DairyNZ attacks economic report – but has no problem with the NZIER’s work which dairy people commission

DairyNZ chief executive Ian Mackle should have done a bit more thinking about the implications before he dismissed an economic report as an inaccurate, trivial attack on farmers.

He was assailing the credibility of a recent NZIER report which (he said) trivialises the significant role the dairy sector plays in New Zealand’s economy – and fails to look at the specifics of the Government’s freshwater package.

He made special mention of the report having been commissioned by Fish & Game, Forest & Bird and Greenpeace.

And he huffed that it was less an economic report and more a high-level commentary on the dairy sector’s role in the economy – and painted an inaccurate picture.

“This is yet another case of environmental lobbyists targeting dairy farmers – who are people trying to do the right thing by the environment and who are actively working to make changes on-farm to protect it,” said Dr Mackle. “By singling out dairy farmers, they are ignoring other contributors to water quality and, therefore, are limiting our ability to actually fix the problems where they exist.

“The NZIER report trivialised dairy’s role in the economy – 3 percent of GDP equates to 28 percent of merchandise exports and one-fifth of goods and services exports coming from the dairy sector.

“The NZIER report does not analyse the economic benefits of dairy to regional communities – which is a critical aspect of dairy farming’s contribution to NZ Inc. Dairying is the engine of the regions, in terms of income and jobs. For example, it is the top income earner in Waikato, West Coast and Southland.”

Mackle referred to the Ministry for Primary Industries’ latest Situation and Outlook for Primary Industries report which showed dairy makes up $18.1b of $46.4b exports to June 2019. Dairy exports were up $1.47b last year.

This has flow-on effects to the communities, where the dairy sector employs 46,000 people on and off-farm.

He also referenced a Local Government New Zealand advisory report on the Essential Freshwater Package that showed that national limits for nitrogen and phosphorus would potentially impose very large costs on agriculture.

“In that report, it referred to a Waikato modelling study which found that land-use change was required to achieve the nitrogen and phosphorus limits proposed – with changes resulting in a dairy revenue loss of $140m per year,” said Dr Mackle.

The LGNZ report showed that these goals require an enormous amount of land use change to take place, with many farms becoming uneconomic and communities being impacted negatively due to rural depopulation and a loss of annual income.

Around 10 years ago, a New Zealand Institute of Economic Research report on dairy’s economic contribution to New Zealand illustrated how important the sector is, not only to the national economy but especially rural economies.

As many as one in four jobs in some rural areas were dependent on the dairy farming and processing sectors, but until then the value of dairy’s economic contribution hads been unclear.

The NZIER accordingly was commissioned to quantify what dairy contributes to rural and urban communities.

And who commissioned the report?

Fonterra and DairyNZ.

The report showed dairy’s contribution to regional economies was far greater than the national average then of 2.8 per cent of GDP.

Southland – for example – had nearly 10 per cent of the national herd, reflecting the sector’s growth in the South Island.

Dairy revenue in the region in the 2009 calendar year was $710 million.

Dairy growth since 1999 meant every Southlander was $650 better off.

Southland and Otago combined generated nearly $900m in dairy production in 2009.

More than 4200 workers are directly employed by the sector in the region.

Similar results were recorded in regions like Waikato, the Bay of Plenty, Taranaki and the King Country.

The NZIER report showed 50 cents in every dollar a dairy farmer earned went back into the economy.

In 2010 this amounted to $3.6b paid for farm supplies, services like vets and accountants and utilities costs such as the $45m spent on electricity.

That $3.6b did not include farm wages.

The report’s data were  regurgitated in submissions by Fonterra and DairyNZ whenever they wanted to emphasise their sector’s importance to the economy.

Last year an NZIER report, titled How does the dairy sector share its growth? provided a more recent analysis of the flow-on benefits of dairy’s revenue generation.

This report was commissioned by the Dairy Companies Association of New Zealand. 

DairyNZ is more likely to use the data in this report, too, to illustrate the importance of the dairy sector, rather than challenge the results, as it did when it  disapproved of an NZIER report prepared for environmental groups.  

But does the NZIER’s credibility really change, somehow, depending on who did the commissioning?


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