Dairy's role in sustaining New Zealand - Fonterra

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Figure 4 Model structure of the sector Figure 4 Model structure of the sector Source: NZIER At each stage of production there is also labour, capital and other intermediate employment. At each stage of production there is also labour, capital and other intermediate employment. 1.7.2 Dairy farming The structure of the farming industry is shown in Table 3. The farming sector produced around 1.7.2 $7.5 Dairy billion farming worth of raw milk in the 2009/10 production year for sale to the processing operations. As expected, farming uses a lot of land and the labour is not a large part of the The structure of the farming industry is shown in Table 3. The farming sector farm’s costs. The on-farm sector employs around 24,000 full time equivalent (FTE) workers. The produced around $7.5 billion worth of raw milk in the 2009/10 production year for sale primary cashflow costs for farmers are fertiliser for the land and feed for the animals. These to the processing two industries operations. are heavily affected As expected, by movements farming in demand uses for a milk lot of products. land and the labour is not a large part of the farm’s costs. The on-farm sector employs around 24,000 full We can break down the $7.5 billion of raw milk into the following parts: time equivalent (FTE) workers. The primary cashflow costs for farmers are fertiliser for the • land $3.0and billion feed is retained for the as returns animals. to land, These labour two andindustries capital. are heavily affected by movements • $3.6 in billion demand is spent for on milk domestically products. produced intermediate inputs, such as fertilizer ($447 million), straw and feed ($723 million), agricultural services ($446 million), financial services We can break ($341down million), the machinery $7.5 billion repairs of ($198 raw million) milk into andthe petrol/diesel following ($80 parts: million). • $3.0 • billion $440 million is retained is spent as onreturns imported to inputs land, such labour as fertilizer and capital. ($138 million), pharmaceuticals ($111 million), feed ($31 million), agricultural equipment ($26 million) and pesticides ($16 • $3.6 billion million). is spent on domestically produced intermediate inputs, such as fertilizer ($447 million), straw and feed ($723 million), agricultural services ($446 • $290 million is spent on margin services such as transport. million), financial services ($341 million), machinery repairs ($198 million) and petrol/diesel ($80 million). NZIER – Dairy’s role in generating growth 6 Dairy’s role in generating growth Final report - 16 November 2010 • $440 million is spent on imported inputs such as fertilizer ($138 million), pharmaceuticals ($111 million), feed ($31 million), agricultural equipment ($26 million) and pesticides ($16 million). • $290 million is spent on margin services such as transport. 7
Table 3 Farming industry structure Input Dairy farming Comment Land 21% Includes Gross Margin Capital 15% Labour 5% Domestic intermediates 47% Ag services, feed, fertilizer Imported intermediates 8% Fertilizer, pharmaceuticals, feed Margins 4% Transport Source: NZIER 1.7.3 Dairy processing The dairy processing industry takes the raw milk and turns it in to products that can be sold to customers and consumers. The industry produces a wide range of dairy products, from milk and cheese to ice cream and butter. The vast majority of the industry’s input costs are the purchase of the raw milk, which accounts for 70% of the industry’s costs. In addition, the processing industry uses about $1.1 billion of capital and employs close to 10,000 FTE employees. Of the $10.4 billion exported by our model’s dairy processing sector: • $7.5 billion is used to purchase raw milk from the dairy farming sector. • $1.5 billion is retained as returns to labour and capital (i.e. wages and rate of return). • $625 million is spent on intermediate inputs from New Zealand. This includes $85 million of plastic containers, $45 million on electricity and $22.5 million on financial services. • Imported intermediate inputs account for $310 million – largely plastic containers ($182 million) and other food products to be used in processing ($30 million). • $730 million is spent on retailing/wholesaling costs that get the dairy products from the plant to market. Table 4 Dairy processing industry structure Input Share Comment Capital 7% Includes Gross Margin Labour 7% Raw milk 66% Other intermediates 12% Other farm inputs Other imported intermediates 6% Mostly plastic – packaging Margins 2% Retailing and wholesaling costs Source: NZIER Dairy’s role in generating growth 7
Page 1 and 2: Dairy’s role in sustaining New Ze
Page 3 and 4: Key points Dairy makes a very stron
Page 5 and 6: It drives many rural economies: “
Page 7 and 8: Contents 1. The current contributio
Page 9 and 10: 1. The current contribution of dair
Page 11 and 12: Table 2 Export values $ millions, 2
Page 13: Figure 3 Importance of dairy to reg
Page 17 and 18: 2. Modelling dairy’s economic con
Page 19 and 20: Figure 5 Change in milk solids pric
Page 21 and 22: 3. Milk solids price spike 3.1 Head
Page 23 and 24: Table 5 Indirect impacts 2010 Perce
Page 25 and 26: Figure 7 Gross regional product imp
Page 27 and 28: 4. Production growth over the last
Page 29 and 30: Table 9 Indirect impacts 2008/09 Pe
Page 31 and 32: Figure 9 2009 Gross regional produc
Page 33 and 34: Appendix A CGE modelling framework
Page 35 and 36: Figure 11 The MONASH-NZ database Fi
Page 37 and 38: At the activity level, intermediate
Page 39 and 40: Table 12 IO vs. CGE multipliers Mul
Page 41 and 42: Appendix D References Bandara, J. S
Page 43 and 44: Farming Milk & cream Ice cream Chee
Page 45 and 46: Farming Milk & cream Ice cream Chee
Page 47: Appendix G Changing dairy export ma

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