Export Hay Opportunities: a discussion with Denis Johnson

Jon Paul Driver 0:05
Welcome to Feed Central Hay Matters podcast, your go-to source for all things hay related in Australia. I’m your host John Paul Driver. In today’s episode, we’re joined by Denis Johnson. Also Tim Ford is here and I’ll have Tim do the introduction for Denis.

Tim Ford 0:20
Thanks, Jon Paul. Great to be here today. I’d like to introduce and welcome Denis Johnson to the podcast. Denis is a long term family member of the Johnson’s family, very well known family in South Australia and across Victoria for their pioneering expertise in the export hay industry. I also understand that Johnson’s turned 100 years last year as a family business. So Denis has played a major part in that handed the business over to the to the children now to run but I’ll let Denis talk more about that as the podcast goes forward. Dan has provided great mentorship to myself and Megan, great friendship and great mentorship through a number of years as we were starting our business and Megan and I will be forever grateful for the friendship and the mentoring that from Denis and Pam as a as a family business. So welcome to the podcast, Denis. Thanks.

Denis Johnson 1:12
Thanks Tim. Pleasure to be here.

Jon Paul Driver 1:15
I had the good fortune to come and visit your operation in Kapunda and Corey was the one that gave us the tour that day.

Denis Johnson 1:22
Beautiful, beautiful. And did you did you get a word in with Corey or not?

Jon Paul Driver 1:27
I was just soaking it all in. We got to see the pellet mill and the press and it was wonderful.

Denis Johnson 1:34
I’m glad you enjoyed it.

Jon Paul Driver 1:35
Like I mentioned, I’ve had some of that famous wine as well.

Denis Johnson 1:38
Well the boys’ enjoying it right now. So we’ll probably have a few more as we go along. It won’t be a problem. And it’s good to see.

Jon Paul Driver 1:46
So Tim mentioned now you might have to tell the story behind JTJ, the 100 year anniversary. So tell me the story.

Denis Johnson 1:53
Well, last year we celebrated our 100 year as a family business. Obviously we commenced in 1923 at a little town called Stockport, which is about 30 K’s away from here. My grandfather, John Theodore Johnson started the business initially with his brother-in-law Beno Rhode, but a year later he bought him out. And Ben went off to do other other work. And from there, they started cutting chaff being involved in the hay business. 100 years later, we’re still involved in the hay business, it’s in our blood, it’s in our DNA. And that’s something that now the family from the second generation, which is my father, Max and Uncle Clyde. Third generation was myself, cousin Peter, Christopher, and my brother Jack, then we’ve all either retired or passed on. And now the fourth generation is managing the business, it’s Mark and Robbie. And we’re fortunate enough that we’ve now got the fifth generation working within the company. So two of the granddaughters and one grandson one started about a year ago when the other two just started in the last few months. So it’s very exciting. We’re very happy to see the fifth generation come through. We’re very happy for them.

Jon Paul Driver 3:14
What a great story. Reflections on running a family hay business, what is it to keep a business going for that duration of time?

Denis Johnson 3:22
It’s a good question. It’s, you know, to keep the business going for that length and period requires a bit of innovation, a bit of foresight, a bit of gambling, I must say because I think anyone in business who doesn’t gamble is a liar, because we all do take some risk and trying to achieve some bigger goals. But vision is also a big thing. And to, I’ll give credit to my forbearers, obviously my grandfather, who worked very, very hard. Then my father and uncle, my father, Max was a wonderful entrepreneur, innovator. He really went out to look at new markets. And we started back in 1964, actually, was our first export market to Singapore. Till today, which is 60 years later, we are still supplying the same customer in Singapore. It’s a credit to what Max did. What he taught us and what we do is to carry that tradition through is to look after your customers. We really focus a lot on customer relationships. Customer, of course is paramount. But then again, on the other side of the fence, we also want to have the same connection with our growers. So we’ve taken a lot of time a lot of work in seeking new customers throughout the world, expanding our market share, but at the same time working with our growers, and with our suppliers, our service operators here in Australia. And the other important thing of course, is the staff. We’ve had a number of people here, still working here, you know, some are well over 40 years service, and many of them now in their 30 years, and we have a heap near 20 years. Either we’re paying them too much, or we look after them, I think it’s a bit of give and take. They enjoy it, they get well rewarded. And if they’re happy, we’re all happy. So I think it’s a bit of a combination of everything, John, just make it all work together.

Jon Paul Driver 5:28
A point of interest here, what was that first product that was exported to Singapore.

