Friday, March 29, 2024

Report shows dairy’s role in economy

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The dairy industry has commissioned and released a valuable report on its scale and importance that should be widely used by dairy leaders, Federated Farmers dairy chairman Chris Lewis says.
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Facts and figures from the wide-ranging report by NZIER would be used for making submissions to local and national government.

“Dairy farmers know just how inter-dependent we are with local suppliers, tradespeople, and employees, and this report highlights that,” Lewis said.

The report for the Dairy Companies Association of New Zealand details how $17 billion annually of export income in 2018 was distributed around the country and is sub-titled “an analysis of the flow-on benefits of dairy’s revenue generation”.

It says dairy farms have an output of $12b and that the farming side of the industry is number one in gross domestic product (GDP) in half of NZ’s regions.

Total annual export revenue from dairying had trebled and cow productivity had increased 23% since 2001 (the formation of Fonterra).

Dairying was the top income generator in Southland (14.8% of the regional economy), West Coast (13.4%) and Waikato (11.2%).

“Dairy provides economic opportunities in many regions where there are few alternatives sources of jobs and income,” the report said.

Dairying is the number two industry in Northland, Taranaki and Manawatu-Whanganui, and number three in Canterbury.

The industry paid $2.6b of wages annually to farm and factory workers, 80% of which was earned in rural areas. 

Dairy farm workers had the highest average farming salary, $48,700 compared with the sector average of $45,800.

Dairy processing workers had the highest average food and beverage sector wage of $74,900 compared with the sector average of $59,600.

Females in dairy processing, at $72,100, were ranked fifth highest of all sectors in the national economy.

NZIER estimated total dairy plant investment at $3.1b since 2013, enabling the growth in infant formula exports to more than $1b annually, plus cheese and curd exports over $2b.

Two-thirds of the plant investment went into value-add products and the other third into milk powders.

NZIER said the dairy industry was the fifth-largest industry in NZ behind finance, construction, real estate and health.

Dairy accounted for 3.1% of national GDP in the year to March 2017 ($8.2b) and this was a high percentage for a developed country.

Agriculture accounted for 5% of GDP, the fourth-highest country in the 36-member OECD, of which two-thirds had agricultural sectors contributing 2% or less.

Dairy employment in February 2017 was 38,700, divided into 26,500 on farms and 12,200 in processing.

In addition a further 9000-plus jobs were directly dependent on dairying, in servicing industries.

“Dairy employment has been relatively stable since 2014, despite milk price volatility. 

“This indicates that dairy farming jobs are “sticky” – farms tend to hold on to workers through price cycles.”

Dairy employment has grown by a compounded annual rate of 3.1% since 2001, above that of the national economy at 1.8%.

The rate of growth in wages for females was about 1% CAGR higher than males and the gender gap was narrowing but was still 35% in farming and 20% in processing, the report said.

Women were currently the national president of Federated Farmers, the chief executive of Westland Milk and the executive director of the Dairy Companies Association, which commissioned the NZIER report.

Fonterra had targets for 50:50 gender balance and 20% ethnic diversity at leadership levels.

Dairy Women’s Network was very active in the industry and one of four organisations partnering in the Dairy Tomorrow strategy.

Maori owned more than 10% of the assets in the dairy industry, including 213 Maori-owned or operated dairy farms supplying Fonterra.

Miraka was a Maori part-owned processor and 40% of its employees were Maori.

Many other parts of the NZ economy relied on dairying because dairy farming and dairy processing were the largest purchasers of output from seven and six other industries respectively.

For dairy farming this included rural professionals, veterinarians, pharmaceuticals, fertilisers and motor vehicles.

For processing it included road and rail transport, warehousing, water and electricity.

Dairy farms spent nearly $1b annually on support services, more than $400m on financial services, more than $800m on agrichemicals, more than $400m on forage products and sugar crops, $355m on pharmaceuticals, and $200m each on electricity and accounting services.

“The dairy industry is a massive team effort – we couldn’t run without services and trades and most country towns would collapse without our spending,” Lewis said.

Federated Farmers was writing submissions to the government inquiry into the Dairy Industry Restructuring Act and on immigration matters and this report would be very valuable.

Lewis said the figures on employment and wages were very interesting.

“Wages are increasing quickly and the minimum wage increases are bringing the bottom up.

“Farmers are finding that $6/kg is not quite enough any longer and we will need $7 on average in future.”

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