DairyNZ boss Tim Mackle believes the industry can lift its game, remain confident and maintain the country's clean, green image, writes Bill Bennett.
Staying profitable and competitive in a global market has been a constant challenge for New Zealand's dairy industry over the years.
DairyNZ chief executive Tim Mackle says New Zealand's dairy sector has no choice but to evolve to meet international demand. "That needs to happen at a faster pace than in the past. It's not just the challenges we face reaching markets, but also because of the opportunities that are opening up for us," he says.
There's always something new to deal with. At the moment Mackle sees two international threats to local producers. The first is Europe. In 2015, the European Union decided to scrap milk quotas after 30 years of trying to prevent over-production. This means more milk is spilling onto the world's dairy market.
At the same time United States dairy producers, who until now have focused on their domestic market, have woken to the idea they might boost revenues by exporting. Both changes mean greater competition and price pressure as more exporters chase the same customer pool.
Mackle says dealing with these challenges means lifting New Zealand's game. "We have to be on our toes. At the same time, these changes strengthen our drive to convert more of the milk we produce into higher value products.
"To sell those higher value products we have to build on our reputation. That's based on how we farm."
He says the world's dairy markets are increasingly interested in learning about what happens on New Zealand farms. The country already has a good name as a reliable supplier of high-quality ingredients and dairy products for consumers and the food service industry.
Much of that quality is down to our nation's clean, green image. Mackle says keeping this is important.
Water is the most pressing issue facing the industry and its image. Mackle says water is not only a dairy issue, water quality is something that concerns all New Zealand.
Yet the dairy industry has been fingered as a problem and has an important role to play in fixing water quality.
He says "we have to be part of the solution. The challenge with that is we need to do that while retaining profitability and competitiveness at the same time. Dairy is competitive.
We can't have a high cost structure - we're not like the Dutch tulip industry or the Danish pork producers who have large nearby markets."
Environmental concerns put a limit on how much dairy farming New Zealand can sustain. In some areas the industry is already pushing up against capacity barriers.
The main barrier is water quality. Four contaminants determine water quality - sediment, bacteria, phosphorous and nitrogen.
Mackle says the national policy statement states the water quality in any given catchment should be maintained or enhanced, not reduced. He says "that sets the bar. If any one of the four contaminants gets out of control you have what is called an over-allocation.
Adding more farms to a catchment puts pressure on this."
Mackle says DairyNZ isn't pushing for industry expansion. It doesn't want to see wall-to-wall cows.
"Our organisation's main purpose is to look after the farmers we've already got. If anything, we want to reduce our footprint. We don't want to see more dairy in New Zealand if it harms the environment.
"Across the country, regional councils are developing new plans which impose limits on dairy farming. That's how we are dealing with the issues. The dairy sector is involved in this planning as participants. We're spending five to six million a year on water quality science to contribute."
At the farm level, Mackle says the move to tighten up is well under way. The first thing the industry did was deal with effluent.
There's now a farm certification process, which he says has lifted compliance to over 95 per cent.
Keeping animals out of waterways has an even greater impact on water quality. Apart from their waste, cows drag soil with them when they get into rivers. They cause riverbanks to erode. Mackle says today 97 per cent of dairy waterways are now fenced for cows.
Along the riverbanks, farmers are now using riparian planting. Planting goes a long way towards capturing nutrients before they enter the water. They also create shade. This is important because it helps to lower the water temperature and that reduces the growth of algae.
"We know that planting the right natives encourages biodiversity, which brings fish and insects. We've produced a riparian planning tool that helps farmers map their land and put planting plans in place," he says.
Nutrients are another problem. Mackle says there are plans to help farmers avoid wasting fertiliser. Good management includes delivering the right amount of nutrient to land at the right time. "We're seeing plans for a massive reduction in the amount of nitrogen used on farms. Other plans are in place to reduce phosphate use."
In some ways the problems the industry faces are due to rapid change. The dairy industry has grown fast and altered its nature.
Mackle says when he graduated from Lincoln University in the early 1990s, the South Island accounted for about 7 per cent of national dairy production. Today it is more than 40 per cent.
Dairy's big challenges
Water quality: NZ's fresh water is a global advantage, and preserving water quality is hugely important to New Zealanders. Dairy and other land users all need to reduce their impact on water quality.
Climate change: NZ has set an international target to reduce emissions by 30 per cent below 2005 levels, by 2030. Emissions from dairy will need to keep being reduced while adapting to changes that result from climate change.
Economic growth: Dairy is a significant contributor to the NZ economy. The industry needs to play its role in contributing to NZ's economic well-being, particularly in the regions, while at the same time responding to community expectations.
Attracting and retaining great people: There will be a greater diversity of specialised skills required to ensure dairy is at the forefront of innovation.
Consumer expectations: NZ dairy products have many attributes that consumers want. So having greater supply chain transparency plus robust and verifiable evidence of performance will be pre-requisites for consumers.
Uncertainty and volatility: Greater political and economic uncertainty, rapid technological changes, and ongoing market volatility are all likely to be part of dairy's future. The industry will need to be resilient to volatility, and agile in responding to these changes.
It will also need to be responsive to consumer and public expectations of the level of care for animals, and be transparent about our performance, to maintain trust.