Denis Johnson 5:33
Chaff, chopped hay. Then after we started chaffing, we then got into oat milling. And we used to do clip and graded oats for the racehorse industry, mostly into Singapore and Malaysia, and to the Hong Kong Jockey Club. After too much competition in the end, for about 30 years, we we pulled out of both the chaffing and the and the oat milling. And we just concentrated on the pellet milling, which we started in 1976. And then in 1987, I ventured into the export hay game into Asia. Just to give you a bit of an idea about the export hay business for us. Why did we get involved I suppose might be one of the questions. It was really we got involved because we wanted to sell pellets. I went round did a tour around the East Coast, and particularly Sydney and Melbourne, to the Japanese trading houses was at that time, the Americans and the Canadians were selling hundreds of 1000s of tonnes of alfalfa pellets and alfalfa cubes into Japan. And I thought, well, if they can do that, we can get a little bit of the action. But every place I went to in Sydney or Melbourne, all they wanted to talk about was hay. So I thought, well, one way to do this is we’ll give them hay. But then we can introduce our pellets to them at the same time. So we went out in 1987 and bought a $45,000 single bale press machine with metal straps, we put two little bales together, left the strings on, squashed them up. And all by hand, and machine but most clipping the straps by hand, put the bales on the elevator. And some poor little buddy had to load the bales in the container, one by one on a 40 degree day, did a good job but and that’s how we started. And from there, we transitioned into upgrading the machinery and getting more, not automated back in those days, but getting more efficient. And we got away from small bales went into round bales that went on for a number of years. We made a new hay press what we call SCB, which is a single compressed bale that had a sleeve over it. Yeah, that was a beautiful product. But of course it was very slow was such luck. You know, the plant would only do 8-9 ton hour. We had one of those here and one in Victoria. As we went through… we had a joint venture going in Victoria, at that time with Asahi Industries. And so back in ’95, we formed this joint venture with Asahi, we had two factories in Victoria. One at Boort and one pending to go into Horsham, and again, it was a really dry period, we struggled getting raw materials. And my friend Malcolm May from Balco was kind enough to come along and buy the Boort factory from us. Which was very nice of him. So we still talk about that today. Over lunch. From there we, Johnson’s and Asahi, we then built the Horsham factory and that partnership now… we’re going to celebrate our 30 years next year. Which has been a fantastic involvement. So just carry on with that. And you know, after we… back into 2005. Prior to that Chris and I went to Canada to see the Hunterwood. We heard about the Hunterwood technology when hay pressing lot of American and Canadian companies are using this technology. And so we’ve had a tour around and toured a lot of factories, very good. We came back convinced that this is our future, which we did. And in 2005 we commissioned our first Hunterwood plant production went from 8 ton 18 ton an hour; you don’t have to be too smart to work it out that the margins or the costs dramatically decreased. There was actually a decent profit in that business by upgrading this new equipment or new machinery. 2007 We actually then did the same thing at Horsham with the joint venture. And those two Plants are still currently running one year in Kapunda in one in Horsham. And the next step after that, is we finished up in building a new hay factory in Dooen, just out of Horsham in Victoria. That’s really only got completed in the last year or so, last year. It’s a really state of the art hay plant. It’ll do you know well in the 20 tonnes per hour, it’s got a capacity of if they wanted to do it 150 tonne a year 150,000 tonne a year. And we’re also moving the Hunterwood press from Horsham, and we’re going to move it out to the site at Dooen we got to get to have a lot of hay pressing capacity over in Victoria. And then in December, just last year, a few months ago, we finalised a purchase of another hay factory in Western Australia. So now Johnson’s are located in three states and working hard. Because the seasons haven’t been that good in the last couple of years. You can’t keep spending it all the time you got to start getting something back.

Jon Paul Driver 11:09
I didn’t realise how good of a tour that Tim had given me when I was there. Because we were past that press facility at Boort. Of course, you may know that I interviewed Malcolm May earlier today. So yeah, it’s just a… what a wonderful small world. You’re talking about expansion here. Clearly there’s some vision for the future. Where’s the business headed?

Denis Johnson 11:34
Well, we’ve invested, you know, large sums of money in the last 12 months, two years in the upgrading of Victoria, now Western Australia. Prior to that, seven or eight years ago, we did a $20 million upgrade for our pellet mill or feed mill here. We purchased… five years ago, 2018, a feedlot with a capacity of 10,000 head. We’re also a partner in a freight broking business in Melbourne, also a partner in a logistics company that sells and loads feed out of Darwin in Townsville, load ships does stevedoring things like that? I don’t know how much further they can go. But to be honest with you Jon, but maybe they’ll find something and…

Jon Paul Driver 12:27
No shortage of ambition in any of this?

Denis Johnson 12:30
Well, there is a there is a bit more. I mean, one of our bigger target markets is the horse market. Firstly, here in Australia, and then secondly, in overseas, you know, we’d like to think maybe there’s a small place to play in the domestic pet market. But that’s a little while off yet. It’s a lot of work involved. Yeah, to be honest with you, I think they might have put the put the handbrake on a bit. And we’ll just pay for the other ones first, while I’m still alive.

Jon Paul Driver 13:00
That’s quite a number of businesses. That’s an amazing story. As we think about the hay industry, there’s a number of challenges, what comes to mind first?

