The document summarizes the rise of New Zealand's dairy industry to becoming a dominant global player. It discusses how the removal of subsidies in the 1980s spurred innovation among farmers. This helped the industry grow from producing 25% of export revenue in 2011 to making up 33% of the global dairy market. The industry is cooperative-owned, led by Fonterra which has 10,500 farmer owners and $20 billion in annual revenue. New Zealand's mild climate allows cows to graze year-round, and dairy farming has expanded significantly across the country's pastoral lands. Looking ahead, growth in China's middle class is expected to further drive global demand and reliance on dairy imports.

1. Mark Johnston King’s College, Auckland January 2013
White Gold
The New Zealand Dairy Industry has become entrepreneurial and innovative the New Zealand
a major driver of its economy and in 2011 farmers were and was the catalyst for improved
it produced 25% of its export revenue. capacity, diversifying in land use and development
Furthermore on a global scale it makes up of new products.
33% of the world dairy industry which is a Within the Dairy Industry processing facilities are
significant feat for a small isolated country. mostly co-operatively-owned by farmers, with the
So why has New Zealand become such a main co-operatives being Fonterra, Westland and
dominant player in the global dairy market? Tatua. Fonterra has been in a position of prominence
in this development making up 90% of the dairy
Brief History industry in New Zealand and its revenue in 2011
Up until the 1980s New Zealand farming industry was was NZ$20 billion. It operates in over 100 other
heavily subsidised but the new Labour Government countries and has 10,500 farmer owners, which
in 1984, facing a budget crisis, eliminated all subsidies supply 16 billion litres of milk a year.
which previously had the impact of distorting the
market and putting a stop to any sort of innovation. Grazing land 365 days of the year
It was estimated that 40% of a farmer’s gross income Unlike its European counterparts the New Zealand
came from the government. The removal of the dairy cows live outside all year as the mild climate
subsidies didn’t have a significant impact on the ensures adequate feed for herds. The rainfall averages
number of farmers and in fact only 1% of farmers 2m a year, more than double the world average of
left the industry. However, it showed how 0.8m, and what is occasionally ignored is that food

2. Mark Johnston King’s College, Auckland
production is water intensive. One litre of water is main indicator to look out for is the growing Chinese
required to produce a calorie of food, and 2000 litres middle class. GDP/Capita is approximately
to 3000 litres is required to satisfy one person’s daily US$4,000 but there are 120 million who have
dietary needs. Today Dairy farming occupies 1.6 income greater than US$70,000. This trend should
million hectares out of a total of 12 million hectares increase the demand for higher-value food products
of pastoral land and has been three times more such as dairy. One of the reasons that China has had
profitable per hectare than other pastoral land use, to start importing food is the fact that they only have
encouraging conversions from other farming sys- one-third of the freshwater per capita of the global
tems, such as sheep and beef, to dairy – especially average and with a higher proportion of China’s
in the South Island of New Zealand. water being required for residential consumption
there will less available for agricultural purposes.
A growing industry – some facts
2011 was a record year for dairy in New Zealand. References:
Highlights included: Fonterra - www.fonterra.com
• Total number of New Zealand dairy cows – New Zealand Exporting Water to China -
approximately 4,528,736 – an increase of 3 http://econfix.wordpress.com/
per cent over the 2009/2010 season.
• Average production per cow: Increased 5 per
cent – to an average of 334 kilograms milksolids
• Milk processed by New Zealand dairy companies:
17.3 billion litres,
• The dairy industry is New Zealand’s biggest
export earner, with exports totaling NZ$12.1
billion in 2011.
• Major dairy export markets in 2011 were China,
with 18%, the Philippines, Algeria, Australia and
Saudi Arabia all with 4% each.
• Main dairy exports are concentrated milk, with
58%, butter 21%, cheese 11%,
• New Zealand’s cow population is rapidly growing,
at a rate faster than the country’s population.
• Approximately 95 percent of all New Zealand
dairy production is exported.
• The dairy production has increased by 77 percent
during the past 20 years in New Zealand.
Final thought
The Dairy Industry will continue to be the backbone
of the New Zealand economy and as incomes rise in
China it will become a major importer of food which
includes their demand for more dairy products - the