Mortgage News October 27, 2020
Agriculture & the Recovery

Every sector of the New Zealand economy has been affected by coronavirus, and for the vast majority, the economic impacts have been severely negative. Businesses are closed, tourism is non-existent, and goods are moving through borders at a much slower rate than normal. In times like these, New Zealand is forced to rely on its most traditional and resilient industries, with a healthy dairy trade central to getting our economy back on solid ground.

In the most recent data, the Global Dairy Trade did not follow other primary industry sectors on their downhill path. There was actually a 1.2% lift in whole milk powder (WMP) over the month, which has been largely welcomed after negative results at the start of the year. There were mostly strong results in other monitored products, including a lift of 4.5% for butter and 0.2% for cheddar cheese. The benchmark average dairy price sits at US$2,969, however, which is still below the US$3,000 mark needed to achieve viable farmgate prices.

The NZ government recently announced the dairy market as the nation's biggest export earner. The overall industry is worth close to $19 billion a year, with dairy farmers generating around 8% of total exports to 140 countries around the world. As the largest economic powerhouse in the country, annual exports include whole milk powder at $6.7 billion, butter at $2 billion, cheese at $2 billion, anhydrous milk fat at $1.6 billion, casein at $1.4 billion, and skim milk powder at $1.2 billion. Other dairy exports such as fresh milk, yoghurt, and infant formula made up a further $1.1 billion.

There are 46,000 people employed by the dairy sector, with each person bringing in the equivalent of $350,000 in export earnings. While the dairy industry is affected by coronavirus, the essential, primary, and geographical nature of the industry puts it in a fairly good place for the coming months. While domestic and global economic conditions will undoubtedly take a big hit, and unemployment and debt repayments could be an issue for parts of the industry, the underlying strength of dairy and other primary sector exports will be crucial for New Zealand's forward momentum over the coming months and years. 

The release of recent figures comes at a time when dairy farmers across New Zealand have banded together to send a positive message to the rest of the country: "Of all the countries that could run out of food, New Zealand is not one of them. Our farmers are world leading and we’re damn good at what we do – producing high quality food. We have strong supply lines and we’re all working hard to keep food on the table for your family and for ours. New Zealand dairy farmers produce enough for 100 million people. You’re in good hands New Zealand."

 

 

 

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