New Zealand dairy exports thriving despite tariffs

NEW ZEALAND – Despite encountering substantial tariffs and trade-related obstacles, New Zealand’s dairy sector continues to thrive.

A recent report from the industry players shed light on the resilience and adaptability of the sector, highlighting its essential role in the Kiwi economy as well as its ability to serve as a shock absorber during times of market volatility.

In the 12 months leading up to April 2023, New Zealand’s dairy sector showcased its economic prowess, generating an impressive US$15.29 billion in export revenue.

The report, commissioned by trade organizations DairyNZ and the Dairy Companies Association of New Zealand (DCANZ) and conducted by Sense Partners, revealed that the value of dairy exports has surged by an impressive 45% over the past five years.

Beyond its economic significance, the dairy industry has played a pivotal role in supporting local communities and farmers during challenging times.

When milk prices have fallen, the industry has acted as a stabilizing force, contributing to well-paying jobs and enabling the purchase of goods and services from other sectors.

Mark Storey, Head of Economics at DairyNZ, emphasized the sector’s broader impact, noting that it “absorbs some of the impacts in dairy farmers’ profits,” ensuring that farmers can continue to hire staff and procure essential supplies.

Despite the recent dip in milk prices, the industry remains robust. In the year leading up to March 2023, dairy farmers invested nearly US$4.71 billion in goods and services, while processors spent US$11.53 billion during the same period.

This substantial expenditure has a ripple effect, contributing to a total of US$2.12 billion in annual wages generated by the sector.

While individual dairy products, including whole milk powder, skim milk powder, butter, dairy spreads, protein products, and cheese, all represent multibillion-dollar exports, there has been a notable shift towards exporting more dairy protein products and lower volumes of whole milk powder in recent years.

Kimberly Crewther, Executive Director of DCANZ, emphasized the industry’s adaptability revealing that New Zealand dairy exporters continue to change their market offerings in response to demand.

However, trade barriers continue to pose challenges for the industry. Crewther emphasized the importance of free trade agreements (FTAs), such as the UK-New Zealand deal, which eliminated tariffs on various Kiwi exports in May 2023.

Nevertheless, tariffs on dairy proteins, including lactose, whey, and milk powder, are set to be phased out on January 1, 2026.

Currently, New Zealand dairy exports are burdened by over US$0.88 billion in tariffs and US$4.6 billion in non-tariff measure costs.

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