I visited the country for the first time in 20 years – and just like at home, it appears to me that the steam has run out of dairy expansion.
I recently visited New Zealand – it had been over 20 years since my last visit. It was interesting to observe the changes in a country whose main industry is agriculture or, more precisely, dairying.
The New Zealand dairy industry is still the powerhouse of the economy. It accounts for more than NZ$26bn (€13.7bn), or 26pc, of New Zealand total exports. In 2023, dairy export earnings surpassed those from meat, wool, forestry and seafood combined.
Just like Ireland, more than 95pc of dairy products are exported to over 130 countries and consumed by 90 million people globally. The top five exporting countries are China, USA, Australia, Algeria and Indonesia. They certainly are formidable competitors for us on the global stage.
Perhaps a sign of the times is the New Zealand government department title for the sector now being Food and Fibre – no mention of the word agriculture!
This legislation has since been reversed and there are some suggesting a ‘Gold Rush’ into dairying is commencing.
However, at a panel discussion I attended, a number of dairy industry commentators disagreed on whether the recent increase in applications for permits to convert to dairying was a genuine trend or just a reaction to the lifting of the ban.
Some farmers are being opportunistic, investing NZ$20,000 (€10,500) applying for a permit to convert to dairying as a value add to their property – the permit lasts for 10 years.
In reality, it appears to me that the steam has run out of dairy expansion on New Zealand, just like at home.
Yes, there will be some new conversions into dairying in suitable areas, especially where the permitting laws are favourable. But equally so, there will be dairy farmers exiting the industry in areas less suitable for dairy. Nationally, dairy cow numbers have fallen to 4.67m, down by 6-8pc from a peak in 2022/23.
Presently there are 10,601 herds in New Zealand with an average herd size of 441 animals. Herd sizes are larger in the South Island when compared to traditional dairy areas such as the Waikato in the North Island.
This is because the more recent conversions to dairy occurred in the South Island. This is similar to home, where counties such as Meath and Westmeath have larger herd sizes than traditional dairy counties such as Cork and Tipperary.
Approximately 6,000 of the dairy farms are owner-occupiers, 3,000 are share-milkers and 1,500 are contract-milkers. The share-milking model which has served New Zealand so well – facilitating with new entrants into dairying, allowing them a financially stable income while at the same time availing of the opportunity to grow net worth – is coming under increasing pressure due to the lure of other industries.
The attractiveness of dairying as a career choice has dimmed and landlords are looking for a bigger slice of the profit pie, just like in Ireland. Presently there is an economic recession in New Zealand and the youth are emigrating to Australia, where they see more opportunity. This is a worry both for the dairy industry and the wider economy.
Progress has not stopped for those established dairy farmers. Milk production per cow has increased by 50pc over the last 30 years. The 10 year average for national milk production is 1.87b kg milk solids, a 1.3pc increase over the past decade. Over 25,000km of waterways have been fenced off from livestock in the period as new environmental laws were introduced to reverse the Dirty Dairy campaign waged against New Zealand dairy.
More than 85pc of dairy farmers are implementing and reporting under an environmental plan to clean up waterways and improve biodiversity. There is ongoing research collaboration with Ireland and other countries in respect of Green House Gas emission mitigation strategies.
Animal welfare is now called ‘Animal Wellbeing’ and the drive is on to reduce calf slaughter (bobby calves). Approximately 40pc of dairy bobby calves are transported to slaughter annually. This part of the New Zealand dairy industry appears to have a long way to go before they reach our standard in this touchy area.
The infamous aversion to spending on capital expenditure on New Zealand dairy farms (low-cost system) is also changing. With stronger balance sheets, a labour scarcity and a better work-life balance ethos coming in New Zealand dairying, investments in buildings, machinery and technology are on the rise. For example, the use of electronic collars on cows has rocketed from near zero in 2018 to over 23pc of the national herd today.
The big difference in the New Zealand dairy industry when compared to Ireland is that over 80pc of the milk is processed through the farmer-owned juggernaut co-operative that is Fonterra. This structure returns value to farmer-shareholders, just like the Kerry and Glanbia share spin outs at home. Is this the next step for the Irish dairy Industry, given the stagnation in milk volumes of milk produced?
Twenty years ago we in Ireland envied the New Zealand dairy industry – today we have well and truly caught up and in many area have surpassed it. As the only two grass-based exporting dairying nations on the planet, it is now time to increasingly pool our knowledge and resources to ensure grass-based dairy stays on the global consumers shopping list as a highly nutritious, environmentally sustainable and affordable food.
Mike Brady is an agricultural consultant and managing director at Brady Group, Cork.
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