The dairy industry, which is a major focus for Southern Pastures, is the single most important industry in New Zealand, being responsible for nearly 30% of New Zealand’s export earnings. The industry started in 1814 and the first cheese exports from New Zealand was in 1846.
Just as the dairy industry is very important to New Zealand (it is more important than oil is to Texas), New Zealand is very important to the traded global dairy industry. ‘The Wall Street Journal’ called New Zealand the “Saudi Arabia of Milk” as it is the world’s biggest dairy exporter. However ‘The Economist’ in a later article noted that New Zealand was more than twice as important to the global dairy cross-border trade as Saudi Arabia was to oil.
In terms of products, it is the world’s largest exporter of butter, whole milk powder and casein, and the second largest exporter of cheese and skim milk powder.
An EU report on the competitiveness of the EU dairy industry noted that the world market is growing faster than the EU’s ability and that New Zealand would profit the most from the increasing world demand. It recommended that the EU should focus on cheese due to the increasing competitiveness of New Zealand in milk. It is expected that New Zealand will continue to perform well due to its high and increasing world market share.
It is also noted that full trade liberalization would make some dairy farming uncompetitive in the EU and that New Zealand would benefit the most from liberalization. The study found that in overall terms, which included forecasts for world growth, New Zealand was the most competitive followed by the US. The EU, Australia and Canada were rated as being below average in competitiveness.
- New Zealand remains the lowest cost milk producing country in the world.
- Milk quality is very high. The SCC (somatic cell count) was 200,000 and dropping. By contrast, in the US a premium is paid for counts less than 300,000.
- Clean cows and pasture conditions gives New Zealand a competitive edge.
- New Zealand has ability to build further on its most inexpensive feed resource … pasture.
The New Zealand dairy industry has economies of scale starting at the farm level. Southern Pastures average dairy herd is 700. By way of comparison the average herd in France and Germany is around 40 and in the UK it is around 100.
New Zealand has comparative advantages in its free-range, grass-fed milk production and the capacity to export high quality and increasingly innovative dairy products tailored to customer requirements. Increasing disposable income and consumer awareness of the health benefits and livestock welfare will lead consumers to increase their preference for New Zealand’s pastoral system based milk production versus industrial farmed and/or grain fed milk production.