Liquid milk key to growth - analyst
An Auckland-based global analyst has warned that neither New Zealand nor Ireland is adequately prepared for the growing demand in key markets for liquid milk over the coming decade.
KPMG's global head of agribusiness, Ian Proudfoot, said both countries have not yet come to terms with the fact that within 10 years, the bulk of our respective dairy consumers are likely to be demanding liquid milk.
"We are both looking to sell to consumers who don't have a lot of water available, yet we sell them powder with the expectation that they will rehydrate it," he said.
"I think whoever unlocks that ability to become a true, economic, innovative liquid supplier is going to be in the market that will prove to be a leader in dairy for the next generation."
Mr Proudfoot said that since the abolition of quotas earlier this year, he has been impressed by how the Irish dairy sector has focused on higher value products, such as proteins and complex ingredient solutions, rather than producing additional commodity milk powder.
"If you look at where we are investing in New Zealand, we are still building a lot of base driers to handle volume, so the ability to create more value from that product is very challenging," he added.
As Ireland's milk production has powered ahead with 6.2 billion litres expected this year, the volume is down 4pc in New Zealand in the first four months of the season.
Ireland's Food Wise 2025 strategy projects agri-food exports to increase 85pc to €19bn by 2025.
New Zealand's Ministry for Primary Industries, on the other hand, aims to double exports in real terms from NZ$32bn in June 2012 to NZ$64bn by 2025, at an average growth rate of 5.5pc a year.
Mr Proudfoot said primary industry export growth on a compound basis has been around 4.5pc over the last 12 years, but growth in value-added has probably been less than half of 1pc compound growth per year.
Owing mostly to acute environmental pressures, the ability of New Zealand dairy farmers to increase productivity is more challenging than ever, thereby requiring a shift to value added to attain the 2025 goal.
However, Mr Proudfoot said that the majority of that country's primary sector still sells to overseas distributors and has no real connection to the end consumers of their products - nor do they understand how value is created from it.
"To me, the key difference between Ireland and New Zealand, in relation to their 2025 goals, is that the Irish government seems to have recognised the strategic importance of food in their economy.
"They have put in place a strategy and a vision to show how they will support the sector to be successful," Mr Proudfoot said.
"My personal view on what we have in New Zealand is that we don't have an indication of a vision of where we want our primary sector to head to."
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