New Analysis Highlights Dairy’s Economic Contribution

The dairy sector is encouraged by today’s GDP results that emphasise New Zealand’s economic rebound amid Covid-19.

The dairy sector is playing a key role in a stable economy, contributing nearly one in every four dollars earned from total goods exports and services in the year to September 2020.

Recent Sense Partners analysis, for DairyNZ and DCANZ, shows the sector is delivering $20 billion in export value.

“Today’s GDP rebound may be a short-term benefit from the recovery in retail spending, wage subsidy and a hot housing market. So, it is important we don’t forget to focus on export-led growth moving forward,” said DairyNZ chief executive Dr Tim Mackle.

“Dairy’s sustained economic contribution is a key factor in the country’s Covid-19 recovery, but tourism will also become increasingly important again as borders open. Importantly, dairy sector growth is supporting wage growth in regional New Zealand.

“Dairy provides long-term stability for our communities. Export earnings translate to well-paying jobs, but also support farmers and dairy companies to purchase more than $22.5b worth of goods and services from other industries,” said Dr Mackle.

At a community level, in 2019 the dairy sector accounted for more than 5 percent of GDP in seven regions – and more than 10 percent in four of those. West Coast has the greatest GDP from dairy, at 16 percent.

“In dollar terms, this equates to dairy contributing more than $100 million to GDP in most regions – including nearly $2 billion in Canterbury and $2.5 billion in Waikato. This is especially significant because of the limited scale of other high-value export sectors in rural New Zealand.”

The dairy sector is a significant employer in many districts, accounting for up to one-third of jobs in Waimate, and as many as one in four jobs in South Taranaki and Otorohanga.

“Around 50,000 people are employed in the dairy sector, on and off farms, generating $3.4 billion in wages in 2019. Twenty New Zealand districts see between $50 million and $100 million in wages from the dairy sector, which flows on to local spend.”

Dr Mackle says increased efficiency on the farm is a factor behind dairy’s success, particularly as farmers develop from a sustainability perspective too.

“In 2019, export value per cow was 50 percent higher than 10 years ago – this shows advances in breeding and farm systems are delivering value,” said Dr Mackle.

“Our farmers are focused on ensuring their businesses remain resilient through Covid-19, while making important and incremental changes so high-quality and nutritious dairy products are delivered to consumers at a lower footprint, as we meet our environmental commitments.

“Kiwis are some of the most sustainable producers of dairy in the world. So far over 3500 dairy farmers have Farm Environment Plans and every farmer will have one by 2025.”

Farmers have also been receiving emissions reports from dairy companies, which enable them to understand the source of their on-farm emissions.

DCANZ executive director Kimberly Crewther said since 2015, dairy export value has grown by over $5 billion, adding approximately $375 million to wages while cow numbers remained relatively static and during volatility in global dairy markets.

“Diverse markets and products have helped the dairy sector navigate market events. Across all processors, there is an estimated 1500 different products and product specifications being produced,” said Ms Crewther.

“These are meeting needs for a diverse array of customers, from consumer-ready products in retail to speciality products for chefs and food manufacturers, and products used in medical applications.

“If they were considered individually, whole milk powder, cheese, butter, casein products, infant formula and skim milk powder would all be billion-dollar industries.”

The global trade environment will be key to dairy’s ongoing contribution to New Zealand communities and to globally sustainable food systems.

“Covid-19 has highlighted the importance of reducing barriers to global trade in food. We hope 2021 will be when governments globally lean into reinvigorating the rules-based trading system and turn statements on removing barriers to trade into real action.”

High quality trade negotiating outcomes, such as the elimination of tariffs in the UK and EU Free Trade Agreements, would further enhance the benefit of dairy trade across New Zealand communities, while removing barriers to European consumers accessing lower-emissions New Zealand dairy products.

For a summary on the Sense Partners analysis, visit dairynz.co.nz/dairy-stats

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