22
New Zealand’s dairy industryHon. John LuxtonChairmanDairyNZ
• DairyNZ tvc
IntroducingNZ dairy farming
New Zealand is 1/10th the size of Argentina
Source: IBGE, SAGyPA Indicator Series, ODEPA, OPYPA, LIC, FAONotes: 1) NZ base year is 2000/01 season.
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
75
100
125
150
175
Ar-gentina
Brazil
Chile
Uruguay
New Zea-land
Inde
x (2
000
=100
)Mercosul & NZ milk production
2000200020002000200020002000200020002000200020002001200120012001200120012001200120012001200120012002200220022002200220022002200220022002200220022003200320032003200320032003200320032003200320032004200420042004200420042004200420042004200420042005200520052005200520052005200520052005200520052006200620062006200620062006200620062006200620062007200720072007200720072007200720072007200720072008200820082008200820082008200820082008200820082009200920092009200920092009200920092009200920092010201020102010201020102010201020102010201020102011201120112011201120112011201120112011201120110.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
New Zea-land
Chile X Region
Uruguay
Brazil (MG)
USA
Milk
Pric
e (U
S$/k
g fa
t &pr
ot.,
adju
sted
fo
r inf
latio
n, a
vera
ge o
f las
t 12
mon
ths)
Brazil Dairy Industry Background
Source: LIC,USDA, ODEPA, OPYPA, ESALQ
International milk prices
• 1.46 million ha used• >85% grazed pasture• 16.5 billion litres• 8th largest producer• Only 2.3% of world
production
Dairying in New Zealand
Dairy Industry comprises ~25% of NZ’s export receipts
Milk price = international price… no tariffs and support
NZ dairying statistics
Dairy herds 11,691No of cows milked 4.4mVolume of milk produced 16.5 billion litresAverage herd size (cows) 376Average stocking rate (cows/ha)
2.8
Average milksolids per cow (kg)
318
Milksolids per herd (kg) 123,000
How we compareNew Zealand Argentina
Milk production 18.5 m tonnes 9.5 m tonnes
Milk price 2% above world market -11% below world market
Milk consumption (ME per capita & per year)
>350 kg 187 kg
Milk processing into tradeable products
>90% 58%
Export >90% of production ~22% of production
Import ~3% of local consumption
~1% of local consumption
IFCN 2010 Dairy Report
NZ dairy farms vs Brazilian (Goiás) farms
Performance Indices New Zealand
GO - 2009 (average)
GO - 2009 (>1,000 l/day)
Age at First Calving (months) 24 34 29
Cows in Lactation (% of total) 73% 59% 66%
Machine milking (% of herds) 100% 24.2% 94.7%
Production (litres/ha/year) 12.960 1.981 3,579
Production (litres/man-day) 2.730 124 411
Production (litres/cow/year) 4,550 1,993 3,459
Use of artificial insemination 75% 12% 68%
Cost of Labour (R$/man-day) R$125 R$14 R$26
0
10
20
30
40
50
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Cow
s ca
lved
, %
Calving is seasonal
50
100
75
25
Past
ure
(kg
DM
/ha
per d
)
Demand
Supplement required
Conservation required
Spring
Feed supply
The farming structure is evolving towards bigger farms and fewer farmers
1974
/75
1976
/77
1978
/79
1980
/81
1982
/83
1984
/85
1986
/87
1988
/89
1990
/91
1992
/93
1994
/95
1996
/97
1998
/99
2000
/01
2002
/03
2004
/05
2006
/07
2008
/09
8,000
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
Herds Cows milked
Num
ber o
f her
ds
Cow
s m
ilked
Source: LIC Dairy Statistics, DairyNZ Economics Group
Production by herd size 2009-100-
99
100-
199
200-
299
300-
399
400-
499
500-
599
600-
699
700-
799
800-
899
900-
999
1000
-109
9
1100
-119
9
1200
+
0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
Herd size (cows)
Kilo
gram
s Milk
solid
s (m
illio
ns)
Source: DairyNZ Economics Group
6%
28%7%
9%
11%
4%
18%
17%
Production trends 1990 2000 2010
North Island 93% 77% 61%
South Island 7% 23% 39%
Milksolids production
NZ Export Markets
North Asia South-East Asia
Africa and Middle-
East
South and Central America
North America
Europe Pacific -
500,000,000
1,000,000,000
1,500,000,000
2,000,000,000
2,500,000,000
3,000,000,000
3,500,000,000
4,000,000,000
2000-01 ($m)2010-11p ($m)
$ N
Z FO
B (n
omin
al)
Source: Statistics New Zealand, DairyNZ Economics Group
Major processing companies
• Fonterra Cooperative Group:– 90 percent of milk supply and exports– 40 percent of the domestic consumer market
• 2 other co-operatives: – Tatua– Westland
• 5 other processing companies:– Open Country Dairies– Synlait– New Zealand Dairies– Goodman Fielder
• Farmers own 95%+ of processing capacity
Regulatory framework
DIRA• Open entry and exit• Contracting rules• 20% rule• Raw milk regulations
Fonterra milk price model• Calculates revenue if all milk was processed
into basic commodities & sold overseas• Deducts shipping, processing & freight costs• Balance paid to farmers as milk price• Value add – eg selling premium ingredients/
investment in consumer brands – treated as profit
• Farmers receive profit as dividends on their Fonterra shares, plus price paid for raw milk
Looking ahead 1. Dairy making large & growing contribution
2. Global supply/demand supports NZ growth
3. On-farm business success $83/ha/yr
4. Erosion of NZ’s low cost base poses threat
5. Imperatives for productivity improve remain
6. Public & consumers driving sustainability
7. Public perceptions about dairy are mixed
8. Skilled people increasingly important
9. Unified approach to innovation & adoption
Improving productivityQuestions?
