New Zealand is well known for its rugby prowess. But it can also claim to be a major player in the world dairy markets, punching well above its weight.

Last year, it produced 3% of world dairy production but accounted for 40% of the world’s traded dairy products and its production and actions have a major influence around the globe.

Of the 19 billion litres of milk they produce, 98% is exported. The main co-op, Fonterra, has developed a major foothold in markets across the world but has focused much of its attention in Asia in recent years, where 75% of its dairy exports are now destined to go. A free trade agreement for dairy products with China has been a major political success, opening up that massive market.

The average dairy herd has just exceeded 400 cows, averaging 4,100 litres of milk or 364kg of milk solids (MS). The cost of production has risen to $5/kg MS (20c/l) as farmers have become more focused on pushing production per cow. Once the world’s most cost competitive milk producer, the rising on-farm costs, as well as additional environmental costs and growing debt, are eroding New Zealand’s competitiveness.

Palm kernel imports have significantly increased, from zero to over 2Mt in recent years, to fuel dairy production. This has seen New Zealand dairy farmers mopping up world palm kernel supplies, putting pressure on the price that has doubled to €177/t in recent years.

Agriculture has increasingly become the backbone of the country and makes up over 25% of the New Zealand gross domestic product, which was €108bn in 2012.

The New Zealand economy was not as exposed to the global financial crisis as many countries. The economy grew by 2.7% in 2012, the largest annual rise since the financial crisis hit in 2008.

Unemployment has dropped to 6.2% and there are skills shortages appearing in many sectors. Dairy production is by far the biggest farming sector and was also the largest contributor to overall growth in the New Zealand economy, growing by 16.8% in 2012.

Sheep numbers falling

New Zealand was a substantial exporter of wool in the past but the collapsing wool trade has seen them focus more on meat production. Sheep numbers have dropped by 40 million since the mid ‘80s, to just 30 million, but amazingly lamb meat sales have remained around 350,000 tonnes through better lambing rates and increased carcase weights.

The limited access to the EU for lamb has seen New Zealand focus on Asia for this product. The EU has focused on importing a higher percentage of New Zealand’s quota as chilled lamb, targeting specific times of the year. This has had a particular impact on Irish sheep farmers around the high value Easter trade.

New Zealand exports a small amount of commodity beef, mainly to the US, but its export pig industry has all but disappeared due to the uncompetitive nature of the sector.

New Zealand holds the world record for the highest wheat yields at 15.6 t/ha due to its favourable climate in the tillage growing areas.

The area under wheat and barley is up by 35% since 2007 to 54,800ha, driven by international grain markets and demand from the dairy sector. The increased area sown to maize is expected to produce 28-32 tDM/ha each year.

New Zealand is making a name for itself as a wine producer. The area under grapes has increased by 17% to 34,560ha in the last five years. The kiwi fruit industry, occupying just over 13,000ha, has been hit with the PSA-v bacterial disease and this has closed some kiwi orchards.

Land prices are being fuelled by demand from both New Zealand and foreign investors. This is helped by the continued government policy of no capital gains tax or stamp duty. The top rate of tax is just 35%.

Isolated in location, New Zealand has harnessed its energy potential, using steam from the many volcanoes, as well as hydro power, to supply its energy needs.

Fracking was going on without many obvious objections but there are protests about new deep sea oil explorations just off the coast, which look set to give another boost to the country.