New Zealand looks to dairy boom in 2018

By Jim Cornall contact

- Last updated on GMT

Dairy is New Zealand's chief export, and revenue from the sector is expected to grow in the coming years. Pic: ©iStock/dane-mo
Dairy is New Zealand's chief export, and revenue from the sector is expected to grow in the coming years. Pic: ©iStock/dane-mo

Related tags: Milk

A new document from New Zealand’s Ministry for Primary Industries (MPI) says dairy export revenue is set to boom in 2018.

It says the outlook across the primary sector is stable for the current year, as the dairy industry begins to rebound.

Top dairy export markets:

China 23% 
USA 8%
Australia 6% 
Japan 4%
Malaysia 4%
Algeria 4%
UAE 4%
Philippines 3% 
Indonesia 3%
Other 42%

MPI director of sector policy, Jarred Mair, says the latest Situation and Outlook for Primary Industries (SOPI), published this month, shows that over the next few years, New Zealand’s primary sector export earnings are forecast to increase by an average of 5.4% per year, reaching NZ$47.9bn (US$47.5bn) by the year ended June 2021.

Big dairy growth predicted

Dairy export revenue is forecast to rise 3% in 2017 after a decline in 2016, but is expected to increase 24% to NZ$17bn (US$12.3bn) in 2018 as milk production is predicted to return to previous levels after two years of decline.

In addition, recent increases in global dairy prices are forecast to be sustained into 2018.

The milk price (cents per kg of milk solids) is expected to rise from a low of 424 in 2016 to 794 by 2021, although this does not compare to the high of 840 reached in 2014.

Factors behind decline

In the SOPI document​, in spite of the decline in 2016, dairy is shown to be the main export revenue in 2016 for New Zealand, at 36%.

The report cites a wetter than usual spring was responsible for a 1.7% decline in milk solid production for the 2016/17 season. Peak production in October was down 6.1% compared to the previous year due to waterlogged pasture.

It notes that a forecast fall in milking cow numbers will also contribute to lower production this season.

Export revenues by sector (NZ$ millions), 2013–2021
© Ministry for Primary Industries Situation and Outlook for Primary Industries, December 2016​ 

Chinese demand rising

The demand from China continues to rise, the report says. A record volume of dairy products was imported during the year ending September 2016 despite falling milk powder imports.

China is importing greater volumes of butter, cheese, and liquid milk from Europe, as well as more liquid milk from New Zealand.

The trend for strong global demand for butter is expected to continue as western consumers opt for natural over processed fats.

Better news for farmers

Dairy NZ estimates this year’s average break-even price for New Zealand dairy farmers to be NZ$5.05 (US$3.64) per kilogram of milk solids.

The authors of the report say they expect that most farmers would be making a profit for the 2016/17 season under the latest payout forecast.

 

DAIRY EXPORT REVENUE 2013-2021 NZ MILLION
Dairy export revenues, 2013-2021 (in millions of NZ$)

© Ministry for Primary Industries Situation and Outlook for Primary Industries, December 2016

Related topics: Markets, Dairy Health Check

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