of the Economist on a rack, you begin to wonder where the ballpit and pinball machines are. Especially when one contemplates the ‘informed consent for massage’ forms pinned to a wall. But, as with the famed tech companies abroad, this is very much a place centred around results.

“Anyone can Google-fy their campus. Chuck a few beanbags down and tell people to take off their shoes,” says chief people officer Roz Urbahn. “But it’s actually about how you work.”

Rebecca Dalrymple, business unit manager of LIC’s SPACE program, concurs. At the head of a project spanning optics, satellite technology, data analysis and front-end software development, Dalrymple draws regularly on LIC’s specialists to create multidisciplinary solutions to the complex problems her team faces.

“The fact I can walk from our unit down to R&D and talk to experts in such a diverse range of fields is just so helpful, especially on a project like SPACE,” she says.

SPACE – Satellite Pasture and Cover Evaluation – uses satellite imaging to measure the length of grass in a paddock several times a day, providing accurate measurements to farmers without needing to pull on their Red Bands.

Traditionally farmers have used a rising plate meter, a handheld device that looks a bit like a metal detector, to take pasture measurements from around the farm. This method offers the obvious advantage of not relying on equipment hurtling through space, susceptible as it is to things like heavy cloud cover and adverse atmospheric conditions. But with recent advances in satellite technology and a rapid increase in the number of satellites flying above the country, it has become not only realistic but more efficient and accurate than any farmer’s eye. The trick is convincing farmers it’s worthwhile.

“We never, ever tell farmers they’re wrong,” says Dalrymple. “They may have been doing things a certain way for a long time, and so it’s really about showing them thorough results.”

After all, farmers are the clients of LIC, but they’re also the owners too. A series of small, regional milk testing co-ops in the early 1900s, LIC formed as a wholly owned subsidiary of the Dairy Board in the late 80s. In 2001 the government passed the Dairy Industry Restructuring Act, and the Dairy Board merged with the country’s two largest cooperatives, New Zealand Dairy Group and Kiwi Co-operative Dairies, to create Fonterra. LIC became a user owned co-operative and in 2004 issued investment shares and listed on the NZAX. Today LIC controls over 80 percent of the artificial breeding market in New Zealand, employs 700 full time staff and processes more than 11 million milk samples a year.

Farmers are businesspeople at heart, says Paul Littlefair, chief information officer. In order to have any long term success it’s imperative farmers constantly hold in their minds a complex picture of the health of the farm as a whole, able to pull numbers and projections from the air as things change. Simply telling them a satellite can do the job better just won’t work.

“I come from a business background, and moving into this area I was shocked by how underserved farmers are by technology,” he says.

“But it’s not that they’re unwilling to adapt, in fact when you have a conversation on their terms, it’s very clear they’re interested in anything that can make their lives a bit easier. But it has to actually make things less complicated, not more, to have any worth to them.”

One such project involves using artificial intelligence and neural programming to analyse lameness in animals, normally a time consuming and imperfect process. Controlling for variations in light and topography means optical specialists need to be on-farm regularly, ensuring their projects are not simply nice ideas, but in fact make life easier for farmers. Correctly identifying lameness in a cow before it progresses can save time and money, as well as highlighting behavioural or geographical changes on-farm, but it’s imperative LIC employees are solving problems that actually exist.

In a shed adorned with paintings of frolicking cows, some of the biggest bulls I have ever seen are being lead about by rings in their nose, ready for their first collection of the day. Products of LIC’s groundbreaking sire proving programme, they were absolute specimens, the NFL linebackers of the cow world, fully 1000kg and in impeccable condition. And all of them incredibly horny.

Arranged in a row with their heads secured in stocks were the decoys – castrated bulls whose job it is to be mounted by the sires, providing an opportunity for technicians to reach between the animals and jam an artificial vagina over the bull’s penis. Unlike the technicians, the decoys were certainly not laughing.

The 1100 bulls in LIC’s program provide millions upon millions of straws of semen every season, siring the majority of New Zealand’s dairy herd as well as animals as far away as Ireland, Argentina and the United Kingdom. Bulls with red tags have been involved in aggressive incidents and the overalled staff are fitted with stab vests and walkie talkies, but as LIC farm manager Phil McKinnon says, they’re generally quite docile inside the shed: “the bulls know why they’re in here, and they’re not exactly upset by it most of the time.”

Most bulls have sexual idiosyncrasies, and the technicians employ a variety of techniques to get them going. Whatever the method, it’s imperative the bulls aren’t stressed; they too suffer from performance anxiety.

