A new analysis highlights dairy’s tremendous economic influence in New Zealand.
A new assessment on the dairy sector in New Zealand emphasizes its critical relevance to the national economy as an export earner and employment provider.
According to the research, Solid Foundations – Dairy’s Economic Contribution to New Zealand, the industry is NZ’s biggest products producing sector, accounting for $11.3 billion (3.2%) of GDP in the year to March 2023.
Dairy farming generates $8 billion (2.2% of GDP) while dairy processing adds $3.4 billion (0.9%).
Dairy Companies Association of New Zealand (DCANZ) and DairyNZ collaborated on the paper.
According to DCANZ executive director Kimberly Crewther, the analysis reveals that the dairy sector’s long-term prospects are strong and that it will continue to contribute considerably to the New Zealand economy.
“For the year to April 2023, dairy generated nearly $26 billion in export revenue, accounting for roughly one in every four export dollars earned by New Zealand,” Crewther added.
“The value of dairy exports has increased by 45% over the last five years, helping to support the national economy during the pandemic.”
According to Mark Storey, DairyNZ’s director of economics, the dispersion of farms around the nation helps dairy to sustain regional economies by preserving some local expenditure even when milk prices fall.
“Export earnings from dairy translate into well-paying jobs in the sector and allow for the purchase of goods and services from other sectors.”
“The recent drop in milk prices will inevitably have an impact, with farmers limiting non-essential expenditure and limiting short-term purchases where possible.” This research, however, demonstrates that the industry absorbs some of the consequences on dairy producers’ income.
“Despite lower milk prices, dairy farmers will continue to hire workers and purchase farm supplies.”
The sector is also a major employment in many areas.
Dairy occupations account for one in every three in Waimate, one in every four in South Taranaki, one in every four and a half in Westland, one in every five in Southland, and one in every six in Matamata-Piako.
“It’s difficult to imagine some of these rural economies without dairy.” “They’d look very different,” said John Ballingall of Sense Partners, the report’s author.
Mori Agribusiness, which owns around $4.9 billion in assets in the dairy industry, was also recognized in the study.
According to Statistics New Zealand, Mori authorities’ enterprises exported $207 million in milk powder, butter, and cheese in 2021.
This is a 35.3% increase over 2020. Farms run by Mori-owned firms accounted for 3% of total cropland. The average farm size was 569ha, which was 3.8 times greater than the NZ farm average of 148ha.
Mori-owned farms accounted for 1.4% of the dairy herd, with 87,900 head of cattle, 72,100 of which were milking cows and heifers.
As of March 2023, the dairy industry employed 54,787 people, with 38,462 working on farms and 16,325 working in processing.
Mor made up 16.5% of dairy agricultural workers and self-employed people, up from 12.7% in 2015. Mori’s workforce has grown from 3693 in 2015 to 4040 in 2021.
According to the research, the value of dairy exports has increased by 45% ($7.9 billion) in the five years to April 2023, and currently exceeds $25.7 billion. Exports of products and services account for more than one-quarter of New Zealand’s foreign currency revenues.
It is by far New Zealand’s greatest products exporter, accounting for 35% of total goods exports. Individual dairy products outnumber several other export categories.
WMP continues to be the industry’s biggest dairy product export, accounting for 31.6% of total dairy exports by value, followed by butter and dairy spreads (17.7%), protein goods (13.2%), and cheese (11.1%).
Butter, AMF, and dairy spreads alone amount for more than horticulture ($3.8bn) and wine exports ($2.8bn) combined.
NZ exports dairy products to over 140 countries and is less concentrated in large markets than is usually assumed, with 54.1% of dairy industry exports going to China, Indonesia, Australia, the United States, and Japan.
By far the lowest concentration among NZ’s top ten export industries.
Tariffs continue to restrain most of the global dairy market: 57% of global dairy consumption occurs behind tariff barriers larger than 20%, and 87% of dairy consumption occurs behind a barrier of 10% or more.
While New Zealand’s bilateral and regional trade agreements have been very advantageous, they nevertheless impose a variety of taxes on dairy exports. Tariffs paid on dairy exports to New Zealand’s top 20 markets are expected to be roughly $1.5 billion, according to the research.
Furthermore, the paper predicts that non-tariff measures cost New Zealand dairy exports $7.8 billion.
