Butter prices: The double-edged sword of our $27b dairy success - Tracy Brown

When dairy does well, New Zealand does well, writes DairyNZ chairwoman Tracy Brown. Photo / Sarah Ivey

THE FACTS

• 95% of New Zealand’s dairy products are exported.
• The dairy sector generated $27 billion last year.
• New Zealand butter prices have almost doubled in the past 14 months.

It’s a very unique New Zealand story – when an export does well, it’s good for the economy, but unfortunately tough for locals.

Cyclical food price stories are a reminder that 95% of our dairy products are exported, which means we pay international prices locally.

The demand for dairy overseas dictates the price to farmers and on the supermarket shelves (notwithstanding well-discussed margins at the latter).

I buy butter too, so I can appreciate that double edge very well, as can every dairy farmer across New Zealand.

Every farmer can also appreciate the increasing cost of farming inputs, which puts pressure on our margins as well.

While these stories come and go, they remind us of what we’re good at as a country.

We earn our living from exports – mostly food and fibre, and of those, mostly dairy - $27 billion over the past year alone.

That’s income for the Government in tax take, which gives us the public services we rely on, like our schools, our hospitals, and our roads.

We received a cheeky thank you from an MP at our Farmers Forum recently for the extra addition to their tax coffers this year, as the sector delivers well for the country.

New Zealand’s economic recovery is being led out of the regions, by the 360,000 people working in the primary sector, of which 50,000 work in dairy, in a country of over 5 million.

That’s been the case before, and it’ll be the case again.

New Zealand dairy farmers have tackled challenges head-on over the past decade, including biosecurity incursions, more extreme weather events and regulatory uncertainty.

Over the past decade, too, significant strides have been made in reducing environmental footprint to ensure we remain competitive among the most sustainable and low-emissions farmers on the planet.

DairyNZ chairwoman Tracy Brown. Photo / DairyNZ

All of this equals demand for New Zealand dairy on the world stage.

It also ensures we benefit from a growing global appetite for more natural and nutritional food and fibre that comes from responsible sources.

I recall it wasn’t that long ago that butter was very unfashionable and deemed unhealthy.

So it follows that the swing back to more natural products has driven increased demand and a subsequent increase in price.

While the world shouts for our butter, let’s remind ourselves at home of the reasons why New Zealand dairy is a world-class exemplar and so in demand:

• We export most of what we produce, so we are exposed to world trade and must be customer-focused.
• We are primarily family businesses and farmer-owned cooperatives - and that drives values-led innovation
• We have a temperate climate where we grow pasture well, and that is the ultimate starting point for this story
• We are unsubsidised. We have to make a living at world prices, competing against the best
• Therefore, our pasture-based dairy farming system delivers highly nutritious milk, with a comparably low environmental footprint, and happy cows who graze outdoors.

A story that has clearly spread around the world.