DairyNZ: Milk production doubles, keeps edge over global markets

From the farm to the consumer, are parts of the process operating as efficiently as possible?

New Zealand's production has doubled in the past two decades while growth in some other countries, such as Australia and Argentina, has been slow or even declined, DairyNZ dairy systems specialist Mark Neal says.

"Production had seen some limited growth in Europe with the lifting of quotas, but some of this production went straight to an intervention stockpile. While dairy production in the United States has been lifting slowly, many farmers are on tight margins. It's the value chain for the sector which needs to be competitive, so farming and processing both need to be considered.

"We need to be asking ourselves, is this enough information to conclude that the New Zealand dairy sector has been internationally competitive, and will we continue to be competitive in the future? What does competitiveness mean? How do we measure it? Have we got the right and robust data for comparison?"

In an effort to address these questions, Mr Neal says a small team from DairyNZ, with the help of Waikato University, has been examining and reporting on competitiveness to understand how it might be maintained and improved.

"In my view, international competitiveness is the ability of the sector to be successful, generating sustainable profits, in the face of competition from other countries.

Importantly, it is the value chain for the sector that needs to be competitive, so farming and processing both need to be considered. We should also factor in contributions from the wider New Zealand economy — such as infrastructure, financial markets, government policy, trade rules and innovation. These are enablers for our sector to perform."

Mr Neal says there is not just one single measure of competitiveness and the determinants are often complex and varied. This tends to lead to an index to measure different components of competitiveness, which are then weighted together to form an overall score which can be compared with others.

Competitiveness is a medium/long-term view and it should indicate the strengths and weaknesses of a country or industry.

As far as measurement activities go, Mr Neal says that at a national level, the World Economic Forum annually reports on competitiveness, with New Zealand currently ranked 13th out of the 137 countries measured.

"They base the rankings on a range of indicators from government statistics and industry surveys. For the dairy sector, a specific set of indicators needs to be determined, and then collected and analysed for a group of significant dairy export and producing nations."

Mr Neal says alongside this work, future competitive challenges are also being assessed.

"When combined, this work will identify opportunities and threats which will be used to help inform good strategic decisions for the dairy sector moving forward."¦