“We rustle the plastic covering the AVs (artificial vaginas), as they associate that with collections, we can rotate them around different decoys, even bring another bull in to get them jealous – that has really good results. Otherwise we take them out to the sandpit which they love, but that’s a last resort as they generally won’t be interested in anything else after that.”

With bulls, one thrust is all it takes, and soon 6ml of New Zealand’s finest bull semen is rushed through to a laboratory in an adjoining room. Here it goes beneath a microscope, where scientists analyse the speed and direction of the sperm’s swim patterns, making the call on whether or not it’s fit for market. Beneath the glass they are a million frantic dancers, seizuring through primordial goo. It’s quite hypnotic.

LIC sells semen in liquid and frozen form, and the 6ml payload will produce 500 frozen or 5000 fresh straws. During the spring, when demand is highest, technicians work seven days a week from four in the morning to ensure there is ample semen on the market. From LIC the fresh straws travel to a tight schedule, loaded onto flights departing Auckland for the South Island, and on vehicles headed across the North Island, before heading on-farm within a maximum of three days. Frozen straws are destined for international markets, all with their own specifications around quality, origin, extraction method and so on.

Beyond the space-age projects underway in R&D, LIC remains at its core a co-op centred around improving livestock, something general manager of New Zealand markets Malcolm Ellis believes is more important now than ever before.

“I don’t think LIC has ever been as relevant as it is today,” he says.

“The reason for that is that we rode that cow growth scenario for so long. When I left university in the mid 90s there were 2.1 million cows and when I got to LIC there were 4.8 million: 100,000 cows a year for 23 years and it looked like this thing was going to keep going but now we’re dealing with the reality of peak cow.”

The coalition government has signaled they are looking to reduce herd numbers, with the Green party calling for a moratorium on new dairy farms and increased diversification into horticulture and forestry. Ellis says he believes Minister of Agriculture Damien O’Connor is willing to work alongside industry. After all, dairy remains a cornerstone of the economy, and simply culling cows is to nobody’s advantage – there’s too much at stake.

According to Ellis, there is about $39.6 billion in dairy sector debt in New Zealand. While some farms have been structured to carry debt well, there remains a considerable weight dangling over the industry as a whole as herd growth slows. Ellis believes it will have to be milked out, regardless of the ideological leanings of the current government.

“If there are challenges around carrying capacity, the cows that farmers are milking are going to have to be really, really good,” he says.

But how good? How far can genetic testing push the biological limits of a cow? It turns out it’s less a matter of creating Franken-cows, more udder than beast, than bringing the less efficient cows up to speed with the best.

“The difference between the top quartile and the bottom quartile of cows in New Zealand is 160kg of milk solids,” says Ellis. “Our top cows only average 381kg. So that difference tells you that there is quite a bit of opportunity for us to help farmers. In the 27 years I’ve been in the industry, herd improvement is more important now than it’s ever been,” he says.

It’s like the 100 metres world record, says Ellis. The way we’ve watched sprinters run 100 metres in 10 seconds, then slowly bringing it down to 9.8, and you wonder just how fast can people go. We know we’re not finished yet, and nor are LIC’s cows.

“We’re still seeing growth. But I think the most efficient way to get this extra growth is going to come through genetic merit.”

The advent of different niche markets also provides opportunity for diversification. A2 milk, a milk lacking certain proteins inherent in A1 milk, is one such product. A2 Milk Company recently partnered with Fonterra after nearly two decades of loggerheads as the product makes strides in the all-important Chinese market. However Ellis urges caution against over-diversification.

“I was a technician for LIC as a farmer 20 years ago and everybody was doing Jersey premier sires, or Friesian premier sires,” he says.

”This year we’ll have 12 categories of fresh semen, and with complexity comes changes to the cost model. Here’s a really good example of how careful we’ve got to be around leadership, because I don’t want to see us in five years time with 26 options for our farmers. We’ve got to be really disciplined.”

But that doesn’t mean ignoring alternatives altogether.

“If we acknowledge cow growth is the single biggest factor that drove productivity and prosperity in the last 20 years, what will be the driver in the next 10? Because it’ll have to be something. We know the consequence of standing still. In order to be successful going forward we’re going to have to be very, very smart.”

When the very future of the economy depends on the contents of a bull’s balls, it’s nice to know it’s being taken seriously by those on the front lines.

This content is brought to you by LIC, in the DNA of the New Zealand dairy industry.