DairyNZ: Strong payouts offset high farm costs
The dairy sector is in a relatively stable position, with strong milk price payout forecasts continuing to offset ongoing high farm costs, according to DairyNZ.
This stark warning was delivered by DairyNZ last week in its submission to the proposed Essential Freshwater package.
“The proposed freshwater changes would result in significant declines in milk production: it’s a serious threat to the international competitiveness of New Zealand’s dairy sector,” said DairyNZ chief executive Tim Mackle.
Following the Government’s September release of proposed freshwater regulations, DairyNZ initiated three studies into the potential economic: two of these economic studies are independent and all three have been peer reviewed.
The economic analysis shows potential significant impact: by 2050, total milk production is forecast to fall by 24% and all national exports by 5.2% or $8.1b.
Tax revenue from dairy is also forecast to more than halve by 2050, with an annual loss of $0.54b at the national level.
The flow-on effects of less milk production are far-reaching and particularly severe for several New Zealand communities.
Southland, Taranaki, Marlborough and West Coast are likely to be most negatively affected. By 2050, GDP could fall in Southland by up to 3.6%, Taranaki by up to 2.9%, Marlborough by up to 3.2% and West Coast by up to 2.9%. Waikato would also be significantly affected.
Federated Farmers vice president Andrew Hoggard says the potential economic impact on regional economies is staggering.
“Is this level of economic pain in regional economies justified or are there better ways of improving water quality?” he said to Rural News.
“We believe looking at each catchment and focussing on issues in each catchment is the way to go, rather than imposing a national bottom line.”
Hoggard says the freshwater reform is one of the issues facing farmers.
“Farmers aren’t just facing this one issue, there’s the zero carbon bill: all strikes are coming at once.”
Hoggard says DairyNZ’s economic modelling of the proposed freshwater reform shows regional communities will be hugely impacted.
Mackle describes the proposed Essential Freshwater policy package as one of the largest economic challenges posed to the dairy sector in a generation.
“Its full effect could lead to a fall in our GDP of $6b by 2050, without even adding additional costs related to climate change,” said Mackle.
“Farmers care deeply about the environment and have been doing their bit to protect the environment and our waterways for some time.”
Mackle says farmers are “absolutely onboard” with continuing to play their part in improving waterways.
However stringent changes cannot be to the detriment of farming’s future and the communities they support.
“We need to approach this carefully, balancing environment and economy. We can achieve both goals by working closely together on this issue.”
