Dairy Companies Association of New Zealand executive director Kimberly Crewther said the Sense Partners report Solid foundations — Dairy’s economic contribution to New Zealand was commissioned by the association and DairyNZ and was published last week.
The report shows the importance of ongoing investment in trade liberalisation and resilient infrastructure.
The long-term picture for the dairy sector is solid and it will continue to contribute significantly to the New Zealand economy.
"Dairy generated nearly $26b in export revenue for the year to April 2023, which accounts for around one in every four export dollars earned by New Zealand.
"The value of dairy exports grew by 45% over the past five years, which helped support the national economy through the pandemic."
The Southland dairy sector has 2300 farming jobs and 770 processing jobs, accounting for nearly 20% of the jobs in Southland, the report states.
In Southland, the more than $230million of wages paid by the sector — $123.4m in farming and $111m in processing — accounted for 28% of the total wages paid in the district.
Dairy represents 13.8% of regional GDP, contributing $953m, making it the largest sector in Southland.
In Otago, the dairy sector represents 4.1% of regional GDP, contributing $644m.
DairyNZ head of economics Mark Storey said the spread of farms across the country allowed dairy to support regional economies, maintaining some local spending even when milk prices dropped.
"Dairy’s export earnings translate into well-paying jobs in the sector and enable the purchase of goods and services from other sectors.
"There will inevitably be an impact from the recent fall in milk price, with farmers limiting non-essential expenditure and limiting their purchases short-term where possible. However, this analysis shows that the sector itself absorbs some of the impacts in dairy farmers’ profits.
"Despite lower milk prices, dairy farmers will continue to hire staff and purchase essential supplies to run their farms."
In the year to March 2023, dairy processors spent around $19.6b on goods and services from both farms (purchasing milk) and other industries.
Dairy farmers in turn spent $7.9b on goods and services in the same period.
"Around 55,000 people are employed in dairy, both on and off farms, generating around $3.6b annually in wages,
"At a community level, dairy is a significant employer."
Ms Crewther said the industry continued to face significant trade barriers and costs.
"Reducing them will support exporters to continue growing the export value of New Zealand dairy products."
Sense Partners estimates New Zealand dairy exports continue to incur more than $1.5b of tariffs and $7.8b of non-tariff measures costs.
Nearly 87% of global dairy consumption continued to sit behind trade tariffs of 10% or more, Ms Crewther said.
"This underscores the importance of New Zealand continuing to invest in efforts to remove trade barriers, including those that remain for dairy in some free trade agreement partner markets. Fewer trade barriers would mean a greater diversity of export opportunities for New Zealand dairy companies and greater ability to navigate market volatility."
The report also shows that dairy’s ability to provide a resilient contribution to New Zealand’s economy would be enhanced by infrastructure resilience.
Exporting success requires efficient and reliable movement of milk and products from farms to factory and to ports.
The report detailed the short-term freight cost impact of disruption on several vital roads prone to disruption.
For example, a closure of State Highway 1 at Moeraki was estimated to result in a daily cost of $809,900.
"As a sector, we encourage investments that will support our sector to continue delivering for New Zealand over the long-term. There is significant economic benefit associated with alleviating the costs arising from infrastructure vulnerability and trade barriers."
