2006 Network for Women in Dairying Conference A Strategy for the New Zealand Dairy Industry

1
2006 Network for Women in Dairying Conference
A Strategy for the New Zealand Dairy Industry

• Dr Andrew West

2
(No Transcript)
3
(No Transcript)
4
(No Transcript)
5
Source 2004/2005 New Zealand Dairy Statistics,
LIC Quotable Value New Zealand Rural Property
Sales Statistics
6
6.0bn
173
5.2bn
30
3.8bn
3.5bn
71
3.3bn
299
97
-18
Change 85-04

• Increases in milk solids production (110 since
  1991) have gone mainly into exports of wholemilk
  powder (270 real value since 1990)

Source MAF (Statistics NZ)
7
Source 2004/2005 New Zealand Dairy Statistics,
LIC. (Quotable Value New Zealand Rural Property
Sales Statistics)
8
Dairy farm prices vs earnings
Source Land prices 2004/2005 New Zealand Dairy
Statistics, LIC. (Quotable Value New Zealand
Rural Property Sales Statistics) EFS 2003-2004
Economic Survey of New Zealand Dairy Farmers,
Dexcel EFS indicator of farm profitability
and efficiency. Calculated as cash surplus
before interest, tax, capital expenditure, debt
repayments and drawings adjusted for changes
in stock numbers, ownership of run-offs,
depreciation and farmer and family labour input.
9
The dairying recipe

• Produce commodities
• Farm to a nationwide formula
• Ruthlessly focus on costs and efficiencies

10
The underlying commodity strategy

• Iron out all biological variability on farm
• Average the returns to farmers (as a corollary)
• Introduce all variability at the factory
• A mass, industrial strategy

11
(No Transcript)
12
NZ not the cheapest milk producer

• Chile and Argentina produce milk more cheaply
  than NZ does Russia, Australia and Poland arent
  far behind.

Source Fonterra, Facts Figures, available
online, 11 January 2005
13
Big gains in dairy productivity overseas

• Competitors have made bigger gains in dairy
  productivity than New Zealand has

- 40
- 25
- 20
- 12
Source Dexcel and Dairy Insight, Strategic
Framework for Dairy Farmings Future
14
(No Transcript)
15
5.0
8.8
Total
26.22
24.97
5.0
3.7
22.96
1.6
21.87
21.09
20.76
5.5
10.8
7.5
5.6
1.9
3.8
3.8
0.9
-0.4
-0.7
Source Ministry of Economic Development
16
(No Transcript)
17
Freshwater use in NZ

• Different users shares of NZ water allocated for
  consumptive use

Sources Bright, J. (2002) Water and
agriculture, Primary Industry Management, 4 (5),
pp.4-6. (Quotes Lincoln Environmental (2000)
Information on Water Allocation in New Zealand.
April 2000.)
18
3.4 p.a.
5.4 p.a.
Source Growing for Good report, Parliamentary
Commissioner for the Environment (Source Lincoln
Environmental 2000 Statistics New Zealand, 2003)
19

• The quantities of water required to produce food
  and other crops are astounding

Sources Greatrex, H. (2002) Water, water
everywhere, Primary Industry Management, 4 (5),
pp.14-17. Pearce, F. (2006) The parched
planet, New Scientist, 25 Feb,
pp.32-36. Williams, M. (Parliamentary
Commissioner for the Environment), (2006) Many
rivers to cross, AgScience, January 2006, (24)
pp.6-8.
20
(No Transcript)
21
91
91
84
79
77
74
72
2005 GM planting area estimated based on total
soybean plantings and growth trend in
GM-plantings. Source FAOSTAT. PG Economics, UK
(GM Crops the global socio-economics and
environmental impact the first nine years
1996-2004
22
(No Transcript)
23
So we have to compete with innovative products

• Ideas
• Capital

24
(No Transcript)
25
(No Transcript)
26
Investment level shown in real 2004 dollars,
based on a 5 pa deflator for the international
cost trend of RD (approximately equal to NZ GDP
growth rate during that period, in nominal
dollars). Includes 55 of food and fibre, and 37
of productive ecosystems RD from 2002 onward.
27
(No Transcript)
28
(No Transcript)
29
(No Transcript)
30

• Develop a global strategy
• Part one
• If you cant beat them, join them

31

• Source
• Process
• Distribute
• Sell
• 95 of the milk from overseas

32

• Clip the ticket!
• Return the profits to New Zealand
• and

33

• Part two Get smart!
• Invest those profits in high value products
• food ingredients
• human health products
• industrial feed stocks products

34
(No Transcript)
35

• Remove averaging

36
(No Transcript)
37
Shift production offshore when world catches up
38
Make capital work for not against the future!

• Unbundle dairy returns and unshackle value-add
  from more milk and acquisition of land
• Encourage the operation rather than the sale of
  businesses use a capital gains tax
• Dont cripple exporters to control speculation on
  land and housing

39
(No Transcript)
40
Regenerate the ideas machine!

• Increase national investment in RD to 2.5 of
  GDP
• Government to invest an extra 60 million in
  on-farm RD
• Dairy farmers to invest 1 of export revenues in
  on-farm RD

41
(No Transcript)
42
Conventional
Conventional
Transgenic
Transgenic
Skim milk
Whole milk
43
(No Transcript)
44

• Education, research and development have to stay
  here in New Zealand.
• Along with capital, this is the engine room of
  the new dairy industry.

45

• A national, livestock-derived, high-value, food
  ingredients education, research, development and
  commercialisation centre

46
The new dairying recipe

• Produce high value products
• Farm to a wide range of formulae
• Focus on consumers and product innovation as much
  as efficiency

47
The underlying, high-value strategy

• Introduce biological variability on-farm
• Remove averaging wherever possible and reward
  specific performance
• Complement on-farm variability with
  sophisticated, flexible processing
• A niche, consumer-focussed strategy

48
(No Transcript)