Dairy exports earn New Zealand around $10 billion year and account for about 25% of goods exports. “What happens to dairy prices has massive impact on New Zealand’s terms of trade, and hence the purchasing power of our income,” says O’Donovan. “A strong performing dairy and agriculture sector will do more to help New Zealand ‘catch up with Australia’ (or more realistically ‘keep up’) over the short term than any government policy is likely to do.”
O’Donovan says long-term increase in world demand for high quality food products is going on, driven by the urbanisation and westernisation of the exploding middle class in China and the rest of Asia, and rising demand from “petro-economies”. This long-term dynamic has not gone away, despite short-term reduction in demand due to the global recession, he says, and New Zealand is extremely well positioned to take advantage of it.
This is likely to fuel increasing demand for our dairy products, says the Ministry of Agriculture and Forestry (MAF) in its latest Situation Outlook for New Zealand Agriculture and Forestry. MAF is optimistically forecasting 22% growth in the volume of dairy exports to whopping 1.75 billion kgs of milk solids and 57% growth in export value to $15.7 billion over the next four years.
The theme of the 2010 IDF conference was sustainability and it ironically coincided with the release of another less than flattering report this week on the poor water quality of too many of our lakes. Environmental issues are likely to be the biggest challenge the dairy industry faces over the next decade.
The industry’s own Strategy for New Zealand Dairy Farming 2009/2020 report accepts the Government and the public have increased expectations around environmental standards which have led to greater focus on water availability and quality. Effluent compliance issues and the expansion and intensification of dairy farming are increasing tension between the dairy industry and the public, the report acknowledges. “Despite the efforts of farmers and industry to improve resource use efficiency, there is increasing likelihood of further constraints on water use and nutrient losses,” the report says.
Federated Farmers dairy chairperson Lachlan McKenzie concedes the public perception that farmers are “hooked on the white crystal – not P but nitrogen” cannot be ignored, and farming has to improve its public image. He believes the focus should be on practical, farmer-led and often simple solutions. ”We have to use nature’s kidneys – the wetlands and swamps as purification areas.” He suggests co-operative initiatives between land owners to reinstate wetlands, and possibly grow crops on them, could be an answer to the nutrification of waterways, including the Rotorua lakes.
McKenzie says New Zealand can produce more milk from land currently in dairying, without necessarily increasing water consumption. “Leading technology in Canterbury is irrigating more land without using any more water and it’s delivering water at different rates to specific areas.” There’s potential too in New Zealand’s rainfall. “We use just seven percent. The other 93 percent flows out to sea,” he says. Finding ways of more effectively trapping, storing and utilising this water has been major policy plank of Federated Farmers and is one that current Agriculture Minister David Carter has picked up on.
Fonterra chief executive Andrew Ferrier agrees that ridding the industry of its “dirty dairying” image is vital, although the image is largely undeserved, he contends. “The majority of farmers lift the bar higher in environmental performance every year. Across the industry there has been one percent reduction in the energy consumption for each unit of milk produced since 1991 and the New Zealand dairy industry’s carbon footprint is lower than Europe’s because of our pastoral-based farming model.”
