According to a recent research on recent Zealand dairy export profits, the industry produced over NZ$26 billion/US$15.29 billion in export income in the 12 months to April 2023. This indicates that dairy exports accounted for one-fourth of all export revenues.
The survey, commissioned by trade groups DairyNZ and the Dairy Companies Association of New Zealand (DCANZ) and conducted by Sense Partners, also revealed that the value of dairy exports increased by 45% in the past five years.
The sector has also served as a’shock absorber’ for local communities that have seen milk prices decline. Export revenues, according to DairyNZ’s director of economics Mark Storey, ‘translate into well-paying employment in the industry and allow the purchase of products and services from other industries’. Fonterra reduced its farmgate milk price prediction in August to between NZ$6 and NZ$7.50 per kgMS, down from the revised range of NZ$6.25-NZ$7.75 per kgMS issued two weeks earlier. CLAL reports that the monthly average milk price in July 2023 was down 32.45% year on year, standing at NZ$51.30/US$30.17 per 100kg exclusive of VAT.
“There will inevitably be an impact from the recent drop in milk price,” Storey said, “with farmers limiting non-essential expenditure and short-term purchases where possible.” This research, however, demonstrates that the industry absorbs some of the consequences on dairy producers’ income. Despite reduced milk prices, dairy producers will continue to recruit workers and buy farm supplies.”
According to the research, dairy farmers spent about NZ$8 billion/US$4.71 billion on goods and services in the year to March 2023, while processors spent NZ$19.6 billion/US11.53 billion in the same time. According to Storey, the industry produces NZ$3.6 billion/US$2.12 billion in earnings each year and employs 55,000 people both on and off farms, making it a “significant employer” in the community. “For example, in Waimate, one in every three jobs is in the dairy industry, and wages account for 52% of total wages paid.” Dairy also employs more than 20% of people in both South Taranaki and Westland areas, and pays more than 40% of total earnings in both districts.” According to the survey, jobs in dairy account for more than one in ten across eight more districts and pay higher incomes than similar industries.
Individual dairy goods such as whole milk powder, skim milk powder, butter and dairy spreads, protein products, and cheese are all multibillion-dollar exports, but there has been a noticeable movement in recent years toward exporting more dairy protein products and less whole milk powder. “The analysis highlights that New Zealand dairy exporters continue to change their market offerings in response to demand,” said DCANZ executive director Kimberly Crewther. “The proportion of whole milk powder has decreased from 36.9% in 2019 to 31.6% in the year to April 2023, while dairy protein products have increased to 13.2% of the product mix, up from 8.6% in 2019.”
According to Crewther, trade obstacles remain, emphasizing the need of free trade agreements (FTAs) such as the UK-New Zealand agreement, which eliminates tariffs on a variety of Kiwi products such as yogurt, liquid milk, and baby formula in May 2023. Tariffs on dairy proteins including lactose, whey, and milk powder will be eliminated on January 1, 2026.
“According to Sense Partners, New Zealand dairy exports continue to incur more than NZ$1.5 billion/US$0.88 billion in tariffs and NZ$7.8 billion/US$4.6 billion in non-tariff measures costs.” “86.7% of global dairy consumption is still subject to trade tariffs of 10% or higher,” added Crewther.
“This highlights the critical importance of New Zealand continuing to invest in efforts to remove trade barriers, including those that remain in some free trade agreement partner markets for dairy.” Fewer trade obstacles would imply more export prospects for New Zealand dairy producers and a better capacity to handle market volatility.”
