Wednesday, December 6, 2023

One in four NZ export dollars earned by dairy 

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New report underscores dairy’s enormous economic impact in NZ.
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A new report on the New Zealand dairy industry highlights its crucial importance to the national economy as an export earner and job creator.

The industry is NZ’s largest goods producing sector, accounting for $11.3 billion (3.2%) of GDP in the year to March 2023, the report, Solid Foundations – Dairy’s Economic Contribution to New Zealand, says.

Of this, dairy farming contributes $8bn (2.2% of GDP) and dairy processing contributes $3.4bn (0.9%). 

The report was produced by Dairy Companies Association of New Zealand (DCANZ) and DairyNZ.

DCANZ executive director Kimberly Crewther said the report shows the long-term picture for the dairy sector is solid and it will continue to contribute significantly to the NZ economy.   

“Dairy generated nearly $26 billion in export revenue for the year to April 2023, which accounts for around one in every four export dollars earned by New Zealand,” Crewther said.

“The value of dairy exports grew by 45% over the past five years, which helped support the national economy through the pandemic.”

DairyNZ head of economics Mark Storey said the spread of farms across the country allows dairy to support regional economies, maintaining some local spending even when milk prices drop.

“Dairy’s export earnings translate into well-paying jobs in the sector and enable the purchase of goods and services from other sectors. 

“There will inevitably be an impact from the recent fall in milk price, with farmers limiting non-essential expenditure and limiting their purchases short-term where possible. However, this analysis shows that the sector itself absorbs some of the impacts in dairy farmers’ profits.  

“Despite lower milk prices, dairy farmers will continue to hire staff and purchase essential supplies to run their farms.”

The industry is also a cornerstone employer in many regions. 

In Waimate, one in three jobs are in the dairy sector – and it’s one in four in South Taranaki, one in four and a half jobs in Westland, one in five in Southland and one in six in Matamata-Piako.

“It’s hard to imagine some of these rural economies without dairy in place. They would look very different,” said John Ballingall of Sense Partners, which authored the report.

The report also highlighted the contribution Māori agribusiness plays, owning around $4.9bn in assets in the dairy sector. 

According to Statistics New Zealand, businesses operated by Māori authorities exported $207 million in milk powder, butter and cheese in 2021. 

This was an increase of 35.3% on 2020. Farms operated by Māori-owned businesses made up 3% of total farmland. The average size of each farm, at 569ha, was 3.8 times larger than the NZ-wide farm average of 148ha. 

Māori-owned farms made up 1.4% of the dairy herd – 87,900 head of cattle, of which 72,100 were milking cows and heifers.

Employment-wise, the dairy sector sustained 54,787 jobs as of March 2023, with 38,462 on farm and 16,325 in processing.

Māori made up 16.5% of dairy farming employees and those who are self-employed, up from 12.7% in 2015. The number of Māori employees has risen from 3693 in 2015 to 4040 in 2021.

The report showed the value of dairy exports had risen 45% ($7.9bn) in the five years to April 2023, and now tops $25.7bn. The industry generates more than one in every four dollars of NZ’s foreign exchange receipts from goods and services exports. 

It is NZ’s largest goods exporter by a significant margin, accounting for 35% of goods exports. Individual dairy products are larger than many other export sectors.

WMP, at 31.6% of dairy exports by value, remains the industry’s largest dairy product export followed by butter and dairy spreads at 17.7%, protein products at 13.2% and cheese at 11.1%. 

With a combined $4.6bn in exports, butter, AMF and dairy spreads alone account for more than  horticulture ($3.8bn) and wine exports ($2.8bn). 

NZ exports dairy products to more than 140 markets and is less concentrated in major markets than commonly perceived, with 54.1% of dairy sector exports sold to its top five markets – China, Indonesia, Australia, the United States and Japan.

This is the lowest concentration of NZ’s top 10 export sectors by some margin. 

Much of the global dairy market remains highly constrained by tariffs:  56% of global dairy consumption takes place behind tariff barriers greater than 20%, and 87% of dairy consumption is behind a barrier of 10% or more. 

While NZ’s bilateral and regional trade agreements have been highly beneficial, a range of tariffs still apply to dairy exports under them. The report estimated tariffs paid on dairy exports to NZ’s top 20 markets are around $1.5bn. 

In addition, the report estimates non-tariff measures impose costs of around $7.8bn on NZ dairy exports. 

In Focus this week: NZ Dairy – successes and challenges ahead

A new report commissioned by DairyNZ and the Dairy Companies’ Association of New Zealand outlines the massive contribution the dairy sector makes to the economy. Bryan speaks with John Ballingall of Sense Partners, which wrote the report, about the successes the sector has enjoyed and the challenges ahead.

Mark Hooper from Federated Farmers previews the big rural election debate being held in Hamilton next week that will see politicians answer to a room of 300 farmers.

And reporter Richard Rennie reflects on his recent trip to India as part of New Zealand’s trade delegation.

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