Dairy sector profit still on the table, but margin gap tightens
DairyNZ’s latest Econ Tracker update shows most farms will still finish the season in a positive position, although the gap has narrowed compared with early season expectations.
Management practices and farm values have soared, accelerating the industry's progress.
"It's a terrible thing to say; there has been a massive amount of pain during that time; cashflows were lost," Limmer told the DairyNZ Farmers Forum in Hamilton last week. "But the management practices and value in the industry today is much greater and it has accelerated our progress."
Limmer says the $2 billion industry is on track to double its value within 10 years.
He addressed dairy farmers on how the primary industries sector can adapt to adversity, attributing kiwifruit's bounce-back to cohesion, agility and direction among stakeholders.
The kiwifruit industry shares similarities with the dairy industry: both are heavily focussed on exports and international market vagaries, and both Fonterra and Zespri are 100% farmer-owned co-ops.
There are 2500 kiwifruit growers in New Zealand, producing 400,000 tonnes of kiwifruit on 13000ha.
Of the 3m tonnes of kiwifruit consumed worldwide each year, China produces and eats 1.5m tonnes. Of the remaining 1.5m tonnes, Zespri accounts for about 30% by volume and 70% by value.
Limmer says the relevance of China is very apparent to the kiwifruit industry, just as to the dairy industry.
"The growth in production in China is both a massive opportunity and a threat to us," he says.
"China is also our biggest market: 20% of our volumes go there, growing at 30-50% per annum, and it will become our most valuable market in two years."
Limmer says the kiwifruit industry is a tight-knit community of about 2500 growers; about 80% of kiwifruit is grown in Bay of Plenty.
"The community members know each other well and there is cohesion, because of geography, common sense and purpose; this allowed us to recover from the Psa problem."
He described the advent of Psa in late 2010, and continuing through 2011, as "completely from left-field"; these were "pretty dark days" for the industry.
"We did not understand the problem; there were no such issues in the past."
The industry and MPI pitched in $25 million each to set up Kiwifruit Vine Health (KVH). A new Psa-resistant Gold G3 variety was introduced and all gold growers agreed to switch.
"We needed to shift everybody and we were able to do that; by mid-2012 the industry 'ship' had turned on a dime."