Denis Johnson 13:11
Probably the two obvious things is the market, also supply. Now, I know that’s pretty simplistic and but I am really concerned that within Australia and and in United States in particular, that we’ve probably got a over capacity over supply. Now the thing that keeps supply under control is droughts, floods, the supply of raw materials and this happens. You know, we had the long drought in California for 8-10 years, I think, wasn’t it, supply was very difficult. Water was tight. And now in Australia, the last two or three years, if we haven’t had droughts, we’ve had floods, each state’s had its own problems. Year before last and our crop here 80-90% got washed out, you know, just black, you know, this year, the hay was beautiful, but the straw’s terrible, which in itself balances itself out, you know, the supply and demand scenario. At some stage there’s going to be where, you know, the market, particularly in Asia can only take X amount. And that’s, you know, between the three major countries Australia, particularly United States, of course and Canada, and a little bit comes in from from Italy and Spain, but only a little bit but not much. So the big three, as we say. I think there might be some rationalisation is going to happen in time. Because, you know, they’re very concerned about the price of the product up there in Asia, you know, sustainability for the farmers here, when the grain prices are so high, you know, they’re gonna look at their revenue for their own enterprise, and I don’t blame them but if they see in the rotation that that hay doesn’t stack up to other parts of cropping. It’s their financial decision. So we then got to be able to as an industry, and that’s luck with Tim’s business along with ours that we got to be able to show to the growers, that what we’re offering is going to be a product that they can sell that we can give to the consumer that they can buy with confidence. And the grower at the same time, of course, is going to be making a few dollars out of it, which is very important. We down in Australia, where you may or may not know that we have this really problem with dual monopoly in the supermarkets, Coles and Woolworths. And it’s a big, big thing happening at the moment at particularly at Federal Government level. And this monopoly is causing great headaches. Forget about the consumer, that’s paying enough. But more so the supplier, the grower, and they’re being screwed to the nth. And we being involved in a cattle industry in the feedlot, we know exactly what people are saying, what will happen, of course, if the growers aren’t rewarded for their effort, they won’t grow it. So that’s what will happen with the hay business. So we got to ensure that the growers are going to make their business sustainable. And the same time that we got to ensure that the customer can make his business sustainable by making it affordable. So in between, it’s where you do the work. And that’s in your production, your shipping, your logistics, all that type of stuff. That’s how that works. And that’s the only way you can make the business be successful in the long term. And we don’t take this business as a year by year or you know, it’s a long thing. Agriculture is about the long term. It’s not about the short term, and we have a bad year in 10. That’s fantastic. We’ve only had one… I’ve been here working at Johnson’s for over 50 years. And I can only honestly tell you, we’ve only had one bad year, in 50 years in our area. That’s why we’re in this particular area of South Australia. Sustainability, cost and supply.

Jon Paul Driver 17:15
What are the opportunities for the hay industry?

Denis Johnson 17:17
Obviously, the one at the moment is China, you know, for China to expand their particularly dairy industry that is going up and down as we know, number of factories, about 20 factories didn’t get registered for for a number of years. We all know the particular political reasons for all this. It’s now opened up again, but it’s opening up quite slowly at the moment for a lot of us, but I think there’s a lot of companies are being quite wary about, you know, dealing with China because you just don’t know what’s around the corner. If it does work well, there’ll be again, they’ll become a large market. But I think we should be looking outside of that. And you know, there’s obviously the obvious ones is the Middle East for the export market. It’s got a lot of potential. You know, they tell you over the in Saudi Arabia and the UAE that when they buy the alfalfa hay from America, they bind the American Water, which of course does concern a lot of people in the States because just pumping out billions or giga litres or gallons of water, just to feed the animals in the dairy farms and the camels and in the Middle East. I don’t think that’s sustainable, the Middle East will stop watering their crops. They need imported fodder. They love the American alfalfa. Like the American Timothy, one day, they might like Australian oaten hay, which is better than your Timothy, by the way. But that’s another discussion for another day.

Jon Paul Driver 18:53
Tim must have warned you.

Denis Johnson 18:59
But look, you know, saying that, you know there is emerging markets in volume. But Southeast Asia in itself is becoming… getting away from this developed nation status. Indonesia, Cambodia, Laos, Thailand, Vietnam. We supply a lot of feed on ships that take the cattle up to Indonesia and Vietnam and that sort of stuff. You know, their economies and the way of living is improving. And they want the better quality, they need protein. They need the milk and they need meat. And and of course they can’t grow the sources of feed that we can grow here to make that sustainable, but also make it profitable. So there’s a lot of avenues out there and but it all takes time. And but I think time’s on our side, to be honest with you.

Jon Paul Driver 19:57
That was a lot of opportunities I liked hearing that there is some wind in our sails, as an export industry.

Denis Johnson 20:05
Yeah, yeah, there is.

Jon Paul Driver 20:07
Do you have any closing thoughts?

Denis Johnson 20:08
We’re in a family business with a fifth generation. We’re just here for the long haul. We just hope everything goes well for the industry over the ensuing years.

Jon Paul Driver 20:18
This has been absolutely wonderful. And thank you so much for your contribution here

Denis Johnson 20:22
No worries, Jon, good to talk to you